Will You Be Missed?

Recently, I delivered an “emerging leaders” workshop for a long-standing client’s middle and top leadership team (some participants “emerged” a long time ago, but still come back for a refresher, year after year). .

As often happens, questions from the floor throw up some of the most valuable points from the day. The question on this occasion centred around how to calculate a reasonable remuneration package for those in a leadership or management role, particularly when it may be difficult to directly measure productivity.

The answer to the question is one of those “universal business truths” that is not so universally well-known or adopted, and I felt it well worth sharing.

The following reminder to workshop participants a few days after the event reiterated what was shared off-the-cuff on the day:

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As leaders, a prime (and in some cases, the sole) measure of our worth in that role is the sum total of the extra value which our team members add which would not be added were it not for our leadership.

Sobering thought.

And to put a few reality checks around that, as leaders:

• We each cost our enterprise around 130% of our pre-tax salary package (9% super, 5% workcover, etc). For a leader on a $100,000 package, that’s a $130,000 annual expense (investment?)
• For our enterprise to break even from our engagement each year, we’d have to manifest through our team an additional $130,000 in Gross Profit each year or, at a margin of 20%, additional sales of $650,000 pa.
• But, there is no point in employing a “break even asset” – even if it’s me! Each enterprise will have a different multiple, but as a rule of thumb if you are aiming at and achieving a 3x return on cost from each team member, then you are likely to have a good year.
• So, if we are going to generate 3x our cost that will equate to additional GP of $390,000 or (at 20% GP) $1.95m in sales.

Working backwards, your goal might turn out to be to add, in new sales value:

• $177,272 a month (in each of the 11 months you are at work)
• $44,318 a week (in each of the 44 weeks you are not on annual leave or a public holiday)
• $7,800 each working day (there are 250 of those in a working year)
• $975 every working hour (on an 8 hour day)

So, if you have a team of five that means you are seeking ways to add $195 in sales value – or just $39 in GP – each hour with each of them.

A team of ten!? It should be a walk in the park! Less than $20 an hour – in added GP – and you’re a hero!

So now, by way of a little further grounding:

Our Company, as part of its commitment to equal opportunity principles and international fellowship, recently hired a small tribe of New Guinea cannibals.

“You are all part of our team now,” said our MD during the welcoming briefing. “You get to enjoy all of the benefits of any other team member and you have full access to our corporate cafeteria for meals. That said, I have one request of you – please, please don’t eat any of our other people.”

The cannibal chief promised they would not. Four weeks later the Chief Training Officer, in his role as Chief Cannibal Officer (CCO), called them together for a lunchbox meeting and remarked, “You’re all working very hard, and we’re more than satisfied with the quality of your work and with your team spirit. However – and I apologise for even asking this – but one of our secretaries has disappeared. Do any of you perhaps know what may have happened to her?”

As one, all of the cannibals shook their heads “No,” they assured him.

After the CCO’s address and departure from the lunchbox meeting, the cannibal Chief rounded on the tribe with a furious face and in a low voice spat out, “Which one of you idiots ate a secretary?!”

A lone hand rose hesitantly.

“You idiot!” the Chief thundered, “For four weeks now we’ve been eating managers and no one’s noticed a thing. But no-oooo, this time you had to go and eat someone who actually does something!”

So my advice to us all it to make sure that the way that we lead ensures that if we are eaten we’ll be missed!

PS I now need you all to add value like crazy so that I can hit my 3x for the workshop, please!