A recent Wall Street Journal opinion piece by Andy Kessler is worth your time: “Dear Grads, You Need a P&L.” Kessler is a successful investor, entrepreneur and writer. He focused on recent grads, but he has good advice for all.
A common label for staff roles like HR, IT, legal and accounting is “overhead.” Overhead sounds bad, like an excessive tax. Nobody wants more overhead. Cutting overhead is popular. Some divisions of national companies opt out of their own unresponsive and costly corporate overhead services to buy them locally. Crazy.
I understand there is no revenue without sales, and there are no sales without operations. But you will also fail without the right kind of overhead. The problem is, we do a poor job of describing and monitoring profits produced by the right kind of overhead.
Kessler brought all this together for me in his description of the role of profits in understanding the value of jobs we perform. He says we all need a personal Profit and Loss statement.
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When we tell HR it is overhead, that revenue-producing departments carry the burden of HR, and the goal should be to cut overhead, HR cries out for a P&L.
Kessler defines profit as the payment you or the business receives for producing “customer delight.” Without delight, the customer would self-serve or go elsewhere. What is your role in producing customer delight?
Start with identifying the delight HR produces. Who found and advocated for that star performer in sales? Who helped exit the disruptive poor performer after managers ignored the problems for months? Who found ways to turn a 27 percent health insurance increase into an 8 percent cost cut without reducing benefits? When has HR saved a management team from itself or sparked a productive company culture?
Does that sound like overhead that should be cut, or does it sound like desirable delight?
HR and all overhead functions must focus on delighting their key customers: senior leadership, managers and your best employees. Keep a list of how your team delights these groups and enables their profits.
Energy well spent
All employees at all levels should have a list of ways they delight customers. Delight is the difference between what you and your team cost, and the revenue you directly (or indirectly) produce (or protect). This concept is as important to charities as hedge funds.
I hear people describe their work as undervalued. I see people compare important but lower paid roles with the high pay for pro athletes or Wall Street.
Moan all you like about how they do not understand or it is not fair. Maybe the public’s priorities are all messed up. No argument there. But your energy is better spent finding ways to first produce, then to prove your value to this employer and the public, or to make a change in your own direction.
If the economic system is driven by profit, then understanding and supporting this system is your best ticket to career advancement.
Bruce Clarke, J.D., is CEO of CAI, helping more than 1,000 North Carolina employers maximize employee engagement and minimize employer liability. For more information, visit www.capital.org.