Creating a value-adding organization Featured

10:07am EDT July 22, 2002

All too frequently the pattern is repeated. The organization has a quarter or two of poor performance, and the obvious solution emerges—get rid of some people. Wall Street loves you, and the poor performance is brushed aside—as long as you can reduce the head count.

Organizations often overlook the fact that, once those employees are gone, they no longer can earn a nickel’s worth of profit for you. If these people are really excess baggage or the cause of poor performance, then, as the manager, you should be looking for ways to make them more valuable. And as their value increases, they can help you become more profitable.

One way to make your company more attractive to the investing public is to make your people more knowledgeable and thus more valuable. According to an article in Fortune magazine (June 22, 1998), “In an economy based increasingly on intellectual capital, a company’s assets are in the employees.”

Personal observations and research by writers like Michael Hammer and James Champy, authors of Reengineering the Corporation, indicate that at least 20 percent of all activities add little or no value to your products and services. If you and your people were to place an emphasis on just finding and eliminating those activities, your bottom line would greatly improve.

These non-value-adding activities include non-productive and unnecessary meetings; the preparation of redundant reports and studies no one reads; outdated work practices; checking and re-checking a person’s work; ineffective communications, etc. These problems are present in nearly every organization and can be eliminated if all employees, at all levels, would look at their tasks and ask these four questions:

  • Does this activity increase profits?

  • Does it reduce costs?

  • Does it increase “throughput”?

  • Does it address a specific customer need?

If the activity meets one or more of these criteria, it adds value. If it doesn’t, it should be eliminated.

There is another benefit to this exercise. A recent study reported that two-thirds of the employees in this country leave their places of employment at the end of the day with lower self-esteem than they had when they went to work. This loss of self-esteem accounts, at least in part, for poor morale and the reduced loyalty they feel toward their employers.

I find that self-esteem is greatly enhanced when people feel they are doing work that is important. When useless work is eliminated, and people recognize their roles in improving performance, their self-esteems increase along with their productivity—a double boost for the bottom line. When these areas of waste are eliminated and the bottom line grows, you will begin to see the folly of downsizing as an answer to each problem.

Any way you look at it, value-adding employees are a good investment.

William Armstrong is president of Armstrong/Associates, a Pittsburgh-based management consulting firm. The second edition of his book, “Catalytic Management: Success by Design” is now available at Barnes & Noble, Borders, and WaldenBooks stores.