Growing our people and profits

People are the x-factor powering organizations, innovations, and most significant breakthroughs. We cherish and reward individual brilliance, but the larger success is determined by something more mundane – commonality and consistency – how do we get everyone to be more effective?

So, when we lead large organizations, the more pertinent question (this is truer to service sectors) is the per-person profitability of your workforce as much as the class profit and loss data. The reason is simple – it provides a better view into efficiency.

McKinsey researched about this about a decade and a half ago, and this has been reshaping our approach ever since. Again, the concept is as fundamental as Adam Smith’s labor theory of value defined the worth of goods. But in today’s increasingly knowledge-driven industry, labor has transformed into talent. Therefore, the McKinsey definition of profit per employee = total revenue per employee divided by the cost per employee is a very valid measure of how we are utilizing our most valuable resources.

So, what are the three things that you need to consider?

1. Understand the revenue levers and amplify them. The math is simple, increase the revenue. The realization of this formula is everything. So how do we increase revenue? The delivery services industry is an example where revenue is rate-card driven, and the market is price sensitive. Here is where innovation and skilling come into play. The question we need to ask ourselves is how to convert end-of-life-cycle products to new products. From a skills point of view, this would mean how to upskill and re-skill our resources so that they can easily transition to other roles that would benefit them and the organization.
2. Control cost. Again, it is simple math. But the challenge is, of course, the ever-fluid market dynamics. Here we take India for example; there are a lot of discussions on democratizing talent and tapping into the low-cost centers even within the country – like the tier 2 or tier 3 cities which have traditionally been Talent feeders for the metros. Or another example is how we manage the quality and construct of the skills pyramid. Many organizations are strengthening their campus strategies with intensive boot camps and market-ready competencies to this effect. Maybe we can delve into the workings of this another day.
3. Plan and utilize better. How do we most effectively use the resources we have? This is probably the first math question you faced in school as you divided apples and oranges amongst the strangest possibilities – it may be equally relevant now. But to truly be efficient, we don’t just need to utilize our people and their skills better; we need to tap into possibilities and potential. For example, can we better leverage our contingent/ freelance ecosystem? Can we work with the best-bet resource against a best-fit candidate and derive better economics on the gamble? Or what should be the control span to balance between economics and effectiveness?

In all, we have limited resources and a dynamic market. While success is never a given, we have seen better results when we can amplify the best and mitigate the variables. The market leaders today are the ones who can be agile – when they can train, re-skill and re-deploy people with ease. Here they meet both personal career aspirations and organizational goals. So, in a nutshell, the micro-decisions are what will give macro results. The individuals we grow with will help collectively propel the organizations toward exponential growth.