Talent professionals often struggle to track the financial value of their work. Figure 1 shows in real-dollar terms what the “silent killers” could be costing a company.
Here’s how the numbers were derived. As an example, say the company in question is a manufacturer of electronic devices with 26,000 employees. From that take out the administrative, support, manufacturing and lower-level employees; that leaves roughly 7,000 so-called coordination workers.
Then, say they’re being paid an average annual salary of $90,000. Take $90,000 and multiply by 7,000 to get a total expenditure of $630 million annually for the coordination workers.
According to research by the American Management Association, Gardner and McKinsey & Co., the typical American worker fulfills his or her commitments — meaning that work is completed on time, as scoped and as budgeted — somewhere between 30 and 60 percent of the time. This example will be generous, assuming 60 percent completion.
Sixty percent of $630 million is roughly $378 million, meaning there is $252 million that the company is spending without the promised return. This isn’t entirely waste, however, as workers in the example are still likely producing something, just not entirely what the company is paying for.
What would it be value to the organization if it could free up some or all of that productive capacity?
Interviews with 10 chief financial officers asked to give their estimated opportunity cost of $252 million resulted in a conservative composite figure of $126 million, which is then added to the $252 million cost-without-return figure. Based on this estimate, the company is leaving a total of $378 million on the table every year
Chris Majer is the founder of consulting firm HP2. He can be reached at email@example.com.