Profit Per Person


As I’m someone who might loosely refer to himself as an IT guy, you’d be excused for thinking that I spend a disproportionate amount of time writing about marketing and business related things like Customer Lifetime Value (CLV).

But then why wouldn’t I?

The forces that drive your IT strategy are largely the same as those that drive your marketing and business strategy, and to think otherwise is at best naive and at worst downright destructive, so we’re probably well advised not to do it.

So, when your IT representatives come, cap in hand, begging for resources, not only should you be asking them what problem they’re solving, but how the solution fits in to your overall view of the world.

Projects that offer tools for the customer, or those that provide accurate management information and so on are easy justifications for finding a little wiggle room in a budget, but when it comes down to making employees happier and more efficient, it often seems to be that bit harder to scrape the funds together.

BUT!!!…if you look at business through a Profit Per Person (PPP) lens, you might see the same opportunity in a somewhat different light.

A Quick Aside

So that you’re all familiar with this concept, here’s McKinsey quick overview of the subject and why it’s an interesting and important metric for the modern executive.

Profit Per Person gives us a completely different perspective. Rather than looking at a business based on the return it’s getting from its capital, it gives us a sense of how well our human assets are performing.

Of course, when it comes to PPP, not all people are equal. The maintenance and cleaning staff without whom a business would very quickly disintegrate are going to be viewed as a cost, while the performance and profitability of sales guys or chargeable consultants may well be measured in the finest of details.

Between these two extremes are all the other employees whose value is hard to measure directly, but without whom there would be no business, and this is really where the rubber meets the road.

Keeping the Talent Happy

Sadly for most SMEs, there simply isn’t the money available to allow their staff to work in the playground like environments and enjoy the seemingly unlimited IT budgets that you see at the big end of town. For most, a fruit basket and Friday afternoon bubbles and beer are about as far as it goes.

Not that these should be under valued though. There is a distinct correlation between employee happiness and productivity. Warwick University reported that happy workers are ~12% more productive,

“…management…should strive to make their workplaces emotionally healthy for their workforce” – Dr Eugenio Proto

and Shawn Anchor, author of The Happiness Advantage, tells us that success doesn’t drive happiness. As he explains in his TEDx talk, it’s the other way round: Happiness drives success.

A Waste of Your Time

So what does this have to do with IT?!

Consider this. You give your employees a plush office chair and a well positioned desk in a well lit and comfortable environment. You provide a coffee machine, kitchen facilities and the aforementioned fruit and booze. And then you hope that they’ll be motivated, happy and productive. It’s a simplistic view, but you get the idea. Then you park them in front of ageing PCs accessing servers and systems that are often old, slow, difficult to navigate and barely integrated. While these are perhaps technically fit for purpose, a relatively pleasurable work experience is instead frustrating and inefficient, and at what cost?

A typical office worker spends about 40 minutes a week helping colleagues deal with IT issues. Combine that with the inefficiencies delivered by the use of technology that is often slower and less reliable than their home PC, and you can begin to see that staff performance, efficiency and happiness is being significantly impaired.

This can’t be good from a Profit per Person perspective.

A Waste of the Customer’s Time

Worse of course is when the systems are customer facing.

Doubtless you’ve all had the experience on the phone to a call centre when you’re told that the system is slow today, or it won’t let a change be made for some reason. Or perhaps you’re in a store, trying to pay and the loyalty card system is chugging along, or seemingly too hard to use. Or a website is slower than it should be, or loses information when the Back button is pressed.

Seriously, there’s no good reason for this in the modern world.

Poor service, wherever it occurs in the buyer journey, is going to result in a diminished brand value and lost sales, and 55% of people have decided not to buy because of it.

Time is Money

If you work in the big end of town, an extra body and salary here or there probably doesn’t really matter. But an SME turning over $10 million with 50 employees will be keeping a close watch on staffing levels costs. Each one will cost about $100K on average, and that’s 1% of the gross.

With a profit of $2,000,000 per year, this particular fictitious SME is making a comfortable $40K per person. But if staff numbers drop through natural wastage to 45 and revenue remains the same thanks to system optimization and efficiency improvements, profit rises by a cool half million and PPP jumps to over $55.5K, and that’s without even considering the potential for improved prospect and customer outcomes.

Money invested in employee salaries only accounts for their contribution to the profit of a business for one year. The same money invested in IT assets that drive efficiency, improve usability and employee satisfaction, will minimize wage costs and keep delivering value year on year, helping to keep the Profit per Person as high as possible.

Today’s Top Takeaway

If you skimp on IT investment, every dollar saved is a dollar wasted.

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MarshallFloyd – Your Virtual CIO – Download our free guide with over 100 tip, hints and ideas you can use to improve your IT.

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