As a business owner hiring a new employee, do you consider what additional revenue this addition to the company will create. The increased revenue can come from actual sales from the new employee or it could be that this employee @ $12.00/hour (plus any potential benefits paid), frees up an owner or sales representative to go out and generate additional sales at a much higher hourly rate. Another example is where this $12.00/hour employee allows a manager, making a much higher wage and who is bogged down performing clerical tasks, to focus on tasks that will instead generate revenue or reduce costs for the company.
Here is an example: An owner spends 2 hours on sales netting an average of $200 per sale or $400. They then spend 3 hours on data input and scheduling. If that same owner paid a clerk $36 for those 3 hours plus employer taxes for a total of $48, this would have netted the company an additional $252 for that 3 hour period. Continue that through the week and month and you can see there is an opportunity to significantly raise revenues and/or reduce costs. Alternatively, a portion of the saved time could be used on customer retention which is critical to a company’s longevity and controlling costs. The cost to bring on a new customer versus retaining one is about 3:1.
These are important considerations when hiring a new employee. In all cases, the bottom line should be positively affected by this action.
Rob Pitingolo says
Great post, Ellen. I’m always amazed when people overlook the “opportunity costs” of having a skilled worker focus on tasks that someone else could do, even if that means hiring an additional employee. I had a great supervisor once who always helped me realize the value of my work by reminding me of all the time my work has freed up for senior level sales people to visit more clients, make more calls, etc.
James F. says
That’s very true. A lot of companies just have a budget or salary ceiling for each department, but the company as a whole should pay more attention to the ROI of each employee.