Whether it's physical, emotional, or mental health or relationships, but especially your job path, I believe one of the main issues hurting many individuals is that they aren't as purposeful and rigorous with their journey as they should be...
Deliberately choose the trip they want to take—and the steps involved—and then be disciplined in sticking to it!
Today, I'd like to zoom out and answer a question—you may have had this query at some point, and it goes like this:
Why isn't my job/position at the company I work for compensated as much as other positions in the same firm?
Perhaps you've worked somewhere longer or feel like you put in more effort than others, but you're not making as much money as someone who is new to the company in another field.
To try to explain why, I'd like to deconstruct and explain an alternative model, or map, of how to think about the many positions within almost any business, so you can put yourself on the right side of the equation—where you're most likely to generate the most income!
Now, if life were fair, you'd expect that those who have been doing the work the longest, or those who have been with the company the longest, would earn more money than those who are new. Or you may look at the big picture and argue that it would be fairer and more equitable if everyone made the same amount of money, regardless of their job title—so those in sales, for example, wouldn't be given an abnormally high proportion of compensation compared to someone in customer service.
In this post, I'm not trying to argue about fairness. The world has never guaranteed us that we will be treated fairly. Fairness was never promised to us by God, the cosmos, or whatever you believe in!
While the government may attempt to promote justice, there will never be perfect and total equality. What you need to do is figure out what game is being played, what the "rules" are, and how to utilize strategy to place yourself in a position to succeed in whatever way you define success.
So, my goal for today is to unravel the business model and show you where organizations spend, invest, and save money, so you can grasp what it means to you as an employee.
Right away, most of us can understand anybody who has followed the traditional path to become a professional. We're talking about people who graduated from high school at the top of their class, went to college, got a degree, maybe went on to get a master's or a doctorate (or some type of license or certification), passed the bar exam, etc.—you name it... got the best internship, got the best entry-level job, and worked their way up through some type of power structure, like a law firm, an accounting firm, a hospital, etc.
We're all familiar with that path, the traditional one that was taught to us about how to create a decent income. So, if we didn't take that path, we can see why we don't get paid the same as someone who went to school for ten years.
But I believe that many of us struggle with the realization that there are a variety of occupations that DO NOT require someone to have walked that path—to have completed all of that education and schooling—and that can pay more money than those that do!
This is my goal for today—to try to explain that there are different ways to think about how companies reward employees for doing different jobs for a large segment of the population who don't have college degrees, or who don't have professional "driving" college degrees (maybe you got a degree in humanities or liberal arts that didn't lead to a direct path into a business profession) so that if you genuinely want a better livelihood, you realize there is a way.
Let me begin by emphasizing the first point I want you to grasp:
Rule #1: Your worth to an organization determines how much you get paid.
That isn't to say that employers don't cherish their lower-paid employees. However, the value that an individual employee brings to the business is usually linked to the company's reward system, and thus to how you are compensated as an employee. As a result, the less overall "value" you provide to an organization, the less money you'll make, and the more overall value you offer to an organization, the more money you'll make. That, hopefully, is our first basic comprehension.
As a result, if you want to earn more money, you must individually add more value to a company.
Rule #2: The value of something is in the eyes of the beholder.
What I mean is that I'm referring to the value you offer to the "transaction" between you and a potential employer. (As a side note, if you're a contractor, service provider, or even a business, the same rules apply.) We, the "employee" or "contractor," for example, must add more value than we subtract. As a result, if we want to take more money away, we must supply greater value.
But, once again, rule number two applies: the receiver, not the giver, determines value. What does that mean, exactly? It's extremely simple; it has nothing to do with whether you think what you're doing is worthwhile! It all comes down to how the person receiving the value feels. When it comes to employees, it relates to the company in this scenario. You must first understand what businesses value in order to determine where you should place yourself to receive the maximum benefit. I'm going to try to explain (generally) enterprises as a diamond if we dissect this (and I'm not going to delve into financial accounts and all that), all right?
This diamond represents where they (companies) invest their money as well as where they obtain or extract profits. Because, at the end of the day, the simplest way to think about a business is that it brings in money, spends it, and the difference is profit. But it's a little, but more specific than that...
Businesses spend money (or invest money) to generate revenue, then use a portion of that revenue to provide what their customers expect. Profit is defined as the difference between the money received in revenue, the money spent on producing revenue, and the money spent on delivery costs. And it is the most straightforward method to consider practically any corporation.
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Money received in revenue minus money spent to produce revenue minus delivery costs equals profit. |
While the government and nonprofits operate in slightly different ways, the majority of corporations spend money to make money. They use a portion of the money they brought in to fulfill whatever promise or responsibility they made, and the difference—or what's left—is presumably beneficial (in the means of a profit or carryover or whatever). So, what exactly does this imply? So, let's consider this diamond—and where we, as employees, sit on it.
I'm going to start with the diamond's left side.
Where businesses spend their money, or more particularly, where they invest their money, is on the left side of the diamond. The shorter-term investment—money invested in a firm for the goal of earning (or receiving) revenue; what I call "generating demand"—is one of the easier types of this investment to comprehend.
Marketing and salespeople are the demand generation engines for most businesses. That is how regular demand works. You might now add another set of people to that—perhaps account management or customer success—as long as these persons or sections of the organization are tasked with increasing revenue for a certain client.
As a result, firms "spend" or "invest" their money for a shorter period of time in order to earn a shorter-term return. They're attempting to spend money in order to generate income, because revenue is, after all, the primary fuel that powers the firm. If a company doesn't have any income or isn't making any money, it doesn't have any customers. Isn't it true that businesses without consumers aren't really businesses?
So that's number one: firms make short-term investments in order to earn money. Second, in order to grow assets, organizations make longer-term investments. Assets are the product(s) or service(s) that they (the company) intend to provide. Consider this: a hotel will spend money on marketing and sales to attract bookings from individuals who want to come and stay. They invest money over time to establish a facility and services that guests will want to use while they're staying there; this is their asset(s).
Everything on the left side of the equation (sales, marketing, product development, etc.) is a terrific place to be since firms are "spending" (investing) the money they have.
We now have the other two major aspects of our firm on the other side of our diamond...
Delivery and administration are two of them. The people who really deliver the one-on-one service to the consumer "sit" in the delivery area. This could be the support crew in a software company, the front desk at a hotel, or the housekeeping staff. They're the ones who help with the real labor of delivering the goods or service to the customer.
Making sense?
Good!
The administrative personnel makes up the final group. Accountants, lawyers, HR professionals, and human resources teams—all of these employees are needed to keep the business's inner working mechanics and engines running smoothly.
This is what is referred to be "cost centers" on the right side of the equation — and it is not a compliment. Some may argue whether this is correct, but the fact remains that the portions of the right side of the equation are the business expenses that lead us to, or net us out to, profit.
This is what is referred to be "cost centers" on the right side of the equation — and that is not a flattering phrase. Some may disagree, but the truth is that the portions of the right side of the equation are the business expenses that lead us to, or net us out to profit.
I'm not attempting to save money by skimping on the right-hand side. However, as I get more clients and money, I'd like to reach some sort of economy of scale, where I only need a few staff per customer as we grow.
What does any of this have to do with an employee's position inside the company?
People on the right side of the equation (the expense side of the equation) would appreciate a world where corporations invested in their employees equally on both sides—left and right, if life and the world were fair. While "that" world may be a wonderful place to live for certain people, those firms who attempted to do so were not as successful as those that invested "properly" and followed the standard business practices. And, while working for a company like this may be enjoyable in the short term, working for a less successful company, in the long run, is never enjoyable.
On the left, you'll find salespeople and marketers.
So, what does that mean? Well, here's what you can expect: on the left side of the equation, if you're an employee in the marketing and sales arena (on the demand generation side) you can expect that your company will spend money both with third party providers and with you by providing add on benefits--whether that's commission, bonuses, spiffs, monthly contests, whatever the case may be--to drive short term performance from your area.
This is a fantastic location!
It is the company's front-facing (or outward-facing) element that is out there making noise, building a brand, and generating attention in order to attract new customers. And the closer you get to the real money exchange between a prospect and your firm in order for them to become a customer, the more value you're perceived as producing in principle!
This isn't to say that brilliant marketers aren't as valuable as great salespeople. It's the reality that the salesperson is closer to the money exchange, and as a result, they're perceived as adding more value. Marketers just need to work harder to demonstrate their worth.
That is an incredible location to work as an organization—full of parties and excitement! To be honest, the employees who work in these sectors are there because they are willing to take on the risk of growing income.
Developers and Product Managers are on the left side.
The second stage, which is longer-term, is when we start constructing our product. Engineers and product managers are examples in the tech sector. We invest in those teams to ensure that our facility, product, service offering, or whatever it is, is competitive in the marketplace. Because it's about remaining competitive in the marketplace and establishing a long-term asset that we can utilize to go out into the world and generate income, firms invest in those areas and, as a result, in those individuals. That's why engineers and product managers at tech companies are paid so handsomely because they're creating long-term assets.
Another way to look at it is that even when the employees on the left side of the equation leave a company, the value they provided to the company remains in the company and continues to pay back benefits to the company.
Take a moment to consider that.
Even after a marketer has left, the leads he or she has generated continue to pay money to the company. Customers who are closed by a salesman continue to donate money to the company long after the salesperson has left. And the product, the building, the software, the app, or whatever it is that a product manager and an engineer produce for a firm, that asset—that tool, that program—stays with the company and continues to generate income.
As a result, the basic premise here is that the left-hand side of the equation is a fantastic area to work.
On the other hand, interactions between a support person (such as a front desk representative) are limited to a one-on-one, one-time encounter. And although they do have long-term value in terms of building a brand, generating referrals, and other such things, it's quite difficult to recognize that value in any one of those individual interactions.
Delivery is on the right.
As a result, those persons are paid less than salespeople because they are considered to bring less value. I'm not just talking about intrinsic value, like point-of-sale value vs. the one-time chat the support person had to handle a customer issue kind of value, but this right-side personnel is perceived as providing less long-term value.
Clearly, there are businesses out there who are turning it on its head! Whether it's Ritz Carlton, Four Seasons, Zappa, or other customer-oriented and focused businesses, they understand that customer interactions produce long-term value and that they should engage in those connections. Because of this knowledge and belief, such companies will be able to pay more wages for equivalent occupations than other companies. But I guarantee that if you go to those companies, the "delivery" roles (those who help customers have a better experience) will not pay more or even be equivalent to the ones on the other side of the equation.
The administration is on the right side.
Finally, there are administrative positions such as accounting and human resources.
Without a doubt, these are all extremely vital jobs for our organization! Because they are professionals with degrees, certificates, and licenses, they are paid more than many of the delivery occupations. However, when a company grows, it will try to reduce the cost per dollar of revenue in these areas. As a result, these departments will be required to continually improve their efficiency and effectiveness (i.e. doing more with fewer people). This isn't to say they aren't important to the company!
What it means to you as an employee is that you'll be expected to constantly improve your ability to deliver in the hours you have available, and you'll almost certainly not be compensated for your increased efficiency. Because you're getting better at doing things, you should earn higher pay over time, but don't expect it to be a one-to-one ratio with your efforts.
So, what's the bottom line?
Now that you've grasped the gist of it, what does it all mean?
It's actually fairly straightforward. If you want to make more money, you must add more value to the organization you work for, both perceived and genuine value. And whether you're on the side of the equation where companies are investing their money in order to receive that value and those assets, or whether you're on the side of the equation where companies are expending their money in the long run in order to minimize those expenditures per revenue or per customer, determines the value.
If you want to increase your income potential, you should go for a position on the left side of the equation.
That's not to suggest the jobs on the right are awful, but believe me when I say that if you want to make more money in a standard for-profit firm in the United States of America, you should do your hardest to go to the opposite side of the equation!
You CAN do this by choosing a job/career path that gets you there, but if you start on the correct side of the equation, you'll need to find a means to go to the other side—moving from support to success: driving upgrades. Alternatively, you may go from the front desk to a sales or marketing position. Moving from customer service to product management or software development—or any of the other roles that help you cross the revenue-versus-expense equator line.
Any of those professions! While it may be difficult to make the shift (and the longer you wait, the more difficult the transition may be in terms of income, wages, clout, or organizational level), the sooner you make the transition, the easier it will be.
But believe me when I say this: if you want to expand your earning potential, the most important thing you can do is figure out how to move from expenses to assets and revenue!
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