In 2000, fresh from University, I got a job. From that job I learned to not depend on my position or title anywhere I am. I was given the title of manager but was paid less than someone. He was paid more because he was the value creator, the rainmaker. What he brought in got me paid. He was 14 times more valuable than me.
In the study I conducted, I found out that 20% of employees generate 80% of the income. As such this same 20% takes home 80% of the wages. Moving from 80% to 20% is not dependent on the years of work or experience but on the value, you are creating.
In highly bureaucratic organizations where people try so hard to maintain the status quo, you don’t have to create value to earn more. Just get promoted and you become part of the status quo. Kodak filed for bankruptcy when it stopped creating value for its customers and instead maintained the status quo within it. Organizations where the status quo gets maintained only understand how to extract value. Microsoft lost many markets for the same reason.
Value creation is the natural state of humans. When an organization cares for its people and makes them feel like humans, they will in turn do what humans do: care for others. The result of caring for people is creating value for them. We have this natural tendency in us to always make life better and easy for people we care about. It’s a natural instinct.
Employees only sell their labor and time to their employer when they don’t feel cared for. It’s hard to have an organization where people don’t feel cared for and inspired to innovate. Organizations need to create a culture that enables employees to operate in the value-creation economy.
“Companies that solely focus on competition will ultimately die. Those that focus on value creation will thrive.” Edward de Bono
It’s the responsibility of organizations to help their employees self-actualize. I believe businesses are started to serve the customer and the employees. When the employees are served well and cared for, they will in turn feel the need to care for the customer. When the value is created for the employees, they create value for the customer.
- Culture is the way to create value for your employees
- Business model is the way to create value for your customers
When you create value for your employees, you make them feel and act like humans. You create human values.
When you create value for your customers, you make them feel satisfied. You create economic value.
When an organization becomes successful as a result of creating value for its employees and customers, it attracts people who are only interesting in maintaining the status and preserving cash. They create bureaucracy and push out value creation that brought them to where they are. Where they used to give more value to the customer for less than they receive in payment, now the reverse is the case, they offer less for more profit. They have moved from a value creation economy to value extraction.
Once a company moves out of the value creation economy, the customers are no longer the focus; the status quo is not the focus. They are the cabal who want to feed more on the value that has already been created. This is the state of Apple presently.
The company may continue to make a profit, but its culture no longer creates value for its employees and since the employees no longer feel valued and cared for, they stop creating value for the customer. Profit becomes the focus, not the people. The people become a means to an end. The customers also feel the same and start looking for a company that cares for them. Employees who are committed to value creation and innovation leave to seek better opportunities. As they move out, the future of the company begins to deplete.
Here are the stages many companies go through:
- Value Creation: This brings them the initial success that attracts people.
- Value Maintainers: Those attracted start looking for ways to build status.
- Value Extraction: Once the status is created, the focus moves away from value creation.
The culture is the first thing that gets impacted when a company becomes successful. As it moves from startup to bureaucracy, the culture moves from humanistic to functional. At its founding, the cultures of most companies are friendlier and more humane. But as the business grows it becomes more about how to get people motivated or manipulate them to perform. Those who maximize the extraction of value get rewarded by the status quo.
Once the employees begin to be treated as a function, the desire to create value and innovate gets thrown out of the door. Innovative employees and value creators get resisted and their ideas get torn apart.
The key to staying in the value creation economy is always to focus on creating increasing value for your employees by designing a humanistic culture and your customers by innovating the business model.
Get Your People To Be Value Creators
We are organizing a Game-Changing Value Creator Coaching program. You can be part and should be part. It is for you. If you want to attain freedom and find fulfillment at work, then become a value creator.
