Profit per employee

Really interesting McKinsey piece today(no, really) on changing the key metrics for company performance. Rather than just thinking about people as a means to the profit numbers, it suggests that looking at profit/employee focuses attention on good and bad talent management stuff…

Now this is a great start but unfortunately it comes laden with the ol’ War for Talent Schtick that they’ve been on about since Beth Axelrod was a girl (focus only on the top talent and fire the underperformers…).
I’ve long preferred the Jeffrey Pfeffer approach – the job of management is to get all employees to do a bit more/be a bit better, not just the top 10%. Not least because the idea of anyone cornering the market in talent is ludicrous and because the reality for most managers is never going to be a dream team, but making the most of what you’ve got.

Also, while the profit/salary slave metric is a good start in moving business metrics away from just counting the money, it still assumes that individual employees are individually productive and that their productivity can be measured in isolation which is clearly nonsense (at least in most sectors of the economy). As another bunch of McKinseyites* put it, the nature of most business now is person-to-person interaction (c80% or the economy) – our human networks and social skills are becoming more and more important.

“Tacit interactions are becoming central to economic activity. Making those who undertake them more effective isn’t like tweaking a production line” (This paper also notes that the range of productivity they have observed in people/interaction based businesses (the service economy, roughly speaking) is 9 times the range they see in non-people businesses (such as extraction or basic processing sectors).

No, running a modern business is not “like tweaking a production line” and that’s what makes it hard. And what makes the individual-based productivity metrics and individual-based incentive schemes less than helpful in the long run. WPP, IPG and Omnicom HR/talent teams take note.

But I don’t think the right kind of metric is that far away. Surely, these two sides of McKinsey speak to each other. Or is ‘internal competition’ (and thus non-co-operation) the norm there as in most agency networks…?