Appreciation (Employee Value)

Appreciation is the increase in value of an item over time. In most cases, physical things lose value over time. Clothing, electronic equipment, and most automobiles lose value from the moment they leave the factory. Some items, though, rise in value. One only has to look at an antique shop or peruse a few pages of collectibles on eBay to see this firsthand.

The common denominator in appreciation is the scarcity of the item. The less available it is, the more valuable it becomes as time passes. For example, 1992 Ford Tauruses were among the most popular cars ever, and are much less scarce than 1967 Ford Mustang convertibles. Even someone who is not a car buff would be able to make a guess as to which one is gaining value today, and which one is losing value.

In accounting, appreciation is a very specific term, and is generally used only for real property, specifically land and buildings. It is also used, on occasion, for adjusting the value of an intangible asset such as a trademark.

In a Lean organization, though, there is also an “off the books” form of appreciation. People, through consistent learning, gain tremendous value to an organization over time. Their skills increase. Their attitudes and beliefs line up with Lean philosophy. They become accustomed to working in team environments. The gain comfort working around measures and metrics.

Obviously, the more skills a person develops and the more aligned they are to the Lean culture, the more they bring to the company. Because people with exceptional skills and talents are scarce in the job market as a whole, these improved capabilities make the person increasingly valuable.

The financial meaning of the term “appreciation” is clearly defined in the accounting world. The process of accounting for gains is well-documented. Even with all that structure, though, there is still ambiguity. Until an asset is sold, the true value of it is only an estimate.

The rise of value of a person to an organization is even harder to quantify. While we like to think in a politically correct world that all people are equally valuable, that doesn’t actually apply in the business world. Each person has different skills and potential that determines his or her value to a company. And that value changes dramatically over time.

Potential is often emphasized in hiring decisions, despite it being the big wildcard in valuing the people in an organization. Potential is really just an estimate of how much the value of a person will appreciate over time.

Regardless of the sensitivity of the subject, there is a need to understand how valuable people are to an organization, and if their value is likely to rise or not. Imagine there are two people on a team, and a need to recommend one of them for a new position—perhaps for a lead position in a call center.

One is a seasoned veteran with lots of experience who performs the job extremely well. The other is a recent hire who shows great promise but has not learned all the nuances of the job yet. This lead position will likely be filled for several years by whoever you decide to choose, so you suspect the new hire will likely move on before the opportunity opens up again.

One person has reached his potential. The other has not. In this case, you have to take into account the possible increase in value of the new hire and decide if you think he or she will eventually be more effective at the job than the other person, and when that will happen. You are weighing the appreciation of the value of each person to the company as well as current and historical performance.

Words of Warning

• It is easy to treat people like material assets when you focus on their value to the company. Be careful not to forget that they are human beings who inherently deserve to be treated respectfully.
• Make sure that rewards match the growing capabilities of people. In addition to investing in training and development, companies will also have to invest in retention.

While it is in the company’s best interest to develop your skills, your bosses will focus on the ones that they need, not necessarily the ones that are most aligned with your future goals. For this reason, it is a good idea to create a personal development plan.

To create this plan, you will need a detailed assessment of your current abilities. In the best-case situation, this will be a combination of your self-assessment and feedback from both pairs and supervisors. Obviously, you’ll need to do a gap analysis between the skills you have and those that you need to figure out where you should be spending your training effort.

There is a trade-off in having your leaders involved in this planning. On the one hand, they have the resources and authority to help you achieve your training goals. On the other hand, you need to trust them to feel comfortable showing them your hand. If your bosses’ plans for you don’t align with your own, there is potential for some conflict, even though it may be subtle.

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Key Points

• Your employees are one of the few assets you have that become more productive over time.
• The appreciation of your team’s skills and abilities does not happen by accident. Both leaders and individuals must take a proactive approach to close the gap between current and desired capabilities.

Next Steps

1. Leaders should do a thorough review of the people on their team. This should include both an assessment of a person’s capabilities, and a discussion about what the person sees himself doing in the future.
2. Together, they should develop a personal improvement plan. Both the leader and the individual will have to commit resources to successfully accomplish the plan.
3. Identify the proper training materials to round out the person’s skills. Our vast selection of continuous improvement resources is a good place to start.