Income Ratio

Income Ratio

 

Income to Service/Value Ratio 

As individuals (employees, business owners, executives or whatever) we should be mindful of the level of Value – or service/help we are providing in our role, compared to the income we receive.

Similarly with organisations, businesses and distinct teams within teams. We must always ask – are we providing a commensurate level of value or service compared to the level of income we are receiving? Income for individuals could be salary and benefits, or profit for business owners.

We’ve developed a useful conceptual tool to help individuals, team leaders and business leaders gain insight as to whether they are providing a commensurate level of value or service relative to the income they receive.  The Income to Service/Value Ratio Graph.

We as individuals, teams or organisations are giving (or not) a certain level of value or service to our clients or to benefit people generally. Similarly we as individuals or organisations as a whole earn a certain amount of money in any given period.

Is the level of our contribution commensurate with the income we or our organisation is earning?

At any given time we or our team or organisation will fall into one of four categories:

 

Quadrant 1-Higher Earnings/ Income Received & Lower Value /Service given (Upper left Quadrant on the Graph)

These are the employees who are paid too much for what they deliver. They are the businesses that earn more than their value or service contribution to their customers. It is not usually a long-term, sustainable place to be. However it is very hard for businesses, organisations or individual to leave this space voluntarily.

 

Quadrant 2- Lower Earnings / Lower Value/Service Given (Lower left Quadrant on the Graph)

A very dysfunctional place to be. It means that you and/or your business/organisation/team aren’t earning much. Plus you are not providing much value or service to those whom you are supposed to service.

 

Quadrant 3- Higher Earnings/Higher Value/Service Given (Upper right Quadrant of the graph)

This is where we all need to be. It’s the sweet spot. It’s the place where we or our business/organisation/team will earn a higher amount, whilst also contributing and servicing to a higher degree than the norm.

 

Quadrant 4- Lower Earnings/High Service given. (Lower right Quadrant on the graph)

You might feel all warm and fuzzy here or you might feel resentful. Either way you or your business are not earning enough compared to the value or service levels you provide. Perhaps it’s time to seek a pay rise if you’re an individual or move on. Or increase your prices if you’re a business owner.

Where we as individuals, teams or organisations fit on the Graph will change over time. There will be employees in all parts of the graph in most organisations. It’s important however to honestly assess whether you or your team/business are in the top right hand quadrant.

If you’re not-what will it take you to get there?

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