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The 70% solution (first appeared in InfoWorld)

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This one first ran March 4, 1996. It’s still one of my favorites and some of the best advice I’ve ever given. If I hadn’t written it then, I’d write it now and wouldn’t change one word of it.

– Bob

* * *

“I’ve worked my tail off for 20 years and what do I get?” complained a former co-worker on his last day. “Doesn’t that count for anything?”

Here’s what I didn’t point out: we all work under an unstated employment contract. Based on financial mathematics, it supersedes all written contracts, union protections and employment laws.

It’s called the 70% rule (by me), and nobody ever seems to mention it. It says, “If you don’t deliver at least 70% more than your salary in value, you’d better start making other arrangements.”

Here’s why. Let’s imagine you earn $40,000 per year. Add 25% for fringe benefits, taxes and so forth, and you get $50,000. Office space, furniture, telephone, personal computer, and other facilities and overhead expenses — at least $10,000 per year — brings to $60,000 the amount your employer spends each year for your services.

Indexed mutual funds earn about 12% per year over the long haul. By paying you the money, your employer forgoes that income — $7,200 the first year. Add it in and you’re up to a whopping $67,200 per year. In round numbers you find the true cost of having you around comes to your salary plus 70%.

According to the 70% rule, working hard doesn’t matter. Managing the coffee fund doesn’t matter. Being right all the time doesn’t matter, and probably annoys everyone when you point it out, too. Your loyalty and all the great things you did five years ago don’t matter either.

If your job doesn’t add enough value, the quality of your work doesn’t matter, and you — not your employer — are responsible for recognizing the fragility of your situation.

Only one thing matters: delivering more in perceived value than you absorb in costs — your salary plus 70%. (Why perceived? Think of unheard trees falling in uninhabited forests. As with quality, recipients, not providers, define value. Nobody has an accounting system that can show the real dollar value each employee delivers, so value in this context is very much a matter of faith and perception.)

Ask yourself how much value you actually deliver. If your company suddenly decided to stop doing what you do, would it lose more than it saves from your salary plus 70%? Who at senior levels of your organization understands and believes in the value you deliver?

Here’s a harder question: will you and your job deliver the same value next year? The year after?

How many batch Cobol programmers failed to ask this question and now wonder what happened to their careers? They delivered value right up until the point nobody needed much batch programming anymore. Then these hardworking, skilled programmers had no way of delivering enough value in the new environment.

American workers have believed in the idea of job security for decades. You won’t find security in employer goodwill anymore. You won’t find it in union contracts, either, nor in an in-flight magazine or a 3-day seminar on making a fortune in real estate in your spare time.

You won’t find it because it doesn’t exist.

What does exist is opportunity. You have to read your own tea-leaves and peer into your own crystal ball — that’s your job, not your employer’s. Then, you have to ask for the kinds of opportunities that will give you next year’s skills, so you can continue to add value in the future. Good employers give their employees opportunities to grow.

You can still fall victim to office politics. Dumb decisions in the executive suite can run your organization into the porcelain facility. The latest management fad can catch you napping or, worse, you can support the old management fad two weeks after your new manager jumped on a different bandwagon. The dollar can rise in international markets, harming the export situation.

Heck, the sun could go nova prematurely.

In the long run, though, the 70% rule puts you in control of your career, and provides the surest guide you have to continued opportunity and job satisfaction.

Comments (2)

  • The opportunity cost of paying an employee isn’t the return the company would get from investing the salary in the stock market or other external source, it’s the return the company would get from employing a different person. (Assuming the company employs only those positions required to continue functioning/making a profit.)

    What 20 years of “working your tail off” should get you is the benefit of the doubt that the company would be better off with someone else. But that’s only if you continue to work your tail off, instead of having burnt out 5 years ago and now coasting. However, if you routinely give your salary+70% value, then your employer should tolerate brief, temporary slowdowns in performance, because the cost of replacing you is higher than waiting a short time for you to be back to top performance.

    The other thing that working your tail off for 20 years should get you is the money you earned over that time (including retirement funds), plus the reputation built among peers and colleagues, plus the experience gained, plus the ingrained habits and discipline of a hard worker, plus the satisfaction of working hard and a job well done over all those years 🙂

  • Is there a typo in your summary? “you’ll at least have a change.” Do you mean a “chance“?

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