How an employer values an employee is reflected in the latter's salary, responsibilities, and authority. But what criteria should a company use to determine which employees get what compensation? And how can an employer compare the value of two employees with entirely different job descriptions?
Professional sports teams are faced with exactly this problem when evaluating athletes. More than most sports, baseball is awash in statistics, and several analysts have recently developed complex statistical metrics for evaluating players. Michael Lewis's popular book Moneyball tells how the Oakland Athletics used these new stats to build a championship-caliber franchise a few years ago despite a limited payroll.
One such metric is a tool called value over replacement player (VORP), which can be defined as “the number of runs a player contributes beyond what a replacement-level player at the same position would contribute” given the same number of plate appearances. A “replacement-level player” is one who is easily acquired, through either a team's farm system or the waiver wire.
In the past, using raw statistics to evaluate players at different positions and to determine which player was more valuable was an inexact science. But that's all changed now that VORP, among other metrics, is in widespread use. One can now compare, for example, the 2003 season of Javier “Javy” Lopez, then of the Atlanta Braves, with that of Richie Sexson, then of the Milwaukee Brewers. Lopez had a career year in 2003, smacking 43 home runs and driving in 108 runs. Sexson had a similarly productive season, hitting 45 home runs with 124 RBI. Based on these numbers, it would be almost too close to call if you had to choose between the two players. You'd probably take Sexson, because of his slightly higher run production.
But by using VORP, we can clearly see that Lopez is the far more valuable player. Why? Because Lopez is a catcher and Sexson plays first base. As a group, catchers don't hit nearly as well as first basemen. In 2003, the catcher with the next-highest home run total had 30, and only five catchers hit as many as 20. In contrast, Sexson didn't even lead his position in homers, and 20 first basemen hit at least 20 dingers. So even though the two players' raw production is roughly the same, Lopez is more valuable by virtue of the larger gap between him and a replacement at his position. Indeed, Lopez's VORP in 2003, according to www.baseballprospectus.com, was 78.0, meaning that over the course of the season, Lopez contributed 78 more runs to his team than a replacement level catcher would have, seventh-highest in the major leagues. Sexson's VORP was 58.7, 27th in the bigs.
What does this have to do with your workforce? A key employee may not necessarily be the one with the greatest responsibility or the most authority; rather, he or she is one who is hard to replace. Faced with evaluating the performance of, say, a lead carpenter versus that of a salesperson, or an estimator versus a production manager, a concept such as VORP might enable you to better compare their value despite their varied responsibilities.
Hayden Alfano is an assistant editor for REMODELING magazine.