Thoughts on Capacity Exchange for Service Companies

Transcript:

I’m testing something called capacity exchange. This is something I’m building into some of our firm’s growth models. And so I wanted to share it in a quick video. It has to do when our clients ask us, “Hey, how do you hire somebody or promote somebody? What’s happening there? And how do I do that well?” And what we always tell the owners of the agencies we work with, we say, “Make sure when you give money to a team member, you get something back in return.” And basically, we call that a capacity exchange. And so basically what you’re doing is when you see a team member that’s value has increased, then you want to give them a title to match, which is a senior, a director title, something like that. And what you’re doing is you’re designating that their capacity is more valuable. And so, when you’re saying to that team member, give me more of your valuable capacity, what you’re going to do is give them money in return for that. That’s a promotion, that’s a raise, is basically what’s happened.

So, what you always want to think about is when you’re hiring people or promoting people is when you give them a raise or when you promote them, or when you just hire them, you’re supposed to get something in return. And that is capacity, some higher level value capacity, something like that. And we would say specifically for the owner, what you’re supposed to get in return from that team member? Also, you get to free up some of your own capacity and give it down to that team member. As their capacity has become more valuable, you get to replace some of what they’re doing with some of what you’re doing as the owner. You get to give it to that more valuable person. And that’s what you get back in return as an owner when you give money to team, either through hiring, or raises and promotions.

That’s an idea of capacity exchange. It can get really complicated, but I’m just kind of throwing it out there to see if this makes sense. If you have any questions about it, let us know at info@blumercpas. And we’ll be glad to help you out and help you understand capacity exchange more fully. Thanks so much. Take care.