People leverage and System leverage

Leverage means using something to maximum advantage outside of the financial world. It is often used to describe human capital. For example, new hires in a company ideally provide leverage to their managers. And, supporting functions provide leverage to their sales teams.

I find two kinds of leverage in organizations – people leverage and system leverage. The underlying concept is similar. Leverage provides for a stronger support system for execution. However, while people leverage focuses on people to provide the support system, system leverage relies on processes and systems.

Imagine you are the one woman customer service center specialist. Your company is growing quickly and you decide to hire someone. The guy you just hired provides you immediate leverage. He takes all the basic stuff off your plate and allows you to focus on more strategic stuff. Soon, you could expand this to a team of three. This is a classic example of people leverage.

However, let’s assume your first hire does a little more than you asked him to do and creates a really good FAQ resource for your customers. All of a sudden, you may not need to hire three people. That resource has helped provide system leverage. It allows you to operate at a higher level without adding people to the organization to solve the problem.

There are a couple of important takeaways once we understand this difference. First, most organizations intuitively understand people leverage. However, there aren’t enough that get system leverage. The best organizations and teams have fantastic processes and systems that enable their people to perform at a high level. This is often what makes large corporations tick. There are many large corporations whose human capital potential are definitely not being utilized. However, thanks to the strength of their systems, they still deliver impressive results. Of course, the truly great corporations have both.

Second, when you and I are hired to a new job, we provide automatic human leverage. We might even provide our manager the leverage created by two hires if we were very good. However, there is no better multiplier than when we build systems. Looking for inefficiencies in how we operate and solving them by putting systems, tools and processes in place is among the highest impact things we will do.

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