Economic Value of Custodial Work
What is the value of our teams and the work they do?
Our teams are the backbone of our results (it’s true) – at least that is what is shared with every customer as bids are placed in the inboxes of proposal recipients. Although this is true, and the lives of the cleaning teams have value, the customers values are more based in Labor Theory of capitalism.
What is Labor Theory of Value (LTV)?
Labor Theory of Value basically states that “the value of economic goods derives from the amount of labor necessary to produce said items” (Team, 2023), this then leads to the basic natural price of product. In a shared space of commercial cleaning if the average number of hours to clean a floor is, for examples sake, is 10 hours, times the hourly wage, equals the natural price the industry will follow.
Two paths to watch out for at this junction:
1. If a company has historically focused on the exchange of dollars for hours, you are following Labor Theory of Value (LTV).
2. If a company has historically focused on perceived value of the product produced, you are following the Subjective Theory of Value (STV). More to come on that.
Managing your Human Capital within your business model should be human centered.
Is there a middle ground? Should there be a middle ground? Does your business model allow for the middle ground?
Focusing on natural prices comes with a warning, natural price is dependent on labor force availability and labor force upgrades in technology. Natural prices vary based on the technological advances to staff and can be the profit generator. Of course, supply chain reliability and staff acceptance will determine the effectiveness.
The LTV model also lends itself to a commodity-based model where time is the trading currency and will be dependent on the buyer for the gained contracts. Being in the commodity market, defined as a useful or valuable thing, such as water or time, places the product in an emotionless path to swap goods. This theory has been studied since the 19th century and applied as the earliest form of trade. Karl Marx also was a large proponent of this model as he felt that Time was the only common ingredient involved in all trade. Marx went a little further in looking past the time/labor relationship that must be equal to be beneficial to both parties, he also fixated on the need for sale to be “socially necessary” (Team, 2023).
The downfall of LTV is that all goods are sold at the natural prices (true value – labor time wage) profits are not enjoyed by the business unless payment for the workers time is less than what is charged. Again, leading to a commodity-based market selling at the lowest price, workers are willing to perform at.
Subjective Theory of Values is…
Businesses looking to get away from the commodity-based model should look towards the Subjective Theory of Value (STV). This model encompasses the ideal solution to a profit-plus-model that is more based on “individual subject evaluations of the use value of goods” (Team, 2023). Or perceived value.
Subject Theory of Values is the opposite approach to goods production. Based on the idea that labor is expended on the desire for the goods by a client. Very similar to the value-driven market we are currently in. The unfortunate down/upstream realities are all goods are subject to a subjective value base. Leading to supply/demand scenario of fluctuating prices, which can frustrate budgets and strategic plans.
Back to the two paths to watch out for:
1. If a company has historically focused on the exchange of dollars for hours, you are following Labor Theory of Value (LTV).
2. If a company has historically focused on perceived value of the product produced, you are following the Subjective Theory of Value (STV). More to come on that.
Let’s answer these scenarios.
1. Labor Theory of Value based – comes with the difficult relationship between labor and pay with employees, and customers are doubtful the employees are getting that profit paid to them. However, in a labor/value situation profit is designed as a formula of a time swap for pay.
In this situation the real weapon against lost profits is a solid hold on performance and supply chain avenues. This may mean higher pay or more training to support performance. The supply chain will need a solid foundation to handle lost time due to lead times and cost fluctuations.
If your goal is to be best in class with production this path has a strong labor relation potential for the right results.
2. Subjective Theory on Value based – the difficulty here is subjective is subjective. One customer may perceive a higher value and the other may not.
Here the goal is to have the highest possible perception of being the right choice for your clients to get the highest possible price. Hopefully over the natural price of work. This may lead to having a great marketing team, extended training for employees and management in relational building techniques. This training is, must be, over and above the natural price training or you will be outed for all fluff and no meat.
If best in class is your goal in perceived value, training, training, and more training, needs to be a part of your business model. As training takes time, having extra teammates will be needed to cover the lost production. The good thing about this is that production is not the main function of this model.
Is there a middle ground between the two models to have your cake and eat it too?
Business is a fickle little beast, and all management structures wrestle with the in-between ground. After scanning several cleanings companies’ websites, the balance is tough to manage:
In all these instances below, the company messages appear to be focused on perceived values, hoping to have the clients choose them on good/better/best performance. All perceived.
“Top Rated Commercial Cleaning Service”
“First in Commercial Cleaning”
“Cleaning that delivers a higher level of excellence and safety.”
“Cleaning services that go beyond basic cleaning.”
“Provide a healthier environment for your customers and employees.”
“Custom Commercial Cleaning Services for your facility”
“Committed to a higher level of cleaning & services.”
“A worry free commercial clean”
“First impressions are lasting impressions.”
Below are examples of labor-based models, focusing on skill. These companies are also focusing on a value that is reproducible.
“To keep your business operations safe and efficient.”
“Integrity and innovation have made us a premier choice.”
“Experience a healthy-clean commercial facility.”
The daily battle of pricing and methods requires a business owner to be open to new methods and diligent in the methods they use. Support can look different for each. Being conscious of the product you are selling is the focal point for the bid you are putting out there. One method may work better in a government setting that is heavily regulated on certified payroll and equality standards. The other method may be more open to client-based relations.
Whatever method used there are people on the very end of that plan doing the work. Enjoy the battle.
References
Team, T. I. (2023, June 26). Labor Theory of Value. Retrieved from Invetopedia: https://www.investopedia.com/terms/l/labor-theory-of-value.asp
