John Borrowman III
Borrowman Baker LLC
Yes, your career has a NPV. That’s our conclusion, at least, from talking with rising BV professionals for the last twenty years. And you probably calculate it a whole lot more than you think you do.
Very fundamentally, NPV involves looking at a forecast of cash flows and discounting them for risk. When you do that for a client, you’re very careful with your calculations. You double-check the model you’re using. When you try that NPV for yourself, though, you face hidden risk because your ‘personal model’ can be built on suppositions that aren’t accurate.
Think of your salary and bonus as the cash flows and the risk as being the risk of continuing and improving them.
Chances are that you have a reasonably accurate view of the future dollar value of those cash flows. On the whole, rising BV professionals have expectations in line with their actual potential. While we’ve talked to some who are genuinely underpaid, far more of them are within a range of reasonableness when it comes to pay.
It’s the risk part of the equation that can be so easily under- or over-estimated.
Underestimation can happen when time passes without careful assessment. One day it looked like there was room to climb the ladder in your practice. Cash flows look reliable, increasing into the future. Low risk that you won’t be able to maintain those cash flows, and to advance. High NPV.
You get busy. You contribute. You carry a big share of the load. A few years pass and everyone is still on the same rung of the ladder. The cash flows you had anticipated are probably still there, but the risk has taken on a different look. NPV may not be quite so high.
Likewise, you can underestimate risk by not being honest with yourself about your level of commitment. Everyone says they want to get to the top; to make Partner. In the early years of a BV career it’s easy to feel you have the commitment to get there. You calculate lower risk and get a higher NPV.
A few years later you haven’t made the progress you’d like. You overlook the role of your own level of commitment, make a job change and few years later face the same lack of progress. By not accounting for this hidden variable of commitment, you continue to miscalculate NPV and don’t find success.
Personal satisfaction can mask variables that might otherwise trigger a re-calculation of risk. The practice where the rungs on the ladder are full above you can still feel like a nice place to work, full of people you like to be around. Paradoxically, dis-satisfaction can lead to overestimating the NPV of a different job.
Overestimation of the risk variable in NPV often happens when thinking about making a job change. Sometimes it shows up in the phrase, “the devil you know …” Leaving a familiar office with familiar faces carries a risk. Assimilating into a new practice carries a risk. Relying on talk of future advancement carries a risk.
In either case, the primary culprit is simply the lack of reliable information and perspective. That’s where we come in. It could be that the risk of staying is higher than you think. Or the risk of changing is lower than you think. There can also be ways to mitigate risks on either side.
Your career really does have NPV. You just need to make sure you’re getting reliable input about the risk side of that equation.
Contact us for a confidential discussion on the subject.