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Workplace Engagement InsightsLatest Employee Engagement NewsWorkplace EngagementPutting a Real Value on Your Most Critical Asset: Why CFOs and CEOs Need to Take a Hard Look at People

Putting a Real Value on Your Most Critical Asset: Why CFOs and CEOs Need to Take a Hard Look at People

Those of us who have been around long enough have seen many names used to describe the current ‘Human Resources’ function in business and the evolving role of HR. I propose that what many leaders/managers view as the role of HR needs to be examined and corrected. 

Too many people view things like performance reviews as a compliance with HR policy and not as a task for leaders to do because it is simply good business! HR is your expert team internally to equip you with the tools to get the most out of people. Period.

The job of managing for performance, for engaging employees, for retaining the best people, is the job of every single leader.

Something is still missing in our core thinking around people: we aren’t being deliberate about putting a value on the asset represented by the stream of payments making up our payroll.

The salary and benefits line on the S,G & A portion of the income statement in most companies is seldom less than 30% of expenses … and often can be as high as 80%.

Most companies manage expense items like rent, car leases, IT operating costs, telephones, and so on down to double digits.

Your People are Your Biggest AssetAre we doing the same for people?  If not – why not?

Your People Are Your Biggest Asset

Let’s take another look at the salary and benefits line. 

Here’s an example:

You have a company with a $1.0m per month payroll (or $12.0m annually) in pay and benefits. If this were an asset on lease to you, the typical cost of the capital for that asset today would run between 5.0%-7.0%. 

Using the more conservative rate of 5% to put a value on the asset would give us a capital asset worth $240.0m.

So the operative question is: How rigorous is your methodology to measure the well-being of that asset? 

Would you buy a $240m building or piece of equipment and not monitor its maintenance records? 

Would you put the asset to work without any controls or monitoring devices to determine equipment performance? 

If your answer to this is absolutely not, then the question I have is why aren’t we more rigorous in how we measure employees?

You Can’t Manage What You Don’t Measure

Measuring employee engagement gives you a sense of the well-being of the entire workforce, as well as insights into individual divisions and their performance versus ‘like’ divisions in the company. It gives you information regarding how skilled the operator (leader) of that work unit is in getting the most out of the asset. And you’ll better understand the company itself.

Measuring employee engagement isn’t a ‘nice to have’. It isn’t ‘soft stuff’ that should be left up to HR.

It is the stuff of managing an asset and being better at it than your competitors, so you can be a winner in the marketplace.

How does your business manage its most important asset?

>> Check out my employee engagement survey options, or contact me to discuss how to improve employee management in your organization.

Need ideas to help you engage your employees? Check out my free cheat sheet for “Improving Employee Engagement in Just 10 Minutes”.

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Written by Dwight Lacey

Dwight Lacey

Dwight is the President at Workplace Engagement Insights. He leads Workplace Engagement Insights with a clear understanding of the latest employee engagement research, survey best practices, and leadership styles that create successful businesses.

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