Employee Value – Is It Just Costs and Profit?

This is somewhat a tricky topic.

If we are talking about an employee’s worth, we are on thin ice there. Because a common way to calculate it is to divide the firm’s net income by the number of employees. Sounds pretty cold, right?

Let’s see if another method of doing it is more suitable for today’s circumstances. We’ll be using both an artistic and a scientific approach for it.

The science aspect embodies everything that is quantifiable. Thing like salaries, benefits, equipment depreciation, etc. The artistic approach is expressed through the assigning of value to elements such as employee morale, good will, and similar intangibles. Unfortunately, these values can’t exactly be measured in money.

So, here are some principle factors that should be taken into account to determine employee value to the employer. When you subtract all the employee costs from the employee’s assets, what remains is the employee’s value.

Here we have to think about:

Cost of Recruiting

Recruiting might sound almost cost-free, but it is far from it. You need to advertise for employees, screen applications, interview selected candidates and ultimately hire. All of which requires time and money. If your quest for a perfect candidate takes more time than planned, the expenses accumulate. Don’t let us start on costs of hiring an employment agency! A commission paid for the service can be pretty high.
So, even before your new employee walks through the door of your office, the expenses have already started adding up.

Salary

This is an expected and somewhat fixed cost. Of course, it could (and should, as a matter of fact) increase with time. But, only if the employee becomes more valuable to the employer.

Training

Both new hires and old employees may require training to perform their work and to grow professionally. Besides the costs of the training, we have to be aware of the fact that the trainee might not be able to perform on his duties 100%, due to training tasks and time spent on it.

Benefits

Just list it: health insurance, dental plans, sick days, paid vacations, retirement plans, tuition reimbursements… Sometimes the value of a benefits package can even exceed an employee’s salary, which is good to keep in mind.
However, besides being the right thing to do, offering these benefits also attracts experienced, high-quality personnel – that will bring in some good results (in translation, more money). On top of all that, add to this category social security and other expenses mandated by law.

Expenses assigned to the physical location

These are utilities, maintenance, rent or mortgage costs, and insurance. Maintenance and repairs also fit into the equation, as do waste disposal, landscape work, snow removal, and other incidental expenses.

Equipment

Computers, phones and services, company cars, and other equipment are a major expense for the employer.

The total of all these major expenses must be subtracted from the quantifiable value of the employee to come to the employee’s net value. If that is what you are looking for, knock yourself out.
If not, let’s move to some intangible ways of measuring your employee’s value.

Initiative

Initiative usually equals productivity. People who take initiative are more likely to also take risks that pay off. This is why you have to distinguish your most motivated employees from all the others. Those are keepers, with the most value.

Emotionally expensive team members

Are toxic to say the least. They can be your star achievers, but if they keep criticizing other team members, bringing them down and draining their enthusiasm – these talented employees are bringing down the overall results, no matter how successful they are personally. Failing to address these emotional expenses can be a costly mistake.

Cost-effectiveness

This can be seen as a simple question of whether your staff member delivers on the sum they are paid for or not. However, this gets tricky once you start looking at the sectors that are not the ones generating the profit. Take notice of how the employee motivates their coworkers, if they have new ideas on what could be done better and how dedicated they are to the company’s overall goals.

Decision-makers

Sharp decision making is a crucial factor when it comes to business success. Make sure you know exactly which one of your employees is capable of leading when it comes to making professional choices. Those are the ones that will see that your organization gets ahead. A high-value employee can determine all the pros and cons of two completing choices. And with that kind of skill, they easily choose the right path.

Loyalty

Of course, the person’s character can be an essential indicator of a solid employee. Once you recognize integrity within your worker, know that this person is most likely a loyal employee who puts a commitment to the organization ahead of their personal agendas. Investing in loyal staff members is always a smart idea that at the end of the day pays off.

Conclusion

Can we even conclude anything new about this issue? We are afraid – not. In the end, it all comes to two things. Your guts and intuition and the final results which you’ll have to wait for. However, there is one thing you can do, as a leader and manager. You can treat your team members as humans, with all their emotional and social varieties. Know their strong sides, but also know their weaknesses – so you can balance both with success.