Human Capital Valuation: Measuring What Matters
In the current economy, organizations may be tempted to decrease or forgo new employee training or other workforce development programs in order to reduce short term expenses. One of our Kronos colleagues, Dr. Robert P. Yerex, explores quantitative methods for examining those types of decisions in a new paper titled “Valuation of Human Capital – Measure What Matters”. The challenges of valuing investments in employees have been studied many times over the years by well known experts such as Jac Fitz-enz and John Boudreau. Dr. Yerex, a chief scientist at Kronos, builds on some of this earlier work, focusing this paper on the development of a model that is useful for the hourly workforce.
He says the value of investing in employee development can be viewed through employee asset-based valuation models. Creating valuation models to measure human capital requires that organizations take the time to understand the specific direct and indirect costs associated with increasing employee productivity, as well as relevant measures of their value to an organization. The payoff is more informed decisions concerning the benefits of workforce development investments.
What kinds of ROI models do you use in making informed decisions about investments in your workforce?