What's A Worker Worth?
What's the true measure of Man? Before you wax philosophical, glean some practical wisdom from Jac Fitz-enz. His company, Saratoga Institute, devises systems for measuring human capital--in other words, how much economic value employees contribute to their businesses. One of his favorite formulas is what he calls the "human capital return on investment" (table), which calculates dollar-for-dollar profits against pay and benefits. How to use such numbers? Strung together over many months or quarters, they'll help you understand whether you're truly getting more for what are likely increasing employment costs. Most companies actually tend to underestimate human contributions, says Fitz-enz. On average, companies of fewer than 500 employees sock away $1.68 in profits for each dollar in pay and benefits. "All assets other than people are inert," argues Fitz-enz. "They don't add any value until they're leveraged by a human being."
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