Straight Talk

Dec. 21, 2004
What is an employee worth?

How often have you picked up an annual report from Any Company Inc. and found the following statement in the chief executive's letter to shareholders? "Our company's greatest asset is its employees." Yet, how many times have you looked at the company's balance sheet and seen an asset labeled People? Never! Because accounting systems do not consider people assets. Traditional accounting practices consider people costs. An asset is something that has liquidation value. And, if you've ever tried to pay your debts by trading in your spouse, you'll find few takers. Someone who can divorce you is not an asset. Nor is someone who can tell you to "take this job and shove it." To measure the true worth of people assets, one can't be too literal. I set out a few years ago to measure the people assets of my company. A chemist valued the chemical content of their bodies at a measly 98 cents each. An electronic engineer told me that the atoms in each body contained the potential energy of 11 kilowatt hours per pound of weight. By this theory, each person was potentially worth $85 billion. A neurophysiologist told me it would cost $300 billion to approximate the wonders of each brain. An anatomy professor told me that each heart weighs a bit more than one-half pound and that it is the most efficient pump ever created. Using this information, along with calculations on the worth of hands and thumbs from a French consultant who specializes in hands and thumbs, I figured the people assets of my 20-person company were worth more than $7 trillion. Pretty impressive. But like any assets, employees can depreciate quickly if treated improperly. Sharp minds can be dulled by lack of challenge. Contentment can be replaced with resentment when an employee's voice isn't heard. We hire people with hope, then we inundate them with rules, policies, and restrictions. We choke them with criticism, and we fire them with fear. That's not only wrong. It's bad business. We should, instead, hire people with promise, challenge them with opportunity, encourage them with recognition, nurture them with care, help them grow, and treasure them forever. That's not only right. It's good business. And it's moral. In a manufacturing plant, the scrap heap is normally made up of rusting metal cuttings, faulty parts, porous castings, and decomposing chemicals. In many of them, it is also made up ineffective or unwanted people. And a large scrap heap of people usually means that the company is being mismanaged. Among other company and plant aspects, IndustryWeek editors review turnover rates and employee involvement and training when choosing honorees in the America's Best Plants and 100 Best-Managed Companies annual awards programs. Yes, they look at productivity, but with the recognition that no company or plant can be productive if its people are fleeing in droves or suing in spades. As you might have guessed, I believe it's the chief executive's job to make sure a company's most important assets are being properly maintained.

  • First of all, as a leader, the CEO sets the tone for a company by the way he or she interacts with others. Be respectful of everyone.
  • Second, don't be stingy with salaries and training. Pay people what they are worth, and give them the intellectual tools they need to reach their goals and yours.
  • Finally, keep in touch with your employees. Find a way that suits your style and make it part of your routine. Never delegate the task of listening to someone else.
People have tremendous value. They are worth the time we must spend in understanding them, working with them, educating and training them, and helping them to improve their personal skills and achieve their huge potential. It's good management. And it's good business. Sal F. Marino is chairman emeritus of Penton Media Inc., anIWcontributing editor, and is the author of the recently published bookManagement Rhymes and Reason. His e-mail address is [email protected].

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