By Staff Report
Feb. 4, 2001
The Saratoga Institute, now a part of Spherion’s Human Capital Consulting Group, has been measuring the value of human capital for 20 years. Among the 250 different metrics used by the institute are revenue factors, profitability, and investment in a company’s workforce. Using a number of formulae, researchers at the institute are able to quantify the value of human capital as well as its overall effectiveness, claims Robert Morgan, president of the Human Capital Consulting Group.
“One of the things we encourage companies to do is to take the top 10 metrics – not necessarily all 250 – and measure themselves. Not every metric is important to a company. Itdepends how labor-intensive they are, if turnover is a problem, if they are in a knowledge industry, things like that.”
Those 10 metrics were developed by Jack Fitz-enz, founder and chairman of the institute. Since there is no set standard of measurement that fits every company, Fitz-enz says, it’s important to decide which of these apply to your company’s situation. What is important to one firm, he says, might have little value to another.
This metric is designed to help you track changes in your workforce. You can do this best by comparing this metric to your revenue factor, your compensation costs, your benefit costs, and your contingent off-payroll Costs. If your Total Labor Cost Revenue Percent is increasing, you need to see if this is because your compensation costs or your benefit costs are increasing or if your revenue is decreasing. This will help you determine what actions to take based on your business objectives. Cutting costs may only help in the short-term if revenue is decreasing.
Also, by looking at this number in comparison to your contingent off-payroll costs, you can analyze whether or not your contingent workforce is contributing to an increase or decrease in your total labor costs.
Workforce, February 2001, Vol80, No 2, p. 35 Subscribe Now!
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