Is ‘ROI of employee costs’ a new theory of measuring right investment vs returns?

Success or failure of a business directly correlates to its employees' performance. Employees often are termed as the biggest asset of any company. So the highly engaged teams have proven to deliver the best results as per company's desire. This calls for an inevitable spotlight for Employers to make the right investment in talent acquisition and retention. But for many companies, employees end up being the largest expense or if we can say investment.

Calculating ROI of employee costs is not new, many experts have been advocates of this concept over the years. But it is only now shaping to be one of the highly important measurements in driving business performance. In a market led by volatility, every shop in business is trying to keep a healthy balance sheet with less cost and higher returns. Today’s employees are not ignorant of this fact. Workforce now is well informed and smarter than their predecessors on the floor. They are able to read every little space between the lines. It makes it easier for companies to drive a strong performance driven culture. But this brings a degree of relative fear and anxiety among employees to be in low performance situations. This fear of being targeted for not achieving the right level of performance, can affect even the best performing talent. So companies often strive to strike the right balance of engaged top talent and performance improvement plans for low performing employees.

The common questions on the board meetings today are – “The expense on ‘X’ team in $yy, the revenue generated is $zz. Is it well justified? Is it a call for correction? Is there a room for cut down? Do we have best rewarding programs?” HR on the other hand has grown to be a significant partner in driving business performance. Employees are questioned about the cost borne and profit/savings generated by them. A focus on generating higher profit centers vs cost centers is universal. At the same time, rewarding the best performing individuals for continuing to deliver is also a focus.

Employing a dedicated rewards management unit is an example of company which believes in making right investment in its employees. But still this overall cost can kill any small or large companies if the returns are not favorable.  Companies struggle to survive if they fail to meet the costs. So it makes it obligatory on employee’s part to execute best of the abilities to achieve results. Also, an Employer to make this well calculated investment with foreseen results.

It also leaves with a necessity of employees being well aware of market conditions, firm’s performance, individual expectation and strong internal network. These sentient efforts are sure to project significant returns.

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Comment by IT Recruitment on November 15, 2012 at 4:10pm

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