Employee compensation: Value for the money

Figuring out your worth to your company is tricky.

Canadians are a reserved lot. But who doesn’t love to find out what people are worth? In the case of the Canadian elite, the total wealth of those on the Canadian Business Rich 100 increased another 15% last year, rising to a grand total of $176.9 billion. Build an empire on the scale of a Pattison or a Schwartz, and you’ll be entitled to similarly riches, too.

Assuming you don’t, however — and there are 33,390,041 Canadians not on our rich list — you’re likely wondering just how much you’re worth to your employer. But measuring that worth is a frustratingly subjective task, says Jac Fitz-enz, the founder of Human Capital Source in San Jose, Calif., and one of the best in the field of human capital measurement. “Accounting deals principally with fixed assets. Once you buy them, all they do is depreciate over time,” he says. “But humans are just the opposite: they appreciate over time as they grow and develop.”

Capturing the subjective worth of a company’s employees has typically been accomplished by dividing the total revenue of a company by the number of employees to arrive at a general “revenue per person” number, which is good for comparing one company to its peers. “Where you’re going to find the highest-value employees is in service industries, where you get a lot of professional discretion called for in the job,” says Fitz-enz. An employee in, say, the insurance industry, where there is a lot of revenue flowing through the company, yet relatively few employees, will come out being worth quite a bit more than someone in a manufacturing job. Fitz-enz points out employees in the insurance industry can be valued at up to $500,000 to $700,000 each, a lot more than what a person in manufacturing would be worth.

But such a primitive technique is now passé, says Fitz-enz. Companies in the same sector are now so different that simple measures such as revenue per employee are not as helpful as they once were. To address those shortcomings, Fitz-enz is currently building a predictive model (funded by 20 corporations) that will take into account factors like market conditions and the competitive strengths of the individual company. This will allow managers to make forward-looking decisions about human capital and answer, in a more objective way, how much employees should be paid. “It’s not just labour demographics. It’s technology, it’s competition, it’s all kinds of things,” says Fitz-enz. Mixed into the final product will be surveys that gauge management intangibles such as leadership, commitment and engagement. “Rating a leader has a lot to do with turnover and future performance. Nobody works really hard for a leader they don’t like,” says Fitz-enz. “Leadership, engagement and commitment to the vision of the organization, these things are measurable and predictable.” Managers and employees will be able to get a look at the finished model sometime around June 1. And find out, finally, how much you are really worth.