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Employee Valuation: The “A-ha” Moment!

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Bill Powers
January 22, 2018

I remember the moment like it was yesterday. Huddled in a classroom with my doctoral cohort peers, we listened “intently” as Dr. David Vance lectured us on the need for intangible accounting reform. Yawwwwwn. Dr. Vance was discussing employee learning and development models and the need for International Accounting Standards to valuate intangibles. The perplexing looks among our peer group ran the spectrum of intensity from the utterly brilliant to the utterly perplexed. Admittedly, I fell into the latter category.

I likened this moment to the first time I sat in High School Geometry class and the incessant berating related to concepts of geometric proofs. When will I ever find utility in this stuff? In fact, several years ago, in a SkyMall magazine at 37,000 feet, I found the pinnacle gift for my Geometry teacher Mr. Markoe: a sweatshirt that pronounced “Another day has passed and I didn’t use Geometry once.” I digress.

In Dr. Vance’s lecture, we were bemused with facts, figures, standards and policies that heralded us to be aware that as the future leaders of our domains, employee valuation was something we must be more than aware of — we must be married to its parts, principles, applications and impact. After all Vance lamented, “employee valuation is the stanchion of competitive advantage.” Employee Valuation, not evaluation or assessment, but valuation. How do we fully account for the value of the contribution of our employees? This is a more complex question than what are the costs of employment.

The former Chief Learning Office of the Year from Caterpillar North America, a 10,000+ Industrial Manufacturing conglomerate, Vance surely knows a thing or two about how to demonstrate employee valuation and modeling. With enthusiasm, we—well I—listened intently. And, unlike the Geometry class (dare I say) twenty-five years earlier, Vance was espousing concepts I would come to find myself using and proselytizing nearly every day!

Administrators take heed, employee valuation is demonstrated in our commitment to invest in people. This is the “A-ha” effect. If we understand the valuation, the return on investment in our people becomes clear.

The “A-ha” effect is the moment that the imaginary light bulb fully illuminates. It was not flickering, it was not dimly lit. My friends, this bulb was burning bright. I understood the simplistic yet complicated modelling concepts this brilliant Professor was citing.

You are likely asking yourself, “so what that this new PA Times columnist had a learning moment in a classroom?” I implore you to ask yourself, so what? What kind of community could we build as administrators and what kind of capacity could we achieve in our communities when we focus on developing the workforce as an investment instead of expense?

Investing in People, Eric Garton of Bain and Company, Chicago – calls this the “Chicken and the Egg” conundrum. Are Administrators not investing in people because of low output (read: productivity and widgets), or, as Administrators, have we underinvested in our greatest commodity: People? We must have an “A-ha” discussion if we are to ascertain how one impacts the other.

The 21st Century workforce demands we invest in people. The administrative agenda requires Administrators to change the penchant for aged past-practices in favor of emerging trends and applications which spark a new narrative: valuation of intangible investments such as learning and development and knowledge management.

Meaghan Stovel and Nick Bontis discuss this phenomenon briefly from the lens of knowledge management (the apex of a people-centric organization) loss as a result of turnover. These researchers demonstrate that turnover costs to the firm are equal to or greater than 1.5 times salary. Yes, turnover costs the workforce human and knowledge capital (tangible loss)!

Here in the hub of government, Washington, D.C., the average salary of the government worker is approximately $80,000. While high school geometry is more complex, I excelled in simple math and suggest that $120,000 is a staggering number that is certain to make actuaries and administrators nod their heads in unison to the looming crisis. This figure is just the starting point as we all know valuating intellectual capital, that tacit and explicit knowledge, could see this number double quite easily.

Employee valuation is about building capacity. Investing in people is more than hiring candidates to fill a vacancy. It must transcend a cheek in a seat mentality and focus on the intellectual, social, structural and human capital spectrums that exist to spur competitive advantage. Cultivating a workforce begins with valuating the [employee] investment in our workforce (in all its parts, principles and applications).

Think of employee valuation through the lens of function. Those tangible and intangible practices that an employee brings is valuation defined: intellectual contribution, tacit and explicit skills, and aptitude are just a few noteworthy considerations and valuation functions rarely captured on the balance sheet beyond an outlay (expense).

Herald the beacon call of the works of management theorists and scholars like Stovel, Bontis and Vance. Intangible investments such as training and developing our people can and must be viewed as an investment, not an accounting expense. What will your “A-ha” moment be?

Author: Bill “Skip” Powers, PhD is an author, lecturer, Air Force Veteran and Senior Advisor with 25 years’ experience in federal government. Focus areas include emergency management, human capital, continuity, resiliency, and grants management.  [email protected]

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