Why investing in People ? See why they are better assets.
Financiers consider employees as expenses and not investments. Many managers prefer to invest in machines or IT systems rather than people.
But it's a mistake. A financial mistake. A managerial mistake.
One of the most famous economists said it : “I am worried about our tendency to over invest in things and under invest in people”. John Kenneth Galbraith
Investing in people is simply more profitable
Several studies show this:
- 10 % increase in the educational attainment of a company's workforce resulted in 8.6 % increase in productivity. A 10% increase in the value of capital stock such as tools, buildings and machinery, produced only a 3.4 % increase in productivity. Study conducted by the Census Bureau for the Federal Department of Education (1996)
- Companies in the top quartile of the “investment in training per employee” have profit margins higher by 24%, income per employee higher by 218% and stock price-to-book ratio higher by 26% than firms in the last quartile. Study conducted by ASTD (American Society for Training and Development)
Investing in people lasts at least as long as for machines
The fear of investing in your employees is often the fear of seeing them leave and losing your investment.
This can be illustrated by this joke:
Contrary to common believe or fear, the figures show that the investment period is about the same:
- The depreciation periods of the equipment are mostly between 3 and 5 years.
- Workers in management, professional, and related occupations have a median tenure of 5.0 years. Workers in service occupations, who are generally younger than persons employed in management, professional, and related occupations, have a median tenure of 5.0 years. According to a study by the United States department of labor for 2018.
The actual lifetime of the equipment may be longer than the depreciation period. But that of employees is certainly also more so than this "statistical" duration. Indeed, this is only an average, and if we took the duration of jobs for which there is investment in people, it would be longer.
As Richard Branson said: “Train people well enough so they can leave, treat them well enough so they don’t want to”
Employees are sometimes absent for medical or other reasons; somehow they "break down". But they come back alone... and very often the cost of the absence is covered by social security or a mutual insurance company.
Machines fail, and more frequently than employees. And we need maintenance teams to get them back to work.
Employees adapt and grow
Artificial intelligence may allow adaptive and evolving information systems; but not now. And this will not be true for most other equipment.
Employees are able to adapt, change jobs, and sometimes evolve radically.
Employees make your business unique and grow it
It is the employees who make your competitive advantage, not machines.
It is the employees who develop, invent and reinvent your company, not machines.
“You don't build a business, you build PEOPLE. And then PEOPLE build the business.”
Invest in people.
Go further: best practices to engage employees
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