Are Your Employees Assets or Liabilities?
by Todd Gitlin and Craig Lipus

In a labor market where many employers' first reaction to financial setbacks is to fire workers, the idea that employees might really be considered of utmost importance to businesses may be hard for some to believe.

Placing a value on employees can be difficult. Metrics are hard to come by, and there can be several factors that affect the value.

For instance, there is the value of the employee's contribution. In sales, there are proven metrics and performance-based compensation programs that can adequately address value. However, in many cases the contributions made by an employee can be intangible. They can include leadership skills, contributions to morale, production efficiency, and intellectual contributions.

A short-sided view of employees as "liabilities" - what they are costing the company every month - can be deadly. Losing a key member of a team to cost cutting can affect the entire team's performance. The loss to the company can be much greater than the gain made by saving compensation.

Expecting the remaining employees to "pick up the slack" can have consequences as well. Adding to an overworked employee's workload can actually reduce productivity, costing the company more in the long run.

A recent study in the British Journal of Medicine was performed to take a look at the health consequences suffered by remaining employees after a corporate downsizing. One surprising finding was that heart-related death risk is five times greater among people who are not laid off for a full four years following a major downsizing. Contributing factors are the increased stress of an added workload combined with future uncertainty.

Cutting employees as a short-term measure can also have another overlooked consequence. In many instances, the employee has attained a degree of tenure, or a working knowledge of the business and their role in it. Hiring a new employee some months later to replace the terminated employee will cost the company in training fees and lost productivity.

Treating employees as liabilities can create a tremendous loss in performance, as morale drops and people worry about "who's next?" Instead of concentrating on their work, they may be distributing resumes and preparing for what they consider to be the next cut.

Employees who consider themselves assets to the company will perform at higher levels and make significantly higher contributions. Making the employees feel important may not require additional compensation or monetary incentives. Providing a stable environment, a sense of value and responsibility, and a sense of community can be more important than dollars and cents.