Investment in people? Check if it pays off!

Service Business

When asked what value a company has, entrepreneurs most often think about hard facts - account balance, machine value, number of customers or concluded contracts. These dimensions are easy to determine and measure, and also extremely useful - for example when showing creditworthiness. Meanwhile, another aspect that largely determines the value of an enterprise is often forgotten - namely the human factor. Employees are an investment not only in the form of paid salaries, which pays off in the daily performance of routine tasks. This investment is much more serious.

Workforce as a component of the company's value

Employees can be - to put it very simply - perceived in two ways. The first one is treating subordinates only as subordinates, with specific tasks to perform and receiving a specific salary for it. Employers who approach their staff in such a way do not invest in training beyond what is necessary to introduce an employee to the tasks in the company. The main motivators are a salary, a raise, possibly bonuses.

The second approach, on the other hand, assumes that the employee is of value to the company greater than the value of the work performed by him.With the passage of time and increasing seniority, the subordinate not only gains experience, knowledge of the company and customers, but also becomes more and more loyal and connected with the company. Especially if the employer sees the needs and potential of the staff and allows them to develop - both individually and through organized trainings or courses.

Investing in human resources should not be seen only as tying a good employee to the company. It can bring much greater benefits in the form of better education, better results, and finally better matching of employees to their tasks. Therefore, specialists in the development of small and medium-sized enterprises insistently argue that not only hard investments, but also soft ones constitute a huge potential for the company's development.

It is worth paying attention to one serious problem - if investment in human resources is so profitable, why should entrepreneurs be persuaded to do so? Soft investments differ from traditional investments in some respects. Firstly, they are more difficult to measure - when buying a new machine, it is easy to show after some time whether its cost is paid back in the form of better production. But how to determine whether such a return occurs when investing in professional training or - even more difficult - professional recruitment? After all, it cannot be pointed out that employing employee A selected by professional advisers brings the company much higher profits than if employee B were hired. And the costs allocated to the professional recruitment process are visible and eye-catching.

When it comes to investing in human resources, it is also more difficult to identify what it takes to improve the company's health. For this, too, either an employee in human resource management, or a good outsourcing company, or acquiring more knowledge by the boss himself is necessary. In small companies, it is most often considered unnecessary additional costs, leaving the personal development of the company aside.

And yet the specialists are right - investing and controlling investments in human capital most often brings large benefits to companies. Even small businesses should work on this side of their business.

Profitability of investments in the human resources department

The lack of basic tools often stands in the way of profiting from employee development. In the case of other, "hard" investments, the simplest method of relating costs incurred to revenues obtained is the ROI (return of investment). To find out how profitable an investment was, divide the profit by the cost. If the result is positive and increases over time, your investment is working. Conversely, the funds invested do not produce the desired result.

ROI is quite difficult to apply to investments in human capital. This is due to the fact that it is difficult to translate into zlotys the amount of negotiation skills of a sales specialist as a result of training, or how well the last recruitment was carried out. However, you can try to determine such a profit based on, for example, sales data or team results, collected before the training or hiring a new employee and after these events. Even if the results aren't exactly accurate, they will at least give you a general idea of ​​where your business is going.

An innovative tool for Polish entrepreneurs

While approximate profitability results can be useful, entrepreneurs often want something more certain. A more detailed evaluation of the workforce investment is essential when major changes are planned and major decisions are planned that can result in both high revenues if made well and equally high costs if a mistake is made.

The need to obtain a good tool for assessing investment in human capital has been recognized - specialists from the Polish Agency for Enterprise Development in cooperation with the Warsaw School of Economics have created an innovative measurement method.

The Human Capital Value (NKL) measurement tool will allow you to measure the value of this aspect in the company. By the end of March, companies from the SME sector could apply for a pilot study to help test the new tool. In the future, it is to be available free of charge on the PARP website.

The great advantage of NKL is that it does not require a lot of money. The tool will function in the form of the most popular Excel spreadsheet. With its help, it will be possible, among others measure the value and impact of human capital in the company, which will give you a lot of tools for business development. The results may indicate what needs to be improved, in which aspects human resource management in the company is lame, and what is a strong point. In addition, the obtained data will be able to support decision-making processes and plans for the future.

Human capital in the company is extremely important, but not always appreciated. Entrepreneurs are afraid of it because of little knowledge in this field or the high costs that would be required to hire specialists. Thanks to the initiative of PARP and SGH, it will no longer be possible to hide behind such excuses - a tool is to be provided to solve these basic problems. It is up to the entrepreneur how to take advantage of this opportunity.