Friday, August 3, 2012

Calculating return on investment of human resources is very necessary


we hire human resources for our organisation and business need, let them grow in the organization and talk about their increment and sometime feel happy that they are with the organization for a longer time. But is this really a matter of feeling joy and to be happy? I do not think show. Irrespective to the size if the organization, it is very necessary to closely monitoring their worthiness and return on investment to the organisation. HR top management and other business managers have to pay key role on this. Let me illustrate this as follows: Suppose an xyz employee is working in an XYZ department for 10 years and that particular department has a specific job role. Fir our understanding let us take an example of corporate sales department of an FMCG company, the department is relatively small. An individual has joined it as an executive and responsible for increasing sales by contacting corporates. The same employee worked for 10 years for the company and there is neither super increase nor decrease in revenue generation from him/her. After 10 years the employee is now in the position of general manager doing more or less same kind of role and drawing salaary 20 times more than whatever he / she was drawing at the initial stage. Bow Now this work can be handled by an executive with 2 years experience at 80% lesser cost than whatever that employee is drawing. This puts really a serious question to the management and HR why they ignored this fact and why they need to bear such a high cost? I already mentioned in my earlier post that why too low attrition is also dangerous for company and why there must be attrition in any company. This article is somehow related to the same article. I think HR need to regularly assess total cost the company is bearing on that employee, the rate at what the cost is increasing every year and whether employee is giving return at the rate of at least twice of the increased cost. If it is not then it can pose danger to the sustainability of the company for long term.

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