Examining employee lifetime value

by Jeanie Casison

Recent findings confirm a correlation to the financial health of organizations.

New research commissioned by the Forum for People Performance Management and Measurement at Northwestern University reveals just how much workers are worth to their organizations. According to the white paper Employee Lifetime Value: "The People Impact" of Financial Success, simple measurement shows the positive contribution that people can make on the bottom line.

"The most important finding in the white paper is that employees create significant value for organizations and should be viewed as assets, rather than liabilities," says Michelle M. Smith, president of the Forum for People Performance Management and Measurement. "The global economy is in the midst of radical change from a product-based economy to an information and service economy, in which value creation is focused on people and their intellect and institutional knowledge. In this new environment, workforces, not physical assets or technology, are the driving forces of organizational success and are the real value creators."

A central theme throughout is the emerging concept of Employee Lifetime Value, a long-term metric that provides insight on measuring the financial value of employees, which ultimately assists organizational leaders in gathering information and making vital decisions says Smith. Additionally, the white paper which is aimed towards senior executives, financial corporate leaders, middle managers, small business owners, as well as recognition and incentive professionals, offers examples of various measurement tools to determine employees' contributions to the financial health of companies and includes strategies that support the Employee Lifetime Value concept.

"Leaders must understand the long-term value of their people to make the right decisions about how to invest in their employees, identify talents and better allocate funds to maximize performance," Smith says. "This is proving very valuable in helping companies deal with recruiting and retention issues and addressing the looming labour shortage."