People Power: How to Measure It

Companies own their capital assets, but (obviously) not their employees. Yet people-powered business is more important every day. In this Harvard Business Review excerpt, two Boston Consulting Group experts outline a way to measure true performance.

We are hardly the first observers to note the measurement and management challenges posed by the increasingly people-heavy and capital-light nature of business. But in our view, most efforts to take account of this shift focus on the wrong things. For example, attempts have been made to "fix" the balance sheet by including intangible assets. While these attempts certainly have value, they miss a crucial point: The critical resource of most businesses is no longer capital—that is, assets that a company owns and utilizes at as high a level as possible. Rather, the critical resources are employees whom a company hires and must motivate and retain. The fact that companies don't own their employees, as they do their capital assets, is why methods for valuing "human capital" on balance sheets are so tortuous.

Complete article at : HBS Working Knowledge