People – Investment or Expense?

As business owners, we are familiar with the terms ‘asset’ and ‘expense’, but are they limited to purely financial aspects? Can they extend to the people within a business? 

It is widely accepted that employees are a business’s most valuable asset, but the costs of employing staff are treated as an expense, by definition. An expense exists to be consumed, whereas an asset represents a resource that has future economic value. 

Viewing people as an expense means employees and roles are regarded by business owners only as costs, to be minimised (e.g. by replacing with efficiencies such as machinery and automation). Doing so increases reported profits, maximising returns for the shareholders. However, culture, business development and product innovation could be compromised as a result. Treating development of people as an expense rather than an investment can have a significant hidden cost in terms of low productivity, high staff turnover and reputational damage. 

Investing in your employees helps maximise staff output and develop a solid reputation in the marketplace, which in turn attracts better staff. After all, what employee wants to work for a business that regards their people as a disposable resource? A good leader recognises the value of investing in ‘human capital’, and considers his people a valuable resource that will produce an increasing return to the business as they are upskilled and developed through performing higher-value roles and responsibilities. 

 Investing in human capital not only reaps benefits for your business in the short-term, but also the long-term. As businesses navigate their way through the uncertainties posed by the pandemic, forced to challenge the status quo and pivot, having trained people in key roles ensures the business maximises its’ potential in the changing environment, both now and in the future. 

Investing in staff is broader than just training. Offering support programs, allowing flexible working arrangements and providing benefits such as meals are some of the ways employers can invest in their people. And, valuing their feedback and allowing them to share ideas. Example: Virgin recognises that any person on the planet has the potential to come up with the next million-dollar idea, but that this potential will only be realised by listening to their ideas and suggestions, and investing in their people. 

Of course, your investment must be reciprocated. Staff who have had time, money and training invested in them must also demonstrate a commitment to contributing to the company growth, strategy and culture. The risk of them leaving, taking their skills and experience elsewhere is real, but as Henry Ford said, “The only thing worse than training your employees and having them leave, is not training them and having them stay”. 

Whether you’re a leader, manager, employee or business owner, ask yourself, what steps can you take today to invest in the development of your team or yourself?