Understanding Employee Value Addition: How Can HR Enhance Staff Contributions?

Dear All,

I am an HR professional responsible for overseeing all generalist functions of HR. Our management has instructed us to gather details on Employee Value Addition and to enhance the value addition of employees. Can anybody share what "Employee Value Addition" is? How can we improve the value addition of staff/workers? What is the role of HRD in enhancing value addition? Your recommendations would be greatly appreciated.

Please also provide information on the formula for calculating "EMPLOYEE VALUE ADDITION (EVA)." I am familiar with Economic Value Addition, but I require details on EVA.

Thanks with Regards,
Thiru

Hi Thiru,

Please correct me if I am wrong, but to my understanding, your company's management wants you to calculate the "Human Capital Return on Investment". This refers to how much is the ROI on human capital of the company. The formulas for the same are listed below:

1. Human Capital ROI
This measures the return on capital invested in pay and benefits. The formula is:
Revenue - Nonhuman Expenses
Pay and Benefits
Pay includes all money spent on regular and contingent labor.

2. Human Capital Value Added
This uses a similar formula to Human Capital ROI but divides by the number of full-time equivalent employees (FTEs). The formula is:
Revenue - Nonhuman Expenses
Full-Time Equivalents
This yields a profit per FTE. These two measures are views of the profitability attributable to human effort.

3. Human Capital Cost
This is simply the average pay per regular employee. The formula is:
Pay + Benefits + Contingent Labor Cost
Full-Time Equivalents
It can be augmented by adding contingent labor. In that case, we would take total labor expenses, including benefits costs, and divide by FTEs, including contingents.

4. Human Economic Value Added
This is net operating profit after tax, minus the cost of capital divided by FTEs, including contingent labor. The formula is:
Net operating profit after tax - Cost of capital
FTEs

If you need any further information on the same, I would recommend you to read the book "HR Scorecard" by Dave Ulrich. It's a very good book on HR measurement.

Please let me know if this is what you wanted and also in case you would require any further information on this topic.

Regards,
Anurag Kumar

Hi all,

Please correct me if I'm wrong.

Employee value addition can broadly be divided into two categories. First, it involves refining or handling Key Result Areas (KRAs) in a way that adds value to the organization. For example, in the HR field, if a task like managing PF formalities has been outsourced by the company, taking over that responsibility and carrying it out independently would be considered adding value.

Secondly, value addition can also come from going beyond KRAs and contributing in ways that are different from your usual profile but beneficial to the organization.

Now, the question is how to quantify this value addition. There isn't a one-size-fits-all formula that can be applied across all positions. However, exceptional performance that involves a significant change in the traditional approach of working, leading to added value, can be recognized.

Furthermore, suggesting improvements to other departments that enhance their operations can also be seen as value addition. For instance, if someone in a sales role provides suggestions to the operations team that improve system transparency and efficiency.

Calculating value addition may not always be straightforward. For example, motivating a colleague to increase productivity can be a valuable contribution, even if it's challenging to quantify.

Thank you.

Hi all,

The role of HR in employee value addition is crucial. According to my understanding, the initial step is to comprehend the employee's concern profile/KRA, assess their performance, identify areas for improvement, explore additional tasks they can undertake related to their profile, and determine their areas of interest that can bring value.

Furthermore, motivation, training, and development are the tools through which Employee Value Addition (EVA) can be enhanced.

Thanks

Dear Mr. Anurag and Others,

Thank you very much for your timely response. Please reply to my post where I have requested details on how HR can increase the value addition in organizations for all employees. The formulas you have provided are very useful. Further information on this topic would greatly assist me.

Thanks with Regards,
Thiru