Employee BankruptcyRatio

Ali Anani

Employees as Assets and Capital

Employees are assets and capital. So, why not apply financially-derived indicators to evaluate their performance?

Unfortunately when we and the systems we are in are under stress, we can become less flexible and less able to accept the uniqueness of individuals. The higher the stress, the more control we exhibit. The greater the control, the less likely people will function at their best.

Examples of Possible Applications

Employee Performance Score

instead of Financial Credit

Score

Employee Survival Ratio instead of

Company Survival Ratio

Survival Ratio of Companies

Human assetsTotal employee assets

Replace this with employeesknowledge

Retained Employees/ Total Employees

Survival Ratio

Notice the importance of assets. Employees may turn into liability and thus kill the company

Or, the bankruptcy predictor

Employee Value CalculatorPerformance Bankruptcy Predictor

Cost of DisengagementRemember that disengagement renders the employee as liability instead of assetThe cost is both financial and psychological

Motivation

Disengagement

Disengagement Cost Calculation- Base Scenario

Notice that the cost of the annual cost totals $ (564408)

http://www.baselinemag.com/c/a/Projects-Management/How-Much-is-an-Employee-Worth/

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Disengagement Cost Calculation

Notice that lowering the percentage of disengaged employees from 60% to 30% and increasing the moral of disengaged employees from 40% to 60% reduces the annual cost of disengagement to almost one third. The human factor is of overriding importance

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Net Worth Value Of an Employee

I developed this dynamic worksheet based on the grand work of Paul A. Strassmann. The net worth of an employee is negative. Replace this value with the net worth value in the Almans’ Z-Score and the survival of a company becomes critical

Net Worth Value Of an Employee- 2

Notice how reducing the number of employees from 10 to 6 renders the net worth of an employee positive. This shows how employees may be an asset or a liability greatly influencing the survival ratio of a company

A Great Lesson to Learn

The previous discussion highlighted the sensitivity of the survival ratio to

the human factorI propose the development of an Employee Survival Ratio to better

predict the insolvency and possible bankruptcy of companies

Financial Credit Score

Like we have a financial credit score per employee why not

consider developing Performance Credit Score per

employee

Credit Formula CalculationPayment history is 35% Work History is 35%

Employees who conform to work hours and completion of tasks on time with high credit

Credit Formula Calculation

Debt level is 30% Employee Benefits Level (30%)

Employees who conform to work hours and completion of tasks on time with high credit

Credit Formula Calculation

Length of credit history 15%Length of Performance History 15%

Dynamic evaluation system as it takes time into consideration

Credit Formula Calculation

Inquiries are 10% Too Many Complaints 10%

Frequent complaining lowers productivity

Credit Formula Calculation

Mix of credit is 10% Mix of activities 10%

Lack of focus of employee

Conclusion

We need to turn financial ratios into human employee

performance ratio to arrive at better prediction of the future