'Valuation of talent through CTC gross underestimation of person's value

Updated on: Friday, July 15, 2011

Using the concept of 'cost to company' (CTC) to measure talent is a gross underestimation of the value of an employee, says T V Rao, adjunct professor at the Indian Institute of Management (Ahmedabad).

"CTC as a measure of a person's value and an indirect measure of talent is a gross underestimation of the value of talent. The higher we are in the organizational hierarchy, the more value our time has," he writes in his new book "Hurconomics for Talent Management."

"In education, health and other social service organisations, the valuation of talent through CTC or other such measures is a gross underestimation. The contributions of doctors, nurses, teachers and extension workers in agriculture, environment and other such social service agencies cannot be measures in financial terms similar to the ones proposed here. They should be measured in terms of their intellectual capital contributions," says the book, published by Pearson.

According to the writer, human resources cannot be measured, not easily, at any rate.

"In fact, I don't believe that people should be measured in financial terms," says Rao, who is widely acclaimed as the co-founder of the first human resource development department in the Indian subcontinent (along with Udai Pareek) and the initiator of the HRD movement in the country.

Rao writes, "Some years ago, I had developed the concept of 'hunits', which are measures of human resource inputs by an inpidual. A 'hunit' is the equivalent of one hour of time given by a person applying his or her talent to any activity in the organisation or family or society. The value of the unit changes from person to person."

"The 'hunit' value of a person is his or her CTC or his or her annual income plus earnings or expected earnings pided by the number of hours of work he or she puts in to earn that income. This measure will be found useful by HR professionals in the future for measuring talent application," he says.

"Hurconomics" is a way of looking at people, processes and events in economic and financial terms. This book deals with the economics of human resources and attempts to analyse HR activities, processes, events, systems and decisions in terms of costs and returns. It also explores the financial metrics or measures of human resources. While these could include costs, benefits, and ROI, a novel unit of measurement proposed and used extensively in this book is cost of time (COT).

At a time when relationships, loyalty, trust, openness and commitment are increasingly being thrust aside in favour of profits, professionalism, flexibility, strategy, speed and ROI, "Hurconomics" seeks to assimilate the positives in this
new trend, re-establish the better aspects of the older traditions, and integrate them with present practices.

The book explains the new role of the business-driven HRD manager and examines some of the methods he or she can use to meet the short-term and long-term goals of the company.

'Valuation of talent through CTC gross underestimation of person's value

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