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Releasing trapped value in your talent pool.

Very few CEOs view the talent pool of a company from an economic lens.

In general, CEOs and CHROs view the talent pool of a company from a cultural, behavioral or learning lens.

Understanding talent economics of an enterprise can release significant ‘trapped value.’ This trapped value is not, as you may expect, merely related to downward management of people costs. It is more related to lighting up an enterprise’s revenue and profit growth management.

How do you do it?

Let us start with the idea of Total Talent Economics™ (TTE™).

TTE helps you identify the Net Talent Value™ (NTV™) created by the total talent pool employed in a company.

Net Talent Value is the value created by a talent pool minus the cost of the talent pool.

Normally, the focal point for companies has been the cost of talent. The value created by talent has not been quantified with rigor or accuracy. Current models that attempt to calculate value of talent are based on attribution. These result in vague, inaccurate and useless outcomes because the attribution process is based on human judgment.

For talent economics to have a powerful and universal impact, the quantitative foundation needs to be solid yet simple.

A simple, quantitative metric to start with is Revenue Per Employee. (RPE)

Revenue per Employee is the revenue of a company divided by the number of employees. Similarly, Cost per Employee (CPE) is total talent cost of a company divided by the number of employees. Once you know RPE and CPE, you can calculate the Profit per Employee. (PPE)

Profit per Employee is a hugely powerful metric, identified by McKinsey in a 2007 article. We will explore the full power of this metric in a series of forthcoming issues of my newsletter.

While knowing the above metrics at the level of a company is valuable, to unlock the full value of Total Talent Economics, we need to go a step further and disaggregate these metrics.

To do that, we will deploy the method of a Talent Value Cell™. (TVC™)

My next newsletter will focus on the surprising power of Talent Value Cells (TVC) in releasing dollars trapped in your Total Talent Pool.