fluctuation represent an increase in intellectual capital at
Goldman Sachs since the opening? Tobin’s Q would argue
that it does. I leave it to you. Does Goldman Sachs’s intellec-
tual capital fluctuate on a daily basis, or are we really look-
ing at the needs of investors (read gamblers)?
The H in H um an C ap ita l
We’ve discussed a set of financial-based human capital met-
rics. Now we have to balance it with a set of human-based
human capital metrics. Most monitoring of employee met-
rics is basically a body count. How many employees do we
have? What is the gender, racial, and ethnic mix? How many
affected class personnel are in managerial positions? All
that is fine, and it needs to be monitored for equal employ-
ment opportunity purposes, if nothing else. However, no
one has yet shown that a given mix of people correlates with
high performance. Before the diversity gods get me, I want
you to know that I am married to a Latina so I wholeheart-
edly believe that all people, regardless of any demographic
label, need to be cherished, supported, and helped to grow.
And I believe that a diverse workforce is better than a homo-
geneous one. My interest here is to look for metrics that will
tell us something about the effectiveness of certain human-
financial ratios in our operating systems.
Workforce Demographics
It is useful to know things like how many exempt versus
nonexempt people you have and what percentage of the
work is being done with regular versus contingent personnel
or is being outsourced.
Exempt Percent
The exempt percent is the number of exempt FTEs as a per-
centage of total FTEs. The proportion of your workforce
that is exempt versus nonexempt tells you something about
the nature of your organization. If your employees are pre-
dominantly nonexempt, you are probably in the processing
business—building products, processing paper transac-
tions, or running some type of logistics center. If your em-
ployees are predominantly exempt, you are probably more
of a financial service, technology, or marketing business.
There are well-known examples of marketing companies.
Nike enjoys a major share of the sneaker market and a sig-
nificant piece of the sports apparel market. Yet it does not
manufacture its products. It is principally a marketing com-
pany. Fidelity Investments has a mix of exempts and nonex-
empts. It offers both a variety of financial services, such as
mutual fund management, and transaction processing
through its benefits and payroll businesses. Predominantly
professionals populate the investment advisory functions,
whereas the transaction processing services have a higher
percentage of nonexempts. Automobile manufacturers are
heavily weighted toward production workers, who are
mostly nonexempt. If one of them decided to sell its manu-
facturing facilities and focus on design and marketing, its
mix would flip.
In conclusion, knowing your mix is useful because you
can see it begin to move outside of acceptable levels. This is
what happened to many U.S. businesses up through the
early 1980s. The proportion of exempt to nonexempt staff
in manufacturing rms got out of balance and created a
breakeven point that made some companies noncompeti-
tive. This led to the downsizing tsunami. If we had been
watching the mix all along, we probably would not have ex-
perienced that pain.
Contingent Percentage
The contingent percentage is the number of contingent
FTEs as a percentage of total FTEs. The growth of the con-

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