Ultimate Performance: Measuring Human Resources at Work

The Incremental Employee Contribution Model

The Incremental Employee Contribution or IEC model combines the concepts described above; a simplified version is described here. Mathematically, the incremental value that an employee provides within the system can be described as:

Pt	Potential incremental revenue on day t attributable to this employee.
St	Salary cost on day t for this employee.
Dt	Drag cost on day t.
Ot	Allocated overhead cost on day t.
U	Total up-front acquisition cost for this employee.

Graphically these relationships are shown in Figure 4.1.

Figure 4.1.

Descriptively, this model is a statement of the following inputs, effects, links, and causality.

• The longer employees are on the job, the more productive they become. Learning theory supports this proposition and allows for the quantification of a learning curve, which relates the level of productivity, skill, capacity, or capability to length of time on the job (Teplitz 1991).

• System resources in the form of such things as training materials, additional management oversight, and so on.

• Overhead costs are constant over time.

• Salary stays steady over time.

• The incremental value of an employee is negative on the first day, becomes positive over time, and then eventually levels out at a steady rate of productivity (asymptotic).

Each of these statements involves some implicit or explicit set of assumptions and beliefs. These points ...