Cost-value threshold
Cost-value threshold
/kɒst-ˈvæljuː ˈθrɛʃˌhəʊld/ (n.)
Human resources science: The point in an organisation where the value provided by a given member of staff, or item of capital, plant or machinery exactly equals its cost.
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The Human Resources military-industrial complex
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The line isn’t scientific. It is very, very hard to quantify the “value” of staff not in revenue-generating roles. In this day in age, that is most of us. I mean them.
And nor is an one’s value over time necessarily stable. Some of us get better, some get worse. It is hard to know why.
Pure modernist ideology suggests the firm should keep all staff as close to the cost-value threshold as it can. Those who over-contribute, it should pay more; those who under-contribute it should pay less.
But practical challenges (namely, understanding what these people actually do, let alone how valuable it is), human frailty and so on means this won’t happen.
You can’t just pay employees less, getting rid of them is expensive and coaching or managing them to better performance requires talent your human resources department is certain not to have. And paying good performers more just because they deserve it strikes against basic tenets of modern human capital management.
There is therefore a warm “safe zone” penumbra above the cost-value threshold, where over-delivering employees can sit happily until finally bid away, and a cooler, larger “competence phase transition” space below the line where net-negative staff can sit, for years, safely plodding along without really helping, but also without great risk of prejudice, even when a reduction in force comes along.