Humans as financial assets. Some thoughts

This post is unfinished, and I hope that you, the reader, will add some comments and ideas.

NB: I am no accountant :)

Most companies will tell you that their greatest assets are the people, but when you read a financial report, people are not of any value. There is an issue with quantifying people.

Some standard excuses are that people come and go, but other assets do the same, any current asset can be converted in money in less than a year (in theory). Maybe that’s the reason, people cannot be converted into cash directly.

If the company fails, people can be discarded, or be part of the deal, but few companies can deliver without people working for them. There is value in people, it is a big part of the company’s evaluation, but it is not recognised.

So what? A company can exchange some employees for other people with roughly equivalent skillset. This fact seems to mean that people value as an asset is the salary. But that is not valid, because people should have a higher value than their wages, to produce value.

It could be the value-added in $ provided, most revenue is generated by people, working on their own, as a team or on machines, so there is a correlation.

In most financial document Asset depreciate over time, while in theory, people increase value (through experience) over time, but can also lose value, by having skills no longer needed. Should we have exams to understand where we are? I don’t think so, any standard way of measuring will tend to be tricked, like all the appraisal systems.

Humans would be a complex asset.

I am sure that companies with lots of data, like Google, will have something about a $ amount per employee, but it is never made official.

What happens to the value of a company when a key person leaves, if visible enough even the share value might swing just for one person.

Morality and ethic also are at play here, converting people into cash is not something that can be made official, depreciation even worth.

Data is another asset that has value but, as people, is not recognised in a financial report, leading to WhatsApp, with less than 30 employees, 0 revenues get sold for $10B.

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