Human Capital Metrics are extremely valuable when it comes to business planning for the future. It helps Business Owners, Managers and HRs to plan business strategies and achieve the desire results and business goals. One such metric is HCROI. As the term self explains itself, HCROI (Human Capital Return on Investment) is the amount of return you receive on your investment on Human Capital (i.e. workforce). Investment here is the money you spend on them be it salaries, other benefits, operational costs, direct or indirect expenses.

In short, it is the return; a company receives against investing a single penny in its human capital.

Why HCROI Calculation is important?

• It helps to find out the ratio of income obtained against total employment costs
• Furthermore, you can find out which factors are affecting the productivity of the workforce
• You can find the gaps in human capital, analyze and work on it to minimize those gaps
• Moreover, it helps to find out whether the departments in your organization are being led under the guidance and support of the right leaders/managers

How to calculate Human Capital Return on Investment?

Human Capital ROI = (Revenue – Non-Human Capital Expenses) / Human Capital Expenses

Here Revenue is the revenue received after deducting the cost of capital, depreciation, etc.

Non-Human Capital Expenses => Operational Costs – Human Capital Expenses

Human Capital Expenses = Salaries, Training Costs, Compensation and Benefits

Share your thoughts via the comment section below!