How do we measure the worth of our employees and their skills, experience, and contribution? It is a difficult task to do when comparing it to valuing tangible items such as equipment, furniture, IT systems and other material items.

Yet, if we are to make the most of our human capital investments it’s critical to understand the difference between what each hire or layoff ‘costs’ and how much ‘value’ they represent.

Jack Welch, former CEO of General Electric and author of “On Common-Sense Business Management”, categorizes employees into three levels. The most valuable employees that add significant, innovative and lasting impacts on the organization are the A’s, which comprise about 20% of the workforce.

Welch advises that to make the most cost-effective hiring, promotion, and layoff decisions, businesses need to identify top talent and quantify the value of work output that can be achieved with an “A” employee versus a “B” or “C” employee.