Are Employees an Expense or an Asset? The Answer May Surprise You

“Being an employee of several different companies, I can honestly say that I’ve felt like nothing more than a line item on a spreadsheet somewhere that an accountant is desperately trying to eliminate.”

This comment was written by a reader on my recent article, Putting Employees Ahead of Customers, and it got me thinking. Why do so many managers treat their employees like a cost that needs to be eliminated?

My conclusion was that the problem may be related to accounting. Why? Because in accounting, employees are an expense.

Consider this. By accounting rules, the cost of workers is treated as an expense on the income statement. In fact, personnel expense is one of the highest costs a company incurs. Many managers see this sizable cost every month and conclude that people are expensive. They see people as a problem. By seeing people as a costly expense, these managers think that a quick way to more profits is by reducing people or salaries. They look at employees as an expense or a problem that must be reduced or eliminated.

“Assets are company resources which have future economic value.”

Great leaders see things differently. They consider employees as an asset. In accounting terms, assets are company resources which have future economic value. Instead of seeing employees as a problem, these leaders see them as a valuable resource. They know that people have the capability to grow sales, satisfy customers, improve processes, innovate products, and do countless other things that add money to both the top and bottom line. As a CEO, I see daily examples of this in my business, Peak Demand.

If you think of employees as an asset, as I do, you treat them differently. You understand the importance of keeping them happy and operating at peak performance. You recognize the importance of leadership. You realize your team will be at their best when they are loved, appreciated, respected, engaged, and acknowledged.

It seems simple to me but it’s not often practiced. I think one of the problems is the lack of leadership training in business schools. Most graduate and undergraduate students take multiple courses in accounting but they may only attend one or two lectures on leadership. The result is we are sending young managers to the workplace with a belief that numbers are more important than people.

“Great leaders know better”

In accounting, employees are an expense but great leaders know better. They know people are an asset that represent the future results of a company. They see their team as an important resource that needs to be led properly to maximize performance. They understand their team will be at their best when they are loved, appreciated, respected, engaged, and acknowledged.

Where do you stand? Do you see employees as an expense or an asset? Have you worked for a manager who treated you like an expense or a problem that needed to be reduced? How did that feel? Have you worked for a leader that treated you like an important asset? What was that like? Let me know in the comment section below.

2 thoughts on “Are Employees an Expense or an Asset? The Answer May Surprise You

Add yours

  1. Well said Jon. I would like to add one point. It is easier to view employees as an expense… they become just a number. In my opinion, this approach shows the weakness of the leader; the ability to see in one dimension.

    Liked by 1 person

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