Introduction
Have you ever looked at a new hire’s resume and thought, “This person might be exactly who we need,” only to realise six months later that they’ve lost their spark? Or have you ever taken a chance on a wildcard candidate who lacked a perfect background, but they ended up becoming the backbone of an entire department? If you’ve been in the business world long enough, you have probably experienced both scenarios.
We are living in an era where the shelf life of technical skill is shrinking rapidly. What makes an employee valuable today might be entirely automated or obsolete by tomorrow. That means the old way of hiring, checking off a rigid list of past experiences and current proficiencies, just doesn’t cut it anymore.
The real challenge for modern businesses is figuring out how to measure an employee’s future worth. It is a question that keeps HR leaders, hiring managers, and focused on finding the right talent up at night. Fortunately, by adopting a few forward-thinking frameworks and treating employees as long-term investments rather than short-term problem solvers, we can try to quantify and perhaps move past this problem.
The Employee Lifetime Value framework
To assess long term value, businesses need to start with a concept borrowed from marketing, Customer Lifetime Value or CLV. Within Marketing, CLV is used to predict how much revenue a single customer will create through their purchases with a single brand. You can use this framework for your own employees. CLV becomes ELTV or Employee Lifetime Value.
This will represent the total value an employee will bring to an organisation from the moment they are hired to the point of their resignation. The graph would start with a negative value. When you first hire someone, you are paying them and spending money on other factors, such as interviews and onboarding, before the employee has a chance to contribute. When the employee gets comfortable and integrates into the system, the curve will climb rapidly, eventually plateauing at maximum productivity. You might be wondering how to actually use and calculate this framework.
To calculate ELTV, hard performance metrics need to be factored in. Metrics such as revenue generated, projects completed, and overall efficiency rates should be considered and after this, subtract the continuous costs of their employment, like salary, benefits, and ongoing training.
Here is where the assessment gets interesting: you also have to account for the hidden value that an employee creates. Do they actively mentor junior staff? Do they improve the morale of everyone around them during stressful quarters? When businesses start measuring ELTV, they fundamentally shift how they view their workforce. Employees become long-term capital investments.
And just like any good financial investment, the longer you hold onto it, and the more you intentionally nurture it through training and engagement, the higher your compounding returns will be.
Prioritising skills and potential
To accurately assess long term value, underlying skills and adaptability need to be prioritised over job titles. Traditional talent management assumes that the people who create the most value are the ones sitting at the very top of the organisational chart. That is a dangerously outdated and rigid way to look at a company.
Sometimes, a front-line customer success representative with a knack for de-escalating angry clients holds more long-term financial and reputational value than a mid-level manager who simply delegates routine tasks. To truly assess long-term talent value, modern businesses are aggressively moving toward a talent-to-value approach.
This means identifying the specific capabilities and actions that drive your company’s success, and then figuring out which employees have the potential to deliver them, regardless of where they currently sit on the organisation chart. But how do you actually measure this raw potential? This is exactly where modern talent assessments come into play.
Instead of just asking candidates the question of where they see themselves in five years, companies are using a blend of cognitive assessments, behavioural interviews, and scenario-based testing. They are looking for learning agility, the ability to unlearn old habits and pick up new ones on the fly. If your industry gets disrupted by a new technology or a sudden market shift, you don’t want a team of one-trick ponies who only know how to operate the old software.
You want a team of agile learners who can confidently adapt and learn the new technology in a short period of time. By actively mapping out a skills inventory for your entire workforce, you can see exactly what capabilities you have on hand and where your gaps are.
When you assess talent based on their intrinsic human traits, like emotional intelligence, resilience, adaptability, or complex problem solving, rather than just their historical achievements, you get a much clearer, more accurate picture of what they will be worth to your business three, five, or even ten years down the line.
Measuring the Intangibles
An employee can be incredibly talented and brilliant; however, if they are a nightmare to work with, their long-term value to your business is zero. Assessing long-term value requires that intangibles like presence, culture, leadership, and adaptability are considered. Businesses have, for a very long time, hired people who are “culture fit”- those who, as the name suggests, fit into the company’s working environment.
All this does is build a stagnant echo chamber in the workplace. A better metric to evaluate is whether an employee contributes positively to the work culture. Do they bring, relative to the existing team, a unique perspective, background, or energy? Challenging the status quo within the workplace isn’t necessarily a bad thing, as long as it is done respectfully. It’s also important not just to accept people willing to challenge, but to actively seek them out.
An employee who asks difficult questions and offers creative insights during brainstorming sessions has high long-term value since they help prevent the company from becoming stuck in its ways, fostering adaptation and progress. Additionally, potential for leadership should be evaluated. The loudest voice or mere desire to “be boss” doesn’t qualify someone as a leader. A better indicator is who naturally takes ownership of their work, admits mistakes, and, most importantly, accepts responsibility for the team.
When a major project begins to unravel, who steps up to take charge? It’s also crucial to identify who team members turn to for advice when the acting manager is unavailable. Finally, consider how to retain these employees once identified. Long-term value means nothing without long-term tenure. You can measure employee engagement scores and establish regular feedback loops to predict how long someone might stay. It’s vital to help employees see that their career growth can align with the company’s growth, provided they are committed for the long haul.
Conclusion
Assessing long-term talent is not a one-off event; it is an ongoing process that requires active participation. You cannot assess a person’s value to your business in just a single interview and definitely not through a well-crafted resume.
ELTV is a concept that needs to be completely embraced to have maximum value and allow your business and the people within to move toward skill and adaptability-based assessment rather than looking at just the past to provide an accurate depiction of the future.
By embracing ELTV, you can start building a resilient and adaptable workforce that can greatly heighten your company’s productivity, regardless of the problems that arise through the unpredictability of the world around them.
Frequently Asked Questions (FAQs)
1. How can we prevent bias when evaluating a subjective concept like “potential” or “leadership”?
The best way to combat bias is to try to make the subjective concepts as objective as possible. That might sound contradictory, however, it doesn’t mean you have to take out all subjectivity possible; that’s impossible to do, you can define a norm that’s been observed within these categories or ask hiring managers to look for certain indicators of the “subjective” concepts to try to make them an objective reality. Define, within the organisation, what potential or leadership entail for a specific role, keep the questions you ask employees open-ended to see if there is an echo chamber built in or if there is a huge, unnecessary overlap in perspective.
2. How can small startups or businesses with small budgets assess long-term value without expensive HR software or increased labour?
You can start by slightly tweaking your hiring process to try to assess value. For example, candidates who have been shortlisted can be given a paid, short, real-world sample assignment that mimics a problem you see within the company. You don’t have to assess their solutions or thoughts, rather observe how they handle feedback, how they interact with the people around them and how they can adapt if variables within the project are changed impromptu. The cost of a process like this will be relatively negligible in contrast to the insight it can reveal about a candidate’s adaptability, reasoning and work culture.
3. With the growth of AI, can it not predict long-term talent value, if so can we trust it?
AI is a rapidly growing market, and it definitely has its uses, HR and hiring have a human quality that shouldn’t be abandoned. As stated in the first question, the point of this hiring process is to emphasise the intangible and the subjective. An AI cannot account for these things; these are factors where a defined rulebook will do more harm than good. AI will inevitably have a feature to predict long-term talent, it is important to remember that the process AI follows and the traditional hiring process will not be too different. The past will be emphasised more than the present, and historical data will be the only factor that matters, rather than the observable present. The human quality is necessary to spot the intangible and subjective.
