EPISODE 1: PEOPLE ARE CALLED ‘ASSETS’ – WHY ARE THEY TREATED LIKE EXPENSES?

Case Study/Scenario 1:

A company is facing declining revenue due to inflation and market volatility. The board immediately proposes a 20% workforce reduction to cut costs.

Question: Is this a strategic response or a reflex action?

This outcome largely depends on the rigour of the board’s underlying analysis. Globally, evidence indicates that organisations undertaking large-scale layoffs may achieve short-term stock price stabilisation. However, many subsequently face challenges related to long-term productivity and declining morale. Research by Harvard Business School suggests that layoffs can reduce the productivity of remaining employees by up to 20%, primarily due to fear, uncertainty, and disengagement.

Accordingly, the key strategic considerations should include:

1. Has the organisation conducted a thorough assessment of productivity gaps to determine whether workforce reduction is necessary?
2. Have reskilling or redeployment options been fully explored?
3. Have inefficiencies in other areas been addressed before prioritising workforce cuts as a cost-reduction measure?

If people are the primary drivers of organisational value, workforce reduction should be treated as a last resort rather than an immediate financial response during periods of difficulty.

Case Study/Scenario 2: A tech-driven organisation invests heavily in automation and AI tools, reducing its need for certain roles.

Question: Should efficiency automatically override employment considerations?

Technology should augment human capability rather than replace it because it is an enabler that should be effectively integrated with human effort. According to the World Economic Forum, while automation may displace certain roles, it is also expected to generate millions of new opportunities globally, particularly in digital, analytical, and human-centric fields.

The core challenge, therefore, is not automation itself but the management of workforce transition. A responsible approach to adopting AI and technology should include:

1. Strategic workforce planning
2. Structured reskilling programmes
3. Clear internal mobility pathways

When these measures are implemented, the risk of technology displacing employees is significantly reduced. Employees can be redeployed across functions as roles evolve, provided there are structured reskilling initiatives that prepare them for new responsibilities.

Organisations that replace employees without investing in upskilling risk losing institutional knowledge and trust capital, both of which are difficult to rebuild.

How organisations can totally avoid dealing with redundant employees

While automation may displace certain roles, it also has the potential to generate new ones within the organisation, spanning digital, analytical, and human-centric functions.

As roles are impacted by AI and technology, employees can be redeployed into customer-facing or other human-centric positions, ensuring they remain within the organisation rather than being exited.

Consequently, the impact of redundancy can be minimised through effective workforce planning, structured reskilling programmes, and the establishment of strong internal mobility pathways. These measures enable employees to transition into the new roles created by AI.

In Nigeria, there is increasing brain drain. Some argue that employees are leaving because organisations treat them as disposable.

Is there data that supports this perception?

Research by Gallup consistently shows that employees who feel undervalued, particularly high-value employees (HVEs), are significantly more likely to disengage or seek opportunities elsewhere. In emerging economies such as Nigeria, disengagement rates are often estimated to exceed 60%. When professionals perceive themselves as cost variables rather than growth partners, the likelihood of mobility increases, both internally and across borders, contributing to the “japa” phenomenon.

In today’s workplace, retention is largely driven by:

1. Development opportunities: Employees who see clear pathways for growth are more likely to remain with the organisation.
2. Fair compensation: Employees expect equitable rewards that reflect their contributions and value.
3. Psychological and physical safety: A lack of safety, both mental and physical, can prompt employees to exit.
4. Leadership trust: Employees must have confidence in leadership and hold leaders accountable for their commitments.

Organisations that neglect these factors often incur significantly higher replacement costs, typically ranging from 50% to 200% of an employee’s annual salary, depending on the role. Consequently, treating employees primarily as expenses can ultimately result in greater organisational costs.

What people-as-assets model looks like in measurable terms

A people-as-assets approach incorporates measurable indicators such as:

1. Employee engagement scores.
2. Revenue per employee (and employee cost as a percentage of total revenue).
3. Internal promotion rates.
4. Return on training investment.
5. Voluntary turnover rates.
6. Absenteeism metrics.

These metrics enable organisations to assess whether they are operating a people-as-assets model rather than a people-as-expenses approach. They provide a structured basis for evaluating how human capital is managed and valued.

Evidence shows that organisations with high engagement levels can achieve up to 21% higher profitability compared to those with low engagement. Accordingly, just as returns on financial capital are measured, returns on human capital should also be systematically evaluated.

Case Study/Scenario 3

Consider a company that prioritises aggressive productivity targets. Employees consistently work extended hours, burnout increases, but revenue rises.

Question: How sustainable is this model?

Short-term productivity gains can obscure long-term organisational risks. Research by the World Health Organization (WHO) has consistently linked prolonged work-related stress to increased health risks and reduced cognitive performance. Workplace burnout often results in higher error rates, elevated healthcare costs, diminished creativity, and increased employee turnover.

Sustainable productivity requires balancing performance with employee well-being. Organisations that prioritise output at the expense of their workforce risk undermining their long-term stability and foundation.

Responsibility of HR professionals in preventing the ‘expense mindset’

HR professionals are responsible for providing the following evidence to the board:

1. Present workforce analytics.
2. Quantify the costs of employee turnover for leadership.
3. Link employee engagement to profitability.
4. Propose alternatives to restructuring strategies.

Advice for Nigerian business leaders: Balancing financial performance with human value

Financial capital sustains a business, but it is human capital that drives it. While people can invest resources into a struggling organisation, recovery will be slow without trust, competence, and commitment from its workforce.

The most resilient organisations are those that consistently prioritise skills development, leadership capability, organisational culture, and ethical governance. Treating employees merely as costs undermines competitiveness, whereas recognising them as assets strengthens long-term sustainability.

Conclusion

It is important to recognise that, while a balance sheet may record expenses, history records how organisations treat their people. Accordingly, employees should be regarded as assets, not merely as expenses.

This thought leadership piece was adapted from the March 2026 (Season 3, Episode 1) edition of the ‘CIPM Radio Show’ and represents the opinions of the speaker during the session.