Rethinking Your Company’s Biggest Assets
Let’s rethink the mindset around your company’s assets. Too often management can’t see beyond the financial assets listed on the balance sheet. This constrained thinking fails to recognize the company’s biggest asset, its human capital. In fact, it disregards three overlapping yet distinct forms of this asset: leadership, which guides the firm’s human capital; employees, which make up the firm’s talent; and culture, which is the human-centered environment that allows your leadership and talent to be successful. Apple didn’t list Steve Jobs as an asset on their balance sheet, yet everyone would agree he was responsible for creating billions in shareholder value. The same holds true for the hundreds of management teams at GE or the culture at Google. Organizations that see these three pillars of human capital as proprietary and integral assets of the company, position themselves to have a tremendous strategic advantage in the marketplace.
Don’t get me wrong. I am not suggesting a company actually account for their people or culture as assets on the balance sheet. Clearly, a company does not own its employees and it has no ability to monetize these investments through a cash sale. Although, interestingly, a company can patent a culture “process” which would be reflected as intellectual property on their balance sheet and sports organizations do have the ability to trade their players. However, I am talking about the way management perceives its human capital as an asset of the company even though a study of accounting teaches us that it is nothing more than a liability to the firm.
Most managers have a general understanding of basic financial accounting principles. From this schooling they learn that everything associated with human capital is recorded as either a liability or an expense on the company’s financial statements. If this is the way we record our human capital then it must follow that this is the way we should manage our human capital, as merely a cost to the company. True, people do cost a company real money to employ. However, not appreciating your employees or creating a positive culture for them is a losing proposition. A 2017 Gallup Workplace report shows that “actively disengaged” employees cost U.S. firms $483 billion to $605 billion annually in lost productivity. If you think the cost of that lost productivity is not happening in your house then you should be aware that the same report shows only 33% of U.S. employees to be “actively engaged” at work.
What if we treated our human capital as the most important asset in the company? First off, the mood around the office would probably be brighter and people would be more enthusiastic to be a part of an organization that appreciates their talent. Engagement and productivity would improve within this environment as well. Certainly, turnover would decrease and the opportunity costs associated with having to replace key members of a team would be reduced. Under this mindset, management may actually decide to dedicate more pay, benefits and support to their people through employee training and leadership coaching. In tough times, they may actually decide to hold the course with their people rather than go through a vicious cycle of short term layoffs. Indeed, financial costs will go up when you look at human capital as a key asset to the company. But, the rewards borne out in realizing the full power and potential of your people can make these expenses pale by comparison.