An Organization’s People: It’s Most Important Asset

My favorite Dilbert cartoon has the pointy-head boss stating that he had thought the employees were the most important asset but was mistaken. When asked what their rank was now the response was “eighth… right after carbon paper.” I have experienced a similar mindset in organizations I have worked with, although carbon paper has dropped in criticality in most of them with the advent of new technology.

My book “The Most Important Asset: Valuing Human Capital,” which published in the Fall 2017, strives to make the case that nothing happens without the right workforce… all the money, technology, infrastructure and customer base will not result in organizational success without the people. Lester Thurow has pointed out that a competent and committed workforce is the only sustainable competitive advantage, since competitors can get everything else under similar terms. He also rightfully suggests that such a workforce cannot be purchased… it must be built and its viability sustained.

Some would argue the value of a competent and committed workforce cannot be determined. “The proportion of the market value of S&P 500 companies attributable to intangible assets rose from 20% to 80% in the 40 years from 1975 to 2015: from 4% of U.S. GDP in 1977 to 105 in 2006.” (Mayer, C., 2016, Reinventing the corporation. Journal of the British Academy, 4, 53-72). Not all intangible assets are attributable to workforce effectiveness (brands, intellectual property, patents and reputation count)but increasingly the market is valuing organizations based on things that skeptics think have no measurable value.

If employees do not perform well, individually and in aggregate, the organization will not do well. Obvious? Then why does it seem not to be universally recognized? The strategies and systems related to workforce management are often not viewed as being critical to success. Getting financial capital under the right terms, getting the best and latest technology and acquiring the state of the art infrastructure are all important. But if the strategies that enable an organization to staff and develop the right workforce are not in place organizational performance will suffer.

When I attempt to convince clients to do workforce planning the reception is often cool. If an organization is to have a respectable chance of successfully competing for top talent in today’s dynamic global labor markets it must utilize tools such as environmental scanning, scenario-base planning and data analytics. But I rarely see that investment being made. And when I contend that how effectively and appropriately an organization defines, measures and rewards performance will directly and significantly impact workforce effectiveness I get agreement in word but often not in deed. Performance management is typically the weakest link in workforce management processes. Today a debate rages about whether an organization should do performance evaluations or continuously measure results and provide feedback to employees. This “either-or” mindset is misguided… the need is for both to be in place. And rewards strategies often motivate destructive behavior. The banks that motivated employees to create and sell products they did not understand almost ordained their doom. Amazingly they paid out huge sums to make sure the employees did what they asked.

There does not need to be a debate to decide which type of capital (financial, operational, technological, customer or human) is most critical. They all are. The title of the book is intended to suggest that human capital should be given its appropriate place among the critical capitals. Success will be unlikely if attention is not paid to all of them. Batting .500 or .750 may put you in the Baseball Hall of Fame but will be inadequate in today’s competitive world when it comes to workforce management strategies. If something is not valued it will not receive adequate investment, and dramatic under-investments in the people that make everything happen are all too common.