As usual, Senior Partner Diane Janovsky is right on the money in the article below entitled “Human Capital.” This is very timely as we all toil to make 2015 a great year in our respective businesses. Diane reminds us that we can’t just be thinking about tangible assets. We really need to be paying attention to how we manage our most important (and most expensive) assets, our people. Enjoy this week’s Power Idea.
It seems like we were just preparing for the holidays, and suddenly most of the first quarter of 2015 is behind us and March is looking us square in the face! If you haven’t already completed your annual business plan for 2015, it’s time to do so!
At a minimum, most plans contain basic financial goals like revenue, profit and cash flow. Capital requirements are likely a part of your plan as well – the investments you need to make in plant and equipment to continue to grow. But have you considered creating a plan for your “Human Capital”? Rather than treating your people resources simply as an expense on the P&L, to be minimized in order to maximize profit, what if you explored a different perspective and recognized your employees as ASSETS? How would that change your thinking, as well as your business strategy and planning?
Consider the traditional capital planning process. First of all, it typically flows from the strategic business plan. Without the appropriate long-term investment in plant and equipment, growth goals cannot be achieved. Then, because capital is usually a significant cash outlay, great care is taken in the acquisition process which considers detailed requirements and features, expected years of service and output, and maintenance requirements.
Why wouldn’t you also treat the PEOPLE in your company as a long-term investment? No matter what type of business, whether high-tech or low-tech, product or service – organizations are composed of people. Companies don’t do business with other companies – people do business with other people. If you are not attracting, hiring, developing and retaining the right people based on a clear strategy and “employer brand”, then you will also not achieve your growth goals.
We often hear the phrase “people are our greatest asset”, but in most organizations, leadership behavior is not consistent with that philosophy. If you truly regarded employees as a long-term capital asset, not just a monthly expense, wouldn’t you take great care in selecting who joined the team in the first place? Wouldn’t you make sure that they were quickly and effectively integrated into the workings of the organization? And wouldn’t you ensure that they continued to develop their capabilities during the course of their career to contribute most effectively?
Although conventional accounting principles do not currently allow for employees to be captured as a financial asset on the balance sheet, there is no reason why you cannot start now to treat the people in your organization as a strategic, long-term investment. Contact us at email@example.com for more information on how you can implement a “Human Capital” philosophy and enjoy a significant return on your investment!