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People Are Our Most Important Asset!

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How many times have you heard or uttered this phrase in the last 5 years or so. As a "reformed accountant" this phrase makes me cringe more than any other business euphemism being espoused today.

What exactly is an asset? The dictionary defines an asset as "A valuable item that is owned". From an accounting standpoint an asset might be a desk, building, computer, or a truck. The one thing almost all assets have in common is that they are depreciated, or used up by the company until they are worthless. Then they are discarded.

Now you can understand why that phrase makes me cringe. Certainly there are exceptions to the "use and discard" rule. Land, securities, or even artwork are examples of assets that appreciate in value and are worth more over time than they were when they were first acquired. But is that how you are treating your employees?

Many companies today seem to be using employees up. Employees are hired, placed in service, perform at maximum capacity for as long as possible, and then when they are no longer viable, they are discarded and replaced.

Just like a disposable asset.

Oddly enough, it seems to me that there really is a correlation between how companies treat their equipment and how they treat their employees. When times are going well, companies spend money on their equipment. They run routine maintenance; they keep the equipment well oiled; they buy upgrades and add-ons; and they do their best to ensure that the equipment is in the best working order possible.

Then market conditions change and the company suddenly finds itself in more difficult times. What do they do? They try to control expenses by reducing or eliminating any expense that does not show an immediate payback. Instead of getting preventive maintenance on their equipment every 30 days, it is stretched out to 90 days. Instead of upgrading the equipment with new add-ons companies try to make due without the enhancements. Instead of keeping the equipment well oiled, they cut the staff that performed the job, just to save the dollars. The result of these cost cutting initiatives is fairly clear as well. In the short term the expenses are reduced and profits preserved. But after a few months, the cost containment process begins to show it's true impact as equipment shows wear and tear, breaks down, or does not have the capability to perform the job as now required.

Similarly with employees we see the same pattern. When times are good companies spend money to hire the right employees through careful screening processes. They spend money to train employees on both technical and soft skills to improve their performance. And they reward employee performance through pay increases and fringe benefits. When the business gets more difficult the cutting starts with training, followed quickly by pay and benefits, and eventually manpower itself. In the short term, profits are preserved, but after a few months, the employees find themselves without training on new products. Process enhancements that would improve long-term productivity are set aside due to the short term costs of implementation. Companies begin to work their employees harder, without the grease and preventive maintenance required to ensure their productivity. Managers push harder for production with less staff. More coercion is used because managers know that employees have few choices but to put up with the demands being made on them. Bad bosses use bad economic conditions as an excuse to treat their people shabbily.

Just like with equipment, the costs are contained in the short term at the expense of the long-term value of the "asset". Employees are used up and then discarded just like equipment that was not properly maintained.

And who suffers the most in the long term from this shortsighted policy?

Oddly enough, it's not the employees that suffer the most, but the company itself.

Why?

Because when the economy turns again, employees remember how they were treated. They remember the lack of compassion, understanding, and leadership from their company. They quickly begin to focus their efforts on new jobs with a new company, leaving the old indignities behind.

Indeed, the company really does lose its most important assets -its' people.

So, what is the answer, you ask? How does a leadership team maintain its most important asset when finances are tough?

The answer lies in keeping your management and leadership focused on their people. And by providing leadership training for the team that includes how to maintain morale and provide inspirational leadership without spending a lot of dollars.

If you really expect your people to be your most important asset, then it's important to invest in their future, by investing in them and in the people that lead them. Spend those dollars wisely and watch the payback as your most important assets, your people, grow in value.

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