Tuesday, December 10, 2013

Corporations Need People

To say every corporation needs people is an obvious statement. Yet, every balance sheet shows people as an expense. On the other hand, buildings, land and equipment are considered assets. In an era of knowledge workers, has this mindset become obsolete? Why aren’t people considered assets as well? You can’t have a company without people. 

When the US was an
agrarian society, it might have been appropriate to categorize people as an expense. However, even an agricultural society requires human beings to plant and harvest crops. In today’s farming environment, machines do most of the work. Except, at some point, people are involved in organizing and distributing crops, not to mention the need for people to build the machines. Even if machines built machines, a person would be involved at some point for simple maintenance, repairs or improvements.

Then why are people seen as an expense? Perhaps it is because assets can increase tremendously in value as demand for land and buildings rise. At the same time, the intellectual capital of a human being can perpetually increase with experience, training and development.

For example, Steve Jobs did not create the iPod because there was demand for redesigned MP3 players. He used his intellectual capital as well as the knowledge of his employees to innovate something that people didn’t know they desired. In addition to innovative products, he used marketing savvy. In the case of Steve Jobs, his intellectual capital was worth billions of dollars. Land, buildings and equipment have never appreciated in value at the accelerated rate of innovators like Apple, Starbucks, Braniff Airlines and many other companies.

With that said, consider that each employee possess untapped intellectual capital that can give a corporation access to new revenue streams and innovative cost efficient processes. And those same employees are seen as an expense to the company. Machines, on the other hand, only have the capacity to do the same job over and over again without improvements or innovations. 

If employees were seen as an asset that you invest in, businesses would do everything to increase the value of that asset. When it comes to buildings, companies improve the building to make it more valuable. When a company wants to do an IPO or put itself up for sale, it never considers the possibility of doubling the value of each employee. On the contrary, the company fires people to reduce “expenses”. In turn, that makes the enterprise more profitable and valuable. Imagine firing the next Steve Jobs who goes to your competitor or becomes your competitor.

This article was not written as a solution. It was written to start a dialogue that does not exist. In fact, hardly anyone realizes it does not exist. I ask that you consider every organization has unmined revenue lying dormant. That revenue exists in the intellectual capital of people. If the corporation needs people, why not get the most from them. Most people are waiting for someone to ask them for their ideas. The more people contribute ideas, the more ideas they will contribute.

Therefore, if you are going to run a business with people, increase their value by creating an environment that empowers people to be an asset. Otherwise, depend on land, buildings and equipment to grow your business.

How will you make yourself a more valuable asset to your company? 

What do you think? I’m open to ideas. Or if you want to write me about a specific topic, let me know. 

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