Business is not complicated. In essence it is simply a case of people finding a way to deliver a product or service to other people requiring that product or service. Consequently, for all the glamour and mystery we give it, business strategy is ultimately only about the development of a master plan to connect producer and customer. And no matter how sophisticated we make the production process, it all ultimately revolves around people.
Since our earliest days as hunters and gatherers, when we first reasoned that we could be more economically efficient if we diversified and optimised individual talents for mutual benefit, business has always been about trade. Increasing sophistication has undoubtedly swelled the scale, but ultimately the increase in scale boils down to nothing more than the volume of transactions required. Unfortunately with scale the focus mysteriously switches to the transaction rather than the relationship that underpins it – with significant consequences for all involved. The old sales adage that “people buy from people” somehow gets completely overlooked, and a take-it-or-leave-it attitude begins to prevail.
This applies just as much to intra-business transactions as to inter-business transactions, and is epitomised by the term “Human Resources” – a designation that equates people with the other inanimate “factors of production.” So the burgeoning trend to talk about people as assets and the increasing use of the term “Human Capital” is good news. But, driven as it is by a need for new management measures, there is a danger that the change in terminology will not change underlying attitudes. Without this change the workplace conflict, declining levels of employee engagement and poor customer service so prevalent today will remain a problem.
Signs that this tendency to dehumanise may be continuing include:
• The classification of people as intangible assets;
• The subordination of “Human Capital” below “Knowledge Management” and “Intellectual Capital”; and, possibly,
• The burgeoning topicality of “Talent Management” with its inherent risk of focusing on talents rather than the whole persona, a possibly dangerous tendency when we all know that it is not always the star-studded team that wins the tournament, and when allowing people to develop and discover new talents is potentially the single biggest contributor to happy, engaged employees.
Of course this is paradoxical when the trend is being driven by the recognition of the importance of people and the widely accepted fact that people constitute as much as 80% of the worth of a business, something which clearly corroborates my initial point. It also points to the fact that the most successful businesses will be those that manage their people best. So any organisation wanting to survive and thrive in today’s competitive world, simply must recognise the importance of people and find a way to effectively manage them.
Equally paradoxically, despite appearing to turn people into numbers on a balance sheet, Return on Human Assets not only offers a mechanism to drive this, but a universal benchmark to compare different organisations regardless of the nature of their business. This is because it goes to the very essence of business and deals with the fundamentals – the people: identifying the individuals who make both the internal and external trades that are the heartbeat of the business.