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People as Assets – A Practical Proposition

People as Assets – Fact or Fiction?

Alignment“People are our greatest/most important assets!”

How often have you heard that? It has become rather a cliché. But how much validity does the statement have? What does “people are our greatest assets” actually mean? Does it mean anything at all?  

To start to answer this you need a clear definition of what an asset is and then decide whether a person can be one.

What is an asset?     

Webster’s Dictionary defines an asset in part as “1. Any item of value owned.” There are two key elements here.

Firstly “value.” Do you feel valued as an employee? I bet if you are honest you have to say no. The fact that I never have has been one of the key motivations for me moving into this arena.

Secondly, “owned.”  It has to be possessed. Strictly speaking that means a person cannot be an asset unless we go back to slavery! Yet we all have assets that we don’t technically own! For example personally we nearly all have mortgages which means we do not entirely own the house we live in. And business’ include leased assets in their books. So there is precedent for not following the dictionary definition literally.

In any case, before we rule out the possibility, it is worth looking at the second part of Webster’s definition, “2. That which is a resource.”

Now do you think that a person can be an asset? What about “Human Resources!” We could just as easily call it Human Assets and the science of what it does, Human Asset Management! (Tweet this)

Actually there may well be a good case for doing so because Webster also has a definition for assets in the plural. What is interesting here, however, is that the word has its origins in the Old French “asseter” meaning “a thing assigned”, which in turn has its roots in the ancient Latin adsidere which literally means “to seat at.” So, on that basis, you would have very good grounds for considering people as assets!

The awful accounting mismatch     

But, in order to manage people as assets you would have to account for them differently. Currently we account for people as costs and show this in the P&L Account or Income Statement. This creates a mindset that they are a drain on the organisation and promotes behaviours that reflect that. Whereas accounting for them as assets means that you would include them in the Balance Sheet with all your other valuables and manage them accordingly.

You can appreciate that this is very different. Talking about people as assets but accounting for them as costs is hypocritical and it creates an awful accounting mismatch due to the huge dichotomy between theory and practice. I had first-hand experience of this in a large-scale redundancy programme where my employer closed a division and laid off everyone in it – people who had been specially selected because they were in the top 10% of performers! For me the sheer scale of that experience and the lack of awareness of the value that was being lost was a seminal moment. It showed me how regimented and easily panicked management can be, and it ultimately set me on my journey to try to reduce the likelihood of such events.

For more about the merits of accounting for people as assets, download our free paper here or simply pick up the phone and talk to us: we would love to help you realise the value of your human assets!

 

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