"That's not my job!"
Thought & Organisation Building

“The New Metrics!”

“Today's approach to measuring financial performance is geared excessively to the capital-intensive operating styles of 20th-century industrial companies. It doesn’t sufficiently account for factors such as the contributions of talented employees that, more and more, are the basic source of wealth.”

These could so easily be my words, but are, in fact, part of the abstract for a McKinsey article entitled “The New Metrics of Corporate Performance: Profit per Employee,” which is in turn adapted from “Mobilizing Minds: Creating Wealth from Talent in the 21st Century Organization,” a book by McKinsey partners Lowell Bryan and Claudia Joyce. The exciting sense that my philosophy is shared by one of the world’s premier thought-leading organisations is aroused further by their statement, “Financial performance—observed through balance sheets, cash flow reports, and income statements—is and always will be the principal metric for evaluating a company and its managers. But greater attention should be paid to the role of intangible capital and the ways of accounting for it.” Not only does this align with everything I have been saying and writing, but it supports my arguments regarding the benefits, for they add, “The superior performance of some of the largest and most successful companies over the past decade demonstrates the value of intangible assets.”

It is therefore entirely logical that they should conclude, “Companies can redesign the internal financial performance approach and set goals for the return on intangibles by paying greater attention to profit per employee and the number of employees rather than putting all of the focus on returns on invested capital.” Indeed, this is intrinsically very close to the message that I have been proclaiming. So close and yet so far!

'Profit per Employee,' as Bryan and Joyce maintain, is perhaps one of the single most  important measures that companies today should be using to assess their true performance. It unquestionably offers a metric that allows both year-on-year comparison and a meaningful measure of relative performance against competitors, essential for the financial and investment markets. However, it also has one major shortcoming: it fails to recognise the humanity of the people and thereby perpetuates the traditional 'command and control' mindset of the twentieth century.

By contrast, the Zealise solution, recognising and accounting for the people as assets, addresses this shortcoming. It treats people as people, recognising and catering for their individuality, and thus not only creates a more participative culture that eliminates such autocracy, but also provides a basis for consistently valuing and accounting for these intangible assets. By offering a measure of ‘Return on Human Assets’ it still offers a very effective means to consistently quantify the human contribution to the business, with all the benefits offered by 'Profit per Employee', but with the additional advantages of greater buy-in by the people; more engagement as a result of greater ownership and a sense of belonging; and people who are more fulfilled as a result, thereby creating happier workers and a happier work environment.   

I know this is a subject I have written about before, but I cannot help myself. Why would any organisation want to settle for less?

Comments

Bay Jordan

As identified in my earlier blogs - management is increasingly recognising and acknowledging people as assets, but there is either no follow-up action that makes the people feel like assets or the action that is taken retains old-management (top-down) style, and thus remains both costly and ineffectual.

Yes, people can leave, but that presents an enormous cost to the business which is one of the main reasons such initiatives are being introduced in the first place. Furthermore the grass may not prove any greener on the other side in which case neither party benefits, and the net outcome is increased disillusionment on both sides - a compounding of the very problem we are trying to redress!

Martin

All this sounds good and well, but I am no closer to understanding the real issue.

Is it apathy from management to acknowledge people as an asset?
Is it poor organisation design?
Does the problem lie with the employee - i.e. if you aren't happy in your job do something about it! Change your role, challenge management? If only one person knows of a problem, the problem doesn't exist.

If we want to increase employee satisfaction, and individual performance as a step towards improving corporate performance, something needs to be done by both ends of the equation.

There does seem to be an increase in media coverage in this area but it still seems that nobody is any closer to the solution.

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