People & Performance:Assets or Fungible Commodities ?
It's long been a truism that 'people are our most important asset' but anybody with a little bit of real-world experience has plenty of ground to question that. If you want some interesting evidence follow an old colleague's advice and read a Dilbert book from cover-to-cover, if you can. Amusing one cartoon at a time but taken as a series deadly depressing. Many things are embedded and embodied there but one of the keys is this fundamental question:
Are people truly assets or are they consumbles that're easily replaced ?
Now if people were really and truly assets we'd apply the rigors of capital budgeting, discounted cash-flow analysis and IRR assessments. Despite the unhappy reactions I've gotten to that suggestion stop and think about it for a while: we look at capital over it's total lifetime, understand that regular maintenance and upkeep is required and the total life-cycle costs and benefits do NOT happen with one fell swoop. Why can't we apply the same logic to people.
With at least two fundamental differences:
People are appreciating assets - unlike others they accumulate experience, training, contacts and knowledge. Their productivity and value should grow over time.
People are the last thing between you and your customers - and your suppliers for that matter. If you'd like to establish viable and effective long-term relationships it should pay to treat them well.
If you stop and think about it for just a bit the widely shared tribal folk wisdom of business and organizations is that in fact people are treated, depending, as anything but assets. Somebody who's made a major part of his career in examing the characteristics and consequences of that 'strategy' is Prof. Bob Sutton of Stamford who has an excellent blog up at Work Matters .
Bob has recently published his latest book "The No Asshole Rule" which has gotten a huge jumpstart in the blog community and is know a bestseller on Amazon before even hitting the mainstream. Highly recommended as is his blog.
There's a recent entry on the blog on the "Waste of Talent" which reflects the huge outpouring of painful stories that indicate how widespread the problem is. I'm sure Bob's e-mail is getting swamped. You can read my comment there but let me put it up here as well. In my earlier, first post on Nardelli's impact on Home Depot enterprise performance I tried to link external performance measures, market value, to the treatment of employees and customers. That approach is a top-down one that reflects Mr. Market figuring out something is wrong, rather badly wrong, and adapting valuations accordingly. The Efficient Market Hypothesis is all well and good but it takes a while for the distinctiveness of new information to be absorbed by the collective. It's fairer to describe the market, in the short-run, as Adaptive.
I'm not sure that Dark Minions actually do make money at all for themselves or their company. Rather it's a question of the measurement and management systems not capturing the damage they do. One could take that top-down or bottom-up. For the latter consider - if an asshole is abusing their team then more and more of the team's efforts (as ALL your stories show) goes into avoiding him/her and diverting their effort into other directions. And that generalizes to a company-wide basis - can't tell you for example the number of folks at well-known large companies who've told me how bad things are.
If after several rounds of over-work, bad measurement, etc. etc. the bulk of the employees keep reducing their efforts while spending all their time watching their backs and looking for alternatives you get an original 80% effort reduced by, say, 20%, at several rounds of stupidity.
Well .8 x . 8 x .8 X .8 is 40% or so. In other words one gets 1/2 the effort from skilled employees that one is ostensibly paying for.
It doesn't take many iterations for this to destroy a company's capabilities. Yet because people are treated as fungible commodities instead of (uniquely) appreciating assets they're grossly mis-managed.
Turn it around - good service is a major requisite of good competitive position yet employee abuse causes them to spend less and less on attending to customers and you get the external death spiral going. For one perspective on how that played out and is "measurable' at Home Depot see the prior post on Nardelli: Cheap at the Price ?
Interestingly enough there's reverse evidence when you look at how the military performs. Despite the reputation of top-down, rigid hierarchies the modern US military has gone, and continues to go, to great lenghts to push empowered decision-making as close to the frontline as possible. In some cases, for example, USMC doctrine calls for local operating authority to devolve to the squad leader, a corporal. And the Corp expects all its' leaders to take care of the folks underneath them. Which makes perfect sense on several levels when you stop to think about, and for many reasons.
One of which is the joint benefit to all the team-members is pretty clear. Have you ever stopped to wonder why everyone who works for an effective startup is excited and works long hours at 120% efforts levels. Sure, some of it is the wealth prospects and some of it's the challenge. But a lot of it's the fundamental satisfaction we all get from doing good work that is worth doing and makes a difference.
The real question is why don't we manage our organizations to maximize total performance by managing people as assets ?
Comments
Of course, I think this is a great post because we are singing the same tune. To your point, when I start talking to managers, it always amazes me how a surprisingly large percentage see people as not just costs, but as these stupid unreliable components that are always messing things up. I believe that such a world view leads to big problems, as you show so well.
Bob Sutton
Posted by: Bob Sutton | March 20, 2007 10:07 PM
I read Sutton's blog, but have not gotten to his book. And, of course, Dave, you and I have had previous discussions on the dearth of leadership.
Why are "...our most important asset[s]..." treated so shabbily? I've three hypotheses to offer.
First, leadership takes special sets of knowledge, skills, and experience that are difficult to acquire and maintain. Difficulty equates to effort. When raising a child it is always easier to say "Do it because I say so" than it is to patiently explain to them the reasons for the behavior you desire. I refer you to a nice article, How Understanding the 'Why' Of Decisions Matters, in the March 19, 2007 Wall Street Journal that is relevant to this discussion.
Second, there is the threat that that those being lead may compete for one's job. I suppose it's a bit like inviting the fox into the hen house. People are not generally given to this behavior.
Third, it's easier and more defensible to make decision on the basis of facts (e.g., salary) then it is to make qualitative and subjective decisions on the value of the person. For example, when a company rationalizes its workforce and dismisses senior, experienced people, it deflates the value of its assets, but little to no measurement of that is ever done. It's not just "Rather it's a question of the measurement and management systems not capturing the damage they do.", but rather the measure and management of value. I've scribbled some notes, How Do You Know You're Good, that relate to this and I'll clean-up and post at some later date.
Jim
Posted by: James Drogan | March 22, 2007 06:45 AM