The Human Asset - A Liability?

One of my earliest accounting lessons was on understanding Balance Sheet and P&L in simple terms. Our Professor called it the Four Box Approach. These boxes are: Assets, Liabilities, Revenue and Expenditure. In extremely simple words, all Assets become expenditure, every expense creates Revenue and the revenue gets converted to Liability. In short, eventually All Assets become Liabilities.

Is this also true for “Human Asset”? Reams and Reams of management articles and books have been spent on defining and extolling the virtue of the Human Capital, Human Asset, our-people-are-our-biggest-strength (assets) etc. etc.

True to the fundamental accounting principles, I see that the Human Assets also get converted to Liabilities sooner or later. The famous Peter's Principle aptly describes this situation "employees within an organization will advance to their highest level of competence and then be promoted to and remain at a level at which they are incompetent"

Let us not confuse "incompetence" with Technical knowledge and skills alone. This also could be lack of understanding of business principles, market dynamics and changes, refusal to align to shifting demands, capacity to handle larger scale of operation or even as innocuous as the ability to handle change.

Yet, in many companies, the managers fail to see, or at least acknowledge, that many of their valued assets have quietly slipped into becoming liabilities and need to be dispensed with. On the other hand, there are several evolved companies that practice “planned attrition”.

One of the reasons of assets fast depleting into liabilities is depreciation of the assets for too long. Let me explain. In any company, in any department, there comes a stage when the management has to struggle with the same dilemma of “make-or-buy” as in real product manufacturing. Should we stick with home-grown people who understand our business so well and are well versed with the company’s history, problems, constraints etc or should we blood in new talent from outside, someone who is not only free of our historical baggage but also has different set of experiences and probably a different approach to handling the same complexity? Do the home-grown people have the necessary competence and more necessarily the attitude to change the status quo?

Like in any make-or-buy decision, here too both the options have their factors of favourability. These factors largely depend on the context but more on the leadership style of the top management. In any case, it is a painful decision and the management has to be prepared to face the consequences whichever path it chooses.

I am firmly of the opinion that optimism and pragmatism rarely go together. Rather, a certain degree of pessimism may be handy when evaluating options.

I believe that more often than not, if you are driving change or are being driven by it in your environment, one might want to consider blooding-in the new talent from outside to complement the home-grown strengths, especially if the task at hand is a complex one. It has a lot to do with the skills, knowledge, experience and emotions. There is a lesser possibility of the new incumbent getting emotionally influenced and hence might be better placed to take hard decisions and act faster when suitably empowered apart from bringing additional critical skills and experience on the table.

The second aspect of the assets converting to liabilities is the ratio of finished goods to WIP stock. The finished goods if not employed gainfully tend to rot. The WIP stock is the future of any company. The managements must strive to keep their Human Asset in a perpetual state of WIP through appropriate and continuous training. Like any WIP material, the existing people must be constantly worked upon and not allowed to drift into comfort zones.

My worst nightmare begins when someone responds to a discussion with, “Yes, right, but we can’t do …..”, or worse still, “it is not possible to …..”. Such people have generally resigned to the status quo, have stopped looking for solutions beyond the obvious and can not be expected to drive change for the better.

Finally, one must protect the “real” Assets. How does one do that? Well, to begin with, keep them busy. Tap their potential and use them suitably before they slip into fast exponential depreciation mode. In my personal experience, nothing is more de-motivating for an employee than to see that despite the best efforts put in by one unit, the customer, who is usually touted to be at the center of the organization’s universe, can not be given a superior and integrated delivery of products and services. Allow these employees to work across the organization to see what really goes on, where are the challenges and if possible utilize this third eye to propose solutions. You might actually use your assets better.

We tend to box people into their roles and do not utilize their latent potential. We end up focusing more on methods rather than on people. Very often, we fail to recognize that the asset has a lot left in it but we have allowed it to reduce itself to its book value.

Deterioration of the human asset owned by an organization must be arrested. If the Human Asset is the most important asset of a company beyond the balance sheet, then it must act significantly to protect, grow and evaluate this asset on a routine basis.

Should I Go?

I have been noticing that a colleague of many years has been behaving very differently of late. A perpetual frown, quiet behavior, furtive glances, nervy and generally upset. I know these symptoms from my several years of managing people. I sniff around. The grapevine manages to send me the message that the colleague has recently attended an interview call at another company. So I set up a chat over a cup of coffee with this colleague. I learn that the interview was motivated by a call from a head hunter and this colleague went to “test the water”, “understand the market value”, but “No, I am not keen to leave” etc.

I understand this very well. It always starts like this and usually ends with the person finding the offer attractive and quitting. I can’t let this happen this time again, can I?

What should I do?

I realize that I have failed more often that I succeeded in retaining the person who decided to leave. Sometimes I was happy to let the person go with a feeling “Good riddance! Now I have a chance to change a few things around”; at others I tried my best, in vain though, to hold on to the person.

The trouble is that by the time you learn that someone is contemplating a change, they have committed so far on the “I Quit” path that they find it difficult to retrace their steps. Yet, I feel miserable because I know that the new job prospect does not happen by chance but only when one looks around for it. The search for a “better” prospect starts when one suffers some sort of dissatisfaction with the status quo – unfulfilled expectations, lower salary, disparity within the team, lack of freedom to act and decide, stagnation, utter desperation of not being able to bring the change in the environment and sometimes simply boredom. I feel guilty that as a manager and as an organization we did not do enough to anticipate this and bring a change. Cajoling and convincing at that stage has generally failed me.

So what went wrong? I ask myself. I reflect. Reflection is a better teacher than any.

I analyze some past cases and find out that at almost all times, I was trying to convincing the person about pros of staying back, sometimes even showing them the negatives of the future job they had in mind ( not many really tell the truth of where they are going, do they?). I had long discussions with them. Yes, they agreed with me. No, they can not go back on their decision. Hell! It was frustrating for me.

What was going on? I reflected further. Hey, there, I found the problem. The problem was I.

The problem was that I was providing the arguments. They were my arguments. Not theirs!! I was convinced they should not go, they were not!!!

If they could convince themselves, they would stay. If not, then it is best they go! So they should build the arguments, for themselves. All I can do and should do is lead their thinking, maybe even provide a framework in which they can evaluate the options correctly. I might stand a better chance.

I decided to try this approach. I asked this colleague to build a 2X2 matrix as below and asked to list out all factors no matter how trivial against the question asked in black. Then analyze and answer the questions asked in red.

Of course I offered myself as a bouncing board if needed.

Do you want to know what happened? Well, I wouldn’t be writing this piece if I had failed, would I? It is now over three weeks and we did not have to discuss the topic again. My colleague found the answers convincing enough to stay.

I tried it with another colleague when he came up to me and very openly talked to me that he was frustrated in his current role. It worked again!

Yet, I am convinced that this approach may not work always if I employ it ONLY when I learn someone decided to quit. I should propagate this proactively to all my team members. Not necessarily the same format but maybe just the first column. This way, they will participate in collectively improving the work environment, help weed out our deficiencies by highlighting them to the management and own the changes that will be brought about. We will individually and collectively find out what makes us happy and build those factors further.

We will create a happier and better workplace. Amen!

All comments and suggestions are very welcome!

The Terror Strikes in Gujarat

Ever wondered why all the recent terror strikes have only been in BJP (Bhartiya Janata Party) ruled states in India? Is it to destabilize the BJP governments there or is it part of a larger conspiracy to destabilize the Govt. at the Center which is led by Congress (I)? No matter which school of thought you subscribe to, you are essentially hinting at Government (read politicians) led terror strikes and that is what makes me very worried.

If there is even an iota of truth in this thinking, it is a scary thought because then there is no way that we can induce a sense of safety amongst the common man. Suddenly the whole defense mechanism of the country has to look inwards and that too without the active support of the powers-that-be and, that in itself, compromises the security of the country from the evil designs of the anti-India forces.

The Fear Factor normally alters the reaction mechanism in human beings. The Fight-or-Flight mechanism sets in. A heightened sense of mistrust and fear starts affecting how we deal with our neighbours and our friends to an extent that it could mar perfectly nice relationships, cultured and cultivated over years, for ever. I am already sensing an eerie aloofness in people I came across at the airport after 18 bombs were found in Surat in a single day!

I feel appalled at the thought that the guy sitting next to me in the plane could be planning something sinister as he gazes blankly outside the window. For all you know, he may perhaps be trying to reason out why he shouted at his wife this morning just because the omlette was a bit overdone, or wondering what could he do to ensure the success of his ensuing meeting and clinch the deal so critical to his company. Or even worse, he could be pondering on what sinister plans I have in my mind which is making me restless!

I am not happy at the prospect of trying to explain to my wife why I have to go to the same very cities for business which have been put on a High Alert. I am not happy to be stuck in a hotel room for the better part of an evening because there could be a bomb planted on the same very footpath I have to walk on or in the shop which I might be tempted to enter. I am not happy to be living amongst fear-struck and gloomy faces. I am not happy to

I hope the powers-to-be will see reason soon enough and will do whatever they can to stop this madness, whether or not they are involved. After all, who ever wanted to govern a People who have been paralyzed by fear?

Let the sanity return. Let us also renew our pledge to fight this menace with our tenacity, alertness and combined mental strength and resilience of a nation which has survived much more over thousands of years.

Long Live India. Long live its people. Amen.