Capital and Human Assets

Corporate literature, annual reports, letters to stockholders and employment ads are saturated with the assertion that "people are a corporation’s most important asset." -- "people make the difference." Although stated in differently, all are carefully, crafted by corporate communication's departments, public relations firms or executives to reflect the "politically correct" message "People are our most important asset." Virtually every organization uses this theme.

Initially, the statements are reassuring, almost comforting. I have been in Human Resources Management and consulting for over twenty years and have spent my career helping corporations take care of their most important asset. However, over the years, I have become cynical, even critical of the corporate wordsmiths. Actions speak louder than words. I have seen the corporate actions that belie the statements that the people are their "Most Important Asset."

Assets -- The Acquisition and Management Process

Business Schools instruct corporate managers sophisticated processes for the acquisition of capital assets. Students and managers are trained to analyze a project, estimate costs, facility requirements, anticipated useful life, the residual value, and the return on the investment. A capital equipment forecast and budget is prepared.

Typically during an acquisition process for a $50,000 machine, management justifies the purchase by doing a return on investment analysis and then determines the features and functions and throughput required. Depending on the size of the company, the acquisition of the equipment is conducted by a senior manager or someone in purchasing. This person prepares a request for proposal (RFP), contacts potential vendors, conducts meetings, and calls suppliers to present their products. The purchasing agent may, with a representative from the requesting department, travel to see the equipment in operation. Discussions are held with the users regarding productivity, accuracy, reliability, defect rate, and maintainability.

Eventually a supplier is identified, equipment selected, and prices negotiated including expressed and implied warranties. They equipment arrives, is installed, tested, debugged and eventually placed into the mainstream of the operation for which it was purchased.

Prior to the equipment’s arrival, managers and staff are training to properly operate and manage the asset. After the break in period, often watched over by factory technicians, the preventative maintenance program begins. Employees and management are expected to make sure the equipment meets the warranty terms, and the usage reaches the manufacturers specifications.

Human Assets - The Acquisition and Management

Unlike the structured B-School training on cost analysis, decision theory, competitive pricing on capital equipment, the decisions on staffing are often made on "gut feelings". Executives often do not require the analysis, the research, or due diligence found in the acquiring Capital Assets. Lets look at a typical hiring process.

Acquisition of Human Assets

The decision by the company or department that staff is needed is often made quickly, and without the process required for capital assets. This decision may be driven by a reaction to the amount of work to be accomplished, the desire to build up the department, or a reaction to a competitor's inroads. Sometimes the decision is based on the fact or belief that the current human assets can no longer function appropriately, or as a result of the voluntary withdrawal of the asset (they quit).

Seldom does management conduct a thorough analysis of the features, functions, costs and return on investment of adding to staff associated with adding to the capital equipment. Too often after the decision to increase staff, the process is haphazard. The requisition, or request for staff, is given to a recruiter or manager to solicit resumes (brochures) from individuals who purport to have the functionality sought. The hiring agent, whether recruiter or manager, often puts the word out within their network informing peers that there is an opening within the company in the hope that a friend or associate will be able to suggest someone, and therefore limit the costs of acquisition.

The recruiter or manager may utilize newspaper recruitment advertising, or employment or search firms to generate or find candidates.

An interviewer spends approximately 1 minute reading each resume. After selecting potential candidates, interviews are scheduled. The interview(s) for this $50,000 position may occurs during a meal, in an airport or in the office after a long day of meetings and problems. Typically interviews last 45 minutes to an hour, and a successful candidate will be the one who seems to have the skills and whom the hiring manager likes. Often, there are several people who take turns interviewing and examining the applicant. They may go over similar ground and not gain information with which to make a decision. Eventually an acceptable candidate is found and an offer employment is made. Unfortunately, the acquisition process often stops at this point. References from previous employing companies are not checked thoroughly, and no warranty either expressed or implied are requested or received.

The new hire begins, is shown their desk, and left to figure out the organization, responsibilities, resources and the criteria for success. The new employee’s manager doesn’t receive training on how to utilize the individual’s talents. If there is a problem the first reaction isn’t that there is an organizational problem, but that there was a mistake in the hiring decision. Depending on the company or manager, they may wait six moths to a year to conduct a performance review, or the individual may be censured, placed or warning, or terminated immediately.

Why do managers spend more time picking out capital equipment than a $50,000 employee. After all, equipment won’t turn around and sue.