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19 Enterprise Asset Management
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THE NEW WAY: Abstract things like expertise, commitment, integrity and learning capacity are decisive assets.
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The accounting practices commonly used by companies to manage their assets, have proven deficient for the purposes of innovation in today's hyper-competitive world. The reasons for this are twofold. First, financial accounting offers only a retrospective view of operating results, with the best-kept 'books' always being prepared - at best - a week after the business activity they seek to measure, and even then, only in the highly distilled terms of dollars and cents. This is why innovative companies are increasingly adopting operational performance metrics to manage their businesses in real-time. Secondly, the most important assets that any company can have are embedded in their people, and the worth of people is very hard to measure accurately with monetary means. To be sure; personnel costs can be calculated fairly easily; but the worth of people very often defies neat and tidy valuation. These most important assets are the abstract properties of expertise, commitment, integrity and learning capacity. |
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Of course, these things do not lend themselves willingly to being seen, counted, bought or sold. None of them fit easily on the balance sheet. They cannot be itemized, categorized, amortized or depreciated. Critics cite this fact and label them as "soft" assets –- as though this somehow means they are less important and less valuable. |
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But in this new business world where creativity, flexibility and responsiveness are more than critical, these so-called "soft" assets are actually more important than any "hard" asset ever could be. Companies will of course still need concrete assets to do what they do. But the way they do things will be defined by people, not by the equipment they use or where they work. Accordingly, the performance appraisal has become more strategically important than the balance sheet ever was. |
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Next Generation Performance Appraisals
The new way counsels companies to invest in, and operate through the core competencies and competitive qualities embodied by their people; their processes, their values and their vision. Concrete items play a secondary or support role in service of these human assets. Making this come together will require effort on three fronts; teamwork, training, and what we will call "visioneering". Integrating these three strategic imperatives is what performance appraisal is for. |
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The first field of action is teamwork. This is not simply an exhortation for people in companies to work together as teammates. It is much more involved than that. For companies to invest in and develop teamwork as a core competency, a broad myriad of changes must occur. |
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For starters, leaders must stop looking at their enterprise as a collection of separate functions such as Research and Development, Marketing, Manufacturing or Customer Support. This old perspective did more to divide companies than any other single factor. To succeed in the new millennium, companies must deploy employees in multi-skilled, cross-functional teams responsible for the critical processes that lead to customer satisfaction. (Business Process Reengineering) This is why performance appraisal is no longer conducted solely by an employee's superior, who is him or herself defined in functional terms. Performance appraisals must become cross-functional and inter-level (to encompass feedback from coworkers and colleagues, as well as "superiors"). |
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Other changes that often must be made in support of teamwork include the radical overhaul of management systems, accounting systems, business development operations and reward and promotion policies. When everything is put together properly and functioning well, teammates work together in unison – seamlessly coordinating with their colleagues, internal and external, to provide customers with world-class products and services. And they do so with fewer glitches, less time and more creativity than collections of separate functions ever could. (Cross-Functional Teams) |
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The second field of action is training. Many companies suffer some pretty major falls on this field. The result is more often increased confusion than improved performance. After a couple of training initiatives fail to produce any lasting improvement, management and trainee alike are left jaded. If you had someone internal do the job, and you are lucky, then at least they learned something. If you got your training from an external source, than it may have left you with serious regrets. |
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Why is this almost a cliché? Three reasons in particular deserve special attention. First, irrespective of what some training providers will have you believe; training is not a panacea. It is not the cure all approach to fixing performance problems. Training is only one approach that companies can use to improve the performance of their members. For maximum benefit at the lowest cost, companies must use a combination of approaches toward performance enhancement. Intelligent training is but one of these. For lasting results, companies should use no single approach in isolation. |
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Second, where training is concerned, people in companies often lose sight of their objectives. As a result, training becomes a routine operation. It gets written into budgets and plans, and it is either contracted out, or developed in-house by someone or some unit in charge of "human resource development". Regardless of the process, the training is delivered and received, as if by reflex. For management, the purpose of the exercise is to train employees. For employees, the purpose is to be trained. |
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What everyone is forgetting is that the purpose of training is not the training itself, but the learning that enhances performance. Management forgets that this learning must support very specific strategic objectives to be worthwhile. They forget that the work process itself must be changed to allow trainees to put their new skills and perspectives to work immediately after they receive the training. They forget to communicate to employees why they are being trained, or the benefits to them and their company of the training. They forget to require on-the-job use of the training, and so most of the time it just rusts away. |
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For their part, trainees forget that their objective is to capture knowledge for their company. They feel their responsibility is limited to receiving the training. Because many of them know from experience that the training will not change a thing back on the job, they receive their training passively. When the training is over, it is once again business as usual. Obviously, this is not effective. (Training Effectiveness) |
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The third common stumbling block in the path of effective training is often the first one stumbled upon. Many training initiatives are set up for something less than total success, right from the first design decision. Frequently, this is because the person ordering the training, or even those who design it, make choices that disregard important factors. They may have their own ideas about how it should be done, even though they sometimes cannot explain their choices. |
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Perhaps they want to be seen as the sponsor of some stylish or fashionable (or profitable) training technique. Maybe they have some practical reason they are trying to serve, but because they do not know all the alternatives or the pluses and minuses of each, they pick the wrong delivery method. Typical design decision errors occur when the training is engineered for passive absorption, rather than active exploration. If you remember nothing else about effective training, remember this: adults need to be actively involved in their learning to get anything from it at all. The learning must be experiential in order to be fully absorbed by most people. This is why performance appraisals must also follow training and other skills development initiatives, and reflect the new level of performance sought by management. |
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The third field of action is "visioneering". Visioneering is not about providing people in companies with a worthy vision. To do so would be the same as telling people what to think. Rather, visioneering is about drawing out the hopes, dreams and aspirations of your people, and then channeling them and framing them in to an inspiring direction and future for the enterprise. The difference being – real vision comes from the bottom up, not from the top down. (Shared Vision) |
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Some readers will have a hard time envisioning visioneering at work in their own organizations. They will look at their workforce and conclude that this idea just is not going to work, or that it is worthless, or both. Ironically, these are the same business people who complain that they cannot get real commitment from their employees. They say that leadership qualities are in short supply, and that motivation and initiative are problematic. More cynical critics will even suggest that their employees cannot put aside their individual interests in favour of the greater good. The truth is, people secretly yearn to do so. |
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This situation describes yet another self-fulfilling prophecy. It all begins when employers fail to give due credit to their employees. They view them as lazy, unmotivated, uncommitted, and self-serving. And so, they keep an eye on their employees, they try to "light a fire" under them, and they make increasing demands the norm, judging employees to be committed when they forsake their families for overtime. |
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When companies use this logic to write-off the vast majority of their workforce as "followers", they are really doing much, much more. Because followers are deemed not to have a need-to-know, they are not given any meaningful information about their company, their industry or the strategic direction of the firm. They are kept in the dark. Is it any wonder then, that employees are unmotivated and uncommitted? How can employees in this situation serve the common good, or even understand what that means? |
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When employees are kept in the dark on such matters, it robs them of contextual understanding, and of their connection to the rest of the enterprise. Given this sorry state of affairs, you can be sure that the vision your employees have of the future will indeed be meaningless and worthless. |
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The truth is, a work-averse, unmotivated, uncommitted and self-serving workforce is a failing point of leaders, not of their followers. Luckily, there is a way to turn this around. You first have to equip your employees with a truly meaningful understanding of their company, their industry and above all, their customers. |
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To this end, both strategic and tactical information should be shared widely with all employees. This helps to form the basis of a common understanding between all members and all business units. From this common understanding the vision springs up. The performance appraisal process can and should play a pivotal role in gathering together the elements of this common understanding, in a systematic way. By reflecting back the lessons learned, a company can develop the kind of shared vision, that they need to succeed. Organizations will find that they do not need to instill their members with commitment, motivation, drive or a sense of community. They will find these things flowing like a river, from the vision, and into the future. |
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The abstract assets of expertise, commitment, integrity and learning capacity may be unquantifiable. But when they are managed and developed intelligently, they can boost market share immensely. Though they may not be as easily amortized as concrete items are, we must remember that unlike concrete items which depreciate with time and use, these abstract competencies and qualities gain value with time and use — paying dividends instead of depreciating. |
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Employees are not costs, they are assets.
Investing in them pays dividends.
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