The Human Asset Manifesto

The People Gap 3 – If People Are Your Most Important Resource, Then Set Them Free

This is the third in a series of articles on the gap between what organisations say about the importance of people and what they actually do to reflect it.

As social and political freedoms have increased it is not surprising that employees have a greater desire for freedom at work. The failure to recognise this reality is a primary cause of the gap between what organisations say about people, and what they actually do.

If failing to recognise how this seismic shift needs to be reflected in the work environment was not bad enough, we have the incredible situation where some organisations are using electronic tags and cellphone surveillance technology to monitor the movements of their employees – thus decreasing rather than increasing employee freedoms.

Interestingly enough, it was this very same attitude that hindered productivity gains at the outset of the Industrial Revolution. At that time, managers believed that having workers gathered together in factories (previously they were in open fields) was as good a reason as any to closely monitor their every move.

Today we see organisations making that very same mistake – maintaining the belief that having the wherewithal or the technology for closely monitoring employees is sufficient reason to do so.

Thankfully, we also have some fine examples of organisations that are taking an altogether more enlightened approach.

IBM for one seems to be dedicated to what it calls "cutting the ties that bind employees to their desk". It sees no reason why employees should be at their desk when they could be spending more time with clients or working in a more relaxed environment – such as their home. The result is greatly increased productivity.

In contrast, Google allows their engineers to spend 20% of their time exploring topics of interest outside the normal scope of their activities, provided those topics are consistent with the overall goals of the organisation. This particular policy has been responsible for a number of Google’s product innovations.

Some managers might suggest that in an IT and/or services environment, such employee freedom is relatively easy to facilitate. However, freedom at work comes in many forms and as Toyota has shown, it is just as important on the factory floor.

At Toyota, employees on the production line have such freedom to operate that any one of them has the authority to stop a line in the event that they consider it necessary to do so – but in practice the line never stops.

The freedom and empowerment Toyota grants to its employees are at the very core of lean production and the company’s success. One commentator contrasts that freedom and empowerment to the restrictions imposed on Toyota’s Detroit counterparts, where only senior managers have the power to stop the production line – a line which in this case is subject to frequent stops.

If organisations really believe that people are their most important resource, then they need to set them free.

The Times They Are A-Changing – Why Private Equity Firms Must Adopt A Human Asset Model

Several months ago I was having discussions with a number of people in the private equity industry. At that time I was suggesting to them that valuing organisations solely on the basis of their cash flows had its limitations and that they should also consider utilising human asset/capital evaluation and assessment techniques.

I was told that while my proposal was entirely rational, the industry had its own way of doing things, and that given the normal investment time horizon, measuring human assets would be a nice to have, but not in any way necessary.

Since then, the industry has undergone a fundamental change partly as a result of what is happening within, but more importantly because of the pressures and changes on the outside.

As the industry moves from the acquisition of niche or medium-sized entities into the acquisition of larger companies that hire thousands of people, as long as it is perceived to be more preoccupied with investor returns than the public good, it will always be a target for its many detractors.

Criticisms will surface and barbs will be thrown irrespective of the honesty and integrity with which the industry does its business. The problem is that much of the public is already predisposed to thinking that it is merely a collection of asset-strippers whose only purpose is to line their pockets.

This will only serve to make future large transactions more difficult as governments and regulatory authorities come under pressure to curb or otherwise increase the scrutiny of each transaction. Moreover, there are some governments that will readily yield to populism and hold themselves out as guardians against the excesses of Anglo Saxon capitalist greed.

Others, such as the unions, will also take their pot shots knowing full well that their protestations in no way need to reflect the actual facts.

As they say, perception is reality. Therefore one has no option but to deal with that reality.

One of the principal tenets of The Human Asset Manifesto is that organisations should lead social change or otherwise risk being dragged kicking and screaming into making that change.

As of right now, the industry has a golden opportunity to adopt that social leadership position, or otherwise spend the coming years bickering and warding of unnecessary if not unenlightened intrusions into its activities.

So, what would such a move entail?

The first and most important step would be to establish a framework within which the human and social issues that impact each business are placed at the very core of its strategy. One only has to witness the problems KKR and Goldman Sachs are facing in their attempt to acquire the Texas utility company TXU, to realise just how important this is.

The full ramifications of such a step is best understood when we look at a company like BP, who for all its nice CSR programmes, failed in its mission to protect both people and the environment.

Leading social change means ditching the CSR niceties and fundamentally refocusing priorities such that they reflect the concerns of the wider community.

A second step is that of demonstrating a belief in the value of people by establishing guidelines for assessing and developing employee skill sets to match the needs of a restructured organisation.

The above does not preclude making people redundant. However, adopting such a people-focused approach might come in more than handy in union negotiations.

Ultimately, only by viewing their targeted acquisitions as networks of human assets – managers, employees, customers, suppliers, and the public – which must be aligned in pursuit of a common vision, will the industry be able to meet the considerable challenges ahead.

Private equity firms have proven their leadership in corporate takeovers and restructurings. If the industry is to continue its impressive growth, then it will also have to prove its leadership in respect of social change and optimising human assets.

The People Gap 2 – Leadership Might Be Sexy But How People Oriented Is It?

This is the second in a series of articles on the gap between what organisations say about the importance of people and what they actually do to reflect it.

Without a doubt, for better or for worse, leadership is the sexiest topic in management. There are probably more books on leadership than on all other business topics combined. It is the topic with the greatest buzz and the one that elicits the most interest.

What is behind this obsession with leadership?

From a social perspective, there has probably never been a time when people were more individualistic and intent on pursuing their own personal ambition. No other era in history has allowed so many people to think beyond an ordinary existence.

Thus, it would be entirely natural to consider leadership in terms of its appeal to the individual, the hero, that single person who can presumably make all the difference by changing the course of an organisation or even history itself. Throw in a few other human traits such as vanity, a quest for glory, and the desire to stand at the top, and suddenly the obsession with leadership looks like something that has been engineered into our DNA.

There is also a very practical perspective.

The number of knowledge workers and highly qualified staff has increased exponentially over the past twenty years. MBAs and advanced degrees are now the norm rather than the exception. What this means is that the path to leadership for the many who consider themselves suitably equipped is less well defined and certainly more difficult and competitive than ever.

As a consequence, irrespective of the way in which it is viewed, be it lightened or unenlightened, leadership is more often than not far more concerned with the leader than it is with the led and that particular approach is embedded in our subconscious.

This is indeed unfortunate.

Long before their companies collapsed in ruin, corporate titans such as Bernie Ebbers of World Com and Ken Lay of Enron were celebrated and regaled for their leadership qualities. In direct contrast to these shooting stars one could ask the question; “Does anyone know who the President of Switzerland is?”

The answer happens to be Micheline Calmy-Rey. I had to look it up. With the exception of the Swiss and perhaps a smattering of people over the border in Germany, Italy, and France, I would guess that very few people would have known that.

The Swiss actually have a collective leadership, a Federal Council, which consists of seven people. Each year, a member of that council is selected to act as its nominal head and de facto President of the country.

Switzerland is the world’s strongest and most participatory democracy. It holds regular referendums on all sorts of issues and its citizens can challenge the laws at anytime.

Swiss leadership is about the led and the result is a country that consistently ranks as one of the wealthiest (in terms of GDP per capita) and most competitive in the world.

Organisations should take note of the Swiss model. Leadership by definition should be about facilitating and enabling others to be the very best they can be. It is for this reason that the current obsession with leaders should change to an obsession with the led.

Until such a change is effected, the nature of the current focus on leadership will only serve to perpetuate the people gap.

The People Gap 1 – Is HR An Excuse For Managers To Outsource Their Primary Responsibility?

Ask any organisation what is their most important asset and they will say it is their people. Alternatively, ask any group of people whether or not they are treated by their organisation in a way that reflects their supposed importance and invariably the answer is no.

The evidence is everywhere – just about every employee survey indicates that people are less than happy with their jobs and places of employment. Putting it another way, how many shiny happy people do you see going to work in the morning?

The truth is that most organisations have a significant people gap – the difference between people talk and people walk. As such, human assets remain unappreciated and underutilised. This has huge implications for individual productivity and organisational performance.

What is really strange about all of this is that organisations have invested vast amounts of money on HR departments, training, recruitment, and an assortment of other employee related mechanisms and initiatives.

Yet, it would appear that despite all of this, not nearly enough has been achieved and much of that employee related effort and expenditure is missing the mark. As such, although managers continually talk about the importance of people, the considerable gap between talk and action remains.

Why is this so?

I suppose the first and most obvious reason is that irrespective of the amount of money spent on HR and HR related initiatives, by definition that alone cannot be enough. If organisations truly believe that people are their most important asset then it stands to reason that people and the development of people should be the primary focus and responsibility of every manager.

With few exceptions, such as Toyota, we know that this is clearly not the case.

Consequently, the only rational conclusion that one can draw from this is that HR is nothing more than an excuse for managers to outsource their primary responsibility to someone else. Until and unless that changes, the vast amounts of money spent on HR initiatives will continue to go to waste – and no amount of turning HR departments into HR partners is going to change that.

The simple truth is that as far managers are concerned, people are just not sexy. So what is?

This we will explore in a series of follow-up articles which will examine how an obsession with leadership, technology, knowledge management, outsourcing, and a host of fads, have all been used by managers to marginalise human assets. Once we have completed this examination the answer to the people gap, The Human Asset Organisation, will immediately become obvious.

Watch this space.

Is Work As We Know It Compatible With Liberal Democracy?

The idea that people must go to work to give up their freedoms and their ability to be creative, and accept a subordinate role to those who have invested money, is completely contrary to our social evolution and the very nature of humanity. The Human Asset Manifesto, Jonathan Ledwidge

Wal-Mart is one of the most successful and profitable organisations of its kind in the history of modern business. As such, stories in the media about the less than favourable experiences of Wal-Mart’s current and former employees do deserve our attention.

We talk of liberal democracy in terms of elections, a free media and an independent judiciary – and these are very important. However, the policies and actions of Wal-Mart and others like it challenge the very notion of liberal democracy and the social equality it supposedly engenders.

Yet, Wal-Mart is not the only guilty party. Day after day millions of workers trudge to work to engage in activities which for all intents and purposes require that they leave their brains at home. As it so happens, their rewards are more often than not commensurate with the lack of inspiration and creativity that their job demands.

If one is cynical, then one might be of the opinion that this equation is in perfect balance – an unfair day’s work for an unfair day’s pay. However, one might also want to consider that this also quite adequately illustrates why employee surveys routinely show that people are very rarely engaged or motivated by their work – which of course is a hindrance to innovation and productivity.

The long term consequences of the kinds of actions that produce such outcomes can be decidedly unpleasant. Wal-Mart is only now beginning to recognize this as a result of the class action lawsuit being filed against it by some 1.5 million current and former female employees.

In the book Maslow on Management, the author describes the term Enlightened Economics as; “the assumption that everyone prefers to be a prime mover rather than a passive helper, a tool, a cork tossed about on the waves”. Thus, an Enlightened Organization encapsulates the very essence of liberal democracy, by providing an environment where employees are willing to participate and enjoy the freedom to do so.

This ideal is emphatically supported by none other than Ben Bernanke, Chairman of the US Federal Reserve. In a statement to the Greater Omaha Chamber of Commerce on Tuesday, Bernanke noted; “Equality of economic opportunity appeals to our sense of fairness, certainly, but it also strengthens our economy. If each person is free to develop and apply his or her talents to the greatest extent possible, then both the individual and the economy benefit.”

This brings us back to the Wal-Marts of this world, low paid minimum wage jobs, the working poor, and growing social inequality. Indeed, Bernanke further stated; “We also believe that no one should be allowed to slip too far down the economic ladder, especially for reasons beyond his or her control.”

This is as good a pretext as any for organizations to examine their role and impact on the social fabric of society, why leading social change is wholly compatible with success and ultimately even the preservation of liberal democracy.

History shows that the disadvantaged will not tolerate their condition indefinitely.

I came across a very fine example of an organization focusing on people and leading social change while reading about Rosenbluth Travel, a firm whose motto is; “put your employees first and watch them kick butt”.

Against what many would have deemed to be their better judgment, Rosenbluth opened a new office in a depressed area of rural America. The community was extremely grateful for the investment and the opportunity for regeneration – and Rosenbluth’s new employees did not hesitate to show their appreciation. That office quickly became one of the most efficient in the entire Rosenbluth network.

From a philosophical perspective, divorcing the world of work from the idea of people, people development, sustainable living, and our notion of liberal democracy, is a fool’s errand. In the long term, organizations can only hope to optimize people potential and investment returns by adopting a human and social model of their business and leading social change – meaning they will have to move beyond their nice CSR programs.

British Airways – The Case For A Human And Social Makeover

In the almost 25 years since its privatisation, British Airways has achieved some remarkable results. At times when other European airlines were resting on state aid and their US counterparts resorted to bankruptcy protection, BA remained financially independent.

It achieved this by relentless cost-cutting and outsourcing and there can be no doubt that much of that was absolutely necessary. However, that drive for efficiency has come at a cost as the airline has experienced ongoing industrial disputes and employee unrest that have severely dented its image.

Two summers ago BA’s outsourced catering company, Gate Gourmet, went on strike. This resulted in severe disruptions in operations and a significant loss in revenues. Last year BA got caught up in a row over the wearing of religious symbols at work. The recent reversal of its corporate policy on that issue only serves to underline the futility of that whole episode and how unnecessary it was to court the bad publicity that accompanied it. Finally, just last week, the airline’s cabin crew voted overwhelmingly to go on a three day strike.

In time, these and future disruptions will have their own impact on operational and financial efficiency, ultimately neutralising them and destroying value.

While cost-cutting can bring immediate benefits, unless it is underpinned by a human and social model of the organisation, it leaves an organisation open to the risk of disruptions. Such a model recognises that the value of an organisation is largely determined by the quality of the relationships between its various stakeholders or human assets – cabin crew, pilots, caterers, managers, the public etc, and their individual and collective interests.

Approaching efficiency from a human and social perspective provides organisations with a more sustainable and effective business model where it is values that drive the efficiency and productivity necessary for success.

This value-driven approach is essentially the framework adopted by Toyota in the development of Lean Production – a business model based entirely on providing people with the skills and the collaborative environment necessary for them to give of their very best.

Another example is that of US airline Jet Blue, who use “homesourcing” to boost productivity and efficiency. While most companies outsource i.e. place people around technology, Jet Blue decided to take an alternate route by building technology around people, allowing as many of its employees as possible to work from home.

There is no magic formula for developing a human and social model for a particular business. It requires a thorough analysis of the needs of its human assets, and the principal factors and values that drive the quality of the relationships between them. However, if BA wants a future that is financially and operationally sustainable, and if it wants to regain the hearts and minds of its customers, then what it needs is a human and social makeover.

Excessive Executive Pay Can Increase Corporate Social Dysfunctionality

You cannot divorce organisations from the societies within which they exist because it is those societies that supply the employees, the customers, and the social infrastructure necessary for their success.

Consequently, where it becomes apparent that an organisation is is run for the primary purpose of enriching the chief executive and a few others, it risks a severe disruption in the social harmony that is a prerequisite for success. That is especially true when polls indicate that more than 80 percent of Americans think corporate executives are overpaid.

In a recent editorial, The Financial Times cautioned that the excesses and conspicuous consumption brought about by current executive pay levels were placing the very balance of society at risk. In one extract, the editorial noted:

Plutocrats can spend all their money on mansions, yachts and servants, but if they do so, then pressure for higher taxes and collective labour bargaining will return and grow. Great wealth is often the result of great talent. But it is also a privilege granted by the rest of society and, if it is abused, society will not hesitate to take it away.

The Financial Times is not the only publication that has expressed concern over the possible negative impact of executive pay.

The Washington Post editorialized December 22 in support of “Just Capitalism”, remarking, “Executive overpayment running into the billions sends a terrible signal about the justice of the capitalist system.” The newspaper warned that unless executive pay and the “industry of consultants [that] exists to legitimize super-sized executive pay” are reined in, “the growing material inequality in the nation will be compounded by the corrosive perception that the rules are unequal, too.”

Work Foundation, an independent think-tank notes that the “excessive” pay levels of Britain's top chief executives amount to a “perversion of market principles" because they bear little risk…Growing pay inequality, with top directors getting pay rises of 10 times the inflation rate, "corrodes the basic concept of fair reward that underpins a thriving society”.

Then of course, there is the widespread scandal surrounding the backdating of stock options, the full extent of which is only now becoming apparent.

Excessive executive pay rewards will only serve to increase corporate social dysfunctionality by fracturing the relationship between employees and managers and causing their objectives to diverge. This will negatively affect organisational creativity and productivity.

Further, such excesses will also affect an organisation’s relationships with its customers and the wider community, and in the longer term further impair its value.

Executives should view executive pay and rewards as an important aspect of their relationship with all their human asset stakeholders – employees, clients, suppliers, managers, and the wider community. Consequently the management and credibility of the process, as well as how and what it communicates should be considered essential aspects of stakeholder/human asset management as well as the organisation’s overall business strategy.

The Consumer Electronics Industry Is Waking Up To The Power Of Women

It would appear that at least one industry is both understanding and waking up to the challenges and opportunities of the purchasing power of women.

The consumer electronics market is estimated to be worth over $140 billion. A significant proportion of that market is for gadgets, games and other similar items, traditionally considered a male preserve. However, it now appears that women account for some $80 billion or approximately 57% of that market.

As such, manufacturers and retailers alike are now changing their approach to accommodate this phenomenon and are adopting a number of different strategies to take advantage of it:

More ads for electronic gadgets now feature women

There is greater styling and proliferation of colour to reflect women’s tastes

More products are being made to accommodate the specific demands of women

Smart retailers are providing more store assistants, reflecting the demand of women consumers for more attention

There are more women retail assistants

If we think of it in logical terms, it is almost incomprehensible that this change is a recent phenomenon. It is another example of what can be achieved when organisations focus on their human assets and the human and social aspects of business - moving beyond stereotypes and narrow-minded approaches.

However, some sectors of the market do still have some way to go.

For a long time the computer games industry dedicated itself almost exclusively to men. Then one day it realised that women played games too, but their products were simply not catering to their needs. Part of the reasons for that was that the industry had not recruited many women so it could not properly understand or reflect those needs.

They industry is now trying to redress that balance. Many others are yet to wake up.

A Sterling Example Of Why Organisations Should Lead Social Change – New York’s Ban On Trans Fats In Restaurants

The action of the New York City authorities has clearly demonstrated what this blog has been espousing all along; organisations should either lead social change, making human and social issues the centrepiece of their strategy, or suffer adverse consequences and loss in competitiveness. 

Yesterday, December 5, the city placed a ban on the use of artificial trans fats in foods in all its restaurants. The basis of their ruling is that trans fats are responsible for the clogging of the arteries, which can lead to severe heart conditions.

The ban is effective in three months and many of the cities restaurateurs are not prepared for it. They will be scrambling to get their business in order by the due date.

Some of the major chains such as Wendy’s and McDonald’s have been making steps to reduce the level of trans fats in their foods by making “voluntary reductions” in the amounts used. They too will be scrambling to meet the deadlines – their partial solution to the problem has effectively been deemed unacceptable.

This further strengthens the arguments made by this blog and the book The Human Asset Manifesto; for organisations to have a business that is both sustainable and competitive, they must lead social change, rather than being dragged kicking and screaming into it. You would think that made absolute sense.

Unbelievably, the National Restaurant Association is fighting the ban – somehow the initials NRA  seem most appropriate to its stance. The association is more worried about the ban spreading to other parts of the nation, than for the health of the consuming public.

Such thinking is both futtile and backward. Soon, all consumers will be demanding food sans trans fats – be it in New York or wherever in this world the consuming public expresses more than a passing concern for the vitality of its heartbeat. In other words, everywhere.

Those establishments that take the lead by recognising the full human and social implications of their current business model, and resolve to take all necessary action, will emerge as the champions of the future.

If You Have Not Yet Started A Corporate Blog Then Please Pay Attention

If You Have Not Started A Corporate Blog Then Please Pay Attention

Remember the bad old days. If you received poor service from an organisation, ultimately your only chance of getting a satisfactory response would be to write to customer services.

Then, if you were lucky, one day, someone tucked away in some forgotten part of the organisation would write you back. The letter would arrive in the standard format replete with the requisite clichés and platitudes, saying how grateful they were for your custom, had done all they could to respond to your concerns, and hoped that the matter was now settled.

In the end, you would be left holding nothing more valuable than the paper on which the letter was written.

Some would say that for many organisations, those bad old days still exist – and that is the truth. However, some organisations are adopting a more enlightened approach. The emergence and rise of corporate blogging is ensuring that every aspect of an organisation’s customer service is now open for public consideration, discussion, debate, and action.

In its 2005 Survey of Corporate Blogging, Backbone Media concluded that those organisations that had a well thought-out strategy, be they large or small, were enjoying significant improvements in customer services, customer relationships, marketing, and sales.

The corporate blog is also more than useful for product development, as many software companies are finding out.

Consequently, organisations that have not seen it fit to engage in blogging are not only failing to take advantage of one of the most important developments in customer relationship management, they are handing an advantage to their competitors.

The corporate blog is entirely consistent with the very essence of The Human Asset Manifesto – that an organisation’s human assets are both internal and external, and that both clients and the wider community are critical elements in that equation. It reflects the human and social changes within society; the need to be heard, to contribute, and to get value for money.

Those organisations that continue to ignore the potential value of this particular asset do so at their own peril. The world will be busy passing them by.

Is Diversity Hurting Your Organisation?

You cannot divorce organisations from their environment and the societies within which they operate – people don’t leave who they are behind when they walk through the office door. As Drucker so famously stated; “You can’t hire a hand, the whole person comes with it”.

Organisations are therefore not immune from the debate on the topical issues of diversity, multiculturalism, and integration, even as those same issues continue to shape and influence how we live and how we relate to each other.

What is certain is that diversity without integration is not good – it is harmful to society and therefore by definition, it is harmful to organisations and their business.

A study by Putnam of Harvard University recently highlighted the problems associated with diversity. In an interview with the FT, Putnam stated that as diversity increases, the level of trust between people decreases.

There is no doubt that this lack of trust makes integration, in every sense of the word, quite difficult, and actively impedes collaboration, teamwork, and organisational success.

This is not an altogether pleasant reality for those of us who advocate diversity, and who believe that its potential for good far outweighs any negatives. Putnam’s study, and his own belief in greater integration as the answer, thus demands that we first comprehend what true integration actually entails, before we can effectively realise the great benefits of diversity.

Fundamentally, this means going beyond the common platitudes of teamwork, shareholder value, integrity et al – those are nice but are so bland that employees tend not to attach any deep-abiding meaning to them. It also means divesting ourselves of sugar-coated political correctness.

Diversity has human and social elements – age, race, gender, religion etc. As such, the integration of diverse groups is best achieved when the following questions are addressed within a human and social context:

What are the organisation’s values?

What is the organisation’s higher purpose or BE?

Who benefits from the organisation’s activities?

How does the organisation contribute to the well-being of the wider society?

How does the organisation assist or enable employees to fulfil their personal objectives?

How does the organisation assist or enable employees to fulfil their professional objectives?

To what extent are the organisation’s objectives consistent with those of its employees?

If your organisation is not addressing these questions then it is clearly not exploiting the value of diversity and of its human assets.