Posts tagged ‘Employee Engagement’

June 1, 2012

The Human Investment

Nate Young, Education Coordinator, Brightworksby Nate Young

Education Coordinator

The most valuable assets of a 20th-century company were its production equipment. The most valuable asset of a 21st-century institution, whether business or non-business, will be its knowledge workers and their productivity.

– Peter Drucker 1999

No company can succeed without investing in its most important assets. Yet the challenge, as Peter Drucker points out, is recognizing what’s most important. Many modern organizations hold a vast network of “human resources” that are in essence dying on the vine due to a lack of ongoing investment, especially in the area of sustainability training and development. Fortunately, as leading companies are demonstrating, engaging and investing in employees isn’t a charitable effort – it pays dividends of higher company profits and more effective sustainability programs.

Accounting for human resources

To hear Paul Herman of HIP Investor tell it, many companies avoid investing in their employees on a regular basis – possibly due, in part, to a limitation in U.S. accounting standards. You see, employees are not considered an asset, according to the Generally Accepted Accounting Principles (GAAP), the standards by which American corporations develop their financial statements. Employees only show up as salary costs (Expenses on the Income Statement) and possibly as pension costs (Liabilities on the Balance Sheet).

The GAAP requirements can be overcome (Infosys, for instance reports their human resource valuation each year), but these structures tend to reinforce management’s 20th Century views of what are “investments or assets” versus “expenses or liabilities.” Like me, you’ve probably heard the phrase “our employees are our greatest asset” more than a few times. Even if we can’t show it properly on financial statements, why don’t we act like we mean it? Clearly, investing in infrastructure is believed to pay benefits, so why don’t we feel the same about our employees?

Our employees are our greatest asset

The people have spoken…via google search.

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