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Making the Invisible Visible HRMAB 2018


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Presentation made by Stacia Howard, Managing Director of Antilles Economics, at October 2018 HRMAB Conference in Barbados

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Making the Invisible Visible HRMAB 2018

  1. 1. POP QUIZ: ARE PEOPLE ASSETS? An asset is a resource with economic value that is owned or controlled with the expectation that it will provide a future benefit.
  2. 2. THE PROBLEM WITH PEOPLE An asset is a resource with economic value that is owned or controlled with the expectation that it will provide a future benefit. O Ownership – legal possession O Control – ability to control the benefits from the asset O Future Benefits – likely benefits from its use or sale, and the value of the benefits can be measured objectively On their own, people are not assets, at least not in the accounting sense.
  3. 3. POP QUIZ: ARE PEOPLE EXPENSES? An expense consists of the economic costs a business incurs through its operations to earn revenue According to accounting definitions, the human resources of an organisation seem more like expenses
  4. 4. SO, WHY DOES EVERYONE SAY THAT PEOPLE ARE AN ORGANISATION’S GREATEST ASSET? People are the producers and accumulators of invisible assets. They carry and exchange the information that makes invisible assets visible.
  5. 5. Some assets must be present for business operations to take place TYPES OF CORPORATE ASSETS Other assets are necessary for competitive success
  6. 6. INTANGIBLE (INVISIBLE) ASSETS - DEFINITION “… source of future benefits that is without a physical embodiment: •  Intellectual property is an intangible asset with legal rights •  Includes innovation-related intangibles (patents), but also market-related (brands), human resource (compensation systems, training policies) and organisational intangibles (internal structures, systems and processes)” Study on the Measurement of Intangible Assets and Associated Reporting Practices, prepared for European Commission
  7. 7. BARUCH LEV’S CATEGORIES OF INTANGIBLES Discovery/Learning •  Patents on new products and services •  Communities of practice •  Adaptive capacity Customers •  Brands •  Trademarks •  Online distribution channels •  Marketing alliances Human Resources •  Unique work and compensation practices •  Employee training •  Incentives/compensation arrangements Organisational Structure •  Business structures and processes •  Incentive systems •  Information and control systems
  8. 8. COMMONLY CITED PEOPLE-RELATED ASSETS •  Skills •  Corporate culture •  Engagement and loyalty •  Know-how •  Ideas •  Knowledge •  Experience •  Wellness •  Customer service •  Relationships and networks •  Leadership ability •  Teamwork
  9. 9. UNDERSTANDING INVISIBLE ASSETS 1. On their own, invisible assets almost never create value. They need to be combined with tangible assets. •  Training an employee to use a particular piece of equipment is useless if they don’t actually need to use the equipment to do their job •  Creating a visual identity for your brand is a waste of time if it’s never presented on marketing collateral •  Delivering excellent customer service is no good if your employees don’t have a physical environment in which to operate •  A team that works well together is only an asset if they have the tools they need to excel
  10. 10. UNDERSTANDING INVISIBLE ASSETS (CONT’D) 2. The impact of invisible assets tends to be indirect and takes time to be fully realised Ø  Training should improve the skillset and knowledge of team members Ø  Which should improve the quality of the product/service produced Ø  Which should improve customer satisfaction and loyalty and reduce wastage Ø  Which should translate into improved sales and margins Ø  Which should lead to greater profits
  11. 11. UNDERSTANDING INVISIBLE ASSETS (CONT’D) 3. Intangible assets cannot be bought off the shelf. In this sense they are quite ‘fixed’ •  If a resource can be bought or quickly created, competitors with sufficient financial resources can quickly gain access to it.
  12. 12. UNDERSTANDING INVISIBLE ASSETS (CONT’D) 4. Intangible assets can be simultaneously used (and benefits simultaneously realised) in several areas. Tangible assets cannot. Ø  A good reputation for one product can be used to promote another product, attract staff, gain entry to certain markets, etc. Ø  Knowledge and experience in one area of the business can often be applied to another area of the business at the same time Ø  Engaged employees can successfully serve customers as well as support each other’s development
  13. 13. UNDERSTANDING INVISIBLE ASSETS (CONT’D) 5a. Intangible assets are both inputs and outputs of business operations. Some tangible assets – like money – are as well. •  Inputs often lead to outputs of the same or related intangible asset •  We hire people and train people to develop the necessary capabilities and attitudes needed to perform their role well. In conducting their job, they also develop capabilities and attitudes, good or bad. •  Information is needed to make decisions, operate our businesses and facilitate effective communication. But information is also the result of decisions, business operations and communication.
  14. 14. UNDERSTANDING INVISIBLE ASSETS (CONT’D) 5b. Intangible assets are both inputs and outputs of business operations. Some tangible assets – like money – are as well. •  The input of one intangible asset could also lead to the output of another, good or bad. •  Developing the expertise in creating a particular product, could allow a company access to previous inaccessible markets or build relationships with other supportive companies •  Damage to the commercial brand of a company could inadvertently lead to a fall in employee morale
  15. 15. UNDERSTANDING INVISIBLE ASSETS (CONT’D) 6. Intangible assets are worth different things to different people. •  There is no universal consensus on invisible assets; i.e. every organisation would not recognise employee engagement, corporate culture or employee wellness as an asset
  16. 16. POP QUIZ: WHAT ARE YOUR ORGANISATION’S INVISIBLE ASSETS? Are you actively managing them?
  17. 17. A FEW PRACTICAL TIPS ON WHERE TO LOOK FOR YOUR INVISIBLE ASSETS Past Employees Customer feedback Strategic History Strategic Direction Current employees Market feedback
  19. 19. Current Employees Past Employees
  22. 22. “Value can be derived only in the context of strategy … so the value of intangible assets is really about estimating how closely aligned those assets are to the company’s strategy.” Kaplan, R. and Norton, D., ‘Measuring the Strategic Readiness of Intangible Assets’, Harvard Business Review, February 2004 THE MISSING LINK: STRATEGY
  23. 23. HR Data Accounting Data Research 02 03 Insights and Dashboards 01 Making them Visible
  25. 25. ACCUMULATE INVISIBLE ASSETS Direct Actions •  Training •  Wellness programmes •  Employer branding initiatives •  Health and safety policies •  Etc. By-Products of Day-to-Day Operations •  Process development •  Know-how and best practice •  Product and service design •  Relationships •  Etc.
  26. 26. CONTROL INFORMATION FLOW Obtaining Rich Flows of Information What are the critical activities that will carry the most important information? •  Information about your employer brand •  Recruitment activities •  Employer branding activities •  Etc. Getting Information Under Your Control How to control these critical activities and the flow of information? •  Who will perform the critical activities? •  What mechanism will ensure that the information flows with the intended quality and speed?
  27. 27. LEVERAGE INVISIBLE ASSETS Invisible assets tend to appreciate or be amplified with use. So use them! 1.  Link your assets to your strategy and your strategy to your assets 2.  Build their use into your day-to-day operations 3.  Manage and monitor them 4.  Communicate 5.  Rinse and repeat!
  28. 28. Visit our website: Call us: 246.253.4442 Email us: INTERESTED IN LEARNING MORE?