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To outlive and outlast the competition in today’s marketplace where the click of the mouse may cost you thousands of dollars demands an understanding of your company’s value and how it relates to your balance sheet.

value

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A 1978 study by the Stern Business School revealed that there existed a 95% correlation between a company’s value and its balance sheet. By 2005, this correlation almost did an 180 with only a 28% correlation between a company’s value and the balance sheet. What this suggests is that the tangible value in the 1978 has been replaced with an intangible value in 2007.

This dramatic change is in alignment with the changing economy from tangible products to intangible products or what is called intellectual capital. Today’s economy is all about knowledge and more importantly how to apply that knowledge quickly for the greatest gain. The knowledge worker is entirely different than the non-knowledge worker of the past.  To learn more about knowledge worker read Peter Drucker’s book The Efficient Executive.

So where is the source driving this intellectual economy? Simply speaking it is your human capital, your people who will more than ever before make or break your company.

To recognize human capital as our greatest asset (think value) again requires that we change our paradigms. For example, we have Chief Executive Officers (CEO), Chief Operating Officers (COO), Chief Information Officers (CIO) and Chief Financial Officers (CIO). Yet, where are the Chief People Officers? Until we value people at the top, they will not be truly valued at the bottom of the organization.

Another paradigm is within the profit and loss statement. When salaries are listed as an expense instead of an asset, what message does that send about how you value your human capital?

A third paradigm resides within the traditional training and learning departments. To improve performance thereby improving value, the real question needs to change from “Do they know it?” to “Do they want to do it?” For performance improvement is much more about attitudes and habits than skills and knowledge.

Also, the younger workforce is looking for development specifically within the area of leadership. The Fifth Annual Global Millennials Survey by Deloitte revealed that 2/3 of millennials are looking to leave their jobs by 2020 because of a lack of leadership development.

Take action and begin to understand the real source of your company’s value.

 

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