By Kevin Meyer
This is driven in large part by traditional accounting that keeps that pair of hands on the expense side of the P&L and the liability side of the balance sheet. So what happens when managers at traditional organizations look at those traditional financial statements? The big lightbulb goes off and they start running around trying to reduce that expense. They begin to dream up ideas to make everyone work harder so they can reduce the number of hands, move operations thousands of miles across oceans to try to find cheaper hands, and perhaps try to find temporary hands to avoid paying benefits.
Fortunately there are some enlightened organizations that think a little differently. In effect they zoom out a bit and realize something: there's a brain connected to those hands. That brain holds knowledge and training, is creative, and can come up with ideas that both reduce other costs and expand the top line of the business.
Not an expense, not a liability. An asset worthy of investment.
That is how some companies can add labor cost and improve profitability at the same time. And why companies like Toyota use robots only in situations that are dangerous or too difficult for humans, not to automate simply to achieve efficiency. It takes a long time to fill a suggestion box in a room full of robots.
When most companies must comply with artifacts like GAAP, use traditional financial statements, and are scrutinized by investors and analysts steeped in traditional accounting and focused on short-term results, it takes guts to choose a different path. But some do, and they are becoming the winners. They are the ones that aren't lauded for "repatriating jobs" back to the U.S… because they never left in the first place. They are the ones experiencing a surge in profitable business as fuel prices and political instability wreak havoc on far-flung supply chains. They are the ones capturing new markets due to the ability to change direction on a dime without having to worry about language barriers and massive amounts of inventory on container ships becoming obsolete.
Perhaps part of the problem is due to terminology. We've evolved from thinking of people as "personnel" and having a "Personnel Department." Most organizations now call it the "Human Resources Department." Some are a bit further down the path and think in terms of "talent" or "knowledge." But those terms still convey a sense of expense and liability. A resource, not an opportunity.
Some people have been discussing that very idea. Some of them also recognized how many organizations think of traditional human resources:
The real function of 'HR' in corporate America is to insulate
management as much as possible from the unpleasantness, risks and costs
associated with their mismanagement of labor. So, it should probably be
called something more descriptive. Maybe Labor Diversion Department or
Management Protection Department or Personnel Firewall Department.
"Personnel Firewall Department" is pretty good. This then led to a couple similarly sarcastic suggestions:
However there were some on the more positive side, attempting to recognize the value people bring. Some interesting terms, but none hit the mark in my opinion. We're not talking about just the organization, we're not talking about just developing people. Not even just learning or effectiveness. It's more – it's tapping into and developing a whole new asset. Human Capital was the closest.
But in the end those are just terms and titles, and hence meaningless. Similar to missions and visions and policies. The only real value is created by what you really do, by the people leading people. Hopefully using their own brains to recognize the power of the brains of those they serve.