Human Capital and Other Investments

Human Capital and Other Investments

September 25

Future of Work Blog repost from 9/25/2006

The new O’Toole and Lawler book, The New American Workplace, points out clearly that too many organizations treat people as an expense. We spend too much time looking through the lens of the industrial age and believe at the deepest level reducing the expenses associated with people and replacing them with automation will drive up efficiency and reduce costs.

From my perspective, we have a deeply rooted discontinuity in the American Workplace. People are treated as expenses, and I have heard from many CIOs that IT too, is an expense. As they decry, "when will my company realize that IT is an asset and not an expense."

So we have one expense offsetting another while missing the fundamental point that we don’t live in an industrial age economy. Efficiency isn’t everything. Innovation and customer relationships require different investments. They require people. You can’t reinvent yourself continually with machines sitting around doing the same thing. People are the creative input. People drive change. Both employees and customers drive change, computers help facilitate change, but they do not invent it.

We have spent so much time working through the model of how businesses work, that we are blind to the fact that they don’t work like they used to, and that they are being reinvented around us, despite us, by market forces that want a result without worrying about how the supplier sees himself. That makes for some pretty dysfunctional organizational relationships, internally and externally.

I’ll know we are starting to get it when I see articles about new accounting methods, new ways of valuing organizations, new valuation methods on Wall Street. Let’s look at our people and our information technology as investments. Let’s turn our understanding of costs on its ear so we can start seeing where real value comes from.

Daniel W. Rasmus

Daniel W. Rasmus, Founder and Principal Analyst of Serious Insights, is an internationally recognized speaker on the future of work and education. He is the author of several books, including Listening to the Future and Management by Design.

3 comments

    comments user

    Gregory Rader

    The problem with this picture is that even within the corporation our accounting methods endeavor to measure everything as a transaction. I doubt we can move away from the problems you note without developing new ways of measuring and accounting for value. I have developed these thoughts further here:

    http://onthespiral.com/my-story-about-the-future-of-money-asymmetric?c=1

      comments user

      danielwrasmus

      I agree, and that is what I suggest. We have to move from an industrial age lens of value or a sustainable, knowledge economy view of value. This is bigger than transactions, its about holistic value and impact of investments, not just positive impacts, but long term negative impacts. So much of our ROI is based on justification based on omission. We don’t want to know the real risks, we just want to prove enough benefits to justify the short-term investment. The long term, be that deeper knowledge or environmental disaster, as future worries, perhaps for other people. Sustainable, knowledge-based justification would need to take into account not just risks, but risks over long periods of time, as well as returns that extend past the quarter.

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