Wednesday, April 16, 2008

Frustrated Bosses - Under Contributing Employees

"Employees are my company's most valuable assets."

Business owners and management-types say it all the time, but they don't really mean it. It's one of those meaningless catch phrases to make them feel better about what they're doing. They really don't know what they're talking about.

What's an asset?

  • A resource controlled by the enterprise as a result of past events from which future economic benefits are expected to flow to the enterprise. (International Accounting Standards Board)

How do you handle assets?

  • Accumulate them
  • Invest to increase their value

What's a liability?

  • Anything that is a hindrance, or puts an enterprise at a disadvantage. An obligation of an entity arising from past transactions or events, at a sacrifice of economic gain. (IASB)
How do you handle liabilities?
  • Minimize them
  • Decrease their value

Now, what's an expense?

  • The outflow of money to pay for an item or service which decreases economic benefits and equity, other than those relating to distributions to equity participants. (IASB)
How do you handle expenses?
  • Minimize them
  • Decrease their value

So, which is an employee?

Call them what you like, but I have interviewed thousands of business owners over 30 years, and I could count on one hand the number of them who desire to accumulate more employees, or who ask me how they can invest to increase their employees' value.

The most common question frustrated business owners ask me is, "How can I reduce my employee expenses?" Doesn't sound like a question you would ask of an asset.

Abraham Lincoln once asked his cabinet,

“Counting a tail as a leg, how many legs does a sheep have?”

“Five,” came the answer.

Lincoln responded, “No. A sheep always has 4 legs. Pretending a tail is a leg won't make it one.”

When you treat your employees like liabilities and expenses, which most business owners do, you might as well accept the truth: You think they are liabilities and expenses.

  • No wonder you're frustrated.
  • No wonder your employees don't contribute more to your company.
  • No wonder you feel like you have all the worries.
  • No wonder you can't seem to find, or keep enough good employees.
Well, if it'll make you feel any better, you're not alone.

No consolation? Then you'll have to do something about it.


Anonymous said...

How true this is.

Jeff Francis said...

I guess if you treat employees like expenses and liabilities, you can't really expect too much asset behavior from them.