Employees are NOT Assets, They are Investors

I think I have heard the expression “people are our most important asset” a thousand times. And, every time I wince twice. I wince the first time because I know that most executives really believe that labor is a cost, just like steel or semiconductors, and want to get it as cheaply as they can. I wince a second time because an asset is by definition a possession or something we can own and control and we can do neither (legally) to people. So what are our employees? Our employees are really investors in the firm. They just choose to invest their talents, skills, time, and energy in the organization instead of dollars, and they expect a return on that investment just as the dollar investors do. In recruiting terms, this mindset is important for several reasons. First, when you recruit an investor you probably take a different perspective than when you “purchase” an asset. Most companies spend time and executive level attention courting investors, speaking to investor clubs, writing letters and articles in publications aimed at prospective investors and so on. Do they expend the same energy for recruiting top-notch employees? I doubt it. Yet, what would the benefits be if they did? Second, investors can choose to make their investment elsewhere at will, as we all know so well. People who do not feel that they are fairly rewarded for their investment will find somewhere else to invest. They will put their skills and energy to work for whoever understands this need to separate assets from investments. Third, investors need to have a sense of expected return. They want to know what kind of earnings they will get for a given input of funds. An employee instinctively seeks out whatever it is that equates to value to them. That may be job security, salary, flexible benefits, or time off. It may simply be a culture that they find comfortable and lets them express their individuality. Organizations that understand this need for a clearly defined return on investment have low turnover and find it easy to recruit people. Fourth, many people are choosing to become contractors because they then have a contract that spells out the reward they will get for delivery of a service within a certain time frame and at a certain level of quality. We should learn from them that all of us have a need to understand what we will get for our investment. Unfortunately, we often do not make the expectations or rewards clear for regular employees. There is a company in the Midwest that has become well known over the years for its lack of “normal” benefits for workers. This company, Lincoln Electric, has been in business for more than 50 years and yet has no real human resource benefit packages. Employees are paid by the piece, for the work they do; earn as much or as little as they want and are capable of; realize that by gaining more skills they can earn more money; get paid no sick time or vacation time, and vote on the distribution of profits each year. They can vote to improve the physical plant with amenities such as air conditioning or take the profits as cash. They usually vote to take the cash, even though working conditions can be pretty brutal in the middle of the summer. Turnover rate? Virtually zero. Absenteeism? Almost none. Recruiting issues? Standing room only. How does a company with almost no benefits and few amenities get such dedicated employees? Simple. The employees get a clearly understood and fair return on their personal investment of time and energy. Their raises don’t come from who likes them, but from their performance. It is a simple system, but one that works very well. Let’s assume that the top executive team of your firm, whether it is a single individual or ten, invested a few hours each week in activities aimed at marketing the firm to prospective employees. Let’s say that they laid out clearly the return on investment an employee could expect and what their input expectations were of the employee. I believe that the recruiting quality would improve exponentially and that you would have found a way to differentiate your company from the pack. However, you also need to assess candidates as investors as well. Do they have the skills and talents and energy that your firm needs to compete? Do they have the capital to invest that you need? The selection of potential employee-ivestors is much more complicated than that of cash investors because the employee-investor gives us his or her innate abilities, accumulated skills and personal energy rather than an external object like money. Assessing candidates as investors is different, I think, than assessing them as assets. I will devote a column to this topic later. For now, focus on getting management to think of people as investors. Spring is a great time to revitalize, re-educate and re-evaluate. Take a look at your recruiting strategies and messages and try to ensure that you are taking an investor approach and not an asset approach to your employees and candidates.