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Allan Sayle's Comment

Column 5: 19 January 2006.

People are not assets

“People are our most valuable assets” is a common, lofty and perhaps well-meant sound bite with which, upon its analysis, it is difficult to feel comfortable. It is not true.

In business, property and assets are one and the same on a balance sheet. Assets can be traded, exchanged - bought and sold. They can be used as security for a loan or mortgage. If people are a firm’s most valuable assets' the expression infers the enterprise 'owns' its staff. Of course, in today's world the idea is abhorrent, even though slavery and the slave trade still (covertly) exist in various parts of the world.

In The Decline and Fall of the Roman Empire, author Edward Gibbon noted the important distinction that slaves were "valued as property", while servants "can be computed only as an expense." The (somewhat imperfect) corollary to the first statement would be if a person is valued as property, an asset, he or she is a slave. For the second, and also somewhat imperfect: if a person is regarded as an expense, he or she is a servant. Mr. Gibbon wrote of attitudes prevailing during Roman Imperial times. Has anything changed in the last two thousand years?

At your service

For present purposes, we shall ignore the world of professional sports, such as soccer, baseball or ice hockey. Trading players is commonplace and acceptable. In the rest of commercial business and government, employee trading is abnormal.

“I don’t know how someone controlled you.
They bought and sold you.”

While My Guitar Gently Weeps,
George Harrison


That is not to say inter-company disputes do not occasionally occur. The celebrated case of a procurement executive, who moved from GM to Volkswagen some years ago springs to mind. In recent months the legal dispute between Google and Microsoft over the hiring by the former of Mr. Kai-Fu Lee from the latter, where he was an important computer scientist, to become Google's president of its R&D in China, has received some attention in the media. (Ref. 1) Even in such situations, an employee transfer does not seem to be as a result of the two employers agreeing on a trade without consulting or referring to the employee. Rather it seems to be an employee voluntarily responding to an enticement to change his employer. In such circumstances, the employee controls the final transfer decision. That fact makes a world of difference for it confirms the gentleman was and is a free agent. If not, he or she is a chattel.

Of course, any employee must act within the limits of whatever employment contract prevails. The employee was free to accept or reject the contracts terms of the original employer in the first place. In headhunting staff, the new employer generally initiates the contact, albeit through an intermediary, making overtures to the candidate. Indeed, in soliciting the employee’s services, the candidate cannot be accused of meretricious conduct or of questionable parentage, even if the former employer’s outraged management may privately make remarks to that effect!

Employees are free agents who upon agreeing to be hired elect to become servants to their chosen employer. (Yet, in today’s age, even though the so-called service economy is predominant in developed nations, being dubbed a ‘servant’ contains some perhaps unpleasant overtones for the unduly sensitive. A common palliative term is 'associate'.) Even so, subjecting the “servants” to a Victorian upstairs-downstairs, disdainful type of treatment is inappropriate: the firm makes money by selling the outcome of the servants’ knowledge and efforts. It is a team effort.

Deeds not words

Through their actions and attitudes some managers do treat employees as assets: as property. For a business to prosper, staff must be regarded and treated as equal members of the team. Mere proclamations by top executives to that effect are insufficient as are occasional empty gestures concocted as an afterthought, such as pizza parties or cookouts designed to “keep them happy”. Treatment connotes values.

Bad treatment eventually results in revolution, protest and unrest. It is not conducive to improving business results. It loses customers as they feel the effects of disharmony and take their business elsewhere because its effects create for them an avoidable cost arising through poor service, the need to pursue warranties or refunds etc.

Tell tale signs emerge: excessive churn rate; inferior product quality; rework ratios; customer claims; low repeat order rates; and, poor housekeeping. (By taking note of these things, an assessor can begin to unearth the root cause of problems. Poor management. In undertaking a supplier assessment, the assessor must advise her management of the risks of doing business with such a supplier.)

Leases and obligations

In a knowledge society any employee can take experience and expertise elsewhere. In hiring someone, an organization does not purchase an asset. At best, the employer obtains a full repairing lease on the individual’s knowledge property. The employee is the lessor, not the lesser of the two parties involved. As with many leases, improper treatment gives the lessor the right to terminate the lease. Then, the lessee (the employer) is the loser for he must incur all the avoidable costs associated with negotiating with a new lessor (employee).

But, the lessor must also be willing to maintain his property for the benefit of the lessee. In bygone years, it was generally accepted that an employer must provide the necessary funds to maintain appropriate levels of staff knowledge and skills. Indeed, employees expected training and development for free. In developed countries, at least, a new age has dawned wherein employees are expected to invest in themselves to a greater extent than occurred in the past and maintain the knowledge current to retain their market value. By failing to do so, the lessee then has the right to terminate the lease.

In his famous treatise, Mr. Gibbon noted, "A learned slave sold for many hundred pounds sterling." The question for business today is: who now owns the slave? The answer is: the slave. Will the corporate Rome fall because those who regard employees as “assets” do not understand the nature of property rights? Yes, for it is only a matter of time.


1. USA Today, December 8, 2005, p.2B.

© 2006 Allan Sayle Associates. All rights reserved.

Web: www.sayle.com
Email: Publish@SaferPak.com



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