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Do you Suffer from Sand Castle Management? Take this Litmus test.

Guest post by: Susan Ireland

Article Overview: With the intellectual economy well upon us, how many corporations do you think still have their heads buried in the proverbial sand castle? Not mine, you say? Don't forget - - competitive advantages of old are no longer the competitive advantages of today. Technology is more easily and quickly duplicated, and by offshore competitors who do it for less. In days gone by (old industrial economy), a company's greatest assets were their physical and natural resources. Today (new intellectual economy), the biggest competitive advantage is a company's human capital. It's no longer the widget, brand image, or some secret formula. No, what makes one company better than another today is the human capital behind these things. In a recent Harris Study, it was noted that nearly 73% of a company's bottom line is tied to its people asset.

Do you Suffer from Sand Castle Management? Take this Litmus test.

With the intellectual economy well upon us, how many corporations do you think still have their heads buried in the proverbial sand castle?  Not mine, you say?   Don't forget - - competitive advantages of old are no longer the competitive advantages of today.  Technology is more easily and quickly duplicated, and by offshore competitors who do it for less. 

In days gone by (old industrial economy), a company's greatest assets were their physical and natural resources.  Today (new intellectual economy), the biggest competitive advantage is a company's human capital.  It's no longer the widget, brand image, or some secret formula.  No, what makes one company better than another today is the human capital behind these things.    In a recent Harris Study, it was noted that nearly 73% of a company's bottom line is tied to its people assets. 

While many corporate leaders claim to be well aware of the importance on their human capital, all too often their practice fails to live up to their preaching.   The reason is old habits.  Most of today's leaders grew up in the industrial economy, right?   The management philosophies and business practices employed today were originally developed in the previous economy.  That economy has left the building, so to speak.  New economies require new thinking.

Think your organization has a people-centric focus?  Confident your company has enlightened management practices in place?  Here are three easy Litmus tests to see if your organization has shifted from an industrial mindset to an intellectual one:

1. If you list payroll on your P&L as an expense instead of an investment . . . you fail.

2. If your employee turnover rate is higher than the defect rate for any product you produce . . . you fail.

3. If your organization has a Chief Operations Officer and a Chief Financial Officer, but no Chief People Officer . . . you fail.

Now I'm not saying you need to be an overly empathetic humanist seeking to go overboard creating warm fuzzy environments across your organization.  What I am saying is that substantial studies have shown the positive correlation between the ability of an organization to effectively manage its human capital and its ability to increase hard metrics like top and bottom line growth, shareholder value and market share.  Here are some examples:

• Cornell University's study of large publicly funded companies found that those using "high performance" human resource practices have market values that range from $16K and $40K higher per employee than firms who don't use such practices.
• Another study of high tech start-ups showed that for firms going public with a high level of human resource value, the probability of survival is .79; for firms going public with low levels of human resource value, however, the probability is only .60.
• Over the past 10 years the average annual shareholder return of the publicly traded FORTUNE "100 Best Companies to Work for" firms has been 50% higher than the S&P 500.

Bottom line, if your company needs to become more people-centric and move away from old patterns of sand castle management, don't substitute working hard for working smart.   Appreciate the significance of the shift from an industrial to an intellectual economy by focusing on your people. Come up with innovative, creative ways to engage their hearts and minds into every layer of the organization. In doing so, you'll out innovate, outperform and outpace your competition and do it from a perfect vantage point:  the top of the sand castle!

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Article Tags: brand image, competitive advantages, industrial economy, litmus test



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