My campaign to get ‘people’ onto the balance sheet.
If you’re in business then you’ll know that for most organisations, the biggest asset is people. But I’ve never understood why, in the accounting world, we’ve been able to quantify the cost of people, but have failed to reflect their value on the balance sheet.
I’ve been working in brand for a while now and have had the privilege of working alongside some of the world’s most progressive organisations who are at the forefront of management strategy. The one phrase that you consistently hear these days is that ‘we want to build our organisation from the inside-out’.
But even with these organisations when it really comes down to it, the value of their people is never reflected in the value of their organisation. There are some people who claim that people form a part of the intangible asset value, which is bundled in with things like brand value and good will (the likeliness that your customers will continue to buy from you after you sell).
But for me, that’s just not good enough.
The technical reason from an accounting perspective as to why people are not included in the balance sheet is because we don’t theoretically pay to acquire them. In accounting terms, the asset’s value is based on the purchase price. But if we want to get technical then there are lots of ways we can still calculate a price, but totalling the cost of acquisition. We really do underestimate the cost and investment that goes onto acquiring and keeping people, all of which is stored within that person.
But this isn’t about technicality; it’s about real value. Companies who have managed to acquire people with tremendous skill, experience, knowledge and talent are in a much stronger position than their competitors who don’t. After all, these people are a lot more unique than a machine or a computer which can be replicated very easily. So why shouldn’t this be taken into consideration when evaluating the value of the company?
The question is, would the inclusion of people on a balance sheet make a difference in the investment that goes into them over time? At VIVA, we’ve worked on many brand projects that look at metrics such as employee engagement, churn and retention but they all come down to investment. It’s not just about looking at people as individual assets, the collective group value is far superior and important in the valuation. The investments that companies make on collaboration, team dynamics and processes are all part of this value.
So next time when you’re thinking about growing the value of your company, just have a look to see if you’re already filthy, stinking, rich and how you can convey that to the market.
It’s time to market your people.