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If People Are Our Most Important Asset, Why Aren't They on the Balance Sheet?

5/24/2012

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I gaze out the window of the law firm offices in an upper floor of a mid-town Manhattan skyscraper.  It is late evening. Civilization is aglow. Thousands of yellow and white lights in neat rows glow from other buildings.  I see the red, white, and blue lit tower of the Empire State Building.  St. Patrick’s Cathedral spires aim up at me from directly below.   I ponder how a boy from the scrub oak, sage brush covered foothills of the Salt Lake Valley has gotten to this place working on a big project at the center of world business.  It is not a feeling of pride or arrogance; it is a sense of awe at the privilege of being involved.

We are finalizing the prospectus and Securities and Exchange Commission filing to sell publicly traded bonds to raise about $700 million dollars to help construct NEXTEL’s wireless network infrastructure throughout the country.

In short, we are tempting investors to buy into our company, to invest in us, by buying junk bonds – which aren’t junk but are high risk – and have a nice high yield.

I am the director of financial reporting for the company. My team is comprised of fifteen lawyers, Wall Street investment bankers, big accounting firm auditors, and other NEXTEL executives.

The prospectus is meant to inform potential investors everything they should know about the company: its advantages and strategies in the marketplace, its competition and others risks, its assets, liabilities, and capital structure.  However, it doesn’t say one thing about the company’s most important asset—the one that would have the greatest impact in its chances for success.

In this 250-page document filled with small-font information, the people of NEXTEL are not mentioned once!  There’s nothing on the balance sheet that reflects the value of people: only cash, investments, other current assets, and the value of FCC radio licenses.  In all the narrative verbiage, nothing is said about the people, and how they might contribute to–or detract from–the bonds being a great investment.

In his landmark business management book, “Good to Great,” Jim Collins says that getting the right people on board is absolutely crucial to a great company.  People come before market analysis and strategy. 

That isn’t just a touchy feely, namby pamby, sweet loving thing to say – it is hard core, hardnosed, bottom line financial smarts.

John Diebold, chairman of the worldwide firm Diebold Consulting, said this:  “It would be hard to find a corporate annual report in (the US) that does not state ‘Our most important asset is our people’- yet our accounting rules make it literary impossible to reflect this on the balance sheet, and we have just completed a decade in which business after business in the US has flagrantly ignored its reality in part because this is not the way we ‘keep score.’"

This lack of appropriately valuing people in reporting often translates into decision making and daily treatment of people that hurt business operations.  This neglect weakens the bottom line.

In his book “are you a C.E.O. or a P.O.W. ® (now registered with a federal trademark  Tom Cantrell), administrative law expert in human resources matters  states, “If people managed their financial resources as they do their human resources, they'd be broke within a month and in federal prison.”

Fortunately, there are enlightened business leaders who know better than to waste their number one most important asset.

Recently I had lunch with my little brother who is six inches taller than I.  He runs a very successful home mortgage business on Bountiful, Utah’s Main Street.  He’s a people-oriented person.  We bought Philly-cheese sandwiches from Vito’s, a famous lunch spot in Bountiful, and walked up and down Main Street admiring artists at work for the annual sidewalk chalk art festival.

As we strolled and admired, Kay told me how his ten employees decided together a couple of months ago they’d all read the “Hunger Games” book. Then, Kay agreed that if the office met certain revenue goals, they’d take an afternoon off and see together the “Hunger Games” movie.  They did.  This is simple, but valuing people and doing the little things that makes them feel valuable yields greater profits.

Really understanding the unique skills, talents, and career goals of each employee, mentoring and coaching, investing in training are crucial things to maintain and enhance our most important asset.

Each of us has the potential of impacting the success of our organizations through properly valuing the people.  It doesn’t matter if the human capital of our organization is not reflected on our company’s balance sheet.

Regardless of our perspective—whether doing business from a Manhattan skyscraper, Bountiful’s Main Street, or anywhere in our great country, we can make our organizations more successful by valuing people.

Our people are our greatest asset—despite what the accountants say! 


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    Owen Ashton is an author, inspirational speaker, and mental health advocate as well as a CPA and former corporate financial executive.

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