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05:43 on Tuesday
10 February 2004

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Your greatest asset?



Peter Hall is former director of the Management Development Unit at Cranfield, and is now Chairman of The Wadenhoe Group, a Consultancy and Research organization based at Wadenhoe House ouseHounear Peterborough.

'People are your greatest asset' is hardly a new thought. But unlike most old adages, this one seems to grow sharper and more relevant every day.

When Jack Welch handed over the reins of GE, the business press filled to bursting point with analyses of his success. Most commentators agreed that his strategy of remorselessly pursuing excellence (and rooting out underperformance) among his people lay at the heart of his success.

At about the same time, a new book by Jim Collins sifted through the 1,435 companies that had been in the Fortune 500 from 1965 to 1995 in search of ones that had made a transition from 'good' (keeping pace with the market) to 'great' (outperforming the market threefold). Collins found that only eleven companies fitted this bill. Looking at what they had in common, the answer was not systems or technology, but the people in charge. All eleven had a particular kind of leader - modest, determined, passionate about the business, and themselves great believers in the value of excellent, committed people.

I could go on, but I feel the case is proven. People really are the ultimate competitive edge, the ultimate differentiator - a business' greatest asset.

So, are you looking after this asset as well as you need to be? Here are five questions to get you thinking.

  1. Can you list the five brightest people in your organization? 
    This isn't about academic qualifications, it's about their unique capabilities that are really delivering value to your organization. Can you say why you believe them to be the brightest? Are you sure your stars are delivering as much value as they should be? A regular 'Talent Audit' can be an essential tool for ensuring that they are. While we're on the subject, how do you see these individuals' future? How do you feel about them lining up behind you, ready (and possibly a bit overeager) to step into your shoes? The best leaders plan their departures objectively and rigorously.

  2. Do they know they are your greatest asset? 
    Some people are shocked when I ask them this. 'Of course not! We don't want them getting too big for their boots.' Naturally, this is no way to get the best out of bright people - or any of your people.

  3. Do you know their replacement cost? 
    Loss of key staff can be devastating to an organization. I have seen calculations of the cost of replacing staff that vary from 4,500 to 'a year and a half's salary'. The first is ludicrously low: I think it was talking about very junior people. Replacement cost mounts exponentially as you move up the organization. The second estimate is nearer the truth, at the top, anyway. Southampton recently sued Spurs for 900,000 for poaching Glenn Hoddle, exactly one and a half times his salary. And in fact, replacement costs of this most valuable asset - able people at the top of your organization - can be even higher, especially if you recruit from outside and the new person fails to fit in. Such failure is much more common than headhunters let on.

  4. What are you doing to maintain and update this asset? 
    You wouldn't fail to spend money maintaining plant, machinery or vehicles. They receive routine servicing, protection and are upgraded when necessary. So what about your people? All of them, not just the 'high flyers'? Their skills need continual development. And they need looking after, too - witness the effectiveness of Marjorie Scardino's email to Pearson employees after September 11.

  5. Is the person in charge of this asset on your board? 
    If you really believe that 'people are your greatest asset', then why is the HR Director not on your board? For some of you, he or she may be. Great. But for others... Sadly, the story is often that the head of HR is not up to the job. They may have the title 'Director', but actually they are not sufficiently au fait with the broad spectrum of issues that a real director has to be master of. HR tends to be its own world: HR people learn their skills there and don't spend time in other departments. Some may ask, why should they? The answer is, of course, because a real HR director must be as good a strategist as any other director. They must have spent time outside their specialism, so that they can walk into a board meeting and add real value to every discussion. 'Every' because every discussion has a people aspect.

GE or Jim Collins' eleven 'good to great' companies would have given clear, positive answers to these questions. How about you?

March 2002

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Article by: Peter Hall
Peter Hall is former director of the Management Development Unit at Cranfield, and is now Chairman of The Wadenhoe Group, a Consultancy and Research organisation based at Wadenhoe House near Peterborough.

Contact:
Wadenhoe Group
Tel: 01832 720123
Email: [email protected]

Wadenhoe Group Website

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