Are People REALLY Your Most Valuable Asset?

"People are our most valuable asset." Every company says that. However, very few follow through on that statement by making required investments in their human capital. People aren't ONE of the most valuable assets to gain competitive advantage - they ARE the competitive advantage. Let's face it: your competitors, for the most part, have the same facilities, equipment, procedures, etc. that you do. What determines who will win? The people.

While equipment constantly depreciates, the people asset actually appreciates - IF - they receive training, development, and the proper leadership. While bad leadership leads to decreased productivity, increased off quality, turnover, poor attendance, and conflict, good leadership results in associates who are accountable and engaged and not satisfied just to reach minimal goals, but are inspired and motivated to exceed them.

Is there proof that people are THE competitive advantage? Numerous studies bear this out. Perhaps the most famous was conducted by the London School of Economics. The fundamental aim of this research was to aid leaders in determining where to direct their efforts in order to have the most impact on the performance. Data was gathered during an intensive, ongoing 20- year study of over a hundred small and medium-sized manufacturing companies.

Company performances were compared, variations in performance and productivity noted, and contributing practices identified. Data from the study reflects differences BETWEEN the companies in the study. For example, if one company was more successful than another as shown by the data, to what practices can the success be attributed?

Here's what they found:

Percent of overall PRODUCTIVITY improvement differences between successful and not as successful companies from each strategy:

• Business strategy + 3%

• Investment in technology + 6%

• Investments in R&D + 6%

• Emphasis on Quality + 1%

• Employee attitudes +23%

• Culture +29%

• “People” practices +18%

Percent of overall PROFITABILITY improvement differences between successful and not as successful companies from each strategy:

• Business strategy + 2%

• Investment in technology + 1%

• Investments in R&D + 8%

• Emphasis on Quality + 1%

• Employee attitudes +10%

• Culture +10%

• People Practices +19%

So, in the area of Productivity, 70% of the difference, and in the area of Profitability, 39% of the difference was attributable to people.

Conclusion:

• The study found very little company-to-company variation in emphasis on quality, technology, business strategy . WHY? All companies emphasize these areas. Strategy, emphasis on quality, technology, and R&D are required just to be in the game – everyone invests in them so there's no real competitive advantage here other than doing these better than the competition.

• However, there is considerable variation in people practices between the companies, presents a significant opportunity for competitive advantage.

• Employee attitudes, organizational culture, and people practices are not emphasized in many companies and so are far more effective strategies in developing competitive advantage

How is your company doing in these areas? Do you treat you people as is they REALLY are your most valuable asset?

At Tailwinds Consulting, we help you ensure you have the right people, trained to competence, who are accountable and engaged to go beyond minimum expectations.