Reassess your assets

The case aginst people being an organisation's greatest asset is getting stronger. And, in any case, the time to adopt a less fanciful slogan is long past, writes XpertHR's commentary editor Stephen Overell.

According to Adslogans, which runs a database of advertising taglines, the first company in the UK to use the phrase 'people are our greatest asset' was Interactive Services, an Oxfordshire-based training consultancy. That was in 1991. The honour is qualified, however, by the suggestion that the inspiration may be derived from the Army, which has long held that 'the Army's greatest asset is the morale of its soldiers'. Since then, of course, the phrase has blossomed. Marconi, West Midlands Police, UBS Warburg, Ernst and Young, Andersens, Nato, the CIPD - the list of believers is long and diverse, the sentiment wholly uniform.

What are we to make of this? An impressive show of unity? A testament to the sparkling originality of the corporate intellect? Final proof that ideas follow the patterns of diseases, becoming more virulent as they spread? Or is it that social conventions have made mouthing such platitudes a necessary obligation for the go-ahead business leader?

Like many roadworthy slogans, the axiom sums up a generation of academic argument - in this case about the nature and meaning of HRM (human resource management). As scholars wrestled with such matters as the softness of HRM, the hardness of HRM - its wickedness, its contradictoriness, whether it was really different from good old personnel management - practitioners simply got on with it. HRM grew, and as it grew, it needed a positive slogan to reinforce the view that employees were now investments rather than variable costs. Step forward 'people are our greatest asset'.

There is no denying that as rhetoric, the phrase has been phenomenally successful. Its truthfulness, though, has always been in doubt. Michael Hammer, who co-wrote Re-engineering the Corporation , has called it "the biggest lie in contemporary business". Peter Drucker prefers "a cliché that borders on a lie". (1)

A new theory is gaining ground. According to the sudden surge of books about managing professionals, the phrase is not so much a lie, as only realistically applicable to a tiny minority of organisations which operate under a very particular set of pressures - namely, professional service firms (PSFs).

For the majority of organisations, it is simply inaccurate. "In most businesses, a company's competitive advantage does not rely directly on the retention, motivation and behaviour of particular individuals," write Jay Lorsch and Tom Tierney, the authors of a new book on managing PSFs. (2) "Instead, it turns on shelf space, brand strength, cost position, distribution systems, price, technology, product design, location, or any number of other variables that can exist apart from the individuals who created them… Most companies' profit performance does not correlate with their 'people assets'." Or put another way: people are expendable.

In PSFs, however, which, after all, are nothing more than gangs of individuals with specialist skills - lawyers, accountants, PR firms, management consultants, advertisers and so on - the dependence on high-performance people is absolute. Indeed, Lorsch and Tierney describe it as "the distinguishing characteristic" of the PSF - so much so that the interests of the employee come before those of customers. "The people you pay are more important over time than the people who pay you," they explain.

Managing teams of professionals is often alleged to be like 'herding cats'. Patrick McKenna and David Maister, authors of another new book about PSFs, First Among Equals , (3) paint a picture of star professionals as being congenitally averse to accountability, claiming it will thwart their creativity. They hate the uniformity of meetings. Their well-honed professional scepticism trains them to pick holes in constructive new ideas. They have what McKenna and Maister describe as an "alarming tendency" to do precisely what they want, irrespective of the firm's wishes. They are temperamentally restless and ambitious, nursing a compulsion to compete against their colleagues; and they can take lucrative clients with them in the event of a fall-out.

Trimming their elevated salary costs is not an option: cutting wage bills never translates into competitive advantage in a PSF. The firms have little choice but to put up with such irritations because, unlike all other business models, in PSFs the balance of power really is tilted towards the individual. Accordingly, PSFs tend to be flat-structured and participatory. Yet this culture of involvement, even democracy, works against responsibility. "If everyone is in charge, no one is in charge," explain McKenna and Maister.

And, as a sector, professional services has boomed. In 1990, the global revenue of PSFs was $390bn, a decade later, it was $911bn and between 1980 and 2000, PSFs globally grew by 11 per cent a year. (4)

If the professional services sector really is uniquely dependent on good people - and the case is, I think, a fairly strong one - HR's generic cliché of choice during the last 20 years is looking shabbier than ever.

People are our greatest asset' is often used as a reason why all organisations should promote best practice across a host of different agendas - equal opportunities, reward, selection, appraisal, employee relations, development.

The logic carries an implied threat: if companies don't treat people as their most important asset - helping to retain good people by offering competitive maternity rights, for example - those assets will leave and the company will suffer. This threat carries some weight when the only assets an organisation has are its brand and its people - the PSF model.

But does the logic really work in a typical enterprise? Does the threat of workers hot-footing elsewhere really have the potential to devastate the average commercial or public sector operation? The honest answer is probably 'no'. Most organisations can use, abuse and lose their hum- an assets with relative impunity because they have others that are more important. Generally, people are a means to an end.

'People are our greatest asset' is, then, a slogan that is for the most part fanciful and inaccurate, even a downright fib. Nothing new there then. The point is that 'people are our greatest asset' may have done more harm than good. It has made the HR profession look over-ambitious, deceitful and smarmy. Ideas for a new tagline, anyone?