Productivity Through People – Soft Assets, Hard Profit Consequences

Productivity Through People – Soft Assets, Hard Profit Consequences

Productivity Through People Series - Soft Assets, Hard Profit Consequences

Soft Assets Produce Big Dividends! Managing the Assets Entrusted to Managers and Supervisors

The assets entrusted to managers and supervisors in order to achieve business unit goals and organisational objectives comprise both ‘hard’ and ‘soft’ assets.

Hard Assets

‘Hard’ assets are assets that are able to be capitalised and commonly measured in the balance sheet or profit and loss statements such as:

  • Financial Assets
  • Brands & Goodwill (balance sheet)
  • Buildings & Equipment (balance sheet)
  • Finance & Debtors (balance sheet)
  • Land & Investments (balance sheet)
  • Patents & I.P. (balance sheet)
  • Stock & raw materials (balance sheet and profit & loss); and, of course
  • Labour (profit & loss)

Non-Financial/Intangible Assets

  • Channels/Distribution Network
  • Markets/Customers/Clients
  • Operational Competence
  • Products/Services Competence & Quality
  • Supply Chain relationships and competence.
financial assets
Photo: CC BY SA 2011 Ken Teegardin

Soft Assets and the Bottom Line

These ‘hard’ assets, don’t of themselves, execute strategy, make sales and so on. It takes people to do that. People are the ‘soft’ assets organisations purchase in order to execute strategy. Mismanagement of these ‘soft’ assets can have very hard consequences just as there are big payoffs in managing people well.

Key Soft Assets

Managers are entrusted with key soft assets. These don’t appear in the financial statements (other than the cost of time and talent) yet they are the keys to turning off the switches in people. We can explore the key soft assets under 7 headings:

1. Time & Talent

Organisations purchase in time and talent in order to execute strategy. Purchase costs per minute, for a wage of $50k, is around 55c-60c per minute. A minute of time can be used only one. The cost is incurred irrespective of the outcome achieved by its used or the lack of it. Wasted time incurs an unnecessary cost for the organisation. Supervisors and managers have managerial responsibility to ensure that time wastage is minimised.

2. Staff Goodwill

Most employees start off their day wanting to do a good day’s work. Regretfully, some conclude their day’s work believing that they have been messed about by fools. This compromises goodwill which, in turn, compromises productivity and engagement. Supervisors and managers have direct responsibility to manage the goodwill of their staff.

office culture

3. Culture

The competency of the culture in a work unit has a major impact on the productivity the unit achieves. Functional cultures are more productive than dysfunctional cultures. As the dominant alphas in their business unit, supervisors and managers set the standards for the unit. The better or, more functional the standards, the better the relationships within the group. The better the relationships, the better the group productivity.

4. Relationships

The degree of functionality of the relationships between a group is the single biggest determinant of its productivity. The functionality of relationships correlate directly with the levels of emotional intelligence within the group. Business units pay a massive price for dysfunction, both financial and emotional. Again, managers and supervisors have responsibility for the quality and/or functionality of the relationships within their business unit.

5. Psychological Contract

Each person has sets of beliefs and expectations that define their relationship with their organisation. When organisations nurture and deliver on these beliefs and expectations people get engaged and committed. When they aren’t delivered the relationship starts to fracture. This has major impacts on employee engagement. Supervisors and managers are the human interface between the organisation and its people.

work-relationships

6. Significance and Pride

All employees, even the most humble, have a need for their significance as individuals to be recognised. It is important that each person understands the significance of their role (and its tasks and activities) and understands its contribution to achieving organisational goals and objectives. The sum of an organisation’s success is made up of the contributions of each of its members. Some contributions will be greater than others, but the whole will remain greater than the sum of the parts.

The contribution each person makes according to their talent, abilities and effort should be recognised. People who have their significance recognised, feel better about themselves and, have the opportunity to take pride in their contribution. Delivering on significance and pride can unlock energies and motivation, just as their denial will kill motivation. Supervisors and managers have a major responsibility to deliver on and nurture this crucial asset.

7. Processes and Systems

All work is done through a process and system. Obviously, some processes and systems are far more competent than others. The process and system competency is a major asset entrusted to supervisors and managers. Often, supervisors and managers are captives of the system rather than its managers. They are working in it rather than on it. The best batsman in the world will struggle for runs on a poorly prepared pitch. Often supervisors and managers send their people to ‘bat with one hand tied behind their back.’ Productivity is compromised and there are also emotional impacts. Supervisors and managers are responsible for the management of the crucial asset that competent processes and systems represent.

The impact of managing these 7 ‘soft’ assets well is also depicted in the following diagram. Essentially, for the same $ cost two very different outcomes can be achieved.

Soft Assets

The better the soft management the more an employee will increase their discretionary effort resulting in higher productivity and engagement – for the same $ cost. Whilst an employer can compel attendance they certainly can’t compel creativity, passion and commitment. These are controlled by the employee, who decides the extent to which they want to get involved.

The same wage costs are incurred but for totally different outcomes. It is within the power of supervisors and managers to assist their staff to turn on their thinking, creativity, passion and commitment. It is also very easy for supervisors and managers to de-motivate people. There is an anecdotal saying that ‘people join organisations but leave managers’.

These seven assets may not appear on the balance sheet but they have greater bottom-line impact.

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