Employees: Your Most Valuable Asset

What is the most valuable asset that a company has? Is it the name, customers, goodwill, physical resources, or product line? The answer is that it is none of these. A company's most valuable resource is its' employees. Any organization will go only as far as the people who are driving it. In fact, a company is really just a group of people who interact for a common purpose. They are the ones who make up the organization.

The last few years saw a shift in the focus of some companies. For decades, management gurus were preaching that the customer is the most important thing. Certainly you have seen the signs stating, “Rule #1: The customer is always right. Rule #2: Reread Rule #1”. This concept dominated the business culture from the late 1970s through today. However, organizations that hope to survive in the future will need to adopt a new outlook. That outlook is that the employees are the most important aspect of any enterprise.

This is not a call to employee preference or returning to the chaotic times of organized labor. That is not necessary in most environments. The market is driving the direction that organizations are going to have to take. Simply, the advantage is starting to side with employees. Companies can no longer afford to take them for granted. Those that do will perish.

The fact that the US is going to witness the exiting of 50 million baby boomers over the next 10-12 years means that there is going to be a glut of people. It is estimated that there will be a shortfall of workers by some 10 million or so. Certain industries are already experiencing a lack of qualified talent. Presently, salespeople and engineers are in high demand. The options that are available to employees are increasing at a fast pace. Companies that maintain the status quo are already falling behind.

The Internet is one of the greatest inventions that we experienced. It has done so much for the average person. At the same time, it changed how business is done. Unfortunately, one result that was not anticipated is the lack of loyalty which came with it. People are no longer loyal to a company. Insurance, a commodity that was once purchased based upon relationship with an agent, is now sold over the Internet. The lowest price wins in this game. Arranging travel is done online as opposed to going through an agent. People are accustomed to switching brands without a single thought. Companies need to bear this in mind.

Management trainers taught companies to look at the lifetime value of a customer. For example, a person who spends $50 a week a store is actually worth $2,500 a year. Naturally we treat someone better if they are worth $2,500 to us as opposed to $50. However, this brings up an interesting question. What is the lifetime value of an employee to your organization? Consider this carefully keeping in mind that each customer is less valuable than in the past. Their tendency to buy elsewhere when a better price is offered makes them less reliable. The same is true if your organization experiences a high turnover of employees. The entire enterprise experiences a decrease in it’s reliability.

Let's look at the value of a salesperson as an example. Suppose that person sold $750,000 a year worth of product at a 10% profit margin. This person produces $75,000 in profit each year to the company. How much is this employee worth over a 40 year career if the production was the same? That individual suddenly is worth $3,000,000 to that organization. I surmise that you will treat them differently when you view them in this light.

The same can be translated to non-sales positions. How much is a good bookkeeper worth? Have financial issues and you will quickly find out. Customer service people are often taken for granted until they drive a customer away. At that time it is simple to compute how much of an effect they had. Of course, by retaining customers and handling their problems, this person is actually adding to the bottom line. That has a value.

It is important that managers and owners begin to realize that the employees are the most valuable asset any organization can have. Those who accept this new business model will structure their compensation and bonus program to reflect this belief. Maintaining a happy and consistent workforce is going to need to be the primary aim. Failure to do so will result in an organization being short quality people which will spell its ultimate demise.