Turning people into profits

It may be politically correct for employers to say their workers are their greatest
asset, but, says Jonas Ridderstrale, firms now must ensure a continuous transfusion
of talent if they want to stay ahead of the game

What is your company’s greatest asset? Today, most managers would probably
reply: our people. But nothing could be further from the truth – and I’m not
thinking about the Dilbert cartoon where people came in ninth, right behind
paper clips. My argument is that human capital must be regarded as a liability.
You cannot own people. To succeed in a world where power increasingly belongs
to competent individuals, firms must build processes to secure a continuous
transfusion and transformation of talent. Executives must become ‘humanagers’.

Marxist Markets

The balance sheet is probably the only 500-year-old supermodel still capable
of arousing a few people. But despite its long-lasting allure, it often only
captures around 20 per cent of the real value of contemporary companies. Today,
knowledge makes all the difference. And just who owns that exactly? George
Soros?

Ironically, in our hyper-capitalist times, it turns out that Karl Marx was
right. People now control the most critical resources – albeit individually
rather than collectively – their own brains. What is crucial at many firms is
perhaps not the core competencies so much as the core competents – individuals
who make competencies happen.

Competents represent prospective cores rather than retrospective scores. And
we find these ‘knowledge nomads’ all over the map. We find them in sports – the
UK’s football team Liverpool with or without star player Michael Owen; in the
media – CNN and Larry King; in business – Bill Gates once said that if 30
people were to leave Microsoft, the company would risk bankruptcy; and we even
find them in academia – HBS and Michael Porter.

While there are clear signs indicating the business community is moving
closer to perfect competition in many product/service markets, in the high-end
niche of the labour market we are talking about the opposite development. We
are being pushed into a world of increasingly imperfect markets.

Core competents are nothing less than ‘mobile monopolies’, who will stay
only as long as organisations can offer them something they want. When this is
no longer the case, they will leave to set up their own one-person companies –
Me Inc. So, in this gold-collar niche of the labour market, firms may end up as
price-takers – at the mercy of those who control the most rare and critical
resource. Consequently, power is now in the process of being transferred from
the capital owners to the competence owners. The humble, loyal employee becomes
dusty history.

To succeed in a world where the intellectual investors are in charge,
companies must approach talent in new ways. Turning people into profits is a
question of simultaneously applying strategies which revolve around attracting
and reducing the power of competent individuals – talent transfusion and
transformation.

Talent Transfusion

In an economy where competition in the labour market is increasingly
generic, we are all players in a great global attraction game. Success is
contingent on exploiting the fact that human beings want to express both their
individuality and their need for belonging.

People no longer work out of moral obligation. Life-long loyalty to a
company, country or brand is a thing of the past. Today, smart people hire
organisations, rather than vice-versa. For stars, an organisation is disposable
– a temporary home.

But while competent individuals are becoming much more powerful, that is
just about the only thing they have in common. We differ. And sometimes it
takes the business community quite a while to realise that. Remember it took
the automotive industry some 100 years to realise women are not small men.
Treating talent like bulk goods is especially dangerous if you want to attract
Generation I – international, informed, informal, impatient and extremely
individualistic.

So, attracting talent calls for more personalisation. People can be
approached and treated, evaluated and rewarded, and motivated and inspired in a
number of different ways. If Madonna or David Beckham will not settle for
anything the slightest bit normal or average, why should you or your fellow
competents? It used to be XM – extra medium. Now it must be XMe. Instead of
being provided with detailed job descriptions, competents should provide
managers with motivation descriptions. Recall what JFK once said:
"conformity is the jailor of freedom and the enemy of growth".

Talent wants voice and choice. And while most organisations realise the
attraction game needs to be played from the neck up, some doubts remain. As a
leader, are you really prepared to surrender your ego to the talent of
competents? How many companies would recruit a young, female, lesbian,
non-Caucasian Muslim, with a degree from the Saddam Hussein School of
Management? Remember that talent is not the preserve of middle-aged, white
males. Also remember that most competent individuals do not leave companies –
they leave managers.

But people also want to belong. Firms with a future will launch strategies
focused on organisational tribalisation. In a tribe, people share rewards,
ownership, culture, identity and knowledge. Indeed, the list of organisations
having to realise power now belongs to their people is getting longer by the
minute. Already today, some 30 per cent of the equity in US companies is tied
up in promised stock options. At Nokia of Finland, the estimated cost of the
stock-options programme is more than $10bn. Robin Hood is not dead. This time
though, he is not stealing from the rich to give to the poor. Now, money flows
directly from the capital investors right down into the pockets of the
competence investors. Shared ownership and rewards also imply the interests of
the capital and competence investors are aligned to avoid people viewing the
‘battle’ for cash as a zero-sum one.

Increasingly, values will constitute such a lowest common denominator to
keep the tribe together. Today, we see many successful companies recruiting
people with the ‘right’ attitude, then training them in skills, not the
reverse. Look at organisations as diverse as Southwest Airlines and the Hell’s
Angels. Just imagine Hell’s Angels hiring for skills! These organisations do
not believe in the idea of bringing in smart people and then brainwashing them
at training camps because:

– the half-life of knowledge is coming down really fast

– for most of us it is easier to change our skills than our basic values

One additional advantage of having and communicating a clear set of values
is that the organisation becomes self-selecting – it primarily attracts people
who share the same attitude. Being ‘fuzzy’ means that anyone or no-one will
knock on the door.

Talent Transformation

Since we are essentially talking about leading liabilities, companies also
need to work hard to reduce their dependence on competents.

Today’s typical company may not suffer from knowing too little, but rather
from not knowing what it knows. A critical task for any organisation aspiring
to be successful is to engage in knowledge codification – transforming the core
competents into core competencies. To truly boost the value of your company,
you must turn human capital into structural capital – in the form of systems
and procedures, routines, and so on. We must build an organisational memory.
And while human capital is best thought of as a liability, structural capital
is definitely an asset on the balance sheet.

A more systematic approach to knowledge management means keeping track of
both the current stock and flows of knowledge.

At Accenture, the Knowledge Exchange system – a database containing
information on past projects the firm has been involved in – has been around
for years. Memorisation means collecting the knowledge of gold-collar workers
or excellent teams and transferring it to an organisational level. By
collecting, codifying and communicating the knowledge of core competents to the
rest of the organisation, the firm provides the others in the organisation with
an opportunity to learn and then use their new insights to help customers. Over
time, the company also becomes less dependent on the skills of a few
competents.

Not only that, however. Since we are living in discontinuous times,
companies must also become much better at forgetting faster. The memory must be
designed with a built-in delete button. To make room for the new, we must get
rid of the old. But this is easier said than done, particularly since most
senior executives are placed at the top because they are experts at what was
important yesterday.

A second measure aimed at improving the performance of the firm and
lessening the power of competents is increased employee socialisation (not in a
Marxist sense). By working in teams or spending time together after work,
groups will develop tacit knowledge. People will know things they cannot tell.
In Japan, for instance, people sometimes talk about ‘nommunication’, rather
than communication. Nommu is Japanese for drinking. The time spent together in
a bar after office-hours can be critical to the development of new ideas and
relationships.

The existence of tacit knowledge means it is more difficult for competitors
to imitate the knowledge of the firm. Tacit knowledge also makes it harder for
people to walk out the door with their skill sets intact. Part of the body of
knowledge of a specific competent will be nested in an inter-personal network
of relationships with existing colleagues. They can only bring their
intra-personal competence with them if the colleagues decide to walk out the
door. Socialisation = tacit knowledge = knowledge handcuffs.

U2

A final word of caution. I fear that many modern managers are overlooking
something pretty important – themselves. Forget about talent-taming for a
while. From a personal point of view, your most important job is ensuring that,
over time, the structural capital of the organisation becomes your human
capital. You see, the future, as always, does not lie in front of successful
individuals, it must rest within them. Go for lifelong employability rather
than lifetime employment. Make capital dance.

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