Could you imagine how many reports does it take for your organization to function the way it does today? Recently, we came across one that generates 900 reports. Shocked as we were with that number, upon further investigation we realized that a few years ago, each department and BU was given the mandate to increase productivity. So stretched that mandate got in the direction of tracking and monitoring, that those 900 reports completely changed the company culture. Reporting almost became raison d’etre. We were intrigued by this phenomenon and our curiosity exposed us to another interesting aspect.
The Tyranny Of Tangibles
We all have a fetish for tangibles. Everything we can touch, see, hold, quantifiable – the so-called `tangibles’ are naturally attractive to business. Earlier we used to see only the annual results, but now even the quarter on quarter results don’t quench the thirst.
On people side also, we experience resistance to accepting human behaviour as subjective. We want to bring objectivity in selection, performance, want to correlate the impact of training on productivity, engagement numbers to employee morale so that something can be done about it. There is that nagging impulse to convert all intangibles into tangibles, all subjective into objective. These days, even happiness is measured. It may sound funny but “hey, I’m Level 8 happy” or “put all level 3 happiest together and organize a picnic for them”
“Certainly, there are clear pay-offs for this love of tangibles. Like, when things are tangible, quantifiable, we feel in control. It takes care of our fear of uncertainty by creating predictability. It satiates our hunger to figure things out, provides us standardized and consistent parameters for evaluation and so on. All these are legitimate and important reasons for tangibles.”
The human mind compartmentalizes things. We often think `black or white’. So when tangibles are good, intangibles have got to be bad. `If it cannot be measured it ain’t worth it’, haven’t we heard that before? Yet there is tremendous value to be unlocked in exploring the intangibles. If we recognize, accept them and unfold their potential, we will be greatly benefited. The world is waking to the value of intangibles.
Harvard professor Ranjay Gulati in his paper ‘Shrinking core, expanding periphery’ believes that 70% value of most Fortune 500 companies comes from intangible assets. It is not the value of their plant, machinery, financial, physical, intellectual assets but intangible assets such as Relationship which according to him is one of the most significant assets to any business. His research indicates, companies like Starbucks, Google, Apple or even Tata Motors, etc are built on four key relationships – customers, suppliers, alliance partners, and internal business units.
We are already familiar with Goodwill and the Brand value. Intangibles as they are, we have converted them into tangibles. But relationships, value systems, culture are very difficult to quantify and therefore easily dropped as an asset class. Could we begin by recognizing them as Intangible Assets? In many cases, these intangible assets determine the safety of tangible assets. As per Gulati’s research, bottom performing companies resorted to cost-cutting and shedding under-performing assets while the top 25% of companies invested time and money on their employees, inter-unit synergies and on better understanding customer needs in changing times – all intangibles. N Chandrasekaran, during 2009 global financial crisis split BUs into smaller units, decentralized decision making and made leaders travel across the globe to hear from customers. As a result of this, TCS identified the mobile revolution earlier on which paid great dividends in later years. Gulati realized that it is as important for companies to protect their emotional/ relational capital as their financial capital.
How Do Companies Build Relational Capital?
In order to build emotional or relational capital, leaders need to consciously stop looking at things from a utilitarian perspective. They need to start investing in people without tangible outcomes like increased productivity, enhanced engagement and so on. Do it because it’s the right thing to do not because it has benefits.
More we chase numbers, more will people run away from us. More we value people, more numbers will they deliver. As Chip Conley in Peak: How good companies get their mojo from Maslow advocates, `profit and personal happiness are achieved while not working for them directly’. Structures, processes, matrices, incentives, etc while necessary, often have a divisive effect than integrative. They drive extrinsic motivation with a temporary effect. To create relatedness in spite of these is a real challenge. Therefore, leading from the heart should be in focus in contrast to leading with numbers.
It is also through the ideological focus that many organizations have created sustainability. They tend to value long term interest over short term gains. This collective consciousness, value orientation is hard to be contained in numbers but form their DNA. When each and every person develops a sense of ownership towards those principles, when they all work with a sense of belongingness and pride, the soma-rasa of emotional capital is created.
Today my HR and OD fraternity seem to have been unconsciously set up to wipe out the intangibles. Could they understand and unlock the potential of these intangible assets? Could they champion the cause of building relationship-based-companies and not number driven machines? Could they be thought leaders of this change? They are really faced with the challenge of elevating their people strategies from the bottom of the pyramid to the peak of it where people don’t work for money but work for meaning and ennobling purpose. They need to elevate their organizations from profit and the ROCE mindedness to building communities of relationships.
Today performance management is generating fear, incentives and compensation are feeding anger and hurt, competency assessments are creating delusion and engagement activities creating only temporary and fleeting moments of fun. Even though the present lense of tangibles, this is a huge price to pay for any business, indicating that our focus on tangibles for managing people is anyway inefficient. To achieve superlative performance, inspiration is required not the variable pay. More we focus on driving and monitoring performance, more judged and less inspired people feel.
To innovate, we need freedom not control. When we create a sophisticated incentive policy to motivate people, we feed extrinsic motivation that earns temporary results, but then we soon need to up the ante’ by creating more exotic incentive plans to keep people motivated which ends up building a mercenary workforce having a utilitarian relationship. Incentives to achievement, engagement to loyalty, appraisal or training to output are often weak correlations. They show a skewed picture and create a vague and unreliable basis for people decisions. Focusing on intangibles are certainly not easy but who said it is a bed of roses there in the corner office that my fraternity feels rightful heir of? Challenge, Herzberg said it was one of the great motivators. If we take on this challenge and create an organization based on intangibles, based on relational assets we would create a great place to work and we may not need anyone to certify us of that status.
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