Peer Groups

Taking Your Business to The Next Level……It’s About the People

By Mike Kind on February 8th, 2010

The single most important asset of an organization is its employees. The only way to take your company from where you are to where you want to be is by finding the best and the brightest. I’ve discussed in a prior blog the importance of hiring / retaining people based on attitude versus ability but what I am referring to here is finding the best people you can for the organization. Past experience has show me that this can present a real challenge for owners and managers for two primary reasons –

1. Cost – Talented people will usually “cost more” and management in many instances can have a challenging time justifying the additional expense. There are however compelling arguments as to why this can make a lot of sense in the right circumstances –

• ROI – Significant investments in equipment are made regularly in a business. We need to look at employees in the same way. They are the “human capital” component of the organization. Any capital investment made by a business should be justified based on its return on that investment. This should apply not only to equipment but to people as well. When my company went through a significant downsizing in the early ‘90’s, we determined that we could cut additional expenses by creating a new position within the company and adding an in house mechanic to our staff. While the justification was fairly easy it was counterintuitive based on the layoffs taking place. However, we believed that our reduction in maintenance costs would be greater than the salary and benefits we would be paying plus we would have the added benefit of significantly reduced downtime. Twenty years later, I am proud to say he is still with the company and has proven his weight in “titanium”!
• The Advantage of Human Capital over Physical Capital – In the majority of instances, physical capital investments require residual payments whereas human capital investments do not. (Note: This assumes we financed the purchase of the equipment and we did not have to commit to a “term contract” with the employee.) The message here is that there is a compelling argument to be made to “pay the price” for a higher level employee if we believe that it can be justified with increased performance and if we happen to be wrong, it can be corrected.  

2. Insecurity – Many people will not hire highly qualified people as they can be viewed as a “threat”. Some people tend to hire employees who are “followers” (a comment in a prior blog stated that some CEO’s look for “obedient people” which unfortunately can be the case) and managers can fear that they will be upstaged and their position within the organization can be threatened. The right approach is to – always attempt to hire people that know more than you do. This will bring fresh ideas and perspective to the organization allowing the company the opportunity to grow and you to focus on the bigger picture.