I’ve just watched a video of Peter Cappelli, a professor of the Wharton School of business who is one of today’s leading scholars of workforce management. He’s just come out with a book entitled Our Least Important Asset.
You kind of know what that is already, don’t you?
It’s people. Employees. Workers.
Every CEO drones on about how their most important resources are human resources. But this is exactly opposite to the way they behave.
Cappelli says this is because, from an accounting point of view—and we all know how important accounting is—there is no such thing as human assets.
The reasoning is simple, if somewhat idiotic. Assets are things you can own: factories, computers, copying machines. You can’t own people. From this point of view, Cappelli says in an enlightening video interview, “people are not assets and have no real value in the finances of a company.”
When this manner of thinking started to catch on in the 1930s, it was less out of touch with reality than today. Ninety years ago, manufacturing was much more important, and manufacturing means machines and assembly lines. The workers were treated as identical replaceable parts.
Then, as Cappelli explains, in the 1980s, shareholder value—and shareholder value only—“became the new goal for companies. They used to say that the goal of companies was explicitly to balance the interests of the stakeholders. And investors were one, but so were employees, and so was the community around you, and so were your customers.”
Then the economists pushed the idea “that shareholders are the only stakeholder. It was one of those battles that was won without a fight,” says Cappelli.
If you grasp this point, you understand a great deal about the history of the United States for the past 40 years. You can see the unprecedented explosion of stock values over that period. You can see why wealth is becoming concentrated in the hands of fewer and fewer people. You can understand why wages have lagged, and are continuing to lag, both company profits and inflation. You’ll even have a glimpse into today’s labor unrest and (indirectly) the rise of extremist populism on the political landscape.
With the explosion of the information industry, “human capital becomes, in objective terms, more important, but in financial terms still worthless,” Cappelli observes.
Cappelli talks about layoffs: “Let’s say we thought employees were assets . . . and we announce we’re going to have a layoff. What layoffs mean is we’re just going to take those assets and push them out the door. You’d say they were crazy. It’s like, ‘OK, we’ve got a bunch of computers here. We’re going to give them away. We’re just pushing them out the door.’ It wouldn’t make any sense whatsoever.” Especially today, when, he adds, “unlike the 1970s and before, employees are not hanging around expecting to be rehired.”
Who’s going to fix this problem?
“Employees have very little power,” Cappelli says. “The only power employees ever really have is if a lot of them are quitting. A lot of them were quitting. That might be slowing down a bit now. I’d say the employers have largely resisted efforts to make the changes that employees want.”
Even investors who understand this situation have had little impact so far, he adds.
This difficulty affects the produce industry just as it affects every industry with human workers.
So how much do you value your employees? In fact, how do you value your employees?
