5. Behave like…
Behave like an investor
Employees are investors of their own human capital. They are no different from any other kind of investor. Therefore, performance appraisals should first focus on how the (human) capital has grown. By doing this, you can transform the organisation. Everything from plain management to HR management would be completely different. Which is as scary as it is exciting.
Employees are investors. This is a crucial idea that changes everything. (It’s not new, though. Tom Davenport already used it in 1999.) Employees invest their own human capital when working for an organisation. This is their asset: the combination of skills and knowledge and how they can be applied to specific roles. As investors they are paid not for the time spent in the company or for the efforts made, but for the loan and use of their (intellectual) capital to achieve specific company goals.
Also, like any investor, employees should do the math from time to time: is my capital growing? By how much? Since when? No investor will stay with a fund were there is no growth or, even worse, negative growth.
This apparently ‘selfish’ approach is of great benefit, not just to the employee, but to the entire organisation. Imagine an organisation where everybody behaved like an investor and could say at the end of each year that their investment had grown. The investors themselves would be delighted, but the fund managers (the company) would be even more so.
Behaving like an investor turns the company into a employee-centric one, which at first seems to be at odds with the well-established customer-centric one. But only the organisation that is able to grow their human capital will be useful to the customer and the shareholders in the medium and long term. The problem of who comes first in the ‘Organisational Trinity’ (shareholders, customers or employees) is often solved in an artificial way. People often say that shareholders come first, but also agree that nothing can happen without satisfying customers, which in turn can’t happen without having satisfied employees. This chain of logic has always implied to me that the employees were nothing but a nuisance or a necessary evil. There are several permutations of the above logic chain and which permutation you choose, defines the kind of company you are. There are only very few examples of companies that declare that employees come first.
Behaving like an investor deals with the logic of the above chain by making it irrelevant. The ‘fund managers’ (the company, management) may focus on the shareholders – recipients of the fruits of ‘the investment’ – but they can’t do anything without a strong focus on the employees (investors). Put in a different way, external investors put their money into the company so that internal investors can be found and brought in to invest a different form of capital. This internal investment delivers value in the form of products or services that are bought by customers. There is no longer an ‘organisational Trinity’, but a more mature and logical way of understanding the contractual agreements between all the players: external investors (or shareholders), internal investors (or employees), fund managers (management) and customers.
Behaving like an investor within the organisation means that things like ‘effort’ and ‘busyness’ become secondary. From the employee’s perspective, being involved in ‘interesting things’, ‘being busy’ or even ‘being recognised’ don’t have any value per se, unless people can ask fundamental questions at the end of the year or at a review point:
- What is/has been my gain? What is my new market value? Have I gained new skills or updated old ones?
- What is different in my CV compared to last year’s? Is there anything new, except for ‘more experience’ or ‘another year’?
- Have my relationships grown? Do I know more people whose knowledge and experience I can tap into? Do I have more connections in my network?
- What have I leant? Do I have a new pool of ideas? Have I discovered new angles? Different approaches?
Although these are all variations of the same question (What’s the investment like?), they are useful tests to understand whether the behaviour of ‘behaving like an investor’ has been efficient. As a behaviour, it will travel very well virally. Groups of people acting this way can easily show the fruits of their investment.
Performance appraisal systems should be completely adapted to accommodate these investment questions. If an internal investor (employee) ranks very well in ‘objectives accomplished’ at the end of the year, but has achieved no growth for his own human capital (i.e. the job is well done, but the employee sees no obvious gain in skills or learning, other than the time spent and the experience), then I want to point out that the overall appraisal should be negative. But it should be a double negative: for the investor (employee) and for the fund manager (manager). Why for the fund manager as well? Well, the latter is misusing the capital for short-term gains (achieving the annual objectives), but without adding to it (providing learning), the human capital’s reuse will progressively become more limited.
As you can see, behaving like an investor – which de facto creates an employee-centric organisation – is a powerful rule/idea/behaviour. Its importance doesn’t stem from any sort of pseudo-altruistic or paternalistic view about employees, but from pure market dynamics.
Transform the organisation into an Investment Fund where human capital is the capital.
Only selfish ‘human capital owners’ (employees) deliver value to the company. No selfishness (‘must grow my human capital’), no company growth.
‘Employee as investor’ is employee revolution.
This is not paying lip service to the idea of ‘people are our most important asset (the asset is not yours anyway). It is pure Investment Fund Management’, no figure of speech, no metaphor.
