Have you ever heard of a severe chronic disease called “Finaemia”? Interestingly it does hurt a human or any other living being. It’s an economic disease. It’s a disease which slows down the growth of economic entities only and its adverse effects are seen over medium to long-term (say over minimum of two-years). So, it doesn’t seem to be a visible problem and doesn’t hurt the normal functioning of the economic entity over short term. “Finaemia” is the term coined by contracting “financial anaemia”.
Allocation of financial resources to critical aspects of business is akin to supply of oxygen to a living system. Just like consistently lowered supply of oxygen in a body has adverse long-term impact on living organs, inadequate allocation of financial resources to important business activities does have similar adverse effects.
Unfortunately and paradoxically so, that L&D is one such business area where business leaders recognise human as a business critical asset but still don’t allocate sufficient funds for optimum maintenance and up-gradation.
Reason-decision of capital nature involves higher level of risk and board or CEO normally would not take a subjective decision for any aspect of business.
And therefore there is a need for a comprehensive yet simple framework which can assist the board level people to take a shareholder friendly decision in favour of L&D investment.
In my June 08 post I emphasized that similar to Plant & Machinery (P&M), human competencies need maintenance. Objective of schedule maintenance is the keep the asset in good condition so that it can produce the desired output. There I pointed out that akin to physical assets, human assets need schedule maintenance (maintenance of competencies) to be in good condition and perform the desired output.
I am taking up another important aspect and drawing similarity between physical and human assets. “Up-gradation”- is another established characteristic of physical assets. Investment decision on P&M up-gradation is normally a capital budget activity which follows an established financial analysis framework. Investment on P&M up-gradation has to qualify a certain cut-off IRR rate. If it meets that cut-off level board decision is automatic.
We need to understand characteristic similarity between the physical and human asset with respect to “Up-gradation” aspect. To understand this clearly we should know the goal of up-gradation. What Up-gradation does to an assets?
Up-gradation can either increase the through-put, improve quality of output or produce different variants of outputs from the same asset.
Isn’t it true about human asset?
Competency or set of competencies up-gradation can lead to higher level of service output. There is no doubt about the fact that up-gradation of human competencies improves the quality and consistency of output (we take any number of examples- work process improvement, soft skills etc.).
Upgraded competencies in a human being make him competent to engage in wider variety of tasks (some are the variant of standard tasks). Example, improved level of competency in communication skill can add to training & mentoring potential of a human asset apart from enhanced performance in his/her job role.
I can clearly see that there is characteristic similarity w.r.t. to up-gradation aspect both for physical and human asset.
Then why corporate board are able to take decision in favour of P&M up-gradation (and these investment can run into hundreds of millions of $ depending on absolute economic size) with such an ease whereas investment in human asset up-gradation doesn’t figure-out anywhere.
Because again, there is no such financial analysis frame work which can give an investment cut-off number, such as IRR (for investment in physical up-gradation). Where board members don’t have to take a subjective call and take a risk of such a decision.
So we need to create a simple financial framework- may call it “diagnosis report” to indicate level of “finaemia” that organisation is suffering from due to under investment in human asset.
For sure, global economy is suffering from huge inestimable loss every year due to under development of human assets, in the absence of such framework. To make realisation, imagine the amount of loss if business across the globe didn’t investment in up-gradation of physical machinery!
Let us save global economy from such a loss, saviours please chip-in!
(Mr. Ankit Jain is Head – HR & Strategy at G-Cube)