Workforce reductions result in immediate savings, but that’s just part of the overall impact.
Talent is arguably the only true source of sustainable competitive advantage that a company can have. Unlike technologies, techniques and products, which competitors can copy or replace, a company’s talent is practically impossible to imitate.
When it comes down to it, companies treat talent as either assets or expenses.
Talent need to be invested in
The Merriam-Webster Dictionary defines an asset as a valuable person or thing. Talent is clearly an asset, yet many companies treat it like it’s just another business expense.
Assets are carefully chosen and held in the belief that they’ll pay dividends and grow in value overtime. A company that views talent as assets recognizes that costs to acquire, develop and retain talent are investments that pay off over time. So, they’re extremely cautious when downsizing.
Talent should be managed carefully, invested in, and divested as appropriate much the same as a portfolio of stocks. Expenses are minimized and subject to cuts if business slows.
Treating talent as expenses can prove costly. It wreaks havoc on performance and engagement. And productivity will take a hit when business turns around and it becomes necessary to hire a batch of new workers who’ll need time and training to get up to speed.
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People churn is the sign of an unhealthy organization
Workforce reductions result in immediate savings, but that’s just part of the overall impact. What’s not accounted for are the lost experience, productivity, knowledge, and sunk development costs of the fired workers.
These items would be accounted for if talent was truly treated like an asset. Companies could serve their stakeholders better if instead of viewing people churn as simply a cost of doing business, they explored it as a possible sign of an unhealthy organization.
So, does your organization’s mindset and practices treat talent like assets or expenses?
This originally appeared on the iTM System Group blog.