Discovering the Value of People

By Kevin Meyer

Big news in the business world:

Wal-Mart is famous for keeping costs down, including employee-related costs. In Joplin, the company is testing a new approach: investing in workers through higher wages and training, on the theory that this will pay off all around—for customers, the company and employees.

Yes, at just one of their 4500 stores, Wal-Mart has discovered skills training.  If it works they plan to roll out this innovative program to the other stores.

That isn’t a story from 1975 or even 1995.  It’s from this past week.  September, 2015.  Good for them, though, even if they did take a few decades to realize the potential value of people.  A concept that many other companies in many other industries have leveraged to create competitive advantage for a long time.

Pretty much every organization has a mission statement, often gathering dust on the wall in a corner of a conference room, that says “our employees are our most valuable asset.”  Really?  How is that demonstrated?

I bet Whirlpool had a statement like that, as they were laying off thousands of highly experienced people at their Fort Smith plant to chase “cheap” labor to a new facility filled with new inexperienced people in Ramos Arizpe, Mexico, while hiring at their nearby Clyde plant, and then only a couple years later they started looking for people to refill a plant they had closed.  You can’t make that stuff up.

But that’s what happens when you run a company based on traditional accounting methods, where labor is purely a cost and there is no offsetting P&L or balance sheet line for the value of people.  There’s a benefit to reducing cost, there is no balancing benefit to preserving the value of brains.

It takes a strong manager to realize that those brains are creating value that more than offsets their cost, even if it isn’t directly shown on the financial statements, and to buck the questions of their bosses and financial folks.  It takes an even stronger and more capable leader to invest in, develop, and mentor those brains to really tap into the potential value.  Organizations that have such leaders understand the problems with traditional accounting.  As a side note, you can learn more about those problems, and get to know some of those leading organizations, at the Lean Accounting Summit next month.

Truly empowered high-performing people can have an impact far beyond improvements in productivity and quality.  Consider your perception of the Chipotle brand after reading this article about a fatal accident that happened in front of one of their restaurants.

She [Chipotle shift leader] appeared to be in her early 20s – not much older then her direct reports or the victim of the accident. Yet, she acted with the compassion and appropriateness of a far older leader.

The next day, I called the Chipotle restaurant to offer my appreciation to the store’s manager. I told the leader how supportive, flexible, and respectful the Chipotle crew was to all in attendance.

As our phone conversation drew to a close, I said, “I know that our presence last night was not what you expected. We no doubt hurt your business.”

Before I finished my thought, the store manager responded, “There are a lot more important things in life than making our numbers last night. I’m just glad we were able to be there.”

Great people, led by great leaders, create great companies.  As Richard Branson says, “Clients do not come first.  Employees come first.  If you take care of and develop your employees, they will take care of the clients.”

I was thinking about a sandwich for lunch, but I think I’ll head down to Chipotle for a veggie burrito.

2 Comments

  1. Jason Morin

    September 11, 2015 - 8:44 am

    Great post. So what is the countermeasure? Usually you have to be part of a great company (or work for a great boss) that truly believes in developing people and harnessing their untapped potential in order to appreciate the concept you are describing.

  2. Jon Miller

    September 11, 2015 - 9:22 am

    Great post Kevin

    Hopefully someday these same companies will also discover that ruthlessly squeezing suppliers on price and treating them as banks with 90+ day payment terms also doesn’t make sense except in the extreme short-term.

    Jon