Background Image
Previous Page  27 / 44 Next Page
Information
Show Menu
Previous Page 27 / 44 Next Page
Page Background

PCCA Journal|2

nd

Quarter 2010

27

An Upside

to the Downturn

By Andy Patron

Because people are your most valuable asset, this slow-down time offers you

the best opportunity to put your limited resources to work, learning. Invest in

your people now to manage risk today and make themmore valuable as you

rebound in the coming months.

“O

ur people are our most valuable as-

set.” Many executives share this view,

and most really mean it. However,

if you were challenged to prove it,

could you? You might try looking at

your balance sheet because this is

where your company’s assets are listed. Typically, you

will see “cash,” “accounts receivable,” “materials,” and

“fixed assets,” but probably not “people.”

According to the accountants, “people” are not an as-

set. Your accountant, though, will point you to another

financial report: your income statement. There, he or

she will show you line items entitled “direct labor” and

“salaries” in Operating Expenses, with both categories

making up the “people.” The dollars there represent

the direct cost associated with having people on your

payroll. In addition, many of your other costs exist to

provide benefits, supervision, shelter, and communi-

cations for your people. After only a little research,

you find that the most valuable, yet unbooked asset is

really one of your biggest costs! You can see that your

people are expensive, but what are you doing to show

them how valuable they are? Moreover, are you doing

anything to make them more valuable?

Many companies have taken a hard look at their fi-

nancials during this tight economy and have cut costs.

They have made the tough decision to slash overhead

and reduce headcount by trimming “direct labor.”

In other words, they have fired, laid-off, or let some

of their people go. Generally, this first round of cuts

involved jettisoning the “C” and “D” players, reducing

salaries, or asking some staff to work part-time. Many

firms now find themselves in an uneasy place, not

wanting to let any more people go because they may

be needed to do the work the company is chasing. So,

a few extra, topnotch people are hanging around the

office with little or no work to do.

Your “most valuable assets” are costing you cash and

not producing revenue. Your choices are A) pay their

salaries and hope that the economy will turn around in

time or B) terminate them to cut your direct labor costs

today. The expedient, default answer for most business

owners is option B. It is the logical answer. The math

supports it. But if you take only a short-term financial

view, you risk losing some of the very people that

made your business what it is today. This will change

the trajectory of what your business can become

in the future. Before you choose option B, consider

how much you have already invested in your people.

How much money have you spent on the following:

time working with them, the equipment and tools

Continued on page 28