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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