HUMAN RESOURCES: Hidden Power

What

do shareholders look at when they invest in your company’s

shares? Is it the balance sheet or something that goes

deeper than mere financial figures? If it were balance

sheets that attracted the investors then Amazon.com would

not be worth what it is. Wipro need not have been the share

market "Goliath" that it is today.

The thing that drives

shareholder expectations then is the value people put in the

capability of a company to constantly deliver value in the

future.

When one talks of

"capability to deliver value," one means the

ability of the employees, the efficiency of the systems and

processes of the company and the relationships that it has

built over the years with its dealers, vendors, and

shareholders.

Another name for this

capability is Intellectual Capital (IC), which comprises

human capital (competence of employees), structural capital

(brand value, intellectual property, and efficiency of

systems and processes), and customer capital (relationships

with customers, vendors, and dealers). The distinction

between IC and knowledge management needs to be made here.

The latter is primarily the harnessing of the former in

order to create value, while human, structural, and customer

capital is the form in which IC manifests itself.

While the IT industry

is booming and its stocks are high, no one really knows how

long the honeymoon will last. Sooner or later, there is

bound to be a shakeout and then, the market will only allow

those companies that have the capability to deliver this

value to stay.

IC and IT

The

current situation is that of the top 200 companies in the

Internet 500 selected, by Inter@ctive Week (15 November

1999), money losers outnumbered profitable online

enterprises by almost 2 to 1. Some of the Net’s best-known

brands–Beyond.com, E*Trade Securities, eToys, Infoseek,

Lycos, Prodigy, and Value America–have losses in the tens,

if not hundreds, of millions of dollars.

More and more IT

companies are realizing the value of their IC and are

working at increasing its worth. Most dotcom executives,

when given a choice, chose customers and revenue generated

over profitability as their favourite measurements. Brand

equity, customer base, and market share are all forms of

structural and customer capital.