July 28th, 2010
I pay a lot of attention to how business and other types of organizations (non-profits, government and educational institutions, faith communities) are functioning, evolving and interacting with their employees and those they claim to serve. This is going to sound overly dramatic, but I think that there is a struggle for the heart and soul of the organization taking place. The struggle is largely about tangibles vs. intangibles. What is most important? What should we pay attention to…what drives our business? What is the priority? Our tangible resources or the intangible?
My work deals with intangibles and I am a fierce advocate for prioritizing them. I am in the minority. I see tangible assets as being the stuff that really matters. Love, passion, loyalty, creativity, curiosity, influence, empathy, organizational culture, social and emotional intelligence, ethics, integrity, diversity, inclusion….all incredibly important and all intangible. Try as we might, we can never measure these things the way we can measure a pound of flour or the size of our bank account.
I think that organizations tend to make two very real mistakes regarding how they view the assets and resources that they have access to:
1.) Focus too much on tangible assets, which actually tell us a lot less than we think they do.
Take profit for example…
The mother of all priorities. A great deal of emphasis is placed on profit…what will generate a profit, are you profitable now, what is the bottom-line, yadda, yadda, yadda. I am not going to say that profit is not important, I do understand numbers and how business works…but profit is greatly overrated as an indicator of how you are doing as an organization. Whether you are profitable today does not tell me whether or not you made a profit ethically, it does not tell me whether or not you did it in a way that adds to your ability to be profitable tomorrow it actually tells me very little other than for the time frame that we are considering you made more money than you spent. Looking at profit is kind of like looking at the speedometer when you are driving…it is clearly important to know our speed, but the speedometer does not tell me whether or not I have any gas left or whether I am even traveling in the right direction. Placing too much attention on tangibles can easily lead to compromising on the really important stuff. Over emphasizing profit will always lead some people and some organizations to sacrifice people and principles to get more profit.
2.) Try to measure intangible assets as if they were tangible.
There are countless examples of this. There are probably about eleventy gazillion consulting agencies that have some neat shiny metric for employee engagement, organizational culture, inclusion, influence and it is all hogwash. You cannot quantify these things anymore than you can quantify love and the more that you try to quantify them and rely on these metrics the more you distort them and turn a real and dynamic thing into a one-dimensional commodity that actually tells you very little. You can use metrics as indicators of engagement or indicators of wha the culture of an organization is like, but unless they are part of a larger conversation they can easily do more harm than good.
What are the conversations about “what matters” like in your organization or community? What metrics, numbers or ratios do you pay attention to? What are your indicators of success? Do you measure your “success” based on what you truly value as an organization or community?
Be good to each other.
Creating constructs to measure employee engagement or company culture is certainly not "hogwash". I agree that measuring a pound of flour is different than measuring a percentage point of employee engagement. I simply argue that if something is real, it can be measured. If employee engagement is real, it can be measured. If my definition of employee engagement is a romantic, gushy feeling I get when I go to work, measuring it will be fuzzy. But if I define engagement as my intent to stay with my current employer and my commitment to go the extra mile at work–then engagement becomes measurable by looking at attitudinal and behavioral data.
The difference between tangible and intangible isn’t an issue of measurable versus non-measurable. The difference, instead, is the number of variables that need to be measured to create a specific metric. Tangible assets usually require single variable measurement–i.e. weight, dollars, acres. Intangible assets demand multiple variable measurement–e.g. intent to stay + discretionary effort + advocacy = engagement. Measuring intangibles can be more complex than measuring tangibles–but measurable nonetheless.
300 years ago, meteorologists measured temperature, air pressure, and water vapor almost as accurately as they do today. But they measured them in isolation. It wasn’t until the 20th century when the science began measuring all three as they relate to one another–and calculating the rate and strength of change in each. And coincidentally, that’s when meteorology saw enormous advances in its ability to diagnose and predict. Since I live in tornado country, I’m thankful for those scientific advances.
Sounds like we agree that intangibles are just as important as tangible assets. I simply wanted to build the case that the word "intangible" is a misnomer–that these items are indeed measurable.
I hope I’m not over-thinking your post. Part of me bets that Item #2 was merely a stab at Fast Company for its Influence Project.
Greg-
Thanks for your thoughts, maybe my favorite blog comment ever…I think this is a really interesting topic and Iove conversations involving the word "hogwash." I do agree with you 100% that the intangible stuff is important…I actually think that for long-term success the intangible stuff is the stuff that really, really matters. And yes, there was a bit of a dig on Fast Company in there…and I also have to be honest about the fact that you know much more about measurement than I do. There may very well be some things related to measurement that I do not understand.
I do think that tools we use to measure intangibles (engagement, inclusion, etc.) can be of value, but I only see them as "indicators" rather than actual measurements. And I am not sure I am agree with your statement "I simply argue that if something is real, it can be measured." To me (and I probably give this issue way to much thought), there are plenty of things that are very real (and very important) that cannot be measured…that does not mean that they are not real, it just means they are too contextual or fluid or complex for us to quantify. Gravity has always been real, but for many years we were not able to measure it (or even understand it). It was still real. Love is also very real, but I do not know of any way to actually measure it in a way that would be relevant to other people in other situations. Someone could come observe my life and develop a suite of indicators of love in my relationship with my wife…for example one indicator could be how long we have been married, one could be the number of times we say that "I love you" to each other, one could be how often we have actual dates, etc. That index may be closely correlated to successful loving relationships, so the things we are looking at may be valid indicators, but we still have not actually measured love…does that make sense?
I may not be using "measure" correctly, but I will take a look at the actual definition of that word…maybe this is semantic.
If it does make sense, I think that the same is true of things like loyalty, engagement, inclusion, etc. You can find valid indicators, but that is different than actual measurement….because if I wanted to I could move those metrics without actually changing the loyalty or engagement or inclusion. Those indicators are not actual proof of that intangible, but more a reflection of the likelihood that it is present at a certain level. Love to hear more of your thoughts on this Greg, I think the differences and similarities between intangibles and tangibles is becoming an increasingly important conversation for human capital work. Thanks again for taking the time to read and respond.
-joe
Joe – great post! Like you, I yearn for a business world that values profits, principles and people equally. A world where principles (say, safety at Toyota) and people (job satisfaction at its lowest level in 22 years) aren’t sacrificed or ignored in the name of profits. We measure what we value, so perhaps it’s those enduring beliefs that warrant analysis.
The creation of value for all stakeholders is a different kind of economy that I see developing now in front of my entrepreneurial eyes. The discussion with Greg about either indicators or measurements is an intriguing one, but not the core of the issue. Even to hoi polloi intangibles like Status or Esteem make more sense than tangible Profit alone. Good intentions, however, make all the difference.
Joe, in your line "I see tangible assets as being the stuff that really matters." I suppose you mean "intangible", not? Great post, anyway. Thx! Ton from Utrecht NL