In today’s hyper-competitive corporate world, companies are constantly seeking ways to differentiate themselves from and gain advantage over their competitors. But in our information-based economy, where human capital is the predominant “asset” that a company possesses, getting that advantage is truly a factor of the people within the organization. In fact, I would argue that the true value of an organization, rather than being measured by traditional financial measures such as market capitalization, is the cumulative product of the organization’s employees’ knowledge quotients.
To simplify this a bit, whereas in financial terms a company’s valuation is calculated by taking the number of shares outstanding multiplied by the value of each share, in my view, a more realistic valuation in a human capital dominated economy, is obtained by taking an employee’s knowledge quotient (the calculation of which is the subject of a future post) multiplied by the number of employees within the organization.
Taking corporate valuation from this perspective, it is clear that maximizing corporate value can only be achieved by maximizing the knowledge quotients of your employees.
This simple shift in how one views corporate valuation shines a bright spotlight on the value of employee education. Rather than viewing it as many companies today do – as a one-time event – employee education can be seen for what it truly is – an ongoing process wherein employees are continuously upgrading their skills, learning new things and, hence, increasing their personal knowledge quotients.
It is only by understanding employee education from this perspective that senior management will fully understand the value that such education brings to the bottom line of the corporation itself. This all said, an employee that maintains currency of his/her knowledge is far more valuable to their employer than one who simply treats education as a compulsory occurrence.
Nina nets it out: What have you learned today and how is it generating value for your career and your employer?
Nina –
Your post speaks well to the bottom-line value of human capital and the importance of talent management. It amazes me how so many companies still don’t get it, but the good ones seem to these days. Now it’s up to those of us in the training and development profession to deliver.
Indeed Dan, execution is the key! But if companies just value themselves based on the intellectual assets they possess, i.e. their people and more specifically, the cumulative knowledge of their people, education takes on an entirely new meaning!