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Human Capital is Key to Company Results

Published on: December 2009​
Genre: Governance/Public Sector Management​ Category: Op eds​
What could possibly be more important than a company’s financials?
Many companies can get the financials right but the ones I want to invest in are the ones that get people management right. That is where huge amounts of money can be won and lost, all behind the scenes.
Take, for instance, an anonymous UAE company that gathers pages of news coverage about its stock price.
Commentators on Dubai’s talk radio station will dedicate 10 minutes of a 30-minute broadcast to interviews discussing its asset allocations and strategic decisions.
This particular business comes to mind for me because I happen to deal with them on a semi-regular basis. The last time I was at one of their locations, I observed a somewhat tattered sign reading “Employee Stress,” near the worker area, followed by 10 not particularly great suggestions for dealing with on-the-job stress.
The American Institute of Stress reports that 40 percent of employee turnover is due to job stress and it costs up to 150 percent of an employee’s salary to replace them.
Stress also leads to lost productivity, absenteeism, poor performance, health problems and other issues to such a degree that in the US alone it is estimated to cost employers US$300 billion (Dh1.1 trillion) annually. So this job stress problem is not simply something to complain to one’s spouse about. It means money down the drain.
Now it could be that this particular company has a fantastic stress-management programme and a state-of-the-art strategy for dealing with employee stress.
But first of all, the aforementioned sign was in two languages that are not the primary ones for any of the workers in the room where it was hung.
As culture and cross-cultural issues are among my main areas of expertise, I found this particularly noteworthy. It is emblematic of an issue this company and many other companies in the area have failed to address that significantly adds to the burden of employee stress: the issue of managing multicultural workplaces.
Perhaps many employers just think there is nothing they can do; others may assume if they ignore the problems they will go away. Neither could be further from the truth.
There are solutions to manage multicultural work environments, but companies have to be willing to dig deeper than a one-day workshop or a radio programme I heard with a consultant who seemed to have invented his own set of cultural values, despite the fact that the subject has decades of research with well-established indexes.
Just because someone has a consulting service and is well spoken does not mean paying them will do anything for your business. 
Aside from the huge matter of cross-cultural issues, the company has workers insufficiently trained to carry out their jobs and employees working longer than 12-hour shifts, both of which obviously seriously raise stress levels. 
Stress management is not necessarily the place I would start at if I had to list the top management issues I had observed in the UAE, but that is not the point. The cost of stress is easily quantifiable so it makes a good illustration.
The issue is that companies often forget the cost that management mistakes mean for their bottom line. Often, problems of management and organisational issues can lead to many more lost dirhams than questions such as whether the stock price today is up or down.
The point is not to demonise this particular company but to point out how little the stock price tells you about what may or not be happening organisationally in the business in which you invest.
For instance, take the issue of performance and motivation. A survey of employees in the Middle East in January this year found 28 per cent received no performance review at all, and of those that did, 50 per cent received no real feedback on how they are doing.
Not only does this indicate huge possible productivity losses, but it also means that most firms have no strategic human resource management system in place.
In terms of motivation, anyone who has worked in an office environment can tell you that it is quite easy to imagine people getting by at 50 percent productivity or less for quite some time, with nothing happening to them even if there are performance management systems in place.
Without them, what possible incentive do employees have to increase their work efforts?
More to the point, do you want to invest in a company that is hiring people and paying them not to work? Well, if you are investing in companies without such systems that is precisely what you are doing.
Is your company a good investment? Think about how you are allocating and managing not just your financial capital, but your human capital. If you aren’t getting returns, then you’re not doing your job. 
If you’re an investor, buyer beware.
Susan Crotty is an Assistant Professor at the Dubai School of Government.
This was originally published in The National. It can be accessed here.

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