7 Dysfunctions of High-Potential Companies
Are your most important assets generating cash?
Intangible assets account for an average of seventy-five percent of a company's market value (Strategy Maps - Converting Intangible Assets Into Tangible Outcomes).
The ability of a company to mobilize and exploit Its intangible assets — talent, intellectual capital, brand, etc. — has become far more decisive to it success than investing in and managing physical, tangible assets.
- Post-IPO companies that do this well have higher survival rates (Delivering On The Promise - How To Attract, Manage, And Retain Human Capital)
Strategic readiness of intangible assets is analogous to liquidity — the lower the state of readiness the longer it takes for intangible assets to contribute to generating cash.
- “Our core corporate assets walk out every evening. It is our duty to make sure these assets return the next morning, mentally and physically enthusiastic and energetic.” (N. R. Narayana Murthy, Chairman and Chief Mentor, Infosys)
Intangible assets enable a company to:
- Develop enduring customer relationships
- Mobilize employee knowledge, skills, and motivation
- Introduce innovative products and services
- Produce customized solutions
- Leverage organizational learning
- Develop powerful brands
Under-leverage your intangible assets at your company's peril!
What an incredible waste!
The core of a company's intangible assets is its talent, yet research shows this most critical asset is often wasted.
I pointed out in the very first posting to this blog that you have to look under the surface of a company to evaluate what's really going on. Companies point with pride to their list of values framed and hanging on the corporate headquarters lobby wall as evidence they understand the importance of their employees. Dig a little deeper and you often uncover a much different reality.
- The majority of knowledge workers waste 1/2 - 2 days per week on unproductive meetings, e-mail, and voice-mail (Mobilizing Minds - Creating Wealth From Talent in the 21st Century Organization).
A five-year study of 460 companies (Simplicity: The New Competitive Advantage) found that:
- 80% of employees and 60% of managers couldn’t find or translate the information needed to make effective decisions — poor knowledge management.
- 80% of internal communication — email, meetings, etc. — doesn’t require action or there is no discernible consequence for ignoring it — ineffective communication.
- There are often too many goals, and they're often not aligned with strategic direction. One company in the study tried to unite people around 136 strategic priorities — unclear direction.
- Employees are given a broken system and expected to do highly effective, integrated work — corporate insanity.
On average, companies invest a third of their resources in their employees, but few know how — or even seriously try — to effectively manage or measure the value or impact of that investment. Another reason why many companies can't get there from here.
Turning talent into wealth.
Are you exploiting your company's intangible assets — how ready are they to generate cash?
- Are you providing non-traditional opportunities for learning and development — communities of practice, personal projects, self-directed research, mentoring — to your talent?
- Does your talent have the resources, skills, and abilities essential to their success?
- Does each employee have a personal learning and development plan and are employees given the budget and time to fulfill the plan in a timely manner?
- Is personal learning keeping up with the new practices and thought leaders in your industry?
- Does your company encourage your talent to become thought leaders in your company's core competencies?
- Is your company successful at identifying and then communicating new internal practices and innovative ideas throughout the enterprise?
- Is your strategic direction clearly communicated to and understood by all your employees — from lobby receptionist to board of directors?
- Are organizational silos and culture blocking personal performance and enterprise-wide execution?
- Is individual performance monitored and fully enabled?
- Has the fear of taking calculated risk been eliminated from the culture?
- Are there appropriate consequences and rewards for failure and success?
- Does your talent have the personal readiness and capacity essential for continuous innovation and change and, most importantly, continuous customer value creation?
- Is your company acting like your intangible assets are its most important asset?
We've heard the phrase until we're sick of hearing it, but, be honest, is your talent — and the intellectual capital and brand they create — really considered to be your most important asset?
What's the readiness level of your intangible assets? The higher the level of readiness, the more successful you'll be at turning intangible assets into wealth.
This is the fifth of the seven dysfunctions. The first three dysfunctions severely weaken a company's foundation and strategic direction. The next three, including this dysfunction, destroy a company's ability to execute its strategic direction — the reason the organization exists.
All seven dysfunctions create an incredible drag on a company's performance, with the first six dysfunctions contributing to the seventh which is the most destructive. See 'It's Time For A Reality Check' for an introduction to the seven dysfunctions.
The issues addressed in this blog, as well as the supporting examples, are targeted to the leadership of public companies on the way to a $Billion in revenue. These issues, though, are also critical to the strategic success of all profit and non-profit organizations from early stage to mature.
NOTE: Beginning with this posting, postings to this blog will be made every other Monday with "critical issues in the news" addressed as they emerge.
David Seregow, Ed. D. is Founder and President of Attaine Performance Corporation, providing strategic guidance, collaboration, and coaching to high-potential companies. www.attaine.com Copyright 2010 David Seregow, Ed. D. All Rights Reserved. Permission granted to post, print, or email this entire posting if full attribution is included and the post is not edited.