To: Manufacturing and Service Firm owners and their Chief Financial Officers
Re: Firm Specific Human Capital as an Undervalued intangible asset
You're sitting on a goldmine of undervalued intangible assets. Your own workers' expertise is your most undervalued intangible asset.
Reinvest your own workers' firm specific human capital back into the business.
We're going to harvest your own workers' expertise. We're going to package it, and sell it right back to you.
The reason your firm specific human capital never appears on your balance sheet is that nobody every told the boss what he has.The reason your firm specific human capital is invisible to generally accepted accounting practices is that you haven't figured out how to make any money from it.
American firms have a half-assed approach to skills development, particularly their "Follow Joe" method of OJT, which they call "one-to-one" training.
"Training" is generally the purview of your Human Resources department. "Training" from an HR person consists of sitting in a dark room listening to a lecture and staring at PowerPoint slides about how to have a good attitude. It doesn't have anything to do with skill acquisition, skills development, or anything else about how to do the job. If you ask who at a big American company is in charge of training, including on the job training, you will have your telephone call transferred to voice mail at HR. Nobody is actually in charge of on the job training, and nobody spends a single dime on it. So rightsize your HR department by outsourcing the most critical component of it.
Your CFO has been told that there aren't any repetitive critical physical jobs any more at any of the plants. And she believed it. How would she know any better?
I've contacted American and Japanese firms, with varying degrees of penetration into their heirarchies, to get them interested in Quicktime instruction. Not interested. Don't need that. So what makes me so sure that it's a good idea? Simple. Wal-Mart uses it.
I called Wal-Mart Stores about a year ago, in 1998, and they -- meaning a Wal-Mart telephone operator, a Wal-Mart underling, his boss, and his boss's boss the Manager of Information Strategies, Mr Herbert Harper -- told me that Wal-Mart uses Quicktime video.
I couldn't believe it; a bunch of hicks from Arkansas, for crying out loud. Mr Harper told me they've been using Quicktime video as their instructional medium since 1992. Finally I started to believe them; Quicktime was invented in 1992. "How does it work?" I asked. And Mr Harper told me a wondrous tale of forklift training, where the trainee watches the video, perfects his technique, and then performs for the computer. The computer has a video camera attached, which monitors his performance and compares it to the images stored inside it, and ascertains whether the performance is 100% accuract or not. It better be 100% accurate, because at Wal-Mart you have to score 100% or you flunk.
Mr Harper told me, "It's the secret of our success." I then asked him, "Mr Harper, I called up to try and sell it to you; and you're telling me all about how well it works and how you use it, so just what kind of a secret is that?" Harper chuckled, and said, "I know what you're getting at, and that doesn't worry us a bit. You see, our competition is so far behind, they'll never catch on and they'll never catch up. And you see how our stock price is doing!"
Six months later, still never having found a customer, I sent Harper a resumé hoping to get a job working on Quicktime instructional videos. Haven't heard back from him.
But the message was quite clear: The Quicktime technique works, and Wal-Mart is much more profitable than their competitors (Sears, Kroger's, Safeway, KMart et al) because of it. Lately I've even taken to telling prospects about the Wal-Mart connection, thinking that it might make them sit up and take notice. But Harper was right as rain -- it's an open secret. You can indeed lead a horse to water but you can't make him drink. If a horse is so dumb that he won't take a drink when he's got his head right over the trough, then he's just dumb enough to die of thirst a half mile down the pike on a hot day.
That's a bad analogy, really; before that horse has a chance to die of thirst, he's going to get run over and left for dead by the Wal-Mart monolith, and you know what? It'll be the rider's fault. That's you, Mr Bossman. You. If you can't see the business case for emulating the most profitable company around, you better go back to MBA school.
email katz@frogojt.com
FrogOJT Systems for Structured OJT.
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