Oakape
30th Aug 2011, 03:25
A great post from PIXY in the ME forum. Airline managers would do well to have a read & a good think about the message.
Tangibles and Intangibles
Let’s say we have 2 companies, Company Alpha and Company Bravo. Bravo wants to buy Alpha so looks into what it’s worth. Its assets minus its liabilities come to a NTA (Net Tangible Assets) of 1 billion. However company Bravo is prepared to pay 1.5 billion because of what they believe Alpha is potentially worth. The extra 0.5B has to go onto the balance sheet somewhere. Simplistically it goes down as Branding, Intellectual Property or Goodwill. Intangible Assets that then remain on the balance sheet.
Quote: Wikipedia:
Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as a separate asset. Human capital is the primary source of competitive intangibles for organizations today. Competitive intangibles are the source from which competitive advantage flows, or is destroyed.
The point here I think is that not everything can be simplistically priced or accounted. Even revaluation of tangible assets is difficult and subjective. There is more to both companies and their own personnel than simply meets the eye on a balance sheet or spreadsheet. Simple numbers and statistics are not the whole story.
Also it becomes apparent that it is easy to damage these Non Tangible aspects of a company – and not only on the balance sheet. A company could easily damage its brand name by producing an inferior product so the brand name was not taken so seriously. This could have direct impact on the balance sheet next time the company is bought or sold.
I believe while it is incumbent for any influential post holder to ensure a company remains profitable and even increase profitability, that post holder also has to take very seriously what impact any decision has on the Intangible Assets of the company and the intangible aspect of employees.
Motivation is one example. If decisions are taken that either motivate or demoralize the employees, the savings or costs of this are very difficult to quantify. What savings to a company for many employees prepared to make the effort to go the extra mile in areas that they can? Who can say what pushing for shortcuts and direct routings actually saves compared to simply flying the airways as laid out on the chart and OFP. Or the employee that works a little longer to ensure a job is completed with panache rather than the bare minimum necessary to comply. Even enthusiastic talk from employees can encourage their peers to pick up their game and that can have positive impacts in many areas.
Likewise demoralization can have enormous impacts. A few disgruntled employees can cause a lot of unnecessary damage whether through sheer disinterest and apathy or deliberate low level mischief. In history motivated groups have literally moved mountains, disgruntled groups have started wars. And there is the whole spectrum in between.
To attempt to prove or define all aspects of the company and its people by collection of data is a ridiculous notion. The notion that complex beings of this nature can be defined as such shows a lack of understanding and immaturity. Sure, statistics are useful but only if they are obtained correctly with an intention to prove or show something in an unbiased manner, while considering its shortfalls with regard to the entire picture. If statistics are used to justify a position or prove an agenda they become downright dangerous and destructive and pose a grave threat to the company and its shareholders and stakeholders alike. It is incumbent of both these parties to understand and question the validity of this data and ultimately its usefulness.
We are all stakeholders in our company. As are our families, our passengers, the people we fly over, the environment we operate and the businesses that depend on our business.
It amuses me when I hear managers defend their decisions citing that they are responsible to the shareholders for profitability. Clearly they have misunderstood their directive. They are actually responsible to both, morally and legally. The impacts of decisions are far reaching and not always measurable on some spreadsheet.
Shareholders bang the table for bigger and bigger profits. Stakeholders are usually the ones who have to make the sacrifices to ensure this happens with managers in between facilitating this process by being disproportionately rewarded for this task. Demanding more hours, more work more responsibility, diminishing returns.
Where does it all end? Do our kids wind up working for mega corporations that sap every joyous hour out of life, to placate insatiable shareholders, while our children toil well beyond the hours for which they are paid?
While it may suit the financial agendas of individuals to ignore their Corporate Responsibilities by squeezing the unreasonable from the stakeholders, it is up to all of us to make them accountable and responsible for their actions. It serves no one but themselves if they are not.
Besides we owe it to our children.
Tangibles and Intangibles
Let’s say we have 2 companies, Company Alpha and Company Bravo. Bravo wants to buy Alpha so looks into what it’s worth. Its assets minus its liabilities come to a NTA (Net Tangible Assets) of 1 billion. However company Bravo is prepared to pay 1.5 billion because of what they believe Alpha is potentially worth. The extra 0.5B has to go onto the balance sheet somewhere. Simplistically it goes down as Branding, Intellectual Property or Goodwill. Intangible Assets that then remain on the balance sheet.
Quote: Wikipedia:
Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as a separate asset. Human capital is the primary source of competitive intangibles for organizations today. Competitive intangibles are the source from which competitive advantage flows, or is destroyed.
The point here I think is that not everything can be simplistically priced or accounted. Even revaluation of tangible assets is difficult and subjective. There is more to both companies and their own personnel than simply meets the eye on a balance sheet or spreadsheet. Simple numbers and statistics are not the whole story.
Also it becomes apparent that it is easy to damage these Non Tangible aspects of a company – and not only on the balance sheet. A company could easily damage its brand name by producing an inferior product so the brand name was not taken so seriously. This could have direct impact on the balance sheet next time the company is bought or sold.
I believe while it is incumbent for any influential post holder to ensure a company remains profitable and even increase profitability, that post holder also has to take very seriously what impact any decision has on the Intangible Assets of the company and the intangible aspect of employees.
Motivation is one example. If decisions are taken that either motivate or demoralize the employees, the savings or costs of this are very difficult to quantify. What savings to a company for many employees prepared to make the effort to go the extra mile in areas that they can? Who can say what pushing for shortcuts and direct routings actually saves compared to simply flying the airways as laid out on the chart and OFP. Or the employee that works a little longer to ensure a job is completed with panache rather than the bare minimum necessary to comply. Even enthusiastic talk from employees can encourage their peers to pick up their game and that can have positive impacts in many areas.
Likewise demoralization can have enormous impacts. A few disgruntled employees can cause a lot of unnecessary damage whether through sheer disinterest and apathy or deliberate low level mischief. In history motivated groups have literally moved mountains, disgruntled groups have started wars. And there is the whole spectrum in between.
To attempt to prove or define all aspects of the company and its people by collection of data is a ridiculous notion. The notion that complex beings of this nature can be defined as such shows a lack of understanding and immaturity. Sure, statistics are useful but only if they are obtained correctly with an intention to prove or show something in an unbiased manner, while considering its shortfalls with regard to the entire picture. If statistics are used to justify a position or prove an agenda they become downright dangerous and destructive and pose a grave threat to the company and its shareholders and stakeholders alike. It is incumbent of both these parties to understand and question the validity of this data and ultimately its usefulness.
We are all stakeholders in our company. As are our families, our passengers, the people we fly over, the environment we operate and the businesses that depend on our business.
It amuses me when I hear managers defend their decisions citing that they are responsible to the shareholders for profitability. Clearly they have misunderstood their directive. They are actually responsible to both, morally and legally. The impacts of decisions are far reaching and not always measurable on some spreadsheet.
Shareholders bang the table for bigger and bigger profits. Stakeholders are usually the ones who have to make the sacrifices to ensure this happens with managers in between facilitating this process by being disproportionately rewarded for this task. Demanding more hours, more work more responsibility, diminishing returns.
Where does it all end? Do our kids wind up working for mega corporations that sap every joyous hour out of life, to placate insatiable shareholders, while our children toil well beyond the hours for which they are paid?
While it may suit the financial agendas of individuals to ignore their Corporate Responsibilities by squeezing the unreasonable from the stakeholders, it is up to all of us to make them accountable and responsible for their actions. It serves no one but themselves if they are not.
Besides we owe it to our children.