Talent is not an asset ...

... no matter what corporate propaganda may suggest.

Talent, in the corporate context is, by definition, not an asset. It is, however, in some other fields like the English Premier League.

In the EPL, if you 'buy' a player, you are entitled to a specific (negotiable) sum of money if another team was interested in 'buying' the player during the period of the player's contract with your team. In other words, as a team, you have some 'ownership rights' to the player and can claim some value in transferring these 'ownership rights' to another team. As the contract progresses you can 'depreciate' the value of these rights just like you are likely to do for any other asset on your books.

In the corporate world, however, you do not have any such 'ownership rights' in most cases. An employee is only liable to give you a fixed period of 'notice' before he / she moves to another organization. The receiving organization need not pay any 'transfer fee' to you. Only in rare cases, where the employee is serving a mutually agreed 'bond' with your organization, any such payment can be in play.

In most employee contracts, there are no 'ownership rights' for the organization. There is no 're-sale value' for the employee's membership. There is no 'transfer fee'. In accounting terms, therefore, the employee is a fully depreciated asset from day one. In other words, the employee is not an asset at all.

If you take the same argument forward, you will realize that organizations rent talent, pay a monthly rental (salary), some annual rental adjustments (bonus / increment) and that's that. So where does the asset argument come about?

The asset argument holds water only if you look not at the employees themselves but what they help create. The intellectual property created by a talented team of employees can be categorized as an asset (with ownership rights and re-sale value), just like the customer relationships (customer capital or goodwill) that can be created by specific employees over a period of time.

In other words, we need to start figuring out the asset value of relationships, ideas, processes, products and technologies created by employees in order to fully understand the value of our talent pool. Some organizations do this quite well. It requires some discipline around defining a number of different asset classes, creating a valuation technique that is simple yet fairly accurate, and then ensuring there is the requisite technology in place to link this back with individuals or teams of employees.

That way, you may be able to figure out that John Doe in IT has created $2.3 million of new asset value over 3 years of his membership in your company, while Jane Tan in Product Development has created $4.1 million in the same period.

Over a period of time, managers of John and Jane will be able to appreciate that simply measuring the number of training hours of John and Jane or other such measures of input investments is not an accurate indicator of the notional asset-generation value of John / Jane. It is only when we start assigning values to what they help create, do we start treating John and Jane as asset-generators, a label that is much more in line with the nature of employment in corporates.

So, as a manager, do you have any idea of who the most significant asset-generators in your team are? What are you doing to make sure that their ability to generate more valuable assets for the company increases every year (hopefully much faster than their rental costs / salaries)? Do you recognize (at least qualitatively) the value of assets generated by your team members? Are you able to position the asset-generation value of your team appropriately to others and with-stand the glare of corporate scrutiny?

Time to rethink the way you look at your team and what they do?