Six actions HR can take to create sustainable intangible value:
From ‘Strategy’ last month, with ‘Change’ and ‘Communication’ woven in, to intangible value this month - ‘Return On Intangibles’ to be a little more precise.
Here’s a thought - the core work of HR is Return On Intangibles. I have to declare here though, the original thought on ROI belongs to leading HR thinker, researcher, author and speaker Dave Ulrich.
I was listening to the ‘Modern People Leader Podcast’ late in February and Ulrich was the guest. An hour of rich, relevant, and robust content from ‘the guru’. (I’ve added the link to the full ‘cast’ below.)
Ulrich offered up plenty throughout the hour or so that made me pause and rewind, but it was this comment that jolted me to reflect on my own narrative about HR and my practice as a CPO/ CHRO:
“The ROI of HR is - return on intangibles.”
Being the curious soul that I am, I ‘went in search of’ more on this idea of ‘intangibles', as I figured intangibles must have a connection to one of my leading passions and area of interest when it comes to all things HR ‘Strategy’.
My search uncovered a paper that Ulrich co-authored with Norm Smallwood back in 2005, and yes that paper helped my quest for ‘more’. (I’ve added the link to the paper below also.)
“Intangibles represent the hidden value of a firm, shareholder value not determined by financial results. Intangibles are not new to a firm’s overall market value, but they are becoming an increasingly important portion of a firm’s total market capitalization… Intangibles also affect government and not-for-profit agencies in the form of goodwill and contributions to these agencies’ success.”
Almost 20 years on from this Papers publishing, I think the intangibles are now for more important than they ever were. As the commoditisation and automation of core skills sweeps through our 'workplaces', the human skills (please don't call them soft skills!) and intangible impacts are coming to the fore as a key driver in the most successful companies.
The Ulrich and Smallwood Paper sets out six actions HR can take to create sustainable intangible value:
1. Become investor literate.
2. Understand the importance of intangibles.
3. Create a framework for organisation and people practices that increases intangible value.
4. Highlight the importance of intangible value to total shareholder return.
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5. Conduct an intangibles audit that assesses where leaders should focus value creation.
6. Align HR practices and investors.
There’s also a really cool ‘Architecture for Intangibles’ Table in there too. The language needs a little work for 2024 but the message and intent is, in my view, still sound.
● Keeping your promises: Build and defend a reputation among external and internal stakeholders for doing what you say you will do.
● Compelling strategy: Define growth strategy and manage tradeoffs in customer intimacy, product innovation, and geographic expansion to achieve growth.
● Aligned technical competencies: Provide concrete support for intangibles by building core competencies in in critical skills for current and future success.
● Building value through organisation and people: Develop capabilities of shared mind-set, talent, collaboration, speed, accountability, learning, leadership, and the like throughout the organisation.
You’ll have to read the Paper to get in and under each of the six, and I recommend you do to add depth to your own practice, to assist your positioning of HR in your organisation, and to measure and articulate your impact.
HR work done well requires rigour, depth, and commitment, and dare I conclude this month here- it requires a tangible appreciation and understanding of the intangibles.
See you in April.
H
The links:
Executive GM - People, Culture & Safety | CHRO | Exec Coach. C-suite experience in and outside of HR. Shaping better workplaces.
9moGreat piece Hazel.