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Rebooting Business

Valuing the Human Dimension.

Feburary 6, 2012
from CGMA

Most of us sense that we are caught up in something big and uncertain. Much of what we have known — the paradigms that have guided business and government — have been disrupted by a dizzying pace of change brought about by globalisation, innovation and the fallout from the global financial crisis. We see signs of this everywhere — the Eurozone crisis, protestors on Wall Street and around the world demanding a new agenda for business and, of course, the shifting of economic power to Asia.

While the issues and problems are familiar, the real task is to find the way through them to address what the World Economic Forum calls “an indisputable leadership challenge that ultimately requires new models, bold ideas and personal courage to ensure that this century improves the human condition rather than capping its potential.”

Maybe some of the answers are closer than we realise — and not necessarily as complicated as we might fear.

Take, for example, the time honoured maxim to ‘put the customer first.’ Businesses that have been successful over the long term invariably do. But over recent times, how many companies have served customers well in the face of pressures to meet quarterly earnings expectations and respond to the constant changes in the business environment? We aren’t just talking about the commercial sector here. Public services really need to serve the end-user. And not-for-profit organisations also need to get resources to those they work so hard to support.

Do most businesses truly mean what they say when they often claim — “our most valuable asset is our people”? They certainly should start to.

Our new research bears out that the human dimension — relationships with customers, employees, partners and communities — will be key to getting things moving again and sustaining success over the long run.

We surveyed 280 CEOs online from over 21 countries across the world to understand how they viewed current global challenges and what they saw as the priorities in leading their way through them. We followed this up with in-depth interviews with 17 CEOs, chairmen and other business leaders who between them are responsible for over 2.1 million jobs and market capitalisation of $1trn. Their overwhelming response was that the human dimensions of business — for example, customer and supplier relationships, talent development as well as intellectual capital — will be the focus over the next 18 months to 24 months.

Key Actions for Growth in the Next 18-24 Months

We probed further to understand how we are going to move beyond merely paying lip service to customers, employees and partners, to transform what we know into hard reality. What are the obstacles and challenges? Where do companies need to focus theireffort?

Our 280 CEOs consider that the first challenge is to understand value — where it comes from and how much there is of it. They see people’s ideas, skills, knowledge and relationships representing the unique value of their companies. The need to measure and manage the human dimension, although difficult, has never been greater if companies are to achieve long-term sustainable success. CEOs acknowledge a clear imperative to go way beyond the financials, and see this as an increasingly important issue to tackle. They need people who are equipped for this task and able to develop the tools that can make the difference.

Our research explains how the human dimension is becoming far more important. The financial drivers retain their importance but the people-orientated factors have begun to achieve equal weight. Just as important, when combined with those factors such as marketing and distribution where the human dimension is growing, the non-financial perspective dwarfs the narrowly financial one.

If they get the human dimension right, companies will be able to focus their resources on the things that really matter and create value for the long term. One of the greatest challenges to realising the potential of the human dimension is the level of focus on quarterly reporting and short-term results. The value that people add will not appear in the quarterly reports and may not be apparent in the short run, but it must be given its due if we expect to make the right decisions. Adopting strategies that will sustain success for a business is not a ‘nice to have’; it is enlightened self-interest for companies and, ultimately, shareholders as well. However, CEOs cited investors who are more interested in short-term returns and a market system too heavily focused on financial reporting, that are both making it difficult to plan for the long term. Better tools that measure and promote the value of the human dimension will help, but there is also another crucial element here — transparency.

Transparency comes in two guises. First, companies can choose an open and honest approach to reporting their activities and may be repaid by winning more trust among investors and other stakeholders. Transparency permits stakeholders a better understanding of a firm’s operations, though it places greater pressure on the firm’s management to produce acceptable results in all facets of their operations.

Secondly, organisations are finding that, despite their best efforts to do so, it is becoming increasingly difficult to keep confidential or damaging information out of the public domain, with the outcomes being as damaging to corporate reputations as they are unpredictable. In an age where it seems that nothing is private, CEOs see transparency as a critical driver of growth. But it is also a juggling act as it is not always easy to find the right balance between openness and protecting commercially sensitive information. But ultimately, relationships are built on trust and openness, and companies are seeing that they can give employees, customers, partners and investors the facts, coupled with powerful tools such as technology to generate innovative and exciting solutions. So-called ‘Big Data’ is just one example of where the right person with analytical skills and business insight can harness technology to come up with value-creating products and services.

Finally, these CEOs believe that the new answers required will come from new ways of working and new levels of collaboration between executive teams, external experts and other stakeholders. In other words, CEOs want help in pulling things together — or in connecting the dots. And they are clear about the people they need to help them do this — those with a strong grounding in their own area of expertise combined with a multidisciplinary perspective; who understand how the different parts of a business need to come together to create value; who have the ability to communicate and influence colleagues to drive success; and who have the agility and adaptability to manage business opportunities and risks in an uncertain, fast-changing environment.

This has been excerpted from a report that marks the launch of the new Chartered Global Management Accountant (CGMA) designation. CGMAs have the skills and experience to ‘connect the dots’; to use financial and non-financial, qualitative and predictive information to guide critical business decisions and drive strong performance. The CGMA is powered by a joint venture between the AICPA and CIMA, two of the world’s most prestigious accounting bodies. View full report here.

For more information visit CGMA’s website. (Editor's Note: This article is courtesy of CIMA.)

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