The Human Factor

Before I moved back to Petersburg in the fall of 2008, I had been working for five years for the Post and Courier in Charleston, S.C., as assistant business editor. In that capacity, I was asked to write a business blog, which I did for about six months before I accepted a buyout and left.

There was a sort of cognitive dissonance between me and the bosses about that blog: what I was writing turned out not to be what they had expected me to write (and I wasn't even doing any of the cosmic stuff then). So all of my posts there were taken offline pretty quickly after I left.

That's a shame, because personally I think some of them were pretty good, although that might just be my memory playing tricks on me. But one of them in particular I want to try to reconstruct, because the point it made was one that needs to be remembered.

I'm sure at some point or other, all of us have seen a sign at a business that says, "Our people are our most important asset." It's a nice sentiment, but if there's any truth at all in what it says, it's purely symbolic. Under "generally accepted accounting principles," people are not an asset.

If you look at actual corporate financial statements, you won't find "people" listed anywhere. But if you know where to look, you can find where they're hidden. It's not on the statement of assets. On the contrary, people show up on the income statement as a cost of doing business. And if the company owes money to its employee pension fund, that shows up on the statement of liabilities.

As a result, when business slows down (or goes down the toilet), it's a no-brainer for the MBAs and CPAs and other bean-counters to look at the financial statements and think, "Hey, here's a quick and easy way to make the numbers look better: Fire some workers and dump the pension plan."

If people really were treated as an asset in some way - if companies were required to account for the potential cost of training replacements, for example - then it wouldn't be such an easy decision to fire them en masse. That's because anytime a company has to write down the value of an asset, the writedown has to be reflected on the income statement as an expense. So laying people off wouldn't automatically make "the bottom line" look better.

It's ironic, or something, that businesses do account for their "property, plant and equipment" as assets, but not the employees who actually make those things work to put out products or provide services, and in general to create profits. In the real world - the world beyond the spreadsheets and trial balance ledgers and forecasting models - people do actually have value.