Is the focus on tangible assets growing obsolete in the face of human capital?
“In 2015 Uber, the world’s largest Taxi Company owns no vehicles, Facebook the world’s most popular media owner creates no content, Alibaba, the most valuable retailer has no inventory and Airbnb the world’s largest accommodation provider owns no real estate.”
Ever heard the saying that education is the most valuable asset as no one can take it from you? Well it turns out its true –not only in the philosophical, pensive sense but in the hard-hitting, tangible financial sense. Although human capital is hard to measure in actual monetary terms, it has recently proven to be the backbone behind wealth and prosperity just by looking at the shift in the balance sheet asset distribution of leading companies in their respective fields such as Uber, Alibaba, Facebook and Airbnb.
It makes rational sense really, until we have simulated intelligence we need people to make decisive calls and commands that ultimately allow anything to be accomplished in the world. It takes human capital to actually develop any other form of capital from finance to factories –whilst a computer may perform statistical analyses and determine the most optimal course of action, it still took a human being to program the computer.
Under intangible assets, Facebook had an amount of $80m at their 2011 financial year end while their PPE was valued at $1475m. At the 2014 year end, the value of their intangibles was $3929m whilst their PPE was $3967m –thus indicating a massive growth in the value of human capital which is predicted to rapidly surpass the tangible assets in the near future according to the current growth rate. This is just one example of many fortune 500 companies (Facebook Inc., 2014).
So, we’ve established the importance of human capital, one is left wondering how to optimize it and gain the most out of our intangible assets. If we have maintenance, evaluators and developers for our tangible assets then surely we should have the same for intangible assets –if not more so seeing as their increasing value has been recognised. This is where learning and developmental trainers or consultants come into play.
The great thing about being a business in South Africa (and there aren’t too many pros at the moment so listen carefully) is that you can develop a staff sector with accreditations and it is indirectly free. Yes, it does sound like there is a catch and you probably have that one frugal grandpa’s voice in your head saying “nothing in this world is free”, but hear me out… Firstly, if you appoint an accredited Human Resources Development training provider to upskill your employees in anything from corporate executive coaching to a call centre Learnership, you can claim a portion of the relevant training costs back from the SETA your company is a stakeholder of. Secondly, you receive a tax rebate of R30 000 per person on initiation of a learnership and another R30 000 upon the completion. Thirdly, you boost your BEE scorecard rating. Voila! You’ve saved on your costs and maybe made a bit extra –sorry grandpa but times have changed.
We are catapulting this current economy into a knowledge-based framework -reliant on information, high-level skills and technology growth on a global scale. If you still doubt the importance of developing your company’s human capital like the rest of the world, I shall leave you with some wise words from the great Madiba: “education is the most powerful weapon which you use to change the world". Time to revalue those assets!
Written by: Nicola Morkel
Bibliography
Facebook Inc. (2014, December 31). Facebook Annual Reports. Retrieved from Stock analysis on Net: https://www.stock-analysis-on.net/NASDAQ/Company/Facebook-Inc/Financial-Statement/Liabilities-and-Stockholders-Equity
Feldman, J. (2013, March 11). Six Steps for Developing Human Capital. Retrieved from The North Bay Business Journal: http://www.northbaybusinessjournal.com/63232/six-steps-for-developing-human-capital/
Grimsley, S. (n.d.). What is Human Capital? Importance to An Organization. Retrieved from Business 106: Human Resource Management: http://study.com/academy/lesson/what-is-human-capital-importance-to-an-organization.html
Kaplan, R., & Norton, D. (2004, February 1). Measuring the Strategic Readiness of Intangible Assets. Retrieved from Harvard Business Review: https://hbr.org/2004/02/measuring-the-strategic-readiness-of-intangible-assets
United States General Accounting Office. (2000). Human Capital: A Self-Assessment Checklist for Agency Leaders. GAO.
