This picks up on one of the themes from the Dave Ulrich session last week.
Dennis and I have been chatting about intangibles for some time, and I have a queue of posts planned on the topic. (please don’t switch off your feed) I was going to write something about how HR needs to learn from finance about business cases and ROI, but then I realized that marketing could be another “role” model.
Intangibles are those things that accountants find difficult to measure.
Marketing folks don’t. They confidently state that the value of the Brand is 23,24 billion. There are league tables of brands , and according to the Millward Brown Optimor study.
“This is the first study that goes beyond financial data and ‘expert opinion’ to include in-market insights about a brand’s strengths and momentum from potential customers,” said Andy Farr, Executive Director at Millward Brown Optimor and lead researcher on the study. “It proves that investing in brands is key to a company’s long-term success.”
Joanna Seddon, EVP, who heads up Millward Brown Optimor globally added: “We’ve seen that strong brands can create very real financial value in many ways. The best brands drive revenues and profits, reduce risk and cost of entry into new markets and attract talented staff to companies.”
No doubt there is some theory behind how these values are derived, yet one study values coca-cola’s brand at 41 billion, another at 67 billion… biggish gap.
Based on the Interbrand report. SAP has a brand value of 10,007 billion dollars , Nokia 30 billion dollars, Coca Cola 67 billion dollars. Business Week plots these, Bonus plans and careers of marketing directors are linked to them. There was lots of jubilation in the marketing department when SAP moved up 2 places in the ranking.
According to marketing, brand is the magic dust that differentiates company a from company b. The brilliant marketing though, is not just to the external market. It has been internally. Marketeers have got CEO’s and CFO’s talking about the value of the brand to analysts. Marketeers use these numbers to position the value of the marketing function, and the need for it to have more budget. They have clearly linked the value of the brand to describe gap between the EPS of companies in similar industries with similar financial fundamentals. Marketing are masters at deriving numbers from vagueness and selling them inside the organization. Respect is due.
If the marketing department ran HR, they would do exactly the same with Human Capital. Imagine the marketing department was responsible for recruitment, never mind all the cool adverts and the employee branding, what would they do with a well proven statistic like interviews only have a low correlation with good hires compared with assessment centres and formalised testing? Or what about the strong causality between employee engagement and customer satisfaction? I suspect the CEO would be talking how recruitment is strategic and how we are moving up the XYZ recruitment rankings.
Much of HR theory is built on solid empirical study. We know lots about motivation, yet organisations continue to use salary as a blunt instrument for reward. Personality theory has a deep and solid base, yet so much of team management is done on manager gut feel.
Maybe what we need to do is hire some marketing people into HR. Let them loose on all the fabulous statistics we have in HR. Get some help in building the business case for better HR investment.
Just a thought…. If you have examples of HR building business cases for investment based on intangibles then please drop me a note.