Wednesday, August 30, 2006

HR's Future and Intangibles

The Market share and revenues of the firm are not the only factors which drive a firm valuation.

How do you define Intangibles? Does it really matters in a firm’s valuation?

David Creelman and Dave Ulrich answer this in a white paper on “The New ROI of HR”.

They believe the architecture of intangibles has four steps:

1. First is the fundamental issue of keeping promises and managing expectations.

2. Second is a clear strategy—a story about our future that shows how the organization will create value through growth.

3. Third is having the core technical competencies needed to deliver that strategy. These technical competencies might be marketing’s ability to manage its distribution channels or manufacturing’s ability to maintain Six Sigma quality—the specific technical competencies required depend on the strategy.

4. The fourth and final step is capabilities—those things that make a company stand out in the minds of customers. It might be a shared mind-set, such as Nordstrom's companywide commitment to service. It might be speed, such as Apple’s speed to market with the iPod line.
Intangibles like employee and market perception of firm’s goodwill, human capital, value system, and vision guides the intangible values of a firm. Organization can adopt a clear cut strategy to enhance the intangibles of the organization. They need to adopt practical steps which go on to enhance the intangibles .HR is believed to be play a pivot role in enhancing the intangibles of the firm “research data that shows HR makes not just a difference, but a big difference, is conclusive.

“What is really exciting is that investors are beginning to take an interest in organizational and human capital. If investors are interested, you can bet the board will care, and so too will the CEO. This puts HR in the spotlight in a way it never has been before. It won't be easy, but it is a powerful mechanism to ensure that truly strategic, intangible-building HR practices will spread. There has never been a more exciting time to be an HR professional.

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