The Balance People PortfolioTM

Model Overview

Up and until the mid 1970ís, employees were referred to as "personnel" and considered little more than property that was owned by the company. Even when the term Human Resources began to emerge and we started to hear cliches such as "People are our greatest asset", the implication remained that individuals and employees were expendable and their value, as all fixed assets, depreciated over time. Although the rhetoric may have called for "investing in our employees", employees were still viewed as operating expenses. Investing meant training and often the training was similar to retro fitting of the older machinery. The paradigm had not changed. People were still resources that were to be chewed up and spit out. They were renewable resources all right; another human resource was waiting in the wings.

In the mid 1990ís a newer paradigm has begun to surface. Senior management is being called to see employees not as renewable resources worth developing but as investors themselves in the organization. This model implies a whole different view of how we treat our employees. They have become shareholders and by definition management becomes accountable to them. Unfortunately, we know from experience that the small shareholder is generally ignored. This too is our fear using this model. On the other hand, it seems that people tend to place inordinate value on the "almighty dollar". In this vein, a financial paradigm has been adapted to define, evaluate and categorize all business components.  What happens if we equate each individual as a type of investment?  

We believe that the financial paradigm that has extrapolated to the world of human resource management can be repositioned to provide a more meaningful perspective. The author has developed an investment strategy model known as the Balanced People Portfolio ModelTM . This model helps decision-makers clarify their approach to establishing and maintaining a productive organizational culture.  Human Resource professionals who understand the business principles, especially those who are comfortable with financial, are in a better place to strategically assist senior management in their quest for better performance and return to shareholders.

When one invests oneís savings with a financial planner, a portfolio is developed based on oneís long term financial goals, propensity to risk, and age. When an individual goes through a major life change (e.g. marriage, birth of a child, job change, health considerations) it is time to review oneís investment portfolio to see if the objectives have changed and hence the portfolio mix also should be adjusted.  When organizations merge or are involved in an acquisition, the same review of current staffing is required. Organizations, in their rush to cut costs and "right size", are prone to loose sight of ensuring that a balanced people portfolio is left in place. There is a tendency to keep the high potential growth investments and terminate the lower performing income investments. The Balanced People Portfolio Model provides a quick overview of the benefits and risks associated with type of employee group early on in the process of integration.

The purpose of a model, be it a LegoR version of Mount Rushmore, or an architectís scaled down replica of the new US Embassy in Ottawa Canada, is to depict in a simpler framework of the "real thing".  It is not meant to show every little nuance or complexity in absolute terms. We have chosen to build upon the concept of a financial framework because it is one that most individuals, particularly business executives, find appealing.  We are, by no stretch of the imagination, trying to imply that individuals are specific investment instruments and should be treated as such. We wish to present another model that we believe will view individual employees with the value and respect that is often lacking compared to the lip service paid to them.

Table 1: Balanced People Portfolio ModelTM

Investment Instrument

Growth / Income

ROI

Main-
tance

Risk

Equivalent 
Human Talent

Insurance

G

Low

Low

Low

Corporate memory

Collectibles

G

Low Ėto High

High

High

Myths, Legends Eccentrics

Real Estate

G

Low to Medium

Very High

Medium

Prima Donnas

Gold & Metals

G

Low to High

Low

Low

Marginal performer who knows a niche

Bonds, GICís & Money Markets

I

Low

Low

Low

Reliable old guard
Closer to retirement

Preferred & Debentures

I

Low

Low

Low

Long service and solid performers

Blue Chip / Index Stocks

G & I

Medium

Medium

Medium

Sr. Management
Professionals

Common Stock

G & I

Low to High

Medium

Medium

Specialists
Future workforce

NASDAQ

Indexes

G

Low to High

Medium / High

Medium / High

Knowledge workers
Recent grads
Generation X

Mutual Funds

G

Medium

Low

Medium / High

Outsourcing
Alternate Service Delivery

IPOís /
New Stock Offers

G

Low to High

High

High

New Grads

Stock Options

G

Low to High

Very High

Low

Free agents
Some Gen. X

Commodities / Futures

G

Minus to High

Very High

Very High

Creative genius


Chart 2 of the Balance People PortfolioTM, which is not presented here, looks at the benefits, drawbacks and retentions strategies of each human investment group.  Both tables can be viewed or downloaded by clicking below.  Adobe Reader required.

Balanced People Portfolio Model

 
     

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