The myth about people being an asset revealed in a new study.
It is an inconvenient truth for Procurement that employees are simply suppliers of services and, as such, are fair game for cost-cutting and rationalisation. The myth about people being a company’s greatest asset is frequently promoted in the argument that slashing supplier costs helps an organisation to protect and build internal resources, i.e. jobs.
Most of us have been able not only to live with, but also to perpetuate, the cognitive dissonance required to believe this. For us therefore, a report on a study by Acemoglu, He and le Maire in this week’ issue of The Economist, ‘How MBA-wielding bosses boost profits‘, makes uncomfortable reading.
It set out to analyse the impact of MBA-qualified chief executives and found that they do indeed, as advertised by the business schools that sell their certificates, increase their organisations’ return on assets. However, they do so, not by increasing sales, investment or productivity, but by suppressing wages and salaries. The business school message, it seems, is to regard staff as “costs to be reduced” rather than as human capital investment.
Ouch!