Developing Your Best Investment

In today's market and with the turmoil that is our economic system, business owners are left with crucial investment decisions for the upcoming years.  Unfortunately one option often takes the lead over all others.  Because of what can be accurately classified as organizational paralysis, option of "doing nothing" is often chosen in lieu of other alternatives.  As markets become increasingly global and economics become even more unpredictable, the prime investment of choice should become clearer than ever.

Organizations need look no further than the industrial revolution to provide a suitable backdrop against which we can base our current business investment decisions. As factories continued to sprout up and become commonplace during the nineteenth century, the investment of choice was obvious. Any process that could be improved with mechanization would lead to a dramatic increase in production and ultimately increased revenue. From tools and machinery utilized in agriculture to the development of steam power, investment in equipment was often the differentiator between competing companies.

The trend of investing in process improvement through technology and advanced machinery continues throughout the twenty-first century, and rightfully so. As the world shifts into a more global economy, however, what used to be a differentiator has now become nearly commoditized.  What once was an investment to put organizations ahead of competition has now become more of an expense just to keep up.  As resources become plentiful in nations that used to only dream of such potential, the diminishing return associated with the resources becomes more apparent here in the West. So as the rest of the world finds itself on an equal playing field with U.S. business (or even at an advantage considering labor rates and regulation standards of lesser developed countries), many western business are left confused and paralyzed especially during trying economic times such as now.

There is one differentiator that is often overlooked, and surprisingly so given its attainability.  In the twenty-first century, it will be the development of the company’s people that will make the difference  in great organizations. Companies that want to compete, on a global scale or otherwise, must face a difficult challenge - adjusting their own paradigm. For decades, monetary investment in people has been considered a necessary expense, while increased spending on technology has been considered a good investment.  Our paradigm has become somewhat backwards and is now in desperate need of adjustment.  Our new focus, without question, should be the creation and development of knowledge workers, or specialists; the effectiveness of employees is the new key that will separate organizations.

Today’s U.S. organizations are opening shop in foreign countries to produce goods.  It goes without saying that, for the most part, these companies are not employing U.S. management.  They are recruiting and developing natives in management positions, and for good reason.  The issue we must face, however, is only creeping over the horizon at this point.  As these foreign workers, hungry for knowledge, develop better management techniques and business acumen, they begin to see opportunity for themselves and leave to start their own businesses, only to compete against U.S organizations, and eventually create the next generation of knowledge workers.

The writing is on the wall and the opportunity awaits.  Small businesses must develop their people into knowledge workers and leaders who are hungry for achievement.  Business owners must begin to realize that the investment they need to make today is not tangible.  It can’t be packaged in a box and sold above cost.  The investment of choice today is knowledge and leadership.  It is, after all, the function of management to utilize this knowledge.  Peter Drucker writes in The Essential Drucker:

“To be sure, management, like any other work, has its own tools and its own techniques.  But just as the essence of medicine is not the urinalysis, important though it is, the essence of management is not technique and procedures.  The essence of management is to make knowledge productive.”

To enable management to ensure productivity effective enough to compete on any scale, an organization must first create a culture of learning, training and development.  Our society is fast becoming a knowledge society, and those who can develop this culture within their organizations and subsequently transform it to increased productivity will ultimately differentiate themselves.