The Importance of
Human Capital
By Larry Stevens
In 2003 the CBS television network ran a story on their “60 Minutes” broadcast that caught my eye (see below for a link to the story if you are interested). I have never forgotten this story, and I reflect upon it often. The story related to one of America’s largest business software developers SAS. SAS is a privately held, independent company located in Cary, North Carolina. They have sales of over $1 billion per year and they have never had a losing year, nor have they ever had to lay off any employees. The purpose of the story was to highlight the unusual and extraordinary collection of employee benefits they offer to their employees, and the philosophy behind those offerings.
The primary co-founder and CEO of the company is a successful entrepreneur named Jim Goodnight. He founded the company in approximately 1977. SAS has continued and prospered as an independent, privately owned company. They have no stockholders, no board of directors, and have never seen a need to sell or involve additional owners. As far as I have been able to determine, the company is still going strong, maintains an impressive customer list which includes some of the world’s most recognizable companies, and is a major force in providing highly advanced business software.
The company’s wide and growing array of employee benefits was the focus of the story. What caught my attention was the philosophical reasoning behind all the perks. According to their HR director Jeff Chambers, the company does not consider themselves altruistic or philanthropic in offering some major benefits. There is a solid business benefit to the company, derived from each one of the benefits that they offer. For example, the company provides an on-site medical clinic that employees may go to free of charge. “Our studies have shown,” says Chambers, “that our employees are much more productive and are away from the office less time by going to our facility than if they had to travel somewhere and wait in a waiting room to see the doctor.” Their studies have been able to quantify the savings reducing employee absenteeism which are in the millions of dollars annually. When challenged about the wide array of benefits, Mr. Goodnight was taken aback and responded with a smile, “what’s wrong with providing good things for our employees?”
He elaborated by making this important statement, “Every night 95% of my single most important business assets and the very heart of this company-our employees-drive out the gate. It is my job to bring them back the next day.” It only makes good business sense for Mr. Goodnight to want to do everything in his power to create and maintain a stable workforce.
In an era when the average yearly turnover rate in the technology industry is over 20%, SAS has experienced 26 straight years of double-digit growth and an employee turnover rate of less than 3%. Goodnight’s philosophy is simple, “If employees are happy, they make our customers happy, if they make our customers happy, then they make me happy.”
Most companies, including Med One, are not as uniquely positioned as SAS to be able to fully embrace this philosophy to that extent. Make no mistake, at Med One we consider our Human Capital to be one of the most important and powerful assets we have in our company. We have witnessed time and time again in competitive situations the power that individuals have in charting a successful course for the companies for whom they work.
Med One brings a lot of reasons to the table for why customers want to and should do business with us and embrace our offerings. We have significant capacity, give caring customer service, excellent competitive pricing, flexibility, and responsiveness in providing a wide-ranging variety of products. The most powerful part of our story, however, is the individual talent and commitment of our employees who have embraced what we do and what we stand for. Our human capital is the engine that makes all our great plans work as they put our story into action.
We recognize that a chain is only as strong as its weakest link. We rely on the hope that when someone joins our team, they are serious and honest about what they truly represent. We expect each of our team members to embrace and demonstrate the qualities they have led us to believe they have. We do not hire people who don’t profess alignment with our mission and purpose. We do not retain people who do not demonstrate those qualities every day.
The value that our “human capital” brings to us is difficult to quantify and as an intangible asset, it cannot be listed on our balance sheet. But it is a key driver of Med One’s success, nonetheless. There are many striking examples (some of which have been re-told in this publication) of our employees going above and beyond their normally expected duties to serve customers. However, the day-to-day hard and dedicated work of our employees who show up each day and happily do their job and work hard to please our customers is the real value that our human capital brings to us.
“ Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.
One of the misunderstood paradoxes of business is that an effective, efficient system is not the “sum of its parts,” it is the “product of their interaction.” If you imagined trying to build the perfect car by picking the very best systems and parts from all of the best automobiles in the marketplace and then assembling those parts into your dream car, would you have a dream car? No, you would have a big mess because that accumulation of all the best parts in the world would not work together or even function, let alone create a dream car. The key is to find the best parts possible that will function together and are contributors to the whole and then leverage the result.
We have not tried to build a company of individual super stars. We have built a company from a wide variety of people who have come together and who share the vision of Med One and who hopefully share a commonality of integrity and desire to see the enterprise succeed. Hopefully, this team of people–our human capital-recognize that unless the underlying entity (Med One) is successful, their individual accomplishments–no matter how spectacular–will be of little consequence.
There is a quote attributed to Albert Einstein that says, “Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.” I’m not sure Einstein ever really said that, but the point is that systems function best when the individual parts are able to play to their strengths and can succeed based on the value of their individual abilities and talents.
At Med One, we feel that Human capital is one of our strongest and most important assets. Not because we have an accumulation of super stars or geniuses, but because for some fortunate reason, most of our employees have come together as a team that functions as a whole to achieve the worthy goals of Med One and serve the customers who do business with us.
In my mind, a strong Human Capital component is a key driver to the success of any business. Think of the damage done to a business when people not suited to do so interact with their customers. We recognize in our rental division, for example, that the employees who have the highest frequency of customer contact with those who use our services are our drivers who deliver and pick up equipment daily. No other function in our company is in regular contact with our customers more frequently than our drivers and delivery personnel. Customer service teams, sales representatives, and company management would labor in vain to undo the damage that an inept or ill-mannered delivery person or driver can do in a customer account. When we hire anyone in those positions, we are on the lookout for those who demonstrate an interest in what Med One does, a passion for the importance of our mission and desire to help Med One achieve success by pleasing our customers. In like manner, we are always on the lookout to identify those whose attitude, awareness, or integrity are not consistent with the way we want our customers treated.
Sadly, I will say that in some states and under some federal government mandates, it becomes difficult to be able to “do good things” for our employees. Many employment laws and regulations that have been enacted supposedly to make things better for employees cause employers to be more restrictive and less flexible with respect to how employees are treated. In many states, for example, structures have been created that actively encourage every employee to “go after” their employer for a myriad of reasons. In these cases, employees are used only as pawns, and the result is a deteriorating environment for those who want to work hard, get ahead, and contribute as members of society.
Med One is in a very fortunate position to have such a great team of employees who, for the most part, believe in the mission and believe in the company. Success is a long-term play and cannot be accurately measured from quarter to quarter with a short-term view. We have always viewed the opportunity for our success as a 3-legged stool with 3 separate but interrelated constituencies. The three legs represent our customers, our employees, and Med One as an enterprise. We try to give equal attention to each one of the legs to keep ourselves in balance. Unless each one of these legs is strong, healthy, and well taken care of, we cannot be in balance, nor can we hope to be successful. A major contributor to the secret of our success has always been the extraordinary human capital element that has been so vital in executing our strategy.