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As a leader in the company, you should develop your team as members of the organization who specialize in IT, not just as “IT people.” When a business has relatively high employee costs, traditional capital-oriented performance measurements such as return on assets can be irrelevant, if not misleading. An alternative approach, based on a company’s existing financial information but focused on employees, can tell you how the business is truly doing and suggest ways to improve performance. People businesses are those with relatively high employee costs, a high ratio of employee costs to capital costs, and limited spending on activities, such as R&D, aimed at generating future revenue. But people costs exceed capital costs in an array of other businesses as well, as the following breakdown of typical costs by industry shows.

Widely regarded as one of the greatest painters ever, Leonardo da Vinci was an extremely talented polymath. While his work The Mona Lisa became the most famous portrait, his drawing The Vitruvian Man became a cultural icon. A man well ahead of his time, Leonardo is also known for his notes on science and invention. Walt Disney is considered to be the forerunner of the American animation industry.

This showman and founder of Barnum & Bailey Circus captured American fascinating through the fascinating and unexpected. He became known as the Shakespeare of Advertising, for his knack of promoting his business with lurid language was unparalleled. Her business took off and she quickly became one of the most successful American businesswomen in history. She’s a familiar face to many in the Sioux Falls area business community – and her latest role has taken her to Hartford. The Palm Beach Police and Fire Foundation recently announced that Rebecca Torres, who for more than a year worked as the foundation’s development director, was promoted to executive director.

One way for an organization to achieve this is to focus on a particular activity in order to accumulate experience and know-how—think of a company that offers a specific medical procedure, such as dialysis, at hundreds of clinics. This will typically lead to higher returns because, with the right management, experience will improve the speed, quality, and cost with which the service can be performed. Given the high financial stakes, people management needs to be a core operational process and not solely a support function run by the human resource department. Line managers have a vital role to play in improving employee productivity, in terms of both business issues and management issues .

You can get this kind of information by relating performance to people employed rather than to capital employed. You simply reinterpret economic profit—for example, EVA or CVA—so that it reveals the difference between employee productivity and employee cost rather than the difference between capital productivity and capital cost. In other words, you calculate economic profit using a people rather than a capital denominator. If you run a people business—or a company that includes one or more of them—how do you measure its true performance? Avoid the trap of relying on capital-oriented metrics, such as return on assets and return on equity.

We’d be happy to talk more about how your own organization can more effectively align communications between business and IT professionals. IT leaders should take the same approach when issues arise with business peers too, of course. Take, for example, a line-of-business head using a credit card to spin up an Amazon web server for a new effort without consulting IT. While it may be normal for an IT exec to feel annoyed at the action, especially if it could put sensitive corporate data at risk, it’s better to consider this an opportunity on two fronts. Regardless of how many efforts are made upfront to ensure that everyone is working from the same playbook, there is always the chance that a project will run late, an installation will get in trouble, a deployment won’t deliver.


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