Just as Genghis Khan understood the value of one man’s knowledge, you must understand that your people are your most valuable assets. It is the knowledge and skill between the ears of your key people that represents the most valuable part of your business. Your business walks out the door every day at five o’clock. You could lose every tangible asset—furniture, fixtures, buildings, cars, files, computers, and everything else— but as long as you kept your key people, you could be back in business again tomorrow, generating sales and making profits. As Colin Powell said, “Those people in the field are closest to the problem, closest to the situation; therefore, that is where the real wisdom is.”
There are three types of knowledge that a business needs to survive and thrive. In Thomas Stewart’s wonderful book Intellectual Capital, he defines these forms of knowledge as personal knowledge, company knowledge, and market knowledge.
Personal knowledge is the specific knowledge, skills, education, background, experience, training, and core competencies that an individual owns and takes with her from place to place. The ability to write, to speak publicly, to negotiate, to sell, to make presentations, to type, to prepare financial statements, and so on, are all forms of personal intellectual capital. The more of these kinds of knowledge and skills that are relevant to your business a person has, the more valuable that person can be.
The process of interviewing and selection, as well as delegation, supervision, and promotion, revolves around the determination and deployment of these core skills.
The second type of knowledge is the knowledge of your specific company. This form of intellectual capital is very valuable. This includes knowledge about the processes and procedures within your business, the key personalities and their relationships to each other, your products and services and how they are developed, sold, and delivered, and all the other unique factors and features that make your business different from any other.
The third type of intellectual capital is specific knowledge about your market, your customers, and your competitors; and about your products and services, and the way they are marketed, sold, and delivered. This kind of customer and market knowledge can be of inestimable value in a competitive market- place. The longer a salesperson, for example, works for a company, the more valuable he becomes in terms of his network of contacts and his intimate knowledge of customers—who they are, where they are, why they buy, and the various buying influences that operate on them.
Not long ago, a client company of mine brought in a new controller. This controller looked over the payroll and arbitrarily decided that the top salesman was earning too much money. He insisted to the president that the salesman’s commission be cut, his territory be reduced, and several of his major clients be turned into “house accounts.”
As it happened, this salesman represented about 40 percent of the total sales of this medium-sized manufacturing company. When they told him that they were going to cut his commissions and cut his territories, thereby reducing his income by more than 50 percent, he protested. He said, “This is not fair! I have spent twelve years building up my customer base. You can’t just take it away from me like this.”
They refused to listen. The controller said, “In reality, these customers belong to the company, not to you. Their loyalty is to us and to our products and services. There is no reason we should continue to pay you so much money to service accounts that actually belong to us. If you’re not happy with these new arrangements, you can go somewhere else.”
The salesman tried to reason with them, but to no avail. Finally, he quit and walked across the street to their major competitor, taking all the accounts with him. His old company’s sales dropped 38 percent the following year. They almost went bankrupt. They had no idea that the relationship between the salesman and his customers was perhaps the most valuable form of intellectual capital in the entire company.