There’s a saying in business that goes like this, ‘If it can’t be measured then it doesn’t exist.’ This couldn’t be further from the truth and the great businesses know this while the rest are chasing measurements. Businesses that are thriving and winning the game understand the importance of their intangible assets and are valuing it as much as their tangible asset, sometimes even moreso. What are these intangibles and how do they affect the bottom line:
Employee morale, impossible to detect on a balance sheet and perhaps the most important component of any business’ success. There are two types of work environments that I’ve encountered, there could be more, but two have stood out in my experience. A certain type of workplace setting provides a meaning to the daily grind.
The employee in this setting sees, can trace, and understands their impact within their role. They see their meaning, which boosts overall productivity, allows them to push harder, stay a bit longer, and try another method to get the needed work accomplished. In essence, they see and find meaning in their role. The other type of workplace environment is absent of meaning, or better yet, it is not communicated and reinforced to the employee.
This work environment says, punch in and punch out, and do this and do that and go home. Without a ‘Why’, without an inherent meaning, employee morale gradually fades and complacency, or exits occurs. No matter how straightforward the work might seem companies should endeavor to communicate and reinforce meaning in the workplace because this fosters an employee that is thinking in line with the company; and a thinking employee can positively contribute at every point and at any point. Now while employee morale cannot be measured, the results are evident and as plain as the sun at noon, think of Apple, Goldman Sachs, and Google.
Brand Reputation – The reputation of a business is its brand, and a brand is the culmination of a business as the customer sees it. To what degree do brands affect the buying behavior of an individual? If there were 5 different brands of a service offering, is it possible to say that the probability is higher that brand X will be favored in comparison to the other brands?
As abstract as the brand is, if a brand is properly managed, it can grow to become another synonym for the industry, ie: iPod >> music player, Tylenol >> painkiller, Kleenex >> face tissue, and so on. So managing your branding, ensuring it is in line with where you see your business, and putting it to work in positive environment where your customers encounter it, can add considerable growth to the bottom line.
Goodwill – Defined as the present value of potential excess earnings of a company over others in the same industry. Goodwill is similar to brand, but it is an asset that encompasses the brand. When Wells Fargo sponsors an art show, which is unrelated to its business, if you happen upon this event, what does this make you think of Wells Fargo?
Undoubtedly it’ll be positive, and studies show that an individual having been a recipient of some form of goodwill from a company is more inclined to do business with that company. Hosting events, sponsoring non-profits, or underwriting something that the public can experience adds to your brands capital. Additionally, the goodwill you undertake significantly increases your brands mindshare in the public’s eyes, which directly has a positive effect on your bottom line.
Through these goodwill gestures companies are indirectly securing mindshare, value, and an increased bottom line. When it comes to understanding and measuring these intangible assets, I think certain assumptions should be accepted and that is because they can be felt, seen, and experienced, the result for the organizations, can only be positive, because these things are positive experiences in the lives of the people it affects. Perhaps with a better understanding and with the advent of big data, they can be quantified in the near future.