IPM - Great HR Debate:

Financial parameters - more important than people parameters

The foundation of every organization is a collective conglomeration of its people and its financial assets. However, a question may arise as to which is more essential, or crucial to the organization's development and progress.

One may argue that financial parameters matter more, as it is a factor that is most important to stakeholders. Ergo, stakeholders are a growth factor in relation to a business. On several occasions, HR gurus have expressed sentiments that financial factors control the route to success.

However, how important are the people parameters: learning and growth? Innovation is a necessity to achieve the vision that the organization has as its ultimate goal.

Financial factors play a minute role in Innovation and it is people who take steps towards greater learning and organizational growth, whose innovative ideas can take the business forward. Some may say people parameters are only a means to an end, but then, what is an end without the means to get there?

The future that lies before us seems to be that of a knowledge-based economy and learning is the essence of knowledge. From this vantage point, the people parameters within the Balanced Scorecard appear to be of great substantial value to any organization.

Nevertheless, the debate between the two is not a black and white issue. "At any stage in the lifecycle of an organization, financial factors need to be a top priority for any organization to prosper," said HR and Management specialist, David Parmenter.

This rings true in the natural fact that capital and investment is the basis of any business, and without financial stability and development, the failure of an organization would be inevitable.

"The basic premise behind the Balanced Scorecard is a simple, yet profound one: Financial measures are and always will be important," states the best-selling business guide Balanced Scorecard Diagnostics by Paul Niven.

Although people are the initiators of any business, the guiding principle after the initial push is primarily the financial investments. The objectives of the organization are thence supported and governed by the financial perspective. Despite the fact that people are the emitters of Innovation, for expansion and innovation to be followed through, financial factors come into play yet again.

The Harvard Business Review states that on an average, failed organizations have become so because of lesser focus and attention paid to Financial parameters.

On the other hand, investing in the right people is a crucial factor that guarantees a business's future success, whereas financial stability does not necessarily guarantee success in the future although it stabilizes present conditions.

Business leader and Management extraordinaire Andrew Carnegie said, "Take away my people and leave the factories, and soon there will be grass growing on the factory floors, but take away my factories and leave my people, and soon we will have bigger and better factories."

His words hold a very credible point as can be seen by today's top running companies from across the globe. The Top 10 businesses listed out in the 2008 issue of Fortune magazine, Hindustan Unilever being among them, give obvious credit to their financial parameters but very clearly seem to give precedence to the excellent work put into people development.

In a nutshell, although financial factors hold significance in the commencement and stability of any organization, it is Learning and Growth that keeps the wheels of the business running smooth. Money is indeed a growth factor for a business, and is in a sense a fuel, however, vision, strategy and setting of objectives, are all determined by people and the parameters they stand for.

Financial parameters are a definite necessity for an organization to stabilize itself, especially during such an unstable period as the current recession. However, they only provide snapshots of the organization's progress, while People parameters bring in a constant flow of qualitative factors such as the ability to motivate people of the company and increase focus on the company's goals.

In fact, although competing organizations may have comparatively unequal financial assets - an organization's superior people parameters (a focused and innovative team) can safely be labelled as the asset that gives it the upper hand among other organizations, as this asset has potential to alter its financial status.

This notion gives way to the conclusion that people parameters are key factors for competitive advantage. Strategic planning, educating the staff of the latest developments in the market and the general economy, investing in people who are likely to help the organization prosper, and consequent innovation: these are the main bulk of what an organization has to manage and maintain for long-term productivity to ensue.