Every business makes capital investments. Some of these are tangible investments that are recorded on the balance sheet. Others are considered soft investments such as those related to employee knowledge, expertise and talent.
Both types of investments are important to the health of your business, according to business author and management consultant, Baldwin Tom. In this issue of Promotional Consultant Today, we share Tom’s definition of the seven capital investments available to every organization. Two are strictly on the task or tangible work side and five are focused on people and what they produce. This means that five of the seven, or 71 percent, of all capital investments are on people—the soft or intangible side of the equation.
Task Side (Tangibles)
1. Financial Investments: Financial capital is the monetary currency used to run the business by purchasing materials/resources and investing in people to facilitate its success. Financial capital is one of two currencies of exchange between people who do the work and the work they do.
2. Physical Investments: Physical capital is represented in fixed materials needed for products and services. This includes machinery, buildings, equipment, computers, land and labor.
People Side (Intangibles)
3. Human Investments: Investing in human capital is an easy one. Just as with physical capital investments, without upgrades, technology becomes slow and/or obsolete. It is the same with people; you need continuous upgrades. Training, coaching, education, mentoring and internships are obvious ways to increase people’s value. Importantly, the value of this investment spreads throughout an enterprise—in organizational capital (patents, processes, procedures), physical capital (innovative products and services), spiritual capital (morale, work satisfaction) and relationship capital (teamwork, customer relations).
4. Relationship Investments: One of the most valuable assets in an organization is relationships. Value is derived from this investment daily from leveraging people’s interactions. It’s about power and influence. The network of relationships (people inside and outside the organization) that interact with a business represents a significant resource.
5. Spiritual Investments: Spiritual capital in a business is derived from the values created by an organization’s leadership. With a great deal of spiritual capital, there is ethical decision-making built into a value-based culture where the goal is less shareholder gain and more gain for customers and stakeholders. The culture engendered energizes and enriches the human spirit, fostering social connectedness and personal satisfaction. Such investments include a conscious effort to build a family culture that honors and supports each other.
6. Customer Investments: Customer capital is the relationship value a business builds with its customers. This goes beyond customer loyalty and includes customer feedback to the business, and partnering with the customer to produce new products and services. Value also manifests in the form of referrals and great press about the business from customers.
7. Organizational Investments: Organizational capital represents the value of an enterprise derived from mostly intangible assets such as processes, procedures, systems, patents, trade secrets, reputation, brand and intellectual property. Organizational investment is an important one for leaders because this is where the memory of the enterprise resides. Building, investing in, and maintaining one’s brand and reputation and protecting intellectual property (trade secrets, patents, processes and procedures) are critical to sustaining the enterprise.
Read PCT tomorrow to learn more ways to optimize your intangible investments.
Source: Baldwin Tom is a management consultant, professional speaker, and author of 1+1=7: How Smart Leaders Make 7 Investments to Maximize Value. A medical school scientist, professor, leadership program developer, and founder of an award-winning science and technology firm, he leverages his experiences in those fields to provide insight and strategies to fit client needs. Tom is a Certified Management Consultant and served as the National Board Chair of the Institute of Management Consultants USA.
