everyone throughout your organization speaking in a language everyone can understand. A clear, crisp message can only be attained if the intended audience is part of the process of communication. We can start by first understanding exactly what makes an asset an asset in our company.
Just a few paragraphs before, you were asked to record your definition of the word ‘asset.’ At the risk of seeming like busy work, please document a combined definition, using your previous thoughts with those of your two colleagues. Please record that definition here:
| Asset: |
For the remainder of this book, or until you find it necessary to change this melded thought, let’s assume that this is your organization’s working definition of what an asset is. This exercise is important because now we are going to discover what makes an asset an asset in your company.
The working definition I use to explain what an asset is can easily be understood to be “any tangible or intangible item, thought, process, concept, or substance of value that can be manipulated for financial gain.” Ok, that got wordy, but I wanted to incorporate a lot of ideas into that working definition. In the business world, anything that has value and can be used for fiscal gain is an asset. The opposite of an asset in business is a liability. The two (assets and liabilities) make up what is known as a Balance Sheet. When a board member or corporate executive asks, “On the balance, how are we looking?” they are asking what the value difference is between assets and liabilities. As you can imagine, having more liabilities than assets is one attribute of bankruptcy.
This is not an exhaustive list, but rather an example of what an asset might look like in your organization. Very quickly, here are some assets you might consider:
■ Capital assets
■ Human resource assets
■ Financial assets
■ Property assets
■ Trade secrets or proprietary assets
■ Processes
■ Inventory
■ Accounts receivable
■ Your company’s brand
A careful review of the specific definitions of each of these might help in understanding their intrinsic value and to grow an intuitive desire to properly manage these assets. I caution you, these interpretations are not dictionary definitions, but rather my definitions based on three decades of field research. I strongly suggest that as you read this, you give some thought to how these assets are interpreted in your organization.
Capital Assets
I refer to capital assets as the ‘stuff that makes the stuff.’ This may be one of the easiest concepts to grasp. Capital assets may be a piece of equipment or machinery (e.g., office machinery, conveyor, oven, vehicle, etc.) that your company has ‘capitalized,’ indicating that you bought it to enhance, grow, or sustain your business for which the federal government rewards you by allowing you to depreciate its value over time. Depreciation amounts and time frames are dependent upon what type of asset it is, its cost, and use. Capital assets are usually identified in a business by having an individual asset tag and asset number. It is not unusual for maintenance departments to get involved by performing an annual ‘asset audit’ to assure the accounting department that all the assets being ‘depreciated’ are in fact still on the premises.
Several years ago, some crafty accounting loopholes were discovered that allowed for what were traditionally expensed repair activities to be ‘capitalized.’ This seemed like fuzzy math, but it also appears to be legit. The unintended consequence is that maintenance and the storeroom have to track spare parts as capital assets. Very few companies or organizations do this very well. If you track these new capital additions and you’re good at it, then consider yourselves leaders of the pack.
There will be greater discussion on capital assets as this is actually the focus of this book. For now we’ll keep this as just an introductory session.
Earlier I shared my working definition for an asset as, “any tangible or intangible item, thought, process, concept, or substance of value that can be manipulated for financial gain." In Table 1-1, please list a single capital asset in your facility and at least two ways this asset can be (or is) manipulated for financial gain.
Table 1-1 Methods for Manipulating One Asset for Financial Gain
| List one capital asset: | |
| How is it manipulated for financial gain, means #1: | |
| How is it manipulated for financial gain, means #2: |
As an example of what I was looking for in Table 1-1, my fictitious company has a mechanical press. There are many ways my company manipulates this asset for financial gain.
One manner in which they do this is to run the unit 24/7. Secondly, to speed up changeovers, my company has modified the press for quick changeovers to increase its overall availability.
Look back at your entry on Table 1-1 and confirm that your company uses assets for financial gain. This is not a negative attribute. That’s what companies do. They manipulate assets to make money. If it helps, you might consider using the term ‘use’ instead of ‘manipulate.’
Now, the harder exercise: if the asset you listed is truly an asset and valuable, in Table 1-2 please indicate the manner in which your company manifests (or demonstrates) the belief that this particular asset is of great importance to the financial success of the organization. For example: my company has awesome preventive maintenance, clear and complete spare parts availability, and solid drawings and schematics for this mechanical press.
Table 1-2 Demonstration of an Asset’s Importance
| List one capital asset: | |
| Demonstration of asset’s importance #1: | |
| Demonstration of asset’s importance #2: |
Look back at Table 1-2. Can you honestly convince people that your company values its assets, and actively demonstrates the importance of the equipment’s role in accomplishing the mission of the business?
Human Resource Assets
Years ago, I was teaching a class in the middle of the United States and we were just in the ‘introduce yourselves’ phase. A student in the center of the back row was wearing a large, red sweatshirt with a giant letter “N” on it. I asked him if he was a Cornhusker’s fan. He proudly pointed to the letter on his shirt and proclaimed, “Yep, where the ‘N’ stands for knowledge!” I instantly figured him for an OU man (Author’s note: I graduated from Oklahoma State University).
Aside from being a funny story, the gentleman made a poignant observation. It is the knowledge that is important. When companies or individuals tell me that people are their greatest asset, I usually respond, “No they’re not. It’s the knowledge and skills that they possess that make them an asset.” Let’s face it, a new employee is not an asset on day one. Heck, they’re probably
