It’s time to redefine business capital in the corporate world
Traditionally, capital has been defined as the human-created assets that can enhance one's power to perform economically useful work. Adam Smith, the 18th Century Scottish economist who many refer to as ‘the father of capitalism’ went further, defining capital as "that part of man's stock which he expects to afford him revenue".
Over the years, this model has proved resilient and done much to create the contemporary world. So much so that, today in the corporate world, a business with good capital means strong funds and high financial valuation. However, when business capital is measured only by factors such as monetary wealth, market capitalisation, and sales, it also invalidates other larger, longer-term goals in the process. Numbers are important, yes, but they are not the most valuable aspect of capital that will sustain a business over the long term.
The true definition of capital takes a much broader perspective than just a financial attribute.
Business capital, apart from financial wealth creation, is building capabilities and deep know-how, putting down roots and developing a shared culture, enriching individual and community livelihoods, and creating impact that echoes across local, regional, and national levels. The approach enables organisations to think beyond themselves as engines for profit and recognise that they’re part of a much bigger picture.
Building skills and capabilities
In order to take this holistic approach, organisations should focus on building capabilities through continuous investment in R&D and skills development. Developing knowledge capital has to take precedence over getting product out to market as quickly as possible. While this might initially mean sacrificing on budgets for marketing and other secondary functions, the benefits become clearer in the long term. Additionally, building knowledge capital shows your clients that you are in it for the long haul, which engenders brand credibility and helps forge stronger connections with customers.
Building this strong knowledge base goes hand-in-hand with talent nurturing. But when looking for talent, most businesses still restrict themselves to a highly selective talent pool based on credentials and educational qualifications. Unfortunately, credentials do not always attest to a person's true potential and capabilities. Alternatively, when you remove formal education from your hiring requirements, you have access to a huge pool of untapped talent that's waiting for an opportunity to be trained and developed. Taking in potential talent and upskilling them in-house with industry-ready expertise further contributes to stronger knowledge capital. Such initiatives, additionally, make it easier to evolve and pivot when necessary.
Enriching employees’ lives
It’s also important for businesses to remember that their employees are more than the output they produce during working hours. For employees to be their best version of themselves at work, organisations need to foster a sense of belonging that combines material and spiritual well-being. Good pay, perks, promotions, and in-office recreation centres may look good on paper, but they mean little if they aren’t combined with a sense of freedom, trust, patience, and acceptance. Employees also need to feel free to make mistakes and learn from them without being unduly penalised.
Most businesses, however, approach this idea of building an empowered human capital backward. They start with the goal of maintaining a low attrition rate and then try to analyse why employees leave. Rather, it's necessary for businesses to ask themselves "what have we done to deserve the loyalty and commitment of our employees?" This reverses the focus from "why do people leave us?" to "why should they stay with us?", and urges companies to be grateful and appreciative of employees who choose to stick with them over the years.
Developing a shared culture deep-rooted in a core set of principles
A company's culture is its unique personality, which manifests in the form of strongly-held values, business ethics, and a common sense of purpose. Culture adds meaning to why businesses do what they do and also guides how they do it. Culture gives a clear, collective goal for teams to work towards, spiritedly. This cannot be achieved through maximising profits or developing quick win strategies; they seldom motivate people or encourage them to bond.
Ultimately, getting this right means fostering an awareness that no business is larger than life, and thinking more from the angle of how a business fits into the bigger picture. This helps ensure that the business understands the role it plays in society and how it can be a community asset as it balances impact with growth.
Redefining capital to include long-term focus
Hyper-growth and near-instant ROI look glamorous in the short term but they lead to vicious debt traps; the very model is short-lived and untenable in the face of adversity. On the flip side, companies that prioritise laying down fundamentals of durability and nurturing valuable skills and know-how can persevere for longer periods of time, build a positive legacy, and contribute better to community growth and overall socio-economic upliftment.