The time has come for people who need people


What have Alan Shearer and Elizabeth Hurley got in common? The answer is intellectual capital. This strange commodity comes in many forms, but few can be as dramatic as the revelation yesterday that England striker Alan Shearer is worth pounds 15m to Newcastle United - or that Elizabeth Hurley is tipped to be the new Julia Roberts. More of that later - first, Alan Shearer.

The talents of the workforce of most companies may not be as evident as those of footballers, but other businesses are increasingly coming to resemble football clubs in the sense that their two main assets are a brand name and the intellectual capital of the people who work for them. In the last 10 years there have been considerable efforts to measure the value of brand names and to grow and develop these. By contrast, the study of companies' intellectual capital is woefully thin: companies have hardly begun to measure the value of the intellectual assets locked up in the heads of their staff, let alone develop plans to extract more of this value.

Instead they regard the specialist skills of talented people as something they have to acquire, paying whatever the market rate requires. You can see this very obviously in areas like investment banking, or in Hollywood: the star system in both areas has become much more like football. But of course a policy of just paying the going rate and hoping to retain staff that way runs into grave problems. For a start the rate is bid up and up, leaving less and less of the added value available to shareholders. When firms are successful at developing home-grown talent, rather than buying it in, they frequently find that it walks round the corner to a competitor. And in any case these experts often have a different agenda from the conventional hierarchical managers. They do not necessarily want the rewards that corporations by force of habit offer.

As a result a few of the more thoughtful companies have been seeking to develop the intellectual capital of their staff and a few of the more forward-looking management theorists have been trying to help them work out how to do so. As might be expected for any movement which is still in its infancy there is as yet no rule book, no manual on how to manage knowledge. But gradually the literature is amassing. For example early next year Cambridge University Press will bring out a book, Managing Knowledge, by Professor Keith Bradley of the Open University Business School, which will look in particular at the supply side of intellectual capital: how companies can measure it, extract it, and develop it.

A key point here is the present notion that expertise is a fixed supply. When companies need a certain set of skills they go out into the marketplace to buy these. Suppose instead they were to measure what they had already; then see how what these skills had might be transmitted within the company; and then apply best practice across the entire group. Do this and the firms might well find they did not need to buy in so many skills, for they would instead be able to generate the skills internally.

That might seem a very simple example, and it is. But until a company knows what skills it has, it cannot begin to develop these.

There is a further advantage. The more it knows what it has, the less likely it is to suffer what Professor Bradley calls a "punctuated break", a sudden discontinuity where a group of skilled people up and leave. The financial services industry in particular seems to suffer from the punctuated break. The more attention that investment banks put into valuing their human assets the less likely they are to experience this.

But measuring, developing, and extracting value, however desirable, is only one aspect of handling human capital. For pure people businesses the whole notion of the hierarchical company, where knowledge and authority is with the chief executive and the directors, has become less and less relevant.

Many industries, Professor Bradley argues, are likely to become more like the US entertainments industry, where the stars are the key commodity and the studios do an assembly job of bringing together a range of different skills to make a picture. This is very complicated. It looks as though Elizabeth Hurley will star in the sequel to Pretty Woman - be the new Julia Roberts, so to speak - but the choice will bring benefit not just to her but also generate publicity for the other ventures in which she is involved, most notably Estee Lauder cosmetics.

Indeed if you look at the Hollywood model for business and assume that this will become much more dominant in other businesses, it seems clear that two groups of people are going to become more important. One is portfolio managers, the other, the agents.

Portfolio management usually conjures up the image of an investment trust or a pension fund. But in the case of Hollywood, when the big studios are putting together the finance and the team for a film that is very much what they are doing. They make a series of investments - say 30 a year - into which they pop some money; but a lot of their skill lies in laying off the risk as far as possible by picking appropriate partners.

They also have to hire appropriate skills, and here is where the agents come in. It is not just a question of buying what is in the window. The talent in the window knows its full value and will extract so much of that value, that not a lot will be left over the for the studio. So the very complex task of a whole series of agents is to match supply and demand: to enable the skilled people to extract the maximum they can for those skills, but also to assist the studios in picking the appropriate talent - picking the best bargain.

Managing people businesses is much more complex than managing asset businesses. In the case of a football club the scale is sufficiently small to be able to be run by a couple of talented people. Picking talent is perhaps more an art than a science and basically needs a good eye; managing talent is pretty much common sense. But managing larger people businesses is, as the investment banks have found, far more complicated and dangerous. Both football clubs and investment banks are to some extent protected by their brand names, but if the people side goes wrong the value of the brand collapses.

So what should a people business, worried that it is about to face one of Professor Bradley's "punctuated breaks" do? First and most obviously it should start to measure and assess its human capital, and then see what should be done not just to retain that capital, but rather to increase the value and extract it for the company. But that is only the start. I suspect there is a second and even more difficult task, which is to look at the way it buys the skills. Should these be bought in on contract, using a network of agencies to select those most appropriate?

As for Alan Shearer, he can expect a string of calls from agencies anxious to help him maximise his earning potential for years to come.

Start your day with The Independent, sign up for daily news emails
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
Life and Style
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own