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The late Prof. Sumantra Ghoshal has been a writer I have admired for long. Speaking of the difference between value creation and shareholder value, he wrote that value creation is all about utility and functionality. It refers therefore to those the company serves rather than to those who own it.

The value creation logic, for example of 3M , a highly admired company is their constant and now legendary emphasis on innovation. Ghoshal says like the frugal farmer and housewife around the world, innovation comes from stretching all resources to the maximum possible. “The last squeak from the pig” is the Midwest expression of this principle he writes.

I thought about the principle and felt it pretty much applied to individuals too. It has now become a well worn cliché that the organisation’s Human Capital is its most prized resource. How then are organisations and managers within them making the very best use of them?

There are two ways, to my mind. The first and less effective method is to extract as much as you can from individuals through sheer hard work as characterized by agonizingly long hours and rigid controls. I recall with amusement an expression which was popular in the manufacturing industry where I began my career more than 30 years ago. Supervisors in those days were exhorted to “ Stand above them and extract work”! Fairly often, the most effective supervisor was the one with the loudest voice, who was feared the most and who had the stamina to work the longest hours.

In today’s world, it’s far smarter to evoke the best out of people by creating a work environment where they feel they belong – where they believe their contributions are making a difference to the firm and they are indeed important contributors in the value creation chain.

Treating them as assets means acknowledging the potential they have and using the power of their intellect rather than seeing them as an extra pair of hands. Commitment comes from recognizing their contributions, giving them autonomy and independence to do what they should and guiding them where and when necessary. Seeking out their ideas for improvements in our products, in our processes and in the way we deal with our customers can give the organisation valuable inputs into crafting a winning value creation proposition.

The best part of it is that every manager has the same opportunity to get the best out of his/her team. The sad part is that not all make use of the opportunity in a manner which benefits them, the employee and the organisation.

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This is the 102 nd of the “A Step A Day” series : To provide perspective and provoke thought to facilitate self-development across a wide spectrum of issues- big and small- crucial for executive success.

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