Although the asset value of a company is clearly closely financially defined, it has become conventional to use the term ‘asset’ in a more general way. The following examines different types of asset that a company might perceive that it has.
Asset value of brands
More recently there has been a recognition that companies may have a greater value than they appear to have because they own brands,
which themselves have become tradable items. The ownership of brands is just one aspect of the potential future earnings of the com- pany, so it has always been taken implicitly into account, but more companies are explicitly valuing their brands and some are including them on their balance sheets. In small companies, this used to be talked about in terms of ‘goodwill’. The idea of adding brands to the balance sheet seems to be fading at the moment, but it is philosophi- cally interesting to consider brands as hidden assets, because their very purpose is to be something that can command a higher price than its stated worth.
Exclusivity
Some companies have value because they own non-tangible assets, such as trading agreements or patent rights: that is, the legal right to do something that others cannot do, which effectively gives them some form of monopoly. These intellectual rights are also formally recog- nized as having value. Other companies may have secret processes which, while not legally protected, are not available to others, and therefore allow them to do things that others cannot.
Customers
The last few years have seen the idea that the customers of a company are a strong asset. This has led to the growth in the ideas behind cus- tomer relationship management, or CRM as it is known. Customer relation management argues that attention should be paid particularly to those few customers that provide the majority of the company’s business. Although it is obvious that this truth has always been known to small businesses, in classic consumer businesses there are obviously far too many customers for anyone to know individually. However, now it is possible to ‘know’ them through the medium of a database holding information about them. This database is potentially of great value to the company and, for that matter, to its competitors.
A whole philosophy has now grown up around CRM, which at its worst seems to treat customers as unthinking objects that must be stim- ulated in some perverse Pavlovian way. It is based on collecting data about customers at each point of contact that they have with the orga- nization, and storing it for analysis and for formulating marketing.
When it is done well it can build good and lasting relationships between a company and a customer – but we have all experienced this being done badly. There is substantial literature about this, and many case studies have been described, but common experience suggests that successful CRM is still a rarity.
Employees
In the last 10 years or so, it has become more common for companies to talk about their employees as being their greatest asset. Generally these companies are in the service industries, and this comment links to current ideas of customer service. Early ideas of customer service produced a world where staff were expected to act like some form of robot (‘Have a nice day’), or answer the phone in three rings and say
‘Can you hold?’. It is now generally recognized that staff service comes from liberating staff members to act naturally and giving them the power (empowering them) to do the sensible thing. This is extremely hard to do in practice, and the approach that is now mostly proposed is to set up a culture with values from which the staff can draw, bringing about coherence and consistency in behaviour which is not contrived or false. This is what naturally happens in small businesses where the staff takes their lead from the owner; it is, of course, much harder for a large company.
Culture
Cultural management has been seen as a way of aligning the objectives of the employees and improving their effectiveness through building a collaborative environment. Ultimately this is all about leadership and inspiration, to which financial heads of companies are not especially attitudinally attuned or sympathetic, and with very few exceptions, it proves extremely difficult to effect within a company. It is also very expensive in terms of the staff time required to do the training, and the training itself is not cheap. The basic belief was that it should be possi- ble to get a self-sustaining positive cultural environment where new joiners would inevitably assume the company values, or leave if they found they could not. Until recently, companies often held a substan- tial proportion of their employees for a long time, especially those in more senior positions. In such cases, the possibility of achieving a self-
sustaining culture is possible in principle. However, flexible employment is increasingly becoming the norm, and indeed the whole notion of what a corporation actually is seems to be changing. Consequently, it seems likely that cultural management will become increasingly diffi- cult to achieve within corporations, as employee turnover rates increase and the ‘contractor’ society grows.