Hello again. In this module, what I'd like to talk about is the broad strategies that organizations use to manage people. If you think about managing people it's a already articulate, there are a lot of details that go into a lot of little pieces about how you motivate, train, hire people. But once we get beyond those details, I think it's fair to say that there's also kind of a broader strategy, the way that those details fit together. If you want to understand how companies manage people, it's useful, I think, to delineate two broad approaches that they use, which are based off two broad philosophies. That's what I want to really get in this module. To start, what I'd like you to do is to repeat a short mantra after me. I would like you to just say a few times, people are our most important asset. People are our most important asset. You've got it. How does it feel? Good. Judging by the way that organizations behave, being able to repeat this regularly seems to be an important part of modern leadership. But I think it's useful also just to dig a little bit below this mantra and just ask, what do we mean when we say that people are our most important asset? There are a couple of interpretations. One is, we can think about them as being our most important asset just in terms of they're our biggest cost. If you look at pretty much any service business, people are going to be the single largest driver of costs in terms of wages, benefits, overheads, and so on. When you think about how you're spending money and what's driving your profits, people, human capital is going to be a huge part of it. The last time I checked, profits were sales minus costs. People think about, well, people are our most important asset and if we can minimize our spend on that most important asset, our profits will go up. We're embedded in this philosophy, you see a lot of approaches that makes sense to organizations. How can we get wages and benefits down as low as we can? There are lots of great schemes that organizations have come up with. One of my favorites, an organization called Circuit City, which was an electronics retailer in the US. At a certain point when they were struggling, they realized, you know what, we pay a lot more to our employees who've been here for more than 10 years than we pay to our more recent hires. They decide, let's just fire all the people who've been here for more than 10 years that should drive down our costs. I guess it did. They went bankrupt soon afterwards. It's not clear how useful this overall weeds was, but certainly figuring out ways to get costs down, wages down is valuable. The other way, obviously that we try and drive down this cost is by just reducing overall staffing. The leaner we can staff, the less we have to pay for people's time. That can partly be just fewer people per store. It can also be trying to match supply and demand and scheduling. Rather than having people in our store throughout the day, when demand goes up and down, maybe we can have a bunch of people come in for the lunchtime rush and then go off and do something else when we don't pay them and then come back later in the day when maybe demand picks up again. This is a common strategy. I think, just last week I read about a chain of bicycle stores in the UK that announced they're going to cut staff and start really having much more variable scheduling in order to reduce costs. When we think about people being our most important asset, one way that we can think about this is there are highest cost and anything that we can do to drive down that cost potentially increases profits. Is there another way to think about? The other way that you might think about your people, your human capital, is as organizational capacity. They won't actually gets stuff done? Think about retail again, think about, I want to buy a shirt. Well, not that there's anything necessarily wrong with this shirt, but suppose I want another shirt. What does the store have to do in order to actually make that set? Well, first of all, they have to figure out what shirts are we going to stock? They might think what's in style this season. Let's be honest, that's not going to influence my purchase very much, but what shirts that people want to buy? Then they need to manage the whole supply chain, they need to get it made, they need to get it delivered. They need to make sure it's in-stock in the stores and in various sizes they want it to be. In principle, this is something that's automated, this is just a computer problem of tracking our stock. In practice, we can end up with quite big differences between what seems to be in stock when we check in cyberspace and was actually there in real life, I guess IRL these days, I'm still quite fun to the phrase meet space. But anyway, what actually happens in the store itself? Recently I went out to buy a webcam actually to record some different videos. I check online at the retailer and say yes, this webcam is in-stock in the store. Get up early in the morning, rush down to the store and like oh yeah it always says it's in stock, but it never is. I guess they go missing. Who knows? Broadly, the process of actually making sure we have the stock where it is supposed to be when people buy, that can be quite complicated, we need to get that right. Then when I walk into the store, well, the shirt not only needs to be there, it needs to be displayed in some effective manner. They need to persuade me that yes, I look wonderful in the shirt. It will massively improved my life. Should I buy it? Therefore, it's what I want to purchase. Then they need actually to be able to help me actually accomplish that transaction. There are a lot of different stages that go into selling something and we need people to do all of them. The people we hire, they're not just cost, but that actually what happens in the store. There are capacity to carry out those steps and how they behave, not just the number of people we have, but how skilled they are, how engaged they are, is the difference between just doing this in a fairly poor manner, so we don't really have the things where we expect them to be, people can't find the stock, the stock isn't very good anyway, and they hate our service and having a great experience when you walk into a store. That's the other way of thinking about our human capital. It's like, yeah, it's costly, but also it enables us to do the things that we need to do and how we manage it is going to affect our capacity to carry out our strategy.