Is your career a liability in disguise?

By Neil Patrick

This week, the shocking revelations about Volkswagen's emission testing fraud and the consequent collapse of its share price prompted me to think about balance sheets. Not corporate ones, but career ones.

We all have a career balance sheet. Do you really know the condition of yours?

Initial estimates suggest that Volkswagen could be liable for around $18bn of fines from its emission test cheating. Investor sentiment has tanked and around $30bn was wiped off its share price value within two days of the scandal becoming public knowledge.

In an instant, Volkswagen's balance sheet has been trashed. The reputation of perhaps one of the most trusted brands in the world lies in tatters. Yet I'd argue that Volkswagen could have seen this coming, they were just not paying enough attention to things that accountants never measure or show on a balance sheet. Things like culture, values and reputation.

I know that many people glaze over when accountancy language is used, but stick with me. This post isn’t about accountancy. It’s about something much more important to most of us. Our careers.

Most of us think about our jobs and finances from a profit and loss perspective. In other words, if our income exceeds our outgoings, we feel like we are doing well. And vice versa.

We rarely think about the balance sheets of our careers. That is, our career assets and liabilities.

But for 21st century career survival, a balance sheet perspective is now vital.

So what has changed?

In short everything. What the VW story illustrates is how even the most successful organisations can group think their way into catastrophe. The financial collapse of 2008 was the same situation. The dot-com bust of 1997-2000 was too.

These collapses were all based on fundamentally flawed balance sheets. Put another way, the assets were overvalued and the liabilities were undervalued.

Individuals are no different. But employers rarely consider their employees to be true assets. The hard truth is they are viewed as a cost from which employers seek to extract the most value they can. And I am sure I am not the only one who frowns with suspicion every time I hear a CEO say ‘Our employees are our most valuable asset’.

So employers typically adopt a profit and loss perspective when they think about their people. Investments in their people assets are rarely made for the long-term benefit of the individual, they are made with a view to the short term ROI for the organisation. In other words the things which impact their profit and loss not their balance sheet.

This was more or less fine in the 20th century, when we could reasonably expect to have a long and rewarding career with perhaps just two or three employers over the course of a 40 year career. But as average job tenure continues to fall, as skills become redundant ever faster and as individuals leverage increasingly tight incomes through borrowing, the nature of critical career assets has fundamentally changed.

What is a career balance sheet?

Of course it is statement of your career assets minus your liabilities. And the remaining balance is what I call career equity.

We cannot assign strict monetary valuations to these things, so accountants will doubtless lose interest at this point. But we can weigh up the balance between our assets and liabilities. And make a fair judgement about whether they are rising or falling.

These assets and liabilities are quite different to what most people imagine

Because they think about us from a profit and loss viewpoint, our employers encourage us to do the same. This can be fatal. See where the group think risk is?

Conventional thinking dictates we think of our career assets as things like skills, qualifications, experience, salary level. But they also include our creativity, our ability to adapt, our leadership skills, our communication skills, our professional network, our reputation, the amount of goodwill our network has towards us.

There’s a ton of stuff which is immensely valuable to us individually but which our employers will view at best as of secondary importance to us getting our jobs done well.

Conventional ideas about liabilities would cite things like poor employer references, short job tenure, periods of unemployment, haphazard career moves. In the 21st century, career liabilities include student debt, health problems, limited professional networks, obsolete skills, immobility, limited digital know how.

Employers do not measure or manage these things for us

They don’t. Because they see little immediate value to themselves in them. The paradox is that getting an outstanding appraisal, being promoted, earning big bonuses actually encourages an illusionary perception that we are doing well. We might be if we take a purely profit and loss view. But if we take a balance sheet view we almost certainly are not. If all our time and energies are directed at pushing things up on our career P&L, then we are doing very little to directly invest in our career balance sheet. And that’s the bit that matters to us most. A weak balance sheet or one which measures the wrong things makes us vulnerable.

So it’s quite possible to have a booming career P&L and a weakening balance sheet. And a weak balance sheet can be fatal whether it’s an investment, a corporation or our career. And because the performance measures and rewards that employers typically use encourage more of the same behaviours, we can find ourselves sleepwalking into career balance sheet erosion or even career bankruptcy.

As long as employers persist with a short term P&L perspective on employee value, employees run the risk of their career balance sheets being weakened.

Just remember this. It’s almost guaranteed that your employer doesn’t see you as an asset (despite their nice words to the contrary). They see you as a cost.

Provided your value to them exceeds your cost, generally, they will be happy and reward you. But those rewards mostly appear on your P&L, not your balance sheet.

If you really want to grow your career balance sheet instead of your P&L, it’s time to think very differently and that's probably not in the way your employer wants.