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Sunday
Mar022014

A New Balance Sheet for Business

It seems to me that the traditional balance sheet is outdated with its singular focus on the financial capital of a business. This one-dimensional view ignores the multiple forms of capital that a business utilizes in its operations every day. In doing so, businesses bring decision-making down to a simple financial evaluation when in fact the considerations are much more complex. This creates a blind spot that often results in less than optimum decisions in the business.

What we need instead is a more holistic consideration of the business – a balance sheet that allocates all resources: financial as well as natural, human, social and built capital. This greater organizational self-awareness allows for a more full and conscious budgeting of all forms of capital with an eye to the liability of blind spots and recognition of all the equity it creates. As such, it provides the true cost of doing business along with an understanding of the organization’s impact on its environment.

What I propose is a balance sheet that contains a view of assets, liabilities and equity beyond the more quantifiable financial ones for a more comprehensive understanding and awareness of the organization as a whole.

  • An expanded view of the organization’s assets would include strengths and opportunities within the business such as skills and knowledge of the human capital, networks and relationships of social capital, the infrastructure of the built capital and the intelligence of entrepreneurial capital with the unique capacity to assemble all these aspects into a formula for success through innovation.
  • Liabilities beyond the financial would include challenges and risks the business faces such as resource gaps in the organization and marketplace dynamics. Additionally, the self-aware organization would seek to gain visibility into the unseen and unknown – blind spots in the organizational shadow.
  • Equity would also have an expanded depth that takes a more holistic view of the value the organization is creating. This would involve even deeper organizational self-awareness with insights into the context within which the organization operates and how that fits into the dynamics of an evolving world. 

Along with this expanded depth that includes the various forms of capital, the new balance sheet would also have a perspective across multiple dimensions.

  • Financial – dollars and cents, the familiar assets, liabilities and equity of the balance sheet. 
  • Non-Financial – includes skills and knowledge, infrastructure as well as the networks and relationships across the organization through its human, intellectual, experiential, built and social capital. 
  • Emotional – the prevailing emotional tone of the organization. This is the culture of the organization, including the known and acknowledged as well as the unconscious and unseen. 
  • Energetic – beyond words and emotions, there is an actual energetic vibration of the organization that when engaged has the capacity to inform and guide the present through an awareness of an emerging future.

The business organization that endeavors to operate with greater self-awareness – with greater depth and across multiple dimensions – will set itself up more prepared to successfully achieve its objectives and realize its mission. This organizational self-awareness enables the business to:

  • Operate more fluidly in the moment, allowing the business to quickly respond to an ever-changing business climate.
  • Deploy the talent of human capital according to individual skills and capabilities rather than be confined by the boundaries of job descriptions.
  • Truly understand the well being of the entire organization, creating a sustainable operation with the capacity to evolve as the environment in which the business operates shifts.

This approach to a more holistic balance sheet would create a more holistic chart of accounts to capture the greater depth and multi-dimensions of the approach and in turn, expand the approach to analysis, business modeling and even budgeting for a more comprehensive decision-making process that holistically considers the entire business and the environment in which it operates.

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