Saturday, April 10, 2010

Human Capital - Bad Grammar or Organizational Success?

A January HBR blog post by Roger Martin titled "Why Good Spreadsheets Make Bad Strategies" makes the case that organizations have gone too far to the quantitative side in an overwhelming need to make sense of an environment that is volatile, uncertain, complex and ambiguous (VUCA) at the expense of the qualitative nature of organizations. The great example he gives is that you can measure the number of people in the room, but you don't know whether they are happy, sad, motivated, etc.

Mr. Martin's blog elicited an interesting response from Charles H. Green, co-author of the book "The Trusted Advisor" and CEO of Trusted Advisor Associates. In his comment, Charles states the following:

"We now talk about "human capital" with the proper roles of adjective and noun reversed, largely so we can measure the impact of behavioral change."

So the question is have we as Human Capital Management (HCM) leaders done ourselves a disservice by approaching our work in such a way as to allow the measurement of behavioral change and its impact on business strategy execution? In order to position our profession as a "strategic business partner" that could affect the company's bottomline, we put our profession in terms that we thought would resonate with leadership...human resources, human capital, talent management, etc. This has created some angst as people inside and outside our profession saw this as lessening the "people" side of our business because we weren't treating them as people but as commodities of the business like cash or buildings.

Historically, organizations have treated people like resources making decisions about their application to business strategy and execution (See my earlier blog post about impact of layoffs...). John Boudrea's book titled "Beyond HR" advocates for a decision science around human capital...My experience in the Department of Defense indicates there is a chasm between the ability to enable decision advantage in human capital and the need to do it.

My perspective is that human capital decisions made based on incomplete and faulty data can be catastrophic to an organization. If decisions about necessary capabilities to execute the mission and the workforce's capacity to execute the mission are based on anecdotal and incomplete analysis of the challenges being faced then we do our organizations and our profession a disservice.

I believe there is a balance that exists and is developing to address HCM activities and solutions in quantitative and qualitative perspectives...recognizing that we as HCM leaders are striving to create individual and organizational capabilities to execute the business takes people in our profession with the ability to see the forest and the trees as part of a larger talent ecosystem that is alive with hopes, desires, and feelings acting in a global system driven by the strategy of the organization.

Does it need a new name or a correction in grammar? I am not sure. I know we need to enable business and mission success. Whether we do that as the Chief Human Capital Officer, Chief People Officer, Chief Human Resources Officer or Chief Talent Officer should not matter and/or be transparent. What matters is enabling individual and organizational success through human capital decision advantage. Those organizations whose human capital can thrive in VUCA environments with greater agility and adaptability will be hugely successful in the future. Those who are not...well think Enron, Lehman Brothers, etc.


  1. Richard SwartzbaughApril 12, 2010 at 4:00 PM

    Keith's Question: "Have we as Human Capital Management (HCM) leaders done ourselves a disservice by approaching our work in such a way as to allow the measurement of behavioral change and its impact on business strategy execution?"

    Answer: No. We have to approach HCM in such a way that allows for measurable change with the understanding that what we do is a balance of art and science.

    Discussion: Customer and shareholder expectations continually increase, and a variety of forces continuously shape industry competition. Despite these realities, many organizations do not have alignment of: (a) talent management practices (talent strategy, talent management program) & enabling human resources core competencies, (b) organizational culture, (c) strategy, (d) execution, (e) continuous improvement. This is especially critical when customers, shareholders, business leaders, and our workforce are focused on value creation, measurable results, regulatory compliance, and doing the right thing the right way.

    A variety of proven HCM techniques exist to achieve alignment, and ensure that innovation and people remain the source for competitive advantage. Key components include:

    (a) A Talent Strategy focusing on recruiting, engaging, and retaining your workforce that continuously adjusts and improves based on measurable results, industry best-practices, innovation, economic factors, shareholder, customer, management, and employee needs, organizational culture, and the countries and regions that it does business,

    (b) A Talent Management Program focused on human capital planning, talent acquisition, talent engagement, talent development, talent deployment, leading talent, talent retention, evaluating human capital, and continuous improvement,

    (c) Enabling Human Resources Core Competencies, including:

    - Staffing,
    - Compensation & Benefits,
    - Employee Relations,
    - Performance Management,
    - Training,
    - Organizational Development,
    - Payroll,
    - HRIS, and
    - Implementation of policies, procedures, and practices across the business, and

    (d) Alignment of Organizational Culture, Strategy, Execution & Continuous Improvement through:

    - Organizational Mission, Vision, and Values, including M&A integration,
    - Those responsible for strategic planning,
    - Those performing the activities required to execute strategy,
    - Those implementing enabling human capital, process, and technology solutions,
    - Best-in-Class practices across the organization,
    - Employer-of-Choice initiatives, and
    Continuous improvement.

  2. Personally, I have never liked the term "human capital," although I understand how we got here.

    We need to strike a balance in our approach. Unlike facilities, equipment, and cash, people are not easily valued as an individual can be variable in performance (the same person of comparing two different people).

    By the same token, to not attempt to determine returns on our HR initiatives, we are taking the easy road and allowing ourselves to fly by the seat of our pants in our strategies.

    As Richard states above, our profession is really a combination of art and science, not completely one or the other. One size does not fit all.

  3. Yes, being too focused on the numbers has gone too far and this focus has created some harmful scenarios to the sustainability and resiliency of organizations. This is harder to see in an unstable economy where there is constant upheaval but will come home to roost as stability returns. The humans in the organizations are finding their own ways to adapt and those may well be in ways that will surprise the heck out of business decision makers that are not paying attention to the human factor but only to the numbers.

    A balanced approach is necessary and is one that can only be achieved by intention, flexibility and adaptation.