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Cashing In on Human Capital
Value Connection
Human Capital: The Five Big Reasons to Care and the Four Big Questions to Ask by Rand Golletz

One of the questions that people ask me all the time is, "Why do company executives talk about employees being an investment, on the one hand, and treat them as an expense, on the other?”

The reason employees are treated as an expense is that, from an accounting perspective, they are. That isn't to say that they ought to be, but in strictly financial terms, employees and virtually everything to do with employees – their salary, their bonuses, their development, their benefits – are booked as expenses along with other operating costs. When people are dealt with on financial statements as investments, we'll see executives better align their "walk and talk" on the matter.

In the meantime, despite pressure to do otherwise and regardless of accounting treatment, it's still prudent to think about human capital as an investment. Following are five reasons why:

• Learning and deftness are the only sustainable competitive advantages. Product and service attributes come and go. Today's competitive advantage is tomorrow's competitive necessity. The ability of people, individually and in teams, to learn and adjust on the run to changing competitive conditions is the only real enduring advantage.

• Human capital is underutilized. Most companies don't even know what they know.

• People can easily move on. Competent people. Smart people. Emotionally intelligent people. Creative people. These kinds of people have options. If you don't value them by aligning their interests with your company's interests, developing their capacity to contribute and rewarding their contribution – adios!

• People have been overmanaged, undermanaged and mismanaged. Historically, downsizing has been the primary refuge of uncreative minds groping for efficiency. "If we can have five people do the work of six, let's get rid of one," is how the thinking often goes. I'm sure you've heard of survivors' guilt; I bet, however, you haven't consciously thought about survivors' anger, malice and vitriol! The more irresponsible, episodic hiring and firing that occurs, the more company executives test people's commitment.

From a training and development point-of-view, companies spend way too much time, money and energy helping people develop their weaknesses. The end result is that you haven't aligned strengths with organizational needs; rather you've made the weakness less weak. In what I think is his most important and underheard quote, Peter Drucker said that "the primary purpose of management is to make strength productive."

Here's what I say: Strength = commitment x capability!

• Buyers judge the quality of your company’s products and services with surrogates. Look at the "strength equation" again. Bottom-line: If your employees are perceived by your current or prospective buyers as uncommitted or incapable, they will draw conclusions about your product and service quality, sooooo…

The four big questions

At Value Connection, we believe that the only way to get to answers that have high strategic leverage is by asking big questions. The following questions are those that you must answer in order for human capital to drive value creation:

• What knowledge, skills, talents and attributes does your organization require, and in what amounts and combinations, to create value for your targeted buyers? (For more on differentiating knowledge, skills, talents and attributes, click here. For more on value creation, click here.)

• How best can you recruit, select, develop and leverage relevant knowledge, skills, talents and attributes that create value for your targeted buyers?

• What must you do to translate people's capabilities and commitment into performance?

• What must you do to integrate individual people's performance into a cohesive "whole"?

All of the other questions you must ask are derivative.

Four Habits to Keep You Learning and Growing by Mark Akerley

We've all heard the cliché before, "If your business is not growing, it's dying." I couldn't agree more, but I'd like to make the statement a little more personal. "If you are not growing, your business is dying." After all, the success of your business, practice or SBU is all up to you – your ability to identify reality and then lead your company in a dynamic, competitive, changing business environment. And you can only increase this ability through growth.

Such growth, I contend, is intellectual and is a lifelong learning process. Learning more about people, learning more about strategic and tactical alternatives, learning more about what others are doing to achieve success requires discovering new and different information and then "letting it in." However, the process of intellectual learning really isn't all that heady. You don't need to be a rocket scientist or a Harvard MBA. What you do need is the desire to continually grow, supported by a few lifelong learning habits.

I can't address the desire factor – either you have it or you don't. However, four lifelong learning practices when developed into habits will keep you learning and will greatly increase your chances of continued success.

1. Openness. This is a willingness to view life and business with an open mind – being receptive to new ideas and arguments even when they don't feel right. Practice this habit by looking for both facts and feelings of others before deciding yours are right. Hold your fire and look for more information. Avoid generalizing and commit to being free of prejudice.

2. Risk Taking. This is a willingness to push yourself out of your comfort zone – taking action that you have not taken before and being willing to accept a certain degree of failure. Practice this habit by actively looking for opportunities to experiment with life and business challenges. Look for alternatives with bigger paybacks, and view failure as a learning experience.

3. Feedback. This is the willingness to solicit and listen to others' opinions and feedback. It involves understanding the perspective from which facts and feelings come as much as the facts and feelings themselves. It also requires aggressively getting information from others. Practice this habit by selecting several key associates or colleagues who you respect for their candor and regularly solicit their feedback on your important life and business issues. Ask them to be brutally truthful with their feedback and don't defend, just listen.

4. Self-assessment. This is the willingness to look objectively at both your successes and failures. Develop criteria and benchmarks for those issues and challenges you believe to be most important, so you can honestly assess your results. Some results are more difficult to measure than others, but without objective measures you really can't make any assessment. Practice this habit by deciding what's most important to you, setting short-term goals or milestones for achievement, developing realistic measures of that achievement, and reviewing results frequently. Be brutally honest with yourself.

Again, lifelong learning requires a desire to grow and a belief that growth will help you achieve success and fulfillment. The best way to support continued growth is to develop learning practices and, ultimately, habits that will serve you well for a lifetime.

Copyright 2006 Value Connection, All rights reserved.

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At Value Connection, our mission is to enable business chiefs to create and execute a meaningful value proposition for business and personal growth. The partners, Mark Akerley and Rand Golletz, each have more than twenty years experience leading businesses, from the inside and outside, to achieve outstanding results. Their resumes include the titles of CEO, Chief Marketing Officer (Fortune 100 company) and consultant to the senior executives and boards of many companies in a variety of industries. Value Connection maintains offices in Chicago, Illinois (lead by Mark Akerley) and Washington, D.C. (lead by Rand Golletz). For more information, please visit www.value-connection.com or e-mail us at rand@value-connection.com or mark@value-connection.com. To subscribe to our free monthly newsletter, The Brutal Truth, visit: www.value-connection.com/newsletters.php.

"Cashing In on Human Capital"
written by Value Connection

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