If you think the title refers to money, think again! Companies spend millions / billions of dollars a year on managing their balance sheet as if money was their scarcest resource. In a recent HBR article “What if Companies Managed People as Carefully as They Manage Money?” the author notes that financial capital “is relatively abundant and cheap and the global supply of capital stands at nearly 10 times global GDP. Financial capital is abundant but carefully managed; human capital is scarce but NOT carefully managed?
Some might say that human capital is not scarce – there are plenty of people out there ready and willing to work. But, if scarcity is measured by time, talent and energy then you begin to see a different picture. Time is finite as there are only so many hours in a day. Talent, defined as people who make a difference for the company, represents only about 15% of employees. Energy, as measured by the number of employees that are “inspired” at work, is about one out of eight employees (according to research). Energy is important because inspired employees are said to be three times more productive than dissatisfied employees. Why is it that so much more attention is paid to financial capital than to human capital? “In part, it’s because we value and reward good management of financial capital. And we measure it. Great CEOs are held in high regard for their clever management and allocation of financial capital.” Unfortunately, we cannot say the same for human capital.
Talent management is a passion of mine and what I read in this article was not at all a surprise. We have been hearing about the “war on talent” for years especially for strong Sourcing / Supply Chain professionals yet talent management is not necessarily one of the top 5 objectives for the CPO. In addition, as we are working with clients on Sourcing professional services (IT, engineering, finance, etc.) and determining whether certain skills should be maintained in-house or outsourced (perform vs. buy) the talent conversation deteriorates further. Their Business Unit partners claim that certain skills are a “competitive advantage”, yet they have no strategic workforce plan in place. This is becoming an even greater concern as Baby Boomers are retiring and our proposed immigration policy changes may limit access to highly skilled professional resources.
What needs to change? The HBR article offers a few suggestions but I’ve added my own spin:
Measure It – Let’s stop measuring the number of FTE (up or down) and start measuring the contribution those resources make. We try to manage FTE and then end up hiring outside resources that can provide temporary help (at a MUCH higher cost) but do not add to the accumulated knowledge of the organization. There are a few measurement options offered in the article but one measurement of success is the ability to attract and retain those difference-making resources that are hard to come by.
“Invest” in Human Capital – Let’s start treating our people like assets (much like financial investments). What can we do to increase the competency, effectiveness and productivity of our people? If we provide visible investments such as training, tools, technology, competitive salaries / benefits, interesting work, growth opportunities, etc. that would go a long way to attracting and retaining top talent.
Monitor It – Understand why talent is joining your company OR more importantly leaving. We may think that we offer a great place to work but if that is not what others feel then we will continue to fight the battle.
Recognize & reward good management of human capital – This is so critical. Look for great people managers, mine what they are doing right and reward them. On the flip side, identify those poor people managers and get them out of the way. It is so costly to keep recruiting new employees as opposed to taking care of your best people along the way
This blog is meant to be a reminder that in our profession people are our most critical asset and we need to treat them as such. Good people are harder to find and retain these days than financial capital so let’s keep that in mind as we are defining our objectives and priorities.
Let us know what you think and join in the conversation . . . . . .