Investing in Human Capital

Having discussed the potential upside of a greater focus on the returns we can expect from our people, it seems worthwhile to look at how we should be investing in human capital.  We can look at this from several perspectives.  I will touch briefly on three of these. Today, I will start with systemic investment and will follow in the coming days with professional development and recognition and reward.

Human Capital needs a structured and rigorous system to support it. Just as we need accounting systems for finance, so we need to manage human capital effectively.  It is natural for Human Resources to deliver the essentials: compliance, policies and procedures and job descriptions.  The latter are generally used in recruitment, combine some activities, required skills and attributes and describe the type of person required for a role.

The Sky is the Limit for Well Managed People

I prefer to see position decsriptions as part of a performance system.  They need to focus on responsibilities and not tasks, detail authority levels, outline how performance can be measured and be supported by behavioural competencies.  KPI’s or performance objectives can then be derived from the responsibilities to give focus to this trading period’s company goals. 

All of this seems so logical, yet I see so many companies that are deficient in these areas.  Line managers do not do the work (and it is they, not HR that is responsible for the output of people), KPI’s are often not aligned with corporate goals (“they seemed like a good idea at the time”) and no one can keep track of just where we are anyway.  Add to that a genuine need to make sure an incumbent is capable within the role, that they are living company values and exhibiting the right core competencies and it all gets too hard for line managers and HR alike.

HR and performance management is one of the few detailed disciplines in business that is severely under represented in software systems.  We can implement CRM systems to manage relationships, sometimes with tens of thousands of contacts, but we can’t manage the output of a few hundred staff.  The reality is that online software systems are in abundance. Balanced scorecards for people, talent plans, development plans, flight risk, engagement and alignment are just a handful of the valuable people management issues that can be managed effectively in software.  Some of these, such as the favourite at my company 1st Executive,  Peoplestreme (www.peoplestreme.com.au) also have strong foundations in academic work.  The balanced scorecard approach favoured by Becker, Huselid and Beatty in their book The Balanced Workforce Scorecard (Harvard Business School Press 2005) is well represented by Peoplestreme in very practical ways and line managers can not only stay on top of people issues, but how well they are doing this is transparent to their own manager.

If you are a business leader (C-Level, General Manager etc) reading this, you may need to monitor carefully the response of your HR team to any initiative you take in this space. It will tell you clearly wheter they are a strategic partner or change agent versus merely a technical adviser or employee advocate – neither of which create much new value.