Human Capital Management

As business owners, we ALL worry about having enough capital to run our businesses. Most of us immediately think of financial capital. Without cash, we are out of business. However, I suggest that the most important capital we contend with is the human capital of business!

Why “Human Capital”? 
It is clearly the most complicated component is talent acquisition and talent management. In fact, once our companies grow and we solve the cash situation, the people factor remains. Furthermore, it’s the human capital part of our businesses which interacts with our customers on a daily basis. What is more important than that?!
.
Jim Collins in his book “Good To Great” stated companies having the best culture and most engaged employees have the highest market value.  These two factors almost always result in higher profits and fewer headaches in running our businesses.

I have always believed the following when it comes to running companies:

If I want HIGHER SALES and PROFITS, what will differentiate my company from my competitors will be:

• UNFORGETTABLE CUSTOMER SERVICE: the type that customers talk about and benchmark their other vendors against!

o This type of service is delivered by…ENGAGED EMPLOYEES who deliver SUPERIOR JOB PERFORMANCE.   

o Remember that how you treat employees is how they will treat your customers. It is a simple rule that works.  

o Therefore, you need to make sure employees FIT THE JOB and the CULTURE of your company.  Most of us do not spend enough time in this area.   This should happen during the hiring cycle.

Next week, I’m going to talk to you about the hiring cycle and what is involved in human resource planning so………..stay tuned!

I was presenting to a room of CFOs this morning about Human Capital issues, and found them to be scared of the future.  By nature, CFOs are risk managers, and they were dealing with the high risk issues of the market shakeup.  They were trying to make order from the chaos. 

In addition to the craziness of the capital markets and the realization that the "old rules" for doing business were falling away, they were asking me questions that indicated that they were looking for the "new rules" of how to handle the people side of the current crisis.  In this forum, I will be sharing some of these new rules that I am picking up from the front.  Feel free to share your comments for others to learn from...sharing is good.

One quick new rule is to be more carful about the screening you do for new hires - with strange economic times, applicants are driven to do and say WHATEVER it takes to get inside a safe harbor in a storm.

What new rules do you see in human resources?

On the theme of strange times, continued from the last post...

Then, there are the people you already have...

You may have noticed some disquieting trends in your organization at the end of summer of 2008 – absentee numbers that are higher that you prefer, low productivity numbers, the occasional loss of key employees, and the difficulty of hiring good people.  They are all connected – and most businesses are feeling the same pinch.

Don’t get caught in the trap of focusing just on hiring new employees and bailing out the leaking ship.  You have probably noticed that your top performers – the 16% that are stars – produce 80% of the bottom line results.  The remaining 20% of good results come from the 68% of employees that are average performers.

Do the math – that’s 100%.  Let’s also agree that about 16% of employees hide under rocks, hoping that you won’t notice that they haven’t produced anything useful, ever.  Continue to ignore them for a moment - today, we’re talking about the high performers.

My point is simple - retaining all employees at any cost should no longer be your goal.  Focus your retention effort on those few people that are producing 80% of your results.  Do whatever you can do to keep your best on board.  I am not recommending that you ignore the rest – just focus your efforts in the short term on a very important part of your staff. 

I'll wager that if you were to shadow a manager for a day, most of their time would be spent on the lower performing people, leaving the high performers to self-manage.  Not a good strategy...the high performers feel under-loved and will, over time, either become average performers or, worse yet, leave.

Even if you have a good human resource management system, practice good lean hr, and read all of the talent management books you can find, you will still be at risk for the departure of your high performers. 

Action point - sit down with your supervisors and make the above point with them...and get them to spend more of their time with the ones they want to keep.

So, there we were.  A room of senior human resources people and recruiters, all discussing the issues of metrics, assessment, job fit, human capital measurement, and measuring performance.  In short, most of the important issues facing staffing today.  We were all having fun, and it seemed everyone in the room agreed on the main points of the discussion.

 

Then, there was a magical moment about halfway through where everything stopped and the world suddenly became more complex .  Objective feedback appeared that we were not expecting.

 

It had begun simply enough, with a discussion of how assessment tools might be applied to measure job fit, leading to the secondary ability of measuring engagement.  Fine so far.  We had all agreed that leading edge indicators were superior to trailing edge indicators, and the challenge was figuring out leading edge indicators that made sense.  My point was that most people in the room were measuring turnover, a trailing indicator because the individuals that are a part of it had already left the organization when they were measured.  On the surface, employee engagement seemed to be a better metric because it was a measurement of people who were still a part of the organization, and therefore a leading edge metric. 

 

I asked for further input, and got it.  A woman leaning against the back corner quietly asked “Isn’t it true that high performing people would challenge the system more than mediocre people, and therefore high performing people would score worse on engagement metrics?”  Well.  Interesting.  Most people in the room leaned back from their note taking, thoughtfully started chewing on their pens, and nodded in agreement.  The discussion immediately took an unexpected turn, and several audience members have volunteered to give me more data on the subject.

 

To me, the most important point was not that high performers may score differently on engagement assessments.  The most important point is that we must always keep feedback loops in place, to make sure that what we think we’re measuring is actually reflected in real life. 

 

It is human nature to see the world through the filter of what we already know.  For our work in measuring human capital and applying modern assessment tools to human resources, we must always remember to keep objective the backboards in place to keep us on target. 

 

Simply put, I hope this blog can be a part of your personal feedback loop and keep you on target. I look forward to the challenge.