Many business leaders say all the right things about how much they value their employees. But they often fall short in their actual investment in human capital.
Even though human capital investments are one of a company’s largest expenses, these leaders would rather devote more regular attention to the balance sheet, capital investments and risk analysis.
That is a mistake.
There are substantial benefits from a strategic focus on human capital. Higher profitability is at the top of the list.
Numerous studies consistently show higher year-over-year returns for companies that are strategically focused on human capital. These organizations also have higher levels of employee satisfaction and engagement that parallel higher levels of customer satisfaction and loyalty. Given the staggering cost of finding, hiring and keeping employees, there are substantial payoffs if you perform as an industry leader in the human resources area.
Why is it so difficult to focus on human resources? It takes time and commitment. As with all major initiatives, it starts with a clear corporate strategy with board oversight. Senior executives need to assume accountability for outcomes and put clear dashboards in place to measure progress.
For example, leaders of many best-practice companies schedule two days of executive-level meetings quarterly to diligently review their best current and high-potential leaders and individual contributors.
Here are some other things that effective companies do.
- Work to ensure high engagement by involving current and potential leaders in critical work for the organization through regular feedback and through ongoing information flows from senior executives, among other important factors.
- Ensure effective processes in recruitment and selection, on-boarding, and alignment to culture, strategy and role.
- Build an effective performance management system in place with ongoing feedback loops to encourage best performance and optimal results.
- Create continual development opportunities for current employees and ensure future roles are readily available.
- Devote 2 to 3 percent of payroll to learning and development.
The most successful companies also strongly emphasize diversity and inclusion — not just in the traditional areas of focus but also diversity of skills and abilities. In addition, they offer training to ensure that employees at all levels effectively demonstrate inclusion by effectively listening, seeking feedback, giving feedback and managing conflict and differences of opinion.
Why don’t more leaders take full ownership and accountability? Why is human capital reporting not a standard part of executive committee agendas? Why is there a stigma associated with human resources-related functions?
Here is one indication that suggests there is, unfortunately, still a stigma attached to working with HR: In 2008, M.D. Breitfelder and D.W. Dowling — both MBA graduates — explained their career choice by writing a Harvard Business Review story called “Why Did We Ever Go Into HR?”
Human resources and human capital professionals contribute to the lack of understanding of the importance of HR by not speaking in terms of clear business outcomes. In addition, talent management professionals often don’t have a seat at the senior management table. Leaders would do well to involve HR executives at the highest levels and coach appropriately to ensure that HR and talent professionals speak in ways that resonate with the C-suite.
The stakes for human capital are likely to become even higher in the future. Leaders would do well to develop human capital skills and champion talent management overall.
Jay Colker is core faculty for the master’s in counseling and organizational psychology program at the Adler School of Professional Psychology. He also maintains a human capital consulting practice and may be reached at firstname.lastname@example.org or at (312) 213-3421.