Human Capital Management:
It’s Both a Career and a Salary Issue

Human Capital Management

“I set as the goal the maximum capacity that people have. I settle for no less. I make myself a relentless architect of the possibilities of human beings.”

~ Benjamin Zander ~

Randy knows his company’s HR operation is in need of a makeover. The combination of the down economy, government regulations, new technologies and recruiting challenges has overwhelmed people with paper-pushing and record-keeping. Randy wants to shift the company’s focus from a “personnel department” where staff is giving attention to individual career salary for human capital management.

As company president, Randy assumes ultimate responsibility for all departmental outcomes. But he knows that his people will support what they help create, so he wants his managers to be involved in designing a new HR direction. After a two-hour brainstorming session, they come up with three action items:

  1. Adopt an asset focus
  2. Reward results
  3. Expect continuous improvement

1. Adopt an asset focus. A company that operates with a human capital management philosophy believes that its people are just as much an asset as its buildings, its inventory or its cash in the bank. The career salary for people needs to be equal to the value being provided.

“We can quantify peoples’ value,” Randy tells his staff. “And we can increase that value by making the right kind of investment in them. But how do we do that?”

Truly treating employees like assets involves a new and different mindset for many corporations. Often, especially in a down economy, people are viewed as liabilities. Both philosophically and in actual accounting, they are treated as costs, an overhead item that can be reduced or eliminated for short term gain.

Instead of the traditional belt-tightening when the going gets tough, now is the time to increase investment in our people,Randy decides. That means recruiting top talent with the same analysis and intensity the company would put into buying a new piece of equipment. It also means setting up a comprehensive people development program that includes management training, career coaching, and a comprehensive succession plan that provides upward mobility and salary increases for those who want a real future with the company. His focus is on human capital management in which career satisfaction and salary are priorities for employees.

2. Reward results. Overall compensation, including salary, benefits, and intangibles, is important, but it must be based on results. And the corporate culture should be set up so that the best rewards go to those who achieve the most impressive results. Along the way, of course, the company should also reward exceptional effort with praise and encouragement, even in cases where the goal or expected outcome didn’t happen. Each department manager will be responsible for evaluation and rewards, based on holding employees accountable for achieving specific business objectives, coming up with new ideas, and contributing to the company’s long-range plans.

3. Expect continuous improvement. Randy sees this strategy as a long term change, and long term means continuous improvement throughout the company.

The principle of continuous improvement originated with Dr. W. Edwards Deming, the management guru who helped the Japanese rebuild after World War II. Rather than making radical, high profile changes in company operations, Dr. Deming adopted the Japanese concept of kaizen, meaning “good change.” Kaizen says that each employee responsible for making small but consistent changes to his or her own operation. Over time, those small, incremental changes contribute directly to the company’s bottom line results.

Kaizen is based on five key principles: teamwork, personal discipline, improving morale, using quality circles, and making suggestions for improvement. Randy and his C-level managers base their human capital management strategy on implementing these principles. They provide monetary rewards, and they treat people as tangible assets by providing coaching and training that lead to career advancement opportunities.

The moral of the story, Randy says: “Invest in your people, just as you would any other tangible asset, and your ROI will go straight to the bottom line.”

If you would like to turn your people into tangible assets, Joel can show you how to do that. Contact him today.

Talkback: Are you seeing your people as assets or liabilities? Share your experience here.

Image courtesy of S.John / Fotolia.com

What’s It Worth to You?

Valuing Human Capital

“The biggest tragedy in America is not the waste of natural resources, though this is tragic. The biggest tragedy is the waste of human resources.”

~ Oliver Wendell Holmes ~

Patrick is facing a major challenge. As the HR director of a mid-sized manufacturing company, the recession has hit him hard. Attrition is high and hard to rein in. Management is pressuring him to make some major policy changes in the way the company manages and retains talent. But he doesn’t even know where to start.

According to estimates, the service sector is witnessing an attrition rate of 40 per cent, pharmaceuticals about 30-35 per cent and manufacturing more than 20 per cent.

Do you identify with Patrick’s dilemma? How is your company dealing with the recession? Are you compromising on talent? Do you have enough leaders to fuel future growth?

After some research into best practices being implemented by other companies, Patrick developed a three-point strategy to discuss with his CEO:

• Generate recruiting excitement
• Emphasize accountability and rewards
• Create a supportive workplace

1. Generate recruiting excitement. Attracting and retaining key talent takes creativity. In an economic downturn, too many companies are focused on putting out fires and struggling to stay afloat. Instead of buying into the struggle, Patrick focused his energy on rebranding the company’s image by revamping its attitude. He instituted company-wide “conversations” with both internal managers and outside advisors and coaches. He asked his C-level managers to commit to a policy of transparency, sharing openly about where the company stood and where it was headed. Soon people were talking about the company’s possibilities rather than its problems. They were telling their friends that the company was a great place to work.

2. Emphasize accountability and rewards. People need a reasonable level of autonomy and responsibility in order to feel challenged. And with autonomy comes accountability, which leads to rewards. Patrick knew that monetary rewards would be slim in the still-recovering economy so he asked a team of employees to come up with a list of non-monetary rewards. Their recommendations included more public recognition for ideas and accomplishments, as well as small incentives such as extra vacation days and gift certificates to local restaurants.

3. Create a supportive workplace. Patrick recommended that the company focus intensely on creating a work-life balance culture. After agreeing on core working hours, employees were encouraged to set their own schedules. He set aside space in the building for quiet rooms where employees could read, meditate, or even nap during breaks. He set up a cafeteria-style training and development program where employees could choose from a variety of online courses, off-site seminars, and in-house trainings. He set up a quarterly all-hands meeting that featured motivational speakers on a variety of topics.

A study published in CMA Management indicates a strong correlation between the valuing of human capital and creating shareholder value, both short and long term. Over a five-year period, the study showed total return to shareholders was nearly twice as much for high-valuing companies (103%) as for low-valuing companies (53%). What’s it worth to you? Lower turnover, higher productivity and results that show on the bottom line.

If you would like to discuss possibilities for valuing human capital in your company, contact Joel today for some suggestions.

Talkback: Have you tried shifting your company’s internal culture in a way that worked? Share your experiences here.

Image courtesy of Rudie / Fotolia.com