Human Capital Is A New Business Science*
By the Human Capital Institute (HCI) who can be contacted at www.humancapitalinstitute.org
In a military organization, line officers design and execute battle strategies, while staff officers plan and procure. Line officers are trained to think strategically and act decisively, intuitively assessing risk as they go. Staff officers are trained to build a process, keep costs down, limit risk and make sure things are done by the book.
Which are you? Most HR professionals are staff officers. That means you've learned to hire (or fire) as many people as necessary, quickly and inexpensively, in a standard manner that minimizes the risk of lawsuits. Chances are you can evaluate pension and 401k plans, reduce health benefits, counsel underperforming employees, develop training and a execute a host of important administrative operations. In short, you can keep the train on the rails and running, while your line officers build products and win the war.
But today's business battlefield is changing rapidly. The traditional advantages of scale, location, facilities, IT infrastructure, and access to capital are eroding as the international playing field is leveled by new technologies and networks. New strategic advantages are emerging, and the human attributes of intellectual curiosity, flexibility, creativity and action are becoming the new competitive levers of the knowledge age.
The markets understand this shift. In fact, $8 out of every $10 of corporate market value is allocated to intangible property today. CEOs understand, too. Every major business book written by a celebrity CEO in the past decade, from Lou Gerstner (IBM and RJR Nabisco), to Larry Bossidy (Unisys and Allied Signal), to Jack Welch (General Electric), emphasize that talent is the single most important indicator of business success.
That means there is no more critical, strategically vital role in business today, than acquiring, aligning, developing and measuring talent. In most organizations, HR is being offered the chance to step up and address these challenging new demands. But can staff officers win the war?
The answer is no. If talent is the key to corporate success, the companies who focus their most creative, decisive, risk-taking line executives on it will win. Everyone knows that recruiting is a marketing and sales activity. Yet in 90% of organizations it reports into an administrative HR cost center. The first organizations to attack recruiting with the same focus their sales force applies to their product market will simply sweep away the best candidates.
Companies who leave recruiting and developing their workforce to administrative HR specialists will be at a disadvantage to those who create a specialty talent acquisition and development organization. This focus on finding the best people, honing their talents, tying their performance to the bottom line, and proving their contribution to market value, should be a strategic line activity.
Increasingly, HR is being outsourced and taken offshore, because one company's 401k plan is no more strategically important than another's. As a result, HR professionals with purely administrative and soft skills are increasingly at risk.
This crisis for many practitioners is a welcome opportunity for others. HR professionals have an opportunity to move front and center to the strategic table and contribute on the front lines. But to do so requires an entirely new skillset. Great organizations can no longer afford to delegate talent acquisition and development to administratively-skilled HR departments. Acquiring the best and brightest people, and unleashing their creativity are not "by the book" processes. They are risk-based decisions that require mature business judgement, sound financial skills and decisive action.
In short, human capital management is not an extension of the traditional HR function. It is a new, business-driven mission to build a stronger, more competitive workforce, using innovative strategies for the knowledge economy. Though traditional HR organizations are contributing to the field, HCI has adopted a leadership role in helping HR professionals gain new strategic line and talent management skills.
* Reprinted by permission of the Human Capital Institute (HCI)
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- Linking human capital management to business value – a worldwide view