Chief Executive, August 31, 2017
Frank Cespedes, Jay Galeota, and Michael Wong
Korn Ferry recently estimated that, globally, human capital has a value about 2.3 times that of physical capital. This difference is likely to widen in increasingly service economies. Yet, most companies maintain their equipment better than their people. The issue is not good intentions. Executives repeatedly cite employees as critical for success; we rarely hear them mention picking a software package or supplier in the same way. But C-Suite attention and rigorous processes are typically in place for software and supplier selection, not for core people activities. At a minimum, you have three levers to manage human capital with the same rigor as other assets:
Business Reviews are crucial in setting priorities and focusing attention on what “really” counts. Without explicit attention to the skills and behaviors required in a changing market, development of people is hit-or-miss or treated as an abstract set of “competencies.”
By contrast, when one of the authors led Merck’s Hospital and Specialty Care area, human resource reviews were integrated into business operating reviews, with the same amount of time allocated to both, and a few things happened. Employees understood the value that leadership placed on them. Conversely, when either a business or employee was struggling, a number of turnarounds took place, but if results did not materialize, tough decisions were more clearly made about divesting businesses or changing key people. Perhaps most importantly, an artificial separation between “the people” and “the business” was mended. Leaders were questioned about their business lines and talent, and expected to apply disciplined approaches for both inputs to performance.
Talent Profile Tools The availability of assessment tools based on predictive analytics is increasing, while their price is decreasing. It’s important to understand the role and limits of these tools. They can aid judgments about talent but, ultimately, you are paid to execute your company’s strategy, not the skills in a generic assessment tool. But these tools can provide a common language and evidence-based dialogue among executives about talent.
One company uses an assessment quarterly to analyze staffing, succession planning, and development plans. The tool is a means for gathering feedback and skills ratings that rest on more than an individual manager’s judgment. Further, the process itself makes senior executives more aware of the activities required to establish true “high potentials,” rather than simply the top 20% of available talent. The resulting gap analysis is often the most important part.
Involvement in Training & Development Research indicates that the greatest impact from training often has more to do with who is in training sessions: involvement and follow-up actions by senior executives to ensure that people apply and practice the relevant skills and behaviors.
Senior and mid-level employees participate in Boeing Institute leadership training taught by Boeing executives at least twice per year. Consider the value of this approach. Informal peer pressure motivates each “professor” to prepare, and those executives are regularly re-grounded in the current realities of the business with a cross-functional group of employees. Conversely, the participants hear and learn from those who are or will be their supervisors—a bigger motivator in adult learning than grades or certificates–and they are socialized to “pass it on” and be Institute teachers as their careers advance. This combination encourages task-relevant dialogue, often with specific action implications for a business, function, or project.
Senior executives establish the foundational conditions for talent development by using business processes to manage human capital as rigorously as other assets. Strong leaders allocate their scarcest resources–time and attention—to this process.
Frank Cespedes teaches at Harvard Business School and is the author most recently of Aligning Strategy and Sales (Harvard Business Review Press).
Jay Galeota is President of G&W Laboratories, Inc. and is the former Chief Strategy & Business Development Officer at Merck and Co., Inc. and President of Merck’s Emerging Businesses Unit.
Michael Wong is an Associate Partner with IBM’s Global Enterprise Transformation consulting practice.
 K. Anders Ericsson, “The Influence of Experience and Deliberate Practice on the Development of Superior Expert Performance,” in Cambridge Handbook of Expertise and Expert Performance (Cambridge University Press, 2006); and “Unlocking the DNA of the Adaptable Workforce,” Global Human Capital Study (Somers, N.Y.: IBM, 2008).