BACKGROUND
What is Human Capital and why is it so important to your organization?
For us as individuals, human capital is the combined experience, knowledge, competencies, motivation, and skills that make up the whole person. Maximizing our own human capital is an end in itself because it provides us with fulfillment and satisfaction.
As employers, our Human Capital is the collective value of the human capital possessed by the people involved with your company. This Human Capital is your constantly renewable source of creativity and innovation. It is the source of your organization’s ability to adapt, improve, and grow. The value of Human Capital is often underestimated in both business and non-profits in part because it is not reflected in any financial statements. Unlike other kinds of capital, human capital is always possessed by the individual, and it can ‘walk out the door’ unless it is incorporated into the organization’s procedures and structure.
What’s wrong with the traditional “Human Resources” approach?
Let’s start with a common phrase heard frequently among employers who strive to be seen as forward thinking: “People are our most important asset.”
That’s a nice sentiment but it’s misguided. “Assets” are things we own. Accountants see assets as items on the balance sheet. The people who work for you are not your assets. Each of us possesses our own unique Human Capital. When people come to work for you they do it because they expect to get something out of the relationship too. When they go home at night they leave you with only the hope that they’ll come back the next day. And they only come back if they deem the exchange of benefits to be fair, equitable, and appropriate. Without them you have nothing.
Another part of the problem is that Human Resources is comprised of two discrete functions that require two distinct and mutually exclusive ways of looking at the world. Here’s what I mean:
All organizations exist to get something done – you make something or you provide a service. And, when that organization does this work on a scale that requires one or more employees, a whole lot of systems and transactional processes are needed – payroll, benefits, recordkeeping – and all of a sudden the organization’s leaders need to devote attention to managing these systems.
These transactional systems are the first part of Human Resources. It’s vitally important that you get these right but they distract you from the real reason you’re in business. The problem is that people who are really good at handling transactional issues are rarely eve
r really good at guiding your Human Capital through the minefield of day-to-day life at work.
The second part is where the fun – and the challenge – lies. Along with the skills and abilities you hired them for, your employees are quirky mixes of experiences, insights, moods, baggage, desires, problems… you name it. This messy, wonderful mosaic of humanity is all part of “Human Capital” – the combined everything that people bring with them to work every day. And you have to find ways to help these dynamos work effectively so that you can make the best damn widgets you possibly can. Or save the world.
And that leads us to:
The First Third Solution:
- Move your transactional HR needs to Accounting or outsource them
- Optimize the strategic value and productivity of your Human Capital by using First Third’s Human Capital consulting on a cost effective “as needed” basis.
