Human Capital, aka People, Investment

by Dr. Donald N. Sweet

Human Capital investment is stressed in an HBR article this March by Thomas Kochan.  As you know, human capital is “multinational speak” for employees, fellow workers, teammates and friends.  Therein lies one of our smaller privately held companies’ advantages: we see human capital as people.  People with families, likes, dislikes, strengths and opportunities for growth.  Just like us.

With the right management systems in place, privately held companies can be much more personal in selecting and developing their people.  The right management system is key.  To be clear, we’re not talking about an information system, but a management system.

This is a system the owner and/or CEO puts in place and works to improve broader outcomes.  It’s needs to be a management system that helps identify core values, instilling them in the organizational DNA.  It’s a system that helps to hire, promote and, when necessary, release people according to those fundamental values.

Examples of core values include: Customers First, Do the Right Thing, Can Do Attitude, Fanatical Support, Continuous Improvement, The Glass Half Full, etc.  You get the point.  Core values are what an organization feels are truly important, above all else.  As individuals we all have our own core values.  A good match between employees and the organizational values is essential.

To effectively attract, nurture and retain the right people, organizations must articulate their values.  They must purposely reinforce those values continuously.  This is the essence of developing a meaningful and solid organizational culture.

For privately held businesses any management worth its salt should put heavy emphasis on people.  The Gazelles management system points to the four major decisions any private company needs to address.  They are people, strategy, execution and cash.  While many maintain all four are important, at the end of the day it is people that make it all happen.   People, not human capital.