Many organizations do make some attempt to find out about the condition of their human capital. They conduct attitude surveys, they measure turnover, they track the number of job offers accepted, and so on. But very few produce a regularly updated scorecard of human capital metrics, especially one tied to financial performance. The result: incomplete strategic planning, inadequate succession planning, and poor use of people.
Lingering behind the Curve
In all three areas we have considered — corporate boards, HR functions, and information and measurement systems — there are enormous gaps between the way organizations are managed and the way they should be managed and designed if human capital truly is their most important asset. The obvious question is, Why do these gaps exist? Is it because executives don’t really believe what they say when it comes to the importance of human capital? Is it because they don’t know how to design an organization in which human capital is paramount? Are they trapped by the past practices of their organization? Are they personally threatened by change? The answer is undoubtedly some combination of all these factors.
In the end, the reason is less important than the consequences. When senior executives resist designing and managing organizations in ways that treat human capital as their organization’s most important asset, there are multiple negative effects. People feel exploited and undervalued. The best people migrate elsewhere; the midlevel people never get the development that allows them to make a real contribution; and the worst people linger, dragging the whole organization down.
It may take the emergence of a whole new generation of managers before most organizations walk the talk when it comes to talent. Perhaps there is a harbinger of what is to come in the cases of W.L. Gore & Associates, SAS, Whole Foods, and Starbucks. Why are these companies ahead of the curve? One common factor is suggestive: All four have a founding CEO who not only says that people are the company’s most important asset — but personally acts as though it’s true.
Reprint No. 08204
Edward E. Lawler III is the director of the Center for Effective Organizations and a distinguished professor of business at the University of Southern California’s Marshall School of Business. He is the author of Talent: Making People Your Competitive Advantage (Jossey-Bass, 2008) and, with Christopher Worley, Built to Change: How to Achieve Sustained Organizational Effectiveness (Jossey-Bass, 2006).