ThyssenKrupp AG, the major German industrial and steel company, has launched a multiyear advertising campaign, in large part to promote itself as a top employer. The Wachovia Corporation focuses training for its human resources staff on understanding the business and its strategic challenges. Royal Dutch Shell PLC uses its competence in learning and development to attract government partners, who are concerned with building the capabilities of their citizens as well as gaining access to oil and gas. These organizations are taking a creative approach to people management.
Indeed, a growing number of companies around the world are investing in innovative human capital strategies and tactics. The companies are diverse in both industry and heritage: Some are long-established companies in traditional industries, like Swiss pharmaceutical giant Novartis AG, with its 250-year history; others are relative newcomers, riding the whitewater of recent technological revolutions, like the Indian information technology services provider Satyam Computer Services Ltd.
But their industry or heritage aside, these companies confront the same realities: shifting geographic borders and the rapid flows of global capital and technology. In responding to such challenges, these companies have all recognized the compelling need to pay attention to the value of human capital. They are devoting unprecedented resources and, more important, the attention of their leaders, to redesigning their workforce-related practices. In this way, they are developing their human capital as a critical source of competitive advantage.
Some of the most pressing global challenges facing business today are directly related to human capital issues. First are demographic trends. In mature economies, the overall aging of the population has led to a brain drain of critical skills and institutional knowledge in the workplace. Too many people are retiring and too few skilled people are available to replace them, especially in critical sectors like energy and health care. Further complexities stem from the willingness of people to migrate to regions where economic growth creates demand for expert labor — places that currently include centers of oil production, such as parts of the Middle East; booming emerging economies; and some industrially active areas of Europe and North America. Companies whose facilities are located at the origin points of migration will have to cope with talent shortages; companies that attract workers will have to cope with a greater degree of ethnic and gender diversity than they have known in the past.
Skills deficits represent another pervasive challenge. In many nations, education systems aren’t properly preparing young people for work, and employers must pick up the slack. In 2003, according to Newsweek, employers in the United States spent US$1.3 billion to teach basic writing skills. Employers elsewhere report similar problems. C.K. Prahalad, a University of Michigan professor who has written extensively about innovation in emerging markets, notes that realizing the immense aspirations of the new global entrepreneurs of Asia, Africa, and Latin America will require an equally immense acceleration of skill development. “How do you take farm boys and create Six Sigma quality in four years?” he asks.
Finally, the changing needs and expectations of today’s workforce are challenging traditional practices. Organizations need flexibility, but employees have their own needs. Some are reluctant to travel, others want flexible or part-time work, and still others want a global career. The real story in HR is not that of a monolithic shift in employee expectations, or even of a generational shift, but of variation in individual expectations.
The Portfolio Approach
Different companies are tackling these challenges in a variety of innovative ways. That was the underlying theme in a series of in-depth interviews that we and our colleagues conducted recently with distinguished business and HR executives and academic experts in the United States, Europe, the Middle East, and Asia. The interviews were published in August 2008 in Capturing the People Advantage: Thought Leaders on Human Capital (strategy+business Books). We asked the participants for their perspectives on the trends in human capital and for their view of their companies’ most effective people-related strategies. We asked them what works in the real world, not just in theory. Their answers show how a people-related strategy can be a key differentiator in business success.