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 / Winter 2010 / Issue 61(originally published by Booz & Company)


Best Business Books 2010: Human Capital

Groysberg’s work calls into question the concept of an elite workforce of free agents building individual portfolios of skills — a concept that took hold in the wake of Drucker’s observations about the primacy of human capital in a knowledge economy. Groysberg shows how “lateral demand poaching,” which is based on the assumption that performance is highly portable, is driving up compensation, and he suggests that companies rethink these beliefs given the highly speculative market for human capital that has developed. He also shows how these assumptions have made it more difficult for organizations and their leaders to undertake the hard work needed to skillfully integrate exceptional talent into a larger whole.

Finally, Groysberg makes the case that the cult of individualism that has long been operative in the West — an ideology that is only becoming more entrenched on Wall Street — has led us to misunderstand how talent gets translated into achievement. He posits that the growing influence of Asia’s more communal cultures will inevitably begin to change this, leading us to a more refined understanding of the factors that foster exceptional performance.

Talent Everywhere

Jody Heymann, in her meticulously detailed Profit at the Bottom of the Ladder: Creating Value by Investing in Your Workforce, also asks us to rethink how we perceive and define talent. She notes that in the past two decades, companies have tended to view employees as representing two highly contrasting camps.

In one camp are well educated, professional knowledge workers: the clevers, the high potentials, the stars. Companies tend to court this cohort, try to engage their deepest motivators, and pay them well to keep them performing. Most literature about talent focuses on these employees and, as Heymann points out, most of the firms that appear on “best companies to work for” lists tend to restrict their employee-friendly policies to those at the high end of the ladder.

In the other camp are “bottom-of-the-ladder” workers, who are widely assumed to be interchangeable in the old industrial mold. These employees — assembly-line workers, call center operators, retail clerks — are typically regarded as a cost that must be continually reduced if the organization is to achieve a competitive advantage. Even managers who don’t entirely buy this line of reasoning feel pressure to adopt it because analysts routinely upgrade their valuations of companies that cut costs on bottom-tier labor, which is simply not viewed as an asset.

Heymann makes the case that this rigid division between those who are assumed to add essential value and everyone else is itself a manifestation of an industrial mind-set, with its stark divisions between the heads and the hands. Whereas Clever and Chasing Stars ask companies to reexamine their often exaggerated presumptions about the stand-alone value of the heads, and place their value in a broader organizational context, Profit at the Bottom of the Ladder asks them to rethink their presumptions about the potential of the hands, and to develop new ways of understanding, measuring, and supporting the value they can provide.

Like Chasing Stars, Heymann’s book is the result of a wide-ranging multiyear study, though her population is the polar opposite of the high-performing analysts whom Groysberg examined. Heymann’s team researched the relationship between profitability in the marketplace and good working conditions for bottom-tier employees in small, midsized, and large firms in a mix of sectors around the world, some publicly traded and others privately held. She interviewed and observed workers employed by an Alabama brick manufacturer, a Norwegian roofing supplier, an Australian auto parts manufacturer, a South African scrap metal dealer, a Peruvian social services provider, and an Indian cement maker, among many others.

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