The asset that creates all the others

By Ann Francke, Chief Executive, Chartered Management Institute

Many CEOs will tell you that their people are their organisation’s biggest asset. It’s true. But what’s less often acknowledged is that they’re the asset that creates all the others. If a business has cutting-edge technology, valuable intellectual property, or an efficient factory, it is only as a result of astute decisions on human capital.

Ultimately, all business and economic value is created by people. But for too long, the case for measuring human capital has been limited and defensive. It’s framed in the following, rather misleading way:

  • Do we really need supplementary measures for capturing people-related dynamics?

A more telling way to frame the issue is:

  •  A key way to understand the organsation’s ability to create value is to have reliable indicators on how the deployment of people contributes. How do we best build that?

Research, by the Chartered Management Institute and by others, shows that employers that invest in development of management and teams are far more likely to be successful, and that it is possible to analyse and understand the most effective approaches for a given context.

We could be on the brink of an historic change. Recent research by The Conference Board and its UK partner the CMI showed that human capital was the top concern cited by leaders of more than 1,000 international businesses. Mercer in the USA reports an ‘exponential’ growth of companies adopting workforce analytics, in an article published earlier this year. Larger companies use advanced analysis of Big Data, while a smaller organisation might use indicators around employee engagement.

We are delighted at the CMI to be part of the coalition of organisations involved in the Valuing your Talent. Its focus on a practical framework, suitable for use in large and small businesses alike, is ambitious, but that’s why we’ve asked CMI members to feed into the Valuing Your Talent Challenge: we need practical insights now to make sure the end result really delivers the goods.

Key to the challenge is reframing: seeing the business more clearly as consisting of human capital and the other assets that human capital creates. Firms are continually hiring, promoting, losing and firing people, or reshaping the teams and departments they work in. These are economic decisions. What the applied science of human capital measurement does is to bring some consistent feedback and rigour into this decision-making. So it becomes less a case of ‘gut feel’ and more a case of: ‘If we hire and develop teams in this way, we know we are more likely to be successful – and we can demonstrate the results.’

It can lead to counter-intuitive results: sometimes a wage rise reduces operating costs, because of higher engagement and lower staff turnover. Reliable metrics help inform these decisions.

It is true that human capital measurement has at times lacked consistency and rigour, but this doesn’t cause the economic impact of human capital decisions to disappear. The question of how companies can build their human capital isn’t going away. We’re confident that Valuing Your Talent will provide some practical answers. 

Thank you for your comments. There may be a short delay in this going live on the blog page as we moderate the comments added to our blogs.

  • I can relate to Dave's comments. engagement drivers differ with individuals, however, with regular assessments (surveys) you can identify the common problems or varying drivers and as such propose or implement solutions to possibly reduce turnover...In my opinion