Human Capital and Corporate Strategy

Ray Rivera

“So why should this organization invest in human capital?”

human capitalOver the past two decades, HR executives and corporate strategists have been engaging more deeply. Yet when the conversation reaches the point where corporate strategy asks HR this question so bluntly, it usually indicates the beginning of the end.

Nevertheless, HR leaders respond earnestly by asserting that human capital investment is fundamental to a high-performing workplace, or is a best practice, or all industry leaders are doing it, or simply that it is the right thing to do.

Each of these assertions is usually illustrated by a unique set of measures and anecdotes. But to a corporate strategist, neither inventive HR metrics nor colorful storytelling provides sufficient justification for investing in human capital.

Both HR and corporate strategy have the same goal in mind: achieving competitive advantage. But despite their agreement on what the end is, the two regularly talk past one another regarding means. While HR is preoccupied with the right peopleright placeright timeright role, and right training, corporate strategy is much more concerned with what industrywhat product mixwhat segment, and above all, what value the company is delivering to customers.

All the “right” things HR strives to achieve, and all the “whats” corporate strategy tries to answer are not necessarily incompatible. It is hard to imagine many profitable companies denying that the knowledge, skills, and talent of its employees represent one of the few remaining sources of competitive advantage. However, even the most thorough of organizations can easily trip up on the details of how HR contributes to competitive advantage, and have trouble determining how to measure HR’s contribution.

Interestingly, much of the difficulty arises because there are actually several different ways human capital can drive competitive advantage. Is it a result of the people you have, what they do, or how their workplace is organized? To make matters even trickier, corporate strategy usually can address only one of those questions at a time. And that choice is often influenced by the company’s ability to measure and control inputs and outputs, and at the appropriate levels within the organization.

HR tries to chip in by devising its own metrics that resemble corporate financial strategy metrics as much as possible. But that is going about things backwards. A better task for HR is to evaluate the different views of how human capital achieves competitive advantage, and enable the company’s data to do the talking rather than HR talking up the data.

You’ve got to have the goods: The resource-based view

The most widely accepted view of competitive advantage treats an organization’s resources as the primary source of differentiation. Resources can be tangible (e.g., gas fields, precision machinery), intangible (patents, information), or human (talent, unique skill sets).

In this view, human capital is treated as an accumulative resource that benefits the organization like any other business asset, providing competitive advantage through a transformation of the unique capabilities of individual employees to superior organizational performance.

It is understandably common to hear objections to the term resource, such as, “we are human beings, not resources!” Those raising apprehensions can be reassured that HR and corporate strategy tend to use the term resource in a neutral way, with no implication that people ought to be mechanized. Resource simply denotes something that is measurable. Of course not all human performance activity is measurable, and HR is often limited by shabby data. But conscientious analytics and good manager judgment together go a long way in capturing value-driving behaviors in HR metrics, which in turn puts the humanity in human capital.

An advantage of the resource-based view is its clear analytical framework, where human capital is understood as having four important characteristics: it is valuablescarcenot easily imitated, and lacks substitutability. Valuable indicates that companies must be willing to pay, sometimes a premium, for continued access to the resource. Scarce does not necessarily denote a dearth of a resource, as if often conceived when considering talent, but rather that there is not enough of the resource to satisfy every organization’s demand. Not easily imitated creates high barriers to entry for competitors. Lacks substitutability means that if a resource increases in price or suddenly becomes unavailable, a substitute of nearly equal price will not be available.

For example, many valuable employees are impossible to replace, and lost knowledge and capabilities cannot be acquired from the labor market. Strategic human capital management seeks to enhance all four characteristics, in addition to clarifying precisely what talent inventory is needed to execute short-term strategy.

In the resource-based view, the two most important features of organizations are specificity of goals, and formalized structures to conduct the flow of performance activity. Therefore, resources tend to be managed at the executive level, often through a sophisticated hierarchy and a well-developed information system. The role of HR is to partner with other business functions to acquire, develop, and source human capital optimally.

Individual performance data and job competency modeling provide much of the data used for analytics using this view, along with HR efficiency metrics. However, it is not necessary or sometimes even feasible to know how HR inputs are transformed into business outputs. Yet it is necessary to know either the HR inputs that are likely most effective, or how to measure or control business outputs.

Success is as success does: The behavioral view

Rugby-300x201 (1)According to the behavioral view, accumulating a lot of high quality human capital is necessary, but not sufficient. To achieve competitive advantage, human capital must perform in a desired manner. Therefore, human behavior is the mediator between business strategy and outcomes. Moreover, successful execution according to the behavioral view depends on repeated observance of desired behaviors and attitudes in the workplace, which relate closely to sustained levels of performance. The role of HR is to direct and assure desired behaviors, so as to maximize the alignment between strategy and business performance, and to assure consistency across work practices.

As with the term resource, HR and corporate strategy also treat behavior in a neutral sense, denoting a measureable set of actions that can enable business outcomes, not something that is to be manipulated through fear or chicanery. The behavioral view assumes that employees usually know what they need to do to perform well, and HR should remove any barriers to people doing so.

Behaviors are typically managed at the unit or subunit level, by division or department managers. A strategic HR function both supplies new information to employees and creates a rubric for managers to reinforce desired behaviors, while simultaneously evaluating the effectiveness of training in achieving such behaviors. In this view it is necessary to know, or to have a solid theory of how HR inputs are transformed into business outcomes, and to be able to provide control, training, and monitoring.

Data that is often used includes evaluations of employee personal characteristics such as level of risk taking, leadership aptitude, conscientiousness, orientation toward quality, engagement, and attitudes toward coworkers.

Good things come in bundles: The configurational view

The last of these three views states that even the right talent doing the right things is not enough to produce competitive advantage. Behaviors require coordination with other organizational resources in order to be effective, by means of configurations of performance improvement initiatives. Yet regardless of strategic objectives, there are optimal configurations whose components are interdependent, including HR practices. In plain terms, the configurational view acknowledges that if you put good people against a bad system, the system always wins. Behaviors are not optimized so much as functions and processes, which if not managed correctly can negate even the best performance behavior from the best human capital.

Bridges-300x205Consequently, the configurational view seeks to assemble a set of strategic HR practices, or a profile, that drives a single performance outcome, rather than attempting to influence behaviors thought to exert maximum impact on business results, as prescribed by the behavioral view. Such a profile is sometimes referred to as an HR bundle.

The HR function thus drives business results as part of an overall program of superior organization design and development, where HR is complementary to other business functions. In this view it is necessary to know, or to have a reasonably solid theory about how HR inputs are transformed into business outcomes. But it is not necessary to be able to provide control, training, or monitoring. The metrics used vary more than in the other two views, but throughput and feedback metrics tend to be used along with organizational performance. Individual-level metrics are not common.

Put your strategy where your people are

Competitive advantage is not what it used to be. As data becomes an equalizer, global supply chains become more accessible, and consumer goods quickly become commodities, the only way most companies can outperform their competition is to be smarter about creating new markets. Doing so requires a better message along with better products, faster market responses and earlier customer engagement, greater talent and more room for it to perform. The challenge of forming human capital strategy is there are several ways to proceed, some better than others. Yet, if people are truly your most valuable investments, then they belong at the core of your strategy, and deserve the best analytics you’ve got.

This story originally appeared in SAP Business Trends.


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13 Scary Statistics On Employee Engagement [INFOGRAPHIC]

Jacob Shriar

There is a serious problem with the way we work.

Most employees are disengaged and not passionate about the work they do. This is costing companies a ton of money in lost productivity, absenteeism, and turnover. It’s also harmful to employees, because they’re more stressed out than ever.

The thing that bothers me the most about it, is that it’s all so easy to fix. I can’t figure out why managers aren’t more proactive about this. Besides the human element of caring for our employees, it’s costing them money, so they should care more about fixing it. Something as simple as saying thank you to your employees can have a huge effect on their engagement, not to mention it’s good for your level of happiness.

The infographic that we put together has some pretty shocking statistics in it, but there are a few common themes. Employees feel overworked, overwhelmed, and they don’t like what they do. Companies are noticing it, with 75% of them saying they can’t attract the right talent, and 83% of them feeling that their employer brand isn’t compelling. Companies that want to fix this need to be smart, and patient. This doesn’t happen overnight, but like I mentioned, it’s easy to do. Being patient might be the hardest thing for companies, and I understand how frustrating it can be not to see results right away, but it’s important that you invest in this, because the ROI of employee engagement is huge.

Here are 4 simple (and free) things you can do to get that passion back into employees. These are all based on research from Deloitte.

1.  Encourage side projects

Employees feel overworked and underappreciated, so as leaders, we need to stop overloading them to the point where they can’t handle the workload. Let them explore their own passions and interests, and work on side projects. Ideally, they wouldn’t have to be related to the company, but if you’re worried about them wasting time, you can set that boundary that it has to be related to the company. What this does, is give them autonomy, and let them improve on their skills (mastery), two of the biggest motivators for work.

Employees feel overworked and underappreciated, so as leaders, we need to stop overloading them to the point where they can’t handle the workload.

2.  Encourage workers to engage with customers

At Wistia, a video hosting company, they make everyone in the company do customer support during their onboarding, and they often rotate people into customer support. When I asked Chris, their CEO, why they do this, he mentioned to me that it’s so every single person in the company understands how their customers are using their product. What pains they’re having, what they like about it, it gets everyone on the same page. It keeps all employees in the loop, and can really motivate you to work when you’re talking directly with customers.

3.  Encourage workers to work cross-functionally

Both Apple and Google have created common areas in their offices, specifically and strategically located, so that different workers that don’t normally interact with each other can have a chance to chat.

This isn’t a coincidence. It’s meant for that collaborative learning, and building those relationships with your colleagues.

4.  Encourage networking in their industry

This is similar to number 2 on the list, but it’s important for employees to grow and learn more about what they do. It helps them build that passion for their industry. It’s important to go to networking events, and encourage your employees to participate in these things. Websites like Eventbrite or Meetup have lots of great resources, and most of the events on there are free.

13 Disturbing Facts About Employee Engagement [Infographic]

What do you do to increase employee engagement? Let me know your thoughts in the comments!

Did you like today’s post? If so you’ll love our frequent newsletter! Sign up here and receive The Switch and Shift Change Playbook, by Shawn Murphy, as our thanks to you!

This infographic was crafted with love by Officevibe, the employee survey tool that helps companies improve their corporate wellness, and have a better organizational culture.


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Supply Chain Fraud: The Threat from Within

Lindsey LaManna

Supply chain fraud – whether perpetrated by suppliers, subcontractors, employees, or some combination of those – can take many forms. Among the most common are:

  • Falsified labor
  • Inflated bills or expense accounts
  • Bribery and corruption
  • Phantom vendor accounts or invoices
  • Bid rigging
  • Grey markets (counterfeit or knockoff products)
  • Failure to meet specifications (resulting in substandard or dangerous goods)
  • Unauthorized disbursements

LSAP_Smart Supply Chains_graphics_briefook inside

Perhaps the most damaging sources of supply chain fraud are internal, especially collusion between an employee and a supplier. Such partnerships help fraudsters evade independent checks and other controls, enabling them to steal larger amounts. The median loss from fraud committed
by a single thief was US$80,000, according to the Association of Certified Fraud Examiners (ACFE).

Costs increase along with the number of perpetrators involved. Fraud involving two thieves had a median loss of US$200,000; fraud involving three people had a median loss of US$355,000; and fraud with four or more had a median loss of more than US$500,000, according to ACFE.

Build a culture to fight fraud

The most effective method to fight internal supply chain theft is to create a culture dedicated to fighting it. Here are a few ways to do it:

  • Make sure the board and C-level executives understand the critical nature of the supply chain and the risk of fraud throughout the procurement lifecycle.
  • Market the organization’s supply chain policies internally and among contractors.
  • Institute policies that prohibit conflicts of interest, and cross-check employee and supplier data to uncover potential conflicts.
  • Define the rules for accepting gifts from suppliers and insist that all gifts be documented.
  • Require two employees to sign off on any proposed changes to suppliers.
  • Watch for staff defections to suppliers, and pay close attention to any supplier that has recently poached an employee.

About Lindsey LaManna

Lindsey LaManna is Social and Reporting Manager for the Digitalist Magazine by SAP Global Marketing. Follow @LindseyLaManna on Twitter, on LinkedIn or Google+.


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What Gen Z’s Arrival In The Workforce Means For Recruiters

Meghan M. Biro

Generation Z’s arrival in the workforce means some changes are on the horizon for recruiters. This cohort, born roughly from the mid-90s to approximately 2010, will be entering the workforce in four Hiring Generation Z words in 3d letters on an organization chart to illustrate finding young employees for your company or businessshort years, and you can bet recruiters and employers are already paying close attention to them.

This past fall, the first group of Gen Z youth began entering university. As Boomers continue to work well past traditional retirement age, four or five years from now, we’ll have an American workplace comprised of five generations.

Marketers and researchers have been obsessed with Millennials for over a decade; they are the most studied generation in history, and at 80 million strong they are an economic force to be reckoned with. HR pros have also been focused on all things related to attracting, motivating, mentoring, and retaining Millennials and now, once Gen Z is part of the workforce, recruiters will have to shift gears and also learn to work with this new, lesser-known generation. What are the important points they’ll need to know?

Northeastern University led the way with an extensive survey on Gen Z in late 2014 that included 16- through 19-year-olds and shed some light on key traits. Here are a few points from that study that recruiters should pay special attention to:

  • In general, the Generation Z cohort tends to be comprised of self-starters who have a strong desire to be autonomous. 63% of them report that they want colleges to teach them about being an entrepreneur.
  • 42% expect to be self-employed later in life, and this percentage was higher among minorities.
  • Despite the high cost of higher education, 81% of Generation Z members surveyed believe going to college is extremely important.
  • Generation Z has a lot of anxiety around debt, not only student loan debt, and they report they are very interested in being well-educated about finances.
  • Interpersonal interaction is highly important to Gen Z; just as Millennials before them, communicating via technology, including social media, is far less valuable to them than face-to-face communication.

Of course Gen Z is still very young, and their opinions as they relate to future employment may well change. For example, reality is that only 6.6% of the American workforce is self-employed, making it likely that only a small percentage of those expecting to be self-employed will be as well. The future in that respect is uncertain, and this group has a lot of learning to do and experiences yet ahead of them. However, when it comes to recruiting them, here are some things that might be helpful.

Generation Z is constantly connected

Like Millennials, Gen Z is a cohort of digital natives; they have had technology and the many forms of communication that affords since birth. They are used to instant access to information and, like their older Gen Y counterparts, they are continually processing information. Like Millennials, they prefer to solve their own problems, and will turn to YouTube or other video platforms for tutorials and to troubleshoot before asking for help. They also place great value on the reviews of their peers.

For recruiters, that means being ready to communicate on a wide variety of platforms on a continual basis. In order to recruit the top talent, you will have to be as connected as they are. You’ll need to keep up with their preferred networks, which will likely always be changing, and you’ll need to be transparent about what you want, as this generation is just as skeptical of marketing as the previous one.

Flexible schedules will continue to grow in importance

With the growth of part-time and contract workers, Gen Z will more than likely assume the same attitude their Millennial predecessors did when it comes to career expectations; they will not expect to remain with the same company for more than a few years. Flexible schedules will be a big part of their world as they move farther away from the traditional 9-to-5 job structure as work becomes more about life and less about work, and they’ll likely take on a variety of part time roles.

This preference for flexible work schedules means that business will happen outside of traditional work hours, and recruiters’ own work hours will, therefore, have to be just as flexible as their Gen Z targets’ schedule are. Companies will also have to examine what are in many cases decades old policies on acceptable work hours and business norms as they seek to not only attract, but to hire and retain this workforce with wholly different preferences than the ones that came before them. In many instances this is already happening, but I believe we will see this continue to evolve in the coming years.

Echoing the silent generation

Unlike Millennials, Gen Z came of age during difficult economic times; older Millennials were raised in the boom years. As Alex Williams points out in his recent New York Times piece, there’s an argument to be made that Generation Z is similar in attitude to the Silent Generation, growing up in a time of recession means they are more pragmatic and skeptical than their slightly older peers.

So how will this impact their behavior and desires as job candidates? Most of them are the product of Gen X parents, and stability will likely be very important to them. They may be both hard-working and fiscally savvy.

Sparks & Honey, in their much quoted slideshare on Gen Z, puts the number of high-schooler students who felt pressured by their parents to get jobs at 55 percent. Income and earning your keep are likely to be a big motivation for GenZ. Due to the recession, they also share the experience of living in multi-generational households, which may help considerably as they navigate a workplace comprised of several generations.

We don’t have all the answers

With its youngest members not yet in double digits, Gen Z is still maturing. There is obviously still a lot that we don’t know. This generation may have the opposite experience from the Millennials before them, where the older members experienced the booming economy, with some even getting a career foothold, before the collapse in 2008. Gen Z’s younger members may get to see a resurgent economy as they make their way out of college. Those younger members are still forming their personalities and views of the world; we would be presumptuous to think we have all of the answers already.

Generational analysis is part research, but also part theory testing. What we do know is that this second generation of digital natives, with its adaption of technology and comfort with the fast-paced changing world, will leave its mark on the American workforce as it makes its way in. As a result, everything about HR will change, in a big way. I wrote a post for my Forbes column recently where I said, “To recruit in this environment is like being part wizard, part astronaut, part diplomat, part guidance counselor,” and that’s very true.

As someone who loves change, I believe there has never been a more exciting time to be immersed in both the HR and the technology space. How do you feel about what’s on the horizon as it relates to the future of work and the impending arrival of Generation Z? I’d love to hear your thoughts.

Social tools are playing an increasingly important role in the workplace, especially for younger workers. Learn more: Adopting Social Software For Workforce Collaboration [Video].

The post What Gen Z’s Arrival In The Workforce Means For Recruiters appeared first on TalentCulture.

Image: Bigstock


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The Importance Of Leadership On Employee Engagement [INFOGRAPHIC]

Charmian Solter

Here at Switch & Shift we strive to illuminate effective leadership practices. We pride ourselves on creating cutting-edge solutions for employee engagement, communication, and creating company culture, to name a few.

Why are these topics so important? Well, according to The Importance of Employee Engagement infographic by NBRI, courtesy of Brandon Gaille, if leadership doesn’t step up and affect change and build trust and engagement, their employees will be busy doing anything but work while on the job! This infographic says it all.


For more on developing more engaged, loyal, and productive workers, see How Empowering Employees Creates a More Engaged Workforce.


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