Competing for and with Human Capital

It Is Not Just for HR Anymore

J. Stewart Black

• Publisher: Productivity Press
• Year: 2019
• eBook ISBN: 9781000008777
• Topic: Business
• Subtopic: Business General
• Index: Business

Executives say that people are their most important asset, but most don't walk the talk. They don't have systematic strategies for how to get the people they want to want them. They don't have measures and metrics for how they are doing to be the employer of choice. They don't hold leaders accountable regarding those ambitions. In many cases, this is because top leaders don't have concrete tools to help them do what they know they should.

This book fills that gap in three major sections. The first section supports with clear and compelling data what executives intuitively but somewhat superficially believe—that people are their most important asset. The second section provides a systematic process and set of tools to help leaders get the people they want to want them; it shows executives how to win the competition for human capital. The third section then helps leaders position people appropriately so that they can create a sustainable competitive advantage; its shows executives how to compete with human capital.

When it comes to human capital, most books get it wrong. Strategy books place human capital to the side as an enabler of competitive advantage. HR books treat human capital as a support activity to business strategy. This book places human capital where it should be—not to the side and not as an enabler or a support activity, but at the center and as the source of competitive advantage.

1

Why Are Competing For and With Human Capital the Final Frontiers?

As I mentioned, the vast majority of executives claim that people are their most important asset, but they don’t walk the talk. What’s behind this disconnect? Why do so many executives fail to link reality to their rhetoric?

In general, the human capital “say-do gap” (“talking the talk, but not walking the walk”) is a function of the same force that causes us to say we should exercise more or eat better but then don’t. The culprit? In a word—superficiality. This may seem like a flippant or overly simplistic answer, but it is neither. Allow me to explain.

Often we espouse things like “exercise is good for you” but we don’t walk the talk because the truth is we often have a rather superficial understanding of why the statement is true. To illustrate this, let’s take the example of the widely espoused platitude that “exercise is good for you.” Stopping at the surface or simply accepting the platitude superficially contributes to not following through and not walking the talk in at least three ways. First, stopping at the surface keeps us from seeing fully what it takes to achieve the desired outcomes. It creates an artificially inflated balloon of positive expectations that burst the first time we encounter one of the hard realities of exercise (like getting up at 6 AM each day to go to the gym), and as a consequence we talk the talk but we don’t walk the walk. Second, stopping at the surface of a truth keeps us from seeing the full value of the benefits (like a stronger immune system in the case of exercise). When we underestimate the benefits, it takes smaller negative consequences or surprises to make us feel like it’s just not worth it and we talk the talk but fail to walk the walk. Third, stopping at the surface then causes us to miscalculate the ROI (return on investment). For example, for many getting up at 6 AM is a big price to pay just to lose a couple of pounds but may not be a big investment relative to having 20% more energy and 15% less days that you are sick.¹ A superficial understanding of exercise leaves us with a rather shallow belief and conviction that exercise is good for us. We say it, but we don’t deeply mean it. As a consequence, when the alarm goes off at 6 AM, we hit the snooze button, turn over, and go back to sleep. We talk the talk but we don’t walk the walk.

The dynamics of superficiality regarding human capital are no different. Like a thin puddle of water that quickly dries up under a hot, noon-day sun, our superficial understanding and resulting shallow belief in the importance of human capital quickly evaporates in the heat of having to actually formulate an effective human capital strategy, put in place metrics and measures, and hold executives accountable for human capital successes and shortfalls. Simplified: superficial understanding leads to shallow beliefs, which produce weak convictions, which in turn lead to poor or no follow through on what we espouse, and voilà we have the human capital “say-do gap.”

Suppose the case I’ve just made makes sense to you. If so, I can imagine that you might be saying to yourself, “You know, he’s right. I can see that a superficial understanding would lead to a weak conviction and that a weak conviction would result in a lack of aligned actual actions.” Even if you are thinking this, you might want even deeper insights. In this case, you might naturally ask the question: “If a superficial understanding is the starting point for this chain reaction that leaves us talking the talk but not walking the walk, then what accounts for not diving deep enough into the issue in the first place? Why do so many of us stop at a superficial level of understanding? Why don’t we dig deeper?” While this is a great question to ask, you may not like the answer. The main reason we don’t dig deep enough to get the depth of understanding and strength of conviction to bridge the human capital say-do gap (or any other say-do gap for that matter) is because we allow ourselves to be a bit lazy—not physically but mentally lazy. But before you get too upset, give me a chance to explain.

I think you would agree that platitudes like “exercise is good for you” or “people are our most important asset” are inherently appealing. The problem is that it only takes a little bit of mental laziness before we unconsciously assume that our simple mental acceptance will be enough to lead to a strong conviction and real action. Yet, if we are honest, we know in the back of our minds that shallow beliefs, whatever they are about, generally do not generate the strength of conviction needed for us to walk the talk. In other words, deep down we know there is no free lunch, but we allow ourselves to be mentally lazy enough to assume that we can get something for nothing, that we can get the required strategies, metrics, and accountabilities for making people our most important asset with just a superficial understanding of why it should be the case.

To more fully illustrate this dynamic, let’s return to the issue of exercise. We all know that in order to get up at 6 AM every morning and go to the gym we need a strong conviction that exercise is the right thing to do. A superficial belief that “exercise is good for you” just won’t cut it. We also know that strong convictions do not miraculously appear out of thin air. Strong convictions require deep understanding. Deep understanding of why exercise is good for us takes some time, effort, and investment. However, if we are just a little bit lazy in our minds, we can avoid all these needed investments and inconvenient truths, look away, and fool ourselves (at least for a while) into assuming that if we just accept the platitude at the surface we will not only talk the talk but we will walk the walk.

In order to appreciate the pervasiveness of this human frailty, you only have to think about the billions of dollars companies make off it each year. For example, how many billions of dollars have companies made telling us that we can just “eat anything we want and still lose weight” or that we can “tone our abs while watching TV”? Deep down we know these “promises” are too good to be true. But they are appealing enough that if we just don’t think about them too deeply, if we don’t confront them too closely, if we are just a bit mentally lazy, we can maintain the wishful mirage that there is a free lunch.

Likewise, deep down we know that a shallow belief about people being our most important asset will not miraculously generate the necessary energy and investment required to ensure we have the needed strategies, metrics, and accountabilities to back up the platitude. Deep down we know the truth, but we allow ourselves to be just lazy enough to look the other way and avoid a direct confrontation with the fact that there is no free lunch. As a consequence, we simply don’t dig deep enough to understand why people are our most important asset, and as a consequence, we fail to close the say-do gap and fail to walk the talk.

So at this point, let me offer a fair warning. Getting to the point that you can win the battle for human capital by putting in place the strategies, metrics, and accountabilities is not free. It requires some investment. I hate to break it to you, but there is no free lunch whether we are talking about exercise or human capital. Getting to the point where you can bridge the human capital “say-do” gap in your firm will require some investment on your part. That’s the bad news. The good news is that my goal is to help make the necessary investment to bridge the say-do gap as interesting, engaging, and efficient for you as possible.

But before we get too deep into this, I keep using the term “say-do” gap as though it were unidimensional, but in fact it has two important forms or types. Highlighting the two different forms is important because the consequences of each are rather different.

I have already illustrated the first form of the say-do gap or what I will refer to as Type 1. Type 1 of the say-do gap is where we say something but then our actions fall short of living up to what we espouse. We may honestly intend for our actions to be aligned with our words but in the end they fall short. We say exercise is important and so we set the alarm, but then at 6 AM when it goes off, we hit the snooze button.

In the context of the human capital Type 1 say-do gap, we say people are the most important asset, but then we don’t put into place the strategies, metrics, and accountabilities required to back up the claim; or we put all three in place, but they are inconsistent, weak, and otherwise insufficient. If we are guilty of the first form of the say-do gap (i.e., our actions are headed in the right direction but come up short), people typically perceive us as having good intentions but just not having sufficient discipline, motivation, or conviction to follow through.

In saying this, I am not suggesting that there are no negative consequences to this first form of the say-do gap. There are. Clearly, if we say people are our most important asset and then we fall short of aligned actions, the next time we state that people are our most important asset, employees will be a bit more skeptical about whether we mean it; they will doubt that we will walk the talk. They will think, “Hey, last time he didn’t really follow through on what he said. I wonder if this time will be any ­different?” As a consequence, if we are guilty of the first form of the say-do gap, the next time we address the issue we start from a “credibility deficit.”

Type 2 of the say-do gap is much more serious. In this second form, we don’t just fall short of aligned actions, we are perceived as doing the opposite of what we espouse. In the case of human capital, we say people are our most important asset but then we treat them the opposite. For example, we say people are our most important asset but then when times are tough, the first thing we do is cut people. We say people are our most important asset, but when financial results fall short, we ditch training, we cancel development programs, we suspend mentoring initiatives, and the like. In this case, people quite often interpret the contradiction between our words and actions as hypocrisy. People may go so far as to interpret this second form as evidence that we purposefully lied, deceived, or misled them from the outset; we never really meant what we said.

The consequences of Type 2 say-do gap are usually rather serious. When our actions do not just fall short of our words but are perceived as misaligned with and opposite of what we espouse, the next time we espouse something, we don’t just start from a credibility deficit, we start from “credibility bankruptcy.” As with financial bankruptcy, getting out of credibility bankruptcy takes an enormous amount of effort and exponentially more time, effort, and energy than it took to fall into it.

Here, I realize that I am not telling you anything you didn’t already know. The reason I stress both Type 1 and Type 2 say-do gaps is not because you don’t know they exist (of course you do), but because it is easier than we think to stumble into the pits of both types of gaps. To put a spotlight on how easy it is to stumble into the gap, just ask yourself the following question:

• During past economic downturns (such as happened in 1991, 1997, 2001, and 2009), did your firm increase or decrease its spending on human capital? Specifically, during any one of these downturns did your firm spend more or did it spend less on recruitment, hiring, training, and development?

If your firm is like 82 percent of the nearly 300 companies I have surveyed specifically on this issue, during economic downturns, your firm did not increase investments in human capital; it cut them, and typically cut them by more than it cut spending on most other items.

Cutting human capital expenses during economic downturns may seem like an innocent act or even a prudent one, but seen from the perspective of current or prospective employees, executives proclaiming that “people are our most important asset” and then cutting investments in human capital when times are tough can be, and often is, interpreted not as a ­prudent action but as a hypocritical move (i.e., a Type 2 say-do gap). With that interpretation comes all the more severe negative consequences. To illustrate this, let me share with you a recent experience.

Not long ago, I had the opportunity to listen to a CEO present to his troops at a “town hall meeting.” ...

Table of contents

• Cover
• Half-Title
• Title
• Copyright
• Contents
• Author
• Introduction: Straight to the Point
• SECTION 1 WHY ARE COMPETING FOR AND WITH HUMAN CAPITAL THE FINAL FRONTIERS?
• SUMMARY
• SECTION II COMPETING FOR HUMAN CAPITAL
• SECTION III COMPETING WITH HUMAN CAPITAL
• Conclusion
• Index