Corner Office-Drilling for Human Capital Reserves

Corner Office-Drilling for Human Capital Reserves

Vast reservoirs of human energy lie hidden beneath the surface.

Today, as I’m writing this column, oil prices are rising to almost $90 a barrel. Although that’s still below the recent high of nearly $100 a barrel, these prices are causing quite a ruckus in our country, the number-one oil consumer in the world. Everyone is debating the reasons for high gasoline prices, which include the basic law of supply and demand, political instability in oil-producing countries, capacity limitations in U.S. refineries, and government restrictions on drilling and exploration due to environmental concerns.

While there is no easy solution to this complex crisis, some experts suggest that one answer may be tapping into previously hidden U.S. oil reserves. In the western United States, the amount of crude oil in oil shale is believed to rival the proven oil reserves in Saudi Arabia. As technology advances to allow the retrieval of this oil on a large scale, the U.S. could benefit greatly from these previously untapped reserves.

For sure, I’m not an oil industry expert, but I was recently contemplating the parallels between the challenges facing the oil industry and the challenges confronting most companies today. In most industries, organizational structures were developed during the industrial age of the past century. Most are now struggling to overcome high operating costs in a global economy, victims of their hierarchies, bureaucracies, and mindsets of the past. And most have the opportunity to tap into reserves of hidden energy lying beneath the surface.

I’m referring to their human capital—the mind power of the work force, and the underutilized talents, knowledge, skills, and relationships found in the people of an organization.

I’m constantly amazed when executives and management have no problem allotting budgets for “capital equipment”—buildings, machinery, maintenance programs for software and computer equipment—and even for themselves, but then spend nothing, or next to nothing on training, motivating, and nurturing their human capital. They give little or no thought to whether the design of their organization and its technology resources supports and encourages the mind power of their people.

Workers: Assets, Not Liabilities

More than 50 years ago, management guru Peter Drucker was the first to declare that workers should be treated as assets, not as liabilities to be minimized or eliminated. It was Drucker who originated the view of the corporation as a human community built on trust and respect for workers, not just a profit-making machine for shareholders.

In the 1970s, Drucker wrote about the contribution of knowledge workers, long before anyone knew or understood how knowledge would be the essential capital of the New Economy. He was a leader in observing that while many business leaders say that people are their greatest asset, “few practice what they preach, let alone truly believe it.” Drucker insisted that when companies claim they are people-oriented, it’s often no more than corporate hypocrisy. After all, he asked, how can companies declare that they put their employees first when they are willing to lay off thousands while the executive leaders are awarded huge bonuses?

I agree that people assets are too often casualties of short-term financial thinking. Companies driven by the need for short-term results would do well to heed Drucker.

Smart Companies Invest

But if you’re one of those show-me people who need more than Drucker’s advice, I’ve got news for you! A recent report, “Building an Effective Health and Productivity Framework,” shows that companies with the most effective health and productivity programs for their workers have superior financial returns and productivity improvements. The report—by global human resources and financial management consulting firm Watson Wyatt and the National Business Group on Health, a Washington, D.C.–based nonprofit organization—says those companies achieve 20 percent more revenue per employee, have 16.1 percent higher market value, and deliver shareholder returns that are 57 percent higher.

The best-performing companies, according to the report, invest in improving the education and health of their employees. They have health management programs that feature single-access-point technology, educational tools, on-site health centers, and safety education.

Lowell Bryan and Claudia Joyce, consultants with McKinsey & Company, a management consulting firm with offices in Minneapolis, report similar results in their book Mobilizing Minds. After years of analyzing the world’s best-performing companies, Bryan and Joyce say that business leaders must put the same resources, energy, and focus into designing their companies to optimize mind power as they have into designing new products, processes, or entry into new markets. They say that a new organizational model that does so could generate tens of thousands of dollars of additional profit per employee.

In short, successful companies of the future will be those that tap into their people’s underutilized talents, knowledge, relationships, and skills, and encourage more rewarding, productive work. Those companies will create significant new wealth at relatively low risk.

 

Cut Through the Bull

Okay. That makes sense,” you say. “But let’s bring it down from 30,000 feet to the level of everyday life in my company. Let’s put some meat on the bones of the consultant-speak mumbo-jumbo, huh?”

Well, it doesn’t take an IQ of 140 to know that the technology resources we use today are not necessarily productivity advancements. How much time is wasted every day reading through e-mail streams to glean out important information? How much stress is caused by the 24-7 accessibility that’s possible now with Blackberrys and cell phones? How much money is wasted dumping data into shared systems that nobody uses or needs? Is that real-life enough for you?

In the 1990s, conventional wisdom was that the birth of the Internet and the widespread use of Web-based platforms would improve communication within organizations, thereby increasing productivity and ultimately investment returns. Some of those dreams have been realized, but those of us living in the real world of business know that those technologies haven’t been the panacea that was promised. In fact, I’d suggest that the information age has become an information overload that creates confusion, busywork, and indecision, rather than productivity.

To blast through those obstacles, the McKinsey experts say that business leaders must create organizations with clear hierarchies of decision making. A backbone of management authority, with tactical decision-making authority on the front lines, will nurture the most hidden reserves of brain power in the work force.

Business leaders must also be smart about technology investments that are supposed to educate, train, and help their people share knowledge. Don’t just throw every blasted document into a shared network; do research to discover what information people really need to get their jobs done. Don’t create a million mini–Web sites on an internal server that are useful only for a handful of people; create a Wikipedia-like “companypedia” that enables employees across divisions to collaborate and share knowledge—without wading through bureaucracy.

Whether you focus on the health and wellness of your employees, provide ongoing education and training opportunities, or get smarter about your organizational structure and its supporting information structure, the point is to make the untapped resource of your human capital your number-one priority. Old mindsets and structures aren’t keeping up with today’s new challenges, just as oil production cannot keep up with world demand.

Leaping successfully into the new world will take a big commitment by management to drill deep for untapped human reserves of talent, knowledge, skills, and relationships within our organizations. Human capital is a great resource and a source of competitive advantage in the marketplace, if properly tapped—so get on with it, you wildcats!

 

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