The Human Capital Advantage

Without leadership, a business enterprise will eventually fail. Survival is possible without a strategy, but seldom over the long haul. Great strategy with lousy execution isn’t worth the piece of paper it is written on. The consequence of these proclamations is rather obvious; get it right, bring it all together and you have the commercial magic every enterprise seeks.

The glue that binds leadership, strategy, and execution is people – quality individuals at the board level, in the executive suite, in the general office, on the factory floor, and out there in the field, the domain of the customer.

Until the information age, companies needed scads of people to run machines in plants and warehouses all over the country. The assets their shareholders valued most were tangible. Today, 80 percent of the asset value of the S&P 500 is intangible. These assets cannot be seen, touched or physically measured. The knowledge economy appreciates the fact that trade secrets, trademarks, patents, knowledge and know-how are what matters. This ethic explains why they spend so much on research and development. Last year, the world’s top 20 R&D spenders dished out $153 billion. Eight of these 20 companies participated in the healthcare sector, seven were in software, computers or electronics, and five were automakers.

In the new world of business, competitive intangibles are the source from which competitive advantage flows or goes, and human capital is the source of every competitive intangible. Finding the right people, motivating them, retaining them, facilitating their personal and professional development isn’t easy. CEOs come and go. Wall Street demands quarterly results. Recessions thrash astute strategic intent and pressure CEOs and leadership teams into a mish mash of tactical “quick fix” solutions. If those in power are not careful, chaos will rear its ugly head in the complexity they create.

My soapbox rants on leadership, strategy and executional principles and practices are for naught without the right human capital in the right place at the right time, every time. This is the first goal toward creating superior performance. Unlike objectives, goals are intangible. One never quite gets there. In the pursuit of the best human capital, this is a good thing because great leaders never stop trying.

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