This year, the top challenge for CEOs according to The Conference Board’s 2013 CEO Challenge, is Human Capital. But Human Resources (HR) can’t save you. CEOs are looking for methods to improve productivity and reduce cost. HR is regurgitating employee engagement and training and development as though those same traditional methods will suddenly produce the results CEOs need. HR continues to sing the same song that has been heard for decades and seldom produces the desired results.
HUMAN CAPITAL RISK MANAGEMENT
If HR cannot deliver, what is the answer? I believe it is “human capital risk management.”
Human capital risk management is a blend of psychology, business analysis and numerical accountability. The process of production – whether it is manufacturing widgets or creating a piece of art – requires the support of creative forces of human capital and logical business processes of building an outcome. In most organizations, the outcome should be replicable which requires the business process to be defined and supportive of the creative process. One without the other is a weaker, more inefficient system. The talents of HR are heavily weighted on the psychological side to support creativity and engagement, fairness and equity. But these are not sufficient requirements to produce quality, consistency, and scalability which are the goal of organizations. The overarching umbrella is human capital risk management so there is the application of the psychology as well as the application of structured management, prioritization, and logistics.
Consider a workforce planning initiative a client embarked upon. At first glance, the problem seemed to be a typical “HR” type of problem – the department couldn’t seem to hire and keep the right talent. If they found someone who was a great fit for the position and they hired them in, they would become proficient and leave for another opportunity. This happened over and over. Now, they were even finding it difficult to hire the talent – it seemed they had a “reputation”.
Finding a solution followed the typical path – talk to HR. HR offered the typical answer – it must be your job descriptions and your compensation. HR recommended a review of the job descriptions and potentially development of a career ladder or similar professional incentive to entice talent to stay. Accidently, they hired me – not a typical HR thinker I confess. Before I could help them redesign the job descriptions, I ask a simple (I thought) question – “what is the work?” This question led to workshops with their customers (who were internal), their current staff, satisfaction surveys, business process mapping etc. They were very brave. The end result was the identification that a significant part of the problem was how the workflow was structured and designed. It was both frustrating for their customers and frustrating for their staff. Their customers felt their needs were not being met and were sometimes ignored. Their staff felt their talents were underutilized and that they were often mismanaged.
Together, we consolidated the data, identified and prioritized the issues, gained executive level blessing, and began to redesign the work. Now – with the help of HR – there was a roadmap that clarified the work in a way that HR could support the transformation psychologically. The end result was a more efficient, stronger department able to support their customers’ needs, visibly stronger with more stature in their customers’ eyes, and more strategically positioned to support the organization as a whole.
The concept of human capital risk management is beginning to surface more frequently in articles by academics and thought leaders. Though there is no formal definition, the definition provided above is based on my experience and discussion with multiple business leaders on what they need from Human Capital Management. My transition from HR practitioner to business owner exposed me to this untapped opportunity to blend risk management, business analysis and psychology to create a framework which respects the workforce and maximizes productivity.
However, it has been my experience that HR professionals are resistant to it. My conclusion thus far – based on my own experience and exposure to the discipline – is that HR is predominantly composed of “human social psychologists” and compliance officers who deal more with the intangibles of emotion, talent, and intellectual capital and uphold employment law. The result is that HR perceives human capital risk management as dehumanizing.
In my work, I have applied many analytical tools to concepts and problems which involve human capital. The ability to analyze the work – and the quality of the output of the human element of the work – is fascinating. I am not belittling the value of humans – quite the contrary. Human intellectual capital is the most valuable capital on the planet – it is quite literally, creation. To own or have access to it is to be able to change anything. In my view, human capital risk management is founded on that belief – but unlike HR – it is not constrained by or limited to its psychological boundaries and does not rely solely on enticing performance from the workforce through psychology.
APPLICATION OF HUMAN CAPITAL RISK MANAGEMENT (HCRM)
Here are my thoughts on the implementation of a HCRM strategy that encompasses all of these things.
1. Define the work.
Workers and managers must understand the role and responsibilities of each position. According to Lou Adler, the author of The Essential Guide for Hiring & Getting Hired, there are only four jobs within any organization – thinkers, builders, improvers and producers. Mr. Adler’s experience spans 30 years and 2,500 job descriptions. If you design the job description based on these simpler categories and concepts, it is much easier to identify the workflow and – most importantly – the type of person you need at that stage of the workflow.
This task must be done by those who are closest to understanding the work. HR cannot do it for you – they will not recognize when it is wrong. You – the worker and/or manager – are closest to the process and understand the needed results in terms of quality, consistency, speed and customer satisfaction.
2. Identify the type of job that maximizes the value of the position.
Is the position a thinker, a builder, an improver or a producer? How does that support the best outputs from the position? Humans are blended individuals, but there is usually a dominant trait – a preference and excellence that a person will exhibit toward their natural talents. For example, years ago I realized I was a builder. When I am involved in work that is implementing, solving, integrating or building – I am at my happiest and it shows in my work. Once I solve the problem or finish the project, I need something new. What kind of person would enjoy the type of work you have defined for this position? How would their natural tendencies support maximum productivity?
3. Conduct an Employee Skills Gap Analysis.
Basically, this means evaluate the “human capital” in each position and determine if they have the right skills in the right quantities to maximize the productivity of the job. This may seem daunting – but consider this. If you are paying someone $10 per hour but the organization is only receiving $5 per hour of valued work, you are losing 50% of the pay of that one individual. That is real dollars being left on the table. Multiply that by 10 employees, now multiply that by 1.35 to recognize the cost of labor + benefits and taxes to achieve the total cost of wasted dollars when the skills and the job don’t fit. This is very real money and positions that are not optimized damage the business’ cashflow.
4. Build a workforce roadmap to realign and recalibrate skills to work.
A workforce roadmap – or workforce planning – uses the results of the Skills Gap Analysis to help you identify areas of strength and weakness throughout your scope of management and mitigate the risks. You cannot simply fire those that don’t meet the requirements – that may be unfair, you need to be careful to avoid wrongful termination and at the least, you have a responsibility to determine their capability to improve. Nor can you automatically give raises to those employees who have demonstrated exceptional qualifications – you have a budget. The next step has to be a plan of mitigation of risk – human capital risk management. Now that you know where the risks are – you can begin to develop methods to maximize the value and minimize the constraints of the workforce you can impact.
Implementing your workforce roadmap is something HR can help you with by supporting the psychological changes that will be required to recalibrate the workforce.
LESSONS LEARNED
Your ability to conduct this exercise – and then to continuously recalibrate it to the organization’s goals as they change – is your greatest contribution to the organization. It is not simply about getting the work done. It is – or rather can be – so much more. But HR can’t do it – they don’t know how.
You have to do it.
BIO:
Kristie Evans, CEO, HR Logistics LLC (HRL), is a highly sought after management consultant, prolific speaker and educator. Ms. Evans has held staff, project management and senior executive Human Capital Management (HCM) positions at Bayer, Aventis and numerous healthcare organizations before founding HR Logistics (HRL) in 2002 — an HCRM consulting and contract project management services firm. HRL reduces the cost and increases the effectiveness of workforce initiatives through strong business analysis, project management, and integration of strategic and operational solutions helping their clients make better decisions to improve performance and increase productivity, efficiency, profitability, and stakeholder value. HRL is the first to provide Human Capital Risk Management consulting — a three-pronged approach for operational excellence. The methodology focuses on strong risk analysis to define and align talent with productivity and organizational goals, find and place specialized talent in key positions, and identify and manage risks associated with human behavior by leveraging HR technology. The 3-pronged approach facilitates collaboration and integration of HCM with Finance, Operations and IT to increase its effectiveness in workforce management and planning. Kristie can be reached directly at kristie@hrlogistics.us or visit HRL’s website www.hrlogistics.us.