Colin Kingsbury over at HRM Direct left the following comment at the post Strategic Step 1 – 3 Questions. It was such a good one that I decided to publish it in its entirety (as I will be on many of the other comments). You can read more of Colin’s writing on his blog. Colin works at HRM Direct. I can’t claim to know a lot about them, but I am very much looking forward to learning more. Colin is giving to the network before he expects anything in return, a concept I wholeheartedly endorse.
Colin said:
I've always defined "strategic" in terms of things which create sustainable competitive advantage. This makes it easier to broaden the field of contributors without scaring the green-eyeshade crowd too much. When you refer to "the old 'capital is more valuable than talent' orthodoxy" I think a lot of management types (like me?) hear echoes of the "new metrics" era of the late 90s.
Saying that talent has financial value to the company won't raise any eyebrows, and I don't think it's particularly heterodox these days to suggest that the financial value of talent is increasing. The reason is that ideas move from peoples' heads into the marketplace faster every day. It used to be a company could launch a new product and ride it for a few years- in many industries now you get just six months. This means that the "innovation pump" needs to be running at all times.
To me the importance of framing this in terms of competitive advantage is that it makes results more quantifiable, which leads to credibility, which leads to support for execution. In my mind the single most consistent reason why companies systematically under-value people relative to theory is that actually measuring the contribution of a specific person is so difficult.
All great points Colin.
Since I consider myself a pretty hard-nosed business guy (and not one of the “touchy-feely metrics” guys) I will continue to blather on about talent being more valuable than capital and let the results speak for themselves. But I understand your point completely: there has been a tendency to try to sneak HR into a strategic position through the backdoor by telling people the way to a healthy balance sheet is through group hugs and campfire sing-alongs. Not wisdom I subscribe to.
And I agree that saying talent has financial value won’t raise any eyebrows, which is exactly what is wrong with the statement: it is almost meaningless. Its like saying breathing is good for you: nobody can disagree, but who focuses on their breathing as a way of becoming a better person? “People are our number one asset” and “Talent is important here” statements are genuinely believed (in my opinion) by the execs that coin them, but the translation from that statement into the difficult business decisions that risk capital in order to grow shareholder wealth is where most companies fall down. We need to move beyond those platitudes and get to measurements that describe competitive advantage through strategic HR practices. I think EVA may be one. I am sure there are others. They all share the characteristic of being acceptable to the all aspects of the investment community, and all must be based on a business / financial foundation, not a typical “human capital” perspective.
The innovation pump needs to be running all the time, true, but there are other areas that don’t directly affect innovation that directly impact sustainable competitive advantage and that are all about talent. Most of those areas can be summed up in the word “Brand.” Customer service is a big one: being nice to interact with isn’t innovative, but it sure makes for a great advantage. Great customer service is one of the key reasons that Starbucks won early on: they spent the extra money to hire people who could speak in whole sentences and be polite and efficient at the same time. Not exactly innovative, but sure provided them with some competitive advantage.
With regards to your last point: YES! I have written about this before (here and here)and couldn’t agree with you more. The concept of QOH (Quality of Hire) must be tied directly to fit to specification, and the specification must always start with how to build competitive advantage. Hopefully the macro path to building competitive advantage starts with the corporate strategic plan, which is built within the purpose context of the company. One of the reasons that I was so excited about the talk I had with the Prophet Guys is that they seemed to be on a path towards forming the linkage of which you speak.
Thanks for your contribution Colin!
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