The ascendancy of Human Capital Management should come as little surprise - human capital is typically a company’s first or second largest operating expense and controllable cost. In today’s talent-driven economy it is also the most potent source of corporate value creation. While executives widely and increasingly acknowledge these as facts, they continue to search for ways to engage their workforces more fully as the profound source of the competitive advantage they seek.
CEOs recognize this shift in value creation. Several recent studies reveal that two issues, (1) business strategy and (2) talent strategy, are, by a wide margin, the highest priorities for CEOs. While this research confirms that CEOs have their priorities right, I find that they have difficulty acting with confidence. The paucity of reliable data and the interconnected complexities of the challenge too often constrain focused and decisive action. Now more than ever, fully realizing human capital’s potential for value creation requires a new mindset as well as new executive competencies, particularly for CEOs, CHROs, and CFOs.
I believe that human capital can only achieve its full potential to create corporate value if it is more fully synchronized with both business strategy and financial outcomes. A well-conceived business strategy is, of course, essential, but business success or failure is largely determined by the effectiveness of its execution through people.
The talent economy ushers in the golden age of the human capital management profession. This is an age where business oriented CHROs can contribute to the corporate value equation in ways never seen before. The new role will require a decisive orientation of the CHRO as an influential member of the executive team, one who has cultivated financial acumen and extensively employs analytical methods. Most importantly, it will require a mindset shift where the CHRO thinks of herself or himself as a Portfolio Manager of a coherent, mutually supporting solutions suite that creates a large fraction of total corporate value.