Every business has people working within it. Some are owners, some are in leadership roles, and more still have jobs that help perform the delivery of the value proposition to the target…those customers who have a need for the product/service bundle that is the heart of your business.

For most of the last 100 years, we have called these people first personnel, then human resources. Businesses use all sorts of resources to create and deliver their value propositions. At the heart of it, there are two categories of resources that deliver everything else: financial resources and human resources. I don’t like using the term “resources”; I prefer substituting the term “capital” instead. There is financial capital and then there is human capital. Both are forms of capital to be invested for maximum return.

Financial capital is invested to create the business model that delivers the value proposition. Human capital is applied to the business model to make it work.

Financial Capital

  • Starts depreciating in value very soon after it is invested;
  • Is obsolete the moment its purpose becomes irrelevant to the business and its customers;
  • Grows in value in three primary ways:
    • Process improvement
    • Disruptive innovation
    • Long-run growth in owner’s equity
  • Its ultimate return is dependent on talented human capital who knows how to make investments work hard enough to yield a fair return.

Human Capital

  • Tends to appreciate in value with experience and training;
  • Can be planfully developed to yield greater returns in the future;
  • Is never obsolete as long as it is continuously repurposed into growth opportunities;
  • Can be the ultimate competitive advantage.

Smart organizations have a well thought out talent management process that works to hire, develop, and place human capital where it is needed when it is needed. The heart of this process is an assessment tool that identifies each individual’s behavioral tendencies, competencies, and interests. This is crucial because development and self-improvement begin with self-awareness.

Self-awareness allows one to identify what is holding you back. It identifies the barriers to your success. The beauty of this is that, once you understand what’s going on, you can turn your weaknesses into strengths by making the choice to do the work required to change your behavior.

Let’s use a hypothetical example. Consider Jim, one of your prepress techs. Jim loves what he does. You enjoy his passion, but you know he has issues. Jim’s assessment reveals that he has a trait called precise which scores low, meaning it is weak. His low score tells us that Jim is not good with details. Just for kicks, let’s check his tempo trait score. The score on this trait is high and indicates Jim enjoys working at a fast pace. Now, in spite of that passion you love about him, it is highly likely that Jim is making errors faster than his teammates can clean them up. An imbalance between a person’s precise and tempo traits where precise is weak and tempo is strong will nearly always point to quality issues.

Don’t fire Jim…help him. Also, quit writing him up. Don’t throw more training at him because, until he has strengthened that precise trait, it won’t do any good. Structured coaching, working on his precise trait, can help to change Jim into that employee you always thought his passion should allow him to be.

Our example here illustrates the point from an earlier discussion. Human capital can be planfully developed to yield greater returns in the future. Moving further, when promotional opportunities come along in your business a solid talent management system will allow you to know who in the company are likely to be good fits for the open job. None of them will be perfect but you’ll have an understanding of their developmental needs and can provide structured coaching to shore those up. Investing in this coaching and development process can improve their odds of success by up to 3X.

Without belaboring the point further, this discussion points the way to building a company where your human capital becomes a competitive advantage. If this doesn’t make sense to you, that’s OK. Good luck anyway! If you do understand this, why aren’t you doing something about it? With deep financial reserves coupled with deep human capital reserves your chances of surviving natural disasters and economic downturns are dramatically improved.

If you are interested in exploring this further, I encourage you to leave a comment here online. You are also welcome to contact me personally at [email protected]