People, not companies, own their human capital assets and equity in their careers

people

Gary Becker and Jacob Mincer made the term human capital famous. Their intention was to focus on human attributes that can add value. But those who want to attempt the impossible have hijacked their work: to own people. “People are our greatest assets,” they say. They’re not. If they were, the accountants would have gleefully found a way to value them. They haven’t because they can’t.

This is an inconvenient truth for organisations. How wonderful would it be, for some, to slap a barcode on each employee, value them on the asset register and set about sweating the asset? It’s not going to happen. But business is largely in denial about this. It often persists in treating people as mere hires, direct reports, and leavers.

The cost of this denial is high. Businesses spend trillions on human capital asset management (HCM) systems and processes. Even the most evangelical HCM exponents would agree that the return on investment in HCM is often poor. Cynics are scathing and HR, unfairly, takes the rap for what is the CEO’s problem.

CEOs know that they can’t put people on their balance sheets. But if human capital exists – and it does – then who owns it? People own their own human capital assets. I have created a model to help individuals capture and exploit their own human capital value.

career equity

Career Equity is one component of that model (see diagram) which is a function of your Curriculum Vitae, Emotional Intelligence and Reputation. People talk about “shaping their CVs” when they can’t. A CV is a CV. The Latin words curriculum vitae are clear: they mean “the course of my life”. It’s a list of dates, employers, roles, and achievements. Keep “shaping” for the cover letter.

Much has been written about Emotional Intelligence, mostly by Daniel Goleman. My focus is on three aspects. Empathy – your capacity to understand what another person is feeling; self-awareness – your ability to connect with and observe your feelings and finally your ability to negotiate your needs productively.

Your reputation is what it is. You may not like it but you have created it. Over many years as a leadership consultant, I have taken hundreds of references. These are, essentially, reputational statements. I ask five questions: what is s/he good at? What do they enjoy? What is their outstanding behavioural weakness at work? What do you think they should do with their career? How can I help them the small ways? The answers constitute a rough reputation audit.

You can make an assessment now of your career equity. How strong is your CV? How good is your reputation? How emotionally intelligent are you? Taken together, these comprise your career equity now. What will it be in three years time? How can you maximise that outcome? How can you and your employer/customer build a relationship whereby your purpose and theirs is inter-dependent? This is impossible if organisations view you as a capital asset which they own, when they don’t and can’t. Imagine how more successful a CEO you would be if you treated the people who work with you as if they, and not you, owned their own career equity since they do.

Ciaran Fenton

September 2016

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#SmallChange: Have you ever seen a CEO with a Human Capital Asset barcode?

human barcode

I am writing a book. It’s called Small Change: how to work, lead and follow in the 21st. Century. I will be publishing sections as blogs as I write it. I would be grateful for comments, questions and feedback as I proceed.  Below is a draft of Chapter 1, Part 1. You can see earlier drafts on my blog or LinkedIn Pulse.

Chapter 1: Have you ever seen a CEO with a Human Capital Asset barcode?

Part 1: Know, for sure, that Human Capital Assets don’t exist

People don’t see themselves as human capital assets. They just don’t. No amount of management theory will change that fact. Working people don’t buy into this concept. And if businesses continue to treat people as if they own them, they shouldn’t be surprised that they are not getting the best from them.

The concept also has no basis in reality. You can’t put people on a balance sheet. They’re not even intangible assets, like Goodwill. Ask any accountant when they last scanned the barcode (sic) of a CEO or any employee, for valuation purposes. Never.

I once asked a seminar full of human resources directors, many of them from FTSE 100 companies, to “up hands if they loved being human capital assets”. No hands. In all of my thirty or so years in business, I never heard a CEO describe himself or herself as a human capital asset, or resource for that matter.

But I have heard them describe their workforce as such. Whether I like it or not, these concepts have stuck, albeit uncomfortably. It is unrealistic to suggest that somehow, overnight, all the art and science of Human Resources and Human Capital Asset Management can and or should be transformed or eliminated.

HR and HCM practitioners and writers have made an enormously positive contribution to business. Unfairly maligned, they are not the problem. They are victims of “a fudge”. I know that in the USA this expression has a different meaning. I’m using it in the English sense. The fudge is that many CEOs fail to confront the awesomely difficult task of creating an environment in which people thrive.

Some CEOs are not up to that task. And they know it. I have sympathy with them. But instead of confronting their difficulties, they shift this responsibility to HR, who are then held accountable but not given full power to tackle issues that should rest with the CEO, who is the de facto Director of People, whether they like it or not.

CEO s should focus on three issues, according to most commentators:

  • Creating an environment in which people thrive
  • Growing the business
  • Ensuring customers are happy

So what should HR now do? I have devised a 3 Step Plan to Transform HR to support these objectives. CEOs and Boards could implement these relatively quickly by announcing the following:

  1. That the CEO, not HR, is responsible for creating an environment in which the people working in the organisation can thrive.
  2. That the Human Resources Director will be retitled Chief of Staff to support and advise the CEO on the measurable improvement in emotional intelligence across the business.
  3. That all transactional HR matters – health, safety, employment issues, etc. – are now the responsibility Legal or Finance where appropriate.

That’s it. It could happen today.

But what if you agree with my view, but feel there isn’t a snowball’s chance in hell of these changes happening in your organisation?

My answer: act as if it is happening, and watch small change happen.

Ciaran Fenton

August 2016

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