The New Human Capital Strategy
By Bradley W. Hall, PhD
Economists remind us that each individual needs to provide clear business value to justify his remuneration costs and continued employment. While most managers agree that people are an enterprise’s most important asset, calculating their business value can be difficult. The New Human Capital Strategy provides an effective, accessible strategy for meeting this challenge.
Author Bradley Hall espouses a bold premise in today’s cost-conscious world: A well-structured, long-term plan to produce sustained competitive advantages through people, or “human capital,” is more important than reducing expenses. Some support for this premise comes from a 2007 McKinsey Quarterly report that strongly suggests that companies use a new metric-profit per employee-rather than the more traditional Return on Invested Capital (ROIC) as a gauge for future market capitalization growth.
A clear distinction is drawn between human resource management, which focuses on payroll, compensation, benefits, training, staffing, etcetera, and human capital management or HCM. HCM, as presented in the book, stresses the need to discover how people add business value, plan for the long term, sustain competitive advantages through people, and create practical roadmaps to measure and track improvement. Unfortunately, Hall fails to provide compelling evidence that organizations employing HCM are more successful than their competitors. In fact, the most comprehensive example in the book was the story of Bill Walsh, former head coach for the San Francisco 49ers (now deceased), who achieved a string of National Football League (NFL) championships by pursuing the best players in three of four key positions over a number of years.
One is left to wonder whether a company needs to have all the pieces in place to benefit from HCM. Amazingly, the answer appears to be no. The three most critical HCM components, according to Hall, are effective executive teams, leaders who deliver results, and key position excellence. Managers who connect with one or more of these components will find detailed and practical roadmaps, and an end-to-end approach to improving HCM on an incremental basis. For such readers, this book will be a thought-provoking, intellectually stimulating, and very important read. Managers in organizations struggling to achieve results will also find some good food for thought. For those with limited resources to invest in measuring and systematically tracking performance, save this book for if and when you have the time. If you are a manager in a business where price competition is king, this book is not for you.
 Lowell L. Bryan. “The New Metrics of Corporate Performance: Profit per Employee,” The McKinsey Quarterly, 1, (2/2007).