From Human Resources to Human Capital

I was recently named to the Expert Advisory Panel at the Human Capital Institute located in Washington, DC.  This is my first post on that site.


Human Resources is a relative modern term coined from all indication in the 60’s. It was previously known, possibly since its inception, as “Personnel.” During this transformation, HR was basically an administrative function charged with a range of worker-related processes. This same model is still in existence in some companies today if you can believe it. They have plodded along feeling very comfortable in that space and some would stay there if circumstances had not changed. Because of the economic turmoil, the ground has shifted.

With the economic fallout there is a distinct need for a more strategic approach. Meanwhile we have all heard and read about our profession wanting that seat at the table. We wanted a brand as strong as marketing and finance. Because of this “perfect storm,” for all that wanted that new place on the corporate totem pole, your wishes have been answered.

All the issues such as talent management, succession planning, leadership development, and employee engagement are now at the forefront in every company.  From the Board Room to the C-Suite, the entire strategy of managing human capital is there and being discussed. The 64K question is, are you ready for the challenge?

Today is the perfect opportunity for HR professionals with the perfect skill set and business acumen who are passionate about human capital. This is what is going to drive the business going forward, because a strategy for talent has to be put in place.  Research has shown that talent is the biggest differentiator and most critical determinant in driving a company’s performance. Issues such as engagement, leadership development, talent strategy, and career development will have to be addressed in order for a company to execute on current and future business strategies.

Right Management  compiled a recent study that showed 43% of employees in the Northeast were engaged and committed to their jobs and employers. This was the lowest of regions within the US.  I always notice the number of articles that tout the key ways to solving issues such as these—“ 3 steps, 4 steps or 5 steps to create…” etc. There is no one size fits all. There are some common threads even though each company's culture is different and the internal and industry issues may not be the same. Each company has different business drivers. However one thing is for sure-- there must be a concerted effort to define a complete strategy that connects all the dots. The days of disjointed efforts are over for good. The “umbrella” has to be created with all the underlying pieces of talent strategy (On-boarding, Training & Development, Performance Development, Leadership Development, Coaching, Succession Planning).

So where do we start? Working through a SWOT analysis would be a great place to start because it puts all the issues on the table front and center. Developing a long-term strategic plan is also a must for all HR departments. Creating an internal HR advisory board of key leaders throughout the company is also a smart initiative. Create an external like-minded group of fellow HR folks that will allow you to collaborate with peers about your ideas and serve as a sounding board of best practices.

HR Executive ran a great article that states in terms of specific experience, the most common functional area within HR for the HR heads to have worked is talent management. This skill set finally makes it to the top. But it also puts pressure on some HR leaders to raise their game. The skill sets for the HR has done a 180. There is a tremendous body of work on the importance of talent management and how it plays an integral part of any successful company.

Another defining feature of any company moving forward is for the head of HR to report directly to the CEO. That is where Marketing, Finance and all the strategic functions of the company report. There is also a great deal of discussion concerning HR professionals being considered for the CEO's role. If HR is reporting to the COO that is an indication that human capital is NOT taken seriously and that is a problem. With the turmoil continuing and the challenges of keeping the top talent in place and keeping the talent pipeline full, HR today is at epicenter of the upcoming storm.

To make the cut going forward, HR must move from HR departments to a true Human Capital department grounded in long-term strategy, rigor and methodology. Shall we say HR 3.0??