Rare and Inimitable: Creating Human Capital Advantage

In his book, The ROI of Human Capital: Measuring the Economic Value of Employee Performance, Jac Fitz-enz noted that quantitative financial measures alone provide information only on what happened (e.g., time, cost, capacity and revenues). Without quantitative measures of human capital and learning, the organization has no real explanation of how or why its human capital explains financial outcomes.

Yet many firms do not have an integrated approach incorporating human capital and knowledge management into strategic planning and business objectives. While firms have unique HR and learning systems, five problems often occur:

1. The recruiting and selection of human talent starts and stalls as a “stock” concept.

2. Talented people will seek employment that allows greater self-development and growth.

3. Talented people often expect incentives, including health care benefits, retirement plans and tuition assistance, among others.

4. Functional walls of separation prevent cross-departmental collaboration on higher goals.

5. Top executives envision that talentship and knowledge can be integrated into strategic planning in a fashion that supports marketing and finance goals.

While it is important to create a stock of human talent and knowledge, its accumulation alone does not create value. First, employees with valuable knowledge may not share their expertise with management or the C-suite because, more than likely, they operate under the assumption that they’re doing their jobs well. Second, it is only through an active flow of human capital and knowledge sharing that employees can demonstrate their tacit and non-documented knowledge unique to the organization. Last, if employees are not challenged to apply stored but unused talent and tacit knowledge, their skills will deteriorate or become obsolete. Like muscle tissue, talent, knowledge, skills and abilities require exercise for vitality and strength.