Human Capital is one of five types of capital. The other four are: Financial Capital, Organizational Capital, Relationship Capital and Structural Capital. By asking the same questions for each type of capital, you can create a capital utilization index and begin to move the capital performance needle in the right direction
There are different “capital” questions to be asked in the different phases of a solution engineering project.
During the first phase of diagnostics, the capital questions focus on whether the capital levels can support the existing business as in, “Is their sufficient capital (of all types) to achieve the existing strategy.” It is likely that there will be a deficiency in one or more capital levels. Most often, the deficiencies are:
Organizational Capital: Processes or Systems are inadequate
Financial Capital: Strategic projects or parts of the company are underfunded
Relationship Capital: A supplier is under-performing or the strength of customer relationships was over-estimated
Human Capital: Staff without the required skills are in critical position or a strategic initiative requires skills that do not exist within the company
Structural Capital: Space or facility restrictions cause operational issues
The next question is, “Is getting current capital levels to be sufficient for the strategy the solution?” If so, it could help avoid a major change program when it is not required.
In a discussion with a regional president of an automotive company, were discussing the new strategy that had been agreed and communicated by the CEO. When asked what I thought my response was, “The strategy seems like a 5 ton truck but your region’s infrastructure is like a 3-ton bridge. You are going to have a huge challenge getting that strategy over your organization’s bridge.” The assessment was based comparing the current capital levels within the organization with those required by the strategy.
To implement a new strategy the “capital questions” are, “What parts of the organization are impacted by the new strategy? What capital is required by each initiative and where is it needed to ensure success?” On a more operational level:
Organizational Capital: What processes or systems need to be upgraded?
Financial Capital: Do the budgets accommodate the required investment in capital development?
Relationship Capital: What is required of suppliers and vendors and can they provide it?
Human Capital: What skills and within what employee groups need development and by when?
Structural Capital: Do assets need to be deployed differently and can the existing facilities accommodate the re-distribution of assets?
The result was a “capital impact analysis” for the new strategy which highlighted and targeted what “parts of the bridge needed to be reinforced” before they drove the strategy over it.
Consider taking some time and ask, “To what extent is my organization utilizing its existing capital?” and “If we could increase our capital utilization by 10%, what could be the result? After all you pay of it and the answers may surprise you.