Managing Human Capital Like Financial Capital: The Roadmap

“People are our company’s most important asset.” We’ve all heard it; and many of us believe it. But what does it really mean? Do you know of a single CEO who knows whether his/her organization’s human assets are more valuable this year than last; or even what “more valuable” means? Our most important asset seems largely unmanaged.

In the 1950s and 60s when manufacturing capabilities were arguably the world economy’s most important asset, Edward Deming re-conceptualized manufacturing as a system—an engine of sorts that reliably produces an output. Deming defined the engine, the subsystems, and finally the parts. He then created a system for managing and continually improving outputs from each part to drive year-over-year system improvements.

In today’s economy where many companies are largely leased buildings and people (e.g., software, media, consulting, dot-coms), strengthening human assets is often the only real source for productivity gains. It’s time for a Deming-like approach to human capital: one that begins with a clear picture of the “engine, subsystems, and parts” and a disciplined system for systematically measuring and managing for year-over-year improvements.