Change for the Better

Whoever said change is the only constant was understating the obvious. Not only are macro changes apparent, but previously invisible changes are insinuating their way into our lives. The most obvious change force is the social networking phenomenon, and it’s a new opportunity to leverage human capability.

The overwhelming social networking influx is already remaking companies’ structures. People are designing, adopting, broadcasting and exchanging social networking apps faster than the market can absorb them and management can manage them. Those who learn how to marry people with the new data will drive an exponential rise in their enterprise’s effectiveness.

Corporate management is being prodded to leverage employees’ potential. Prior to and through the dotcom debacle, success was all about throwing money at technology. The impact of human effort was largely ignored and shoved aside in favor of financial manipulation and another round of computing investments. This is changing.

Increasingly I see more press devoted to articles around human capital analytics and financial training for employees. If you had suggested 10 years ago that all employees ought to know the fundamental accounting/finance languages, you would have been laughed out of the building, as I often was.

Recently the question came up again: Why don’t CEOs recognize and invest in people like they do in other initiatives and functions? The answer is simple. First, often a C-level executive can make an investment in a non-human arena and feel confident that a reasonable return on investment will occur. That is not the case with people. Investing in complex human beings is a high risk. Second, talent managers have done a poor job of teaching the C-suite how to achieve high rates of return on employee investments. Fortunately, the winds of change are gaining strength.

In the April issue of CFO magazine, David McCann wrote about how insurance broker Marsh is teaching its 25,000 employees the fundamentals of finance and accounting. Everyone at Marsh must participate in a finance education program titled “Making a Financial Impact at Marsh.” One reason behind this is Marsh is linking more employee compensation to the company’s net operating income. The other is the need to rebuild client relationships by having more substantive conversations with clients about their risk factors. Once the word on Marsh gets out, other brokers and insurance companies will follow. The banks will follow and finally, so will general industry. We are seeing the first glimmer of a new people/finance connection.

That change is appearing more frequently in publications such as CFO, The Wall Street Journal, The Conference Board reports and HR journals. Although unemployment still lingers above 8 percent as of May, there is a desperate cry for skilled people in many technical occupations. Increasingly, more jobs require the ability to deal with technology. Beyond computing, service jobs in general are increasingly dependent on technical skills. When you don’t have enough people to do the job, you have to introduce new tools to make the few who can do it more productive. The latest tool expansion program is analytics.

Companies are buried in data but short on the business intelligence needed to supplement skill deficiencies. This brings us back to social networks, which produce a mountain of unstructured, but potentially valuable, data. Analytic tools exist to mine that mass.

Research shows that the rate of return on analytics investments can be as high as 10 to 1. To capitalize on this, large and small vendors are pushing tools into the market to make sense of the data mountain. Still, there is a basic flaw that must be recognized. It is called misdirection.

I have been telling HR people for a very long time that “What should we measure?” is not the right question. We must start by asking what the company is facing in the marketplace, and what it should be doing to gain competitive advantage. Then we can begin to test the predictable value of various plans. That is truly change for the better.