Human Capital Lab

Embracing Uncertainty

Embracing uncertainty can serve as an asset rather than a liability. This is an intellectual stretch for most of us. When thinking about uncertainty in our professional lives, we are forced to see that it exists. Uncertainty exists in our markets, organizational structures, leadership, and internal processes. With everything changing, how do we address this fact on a daily basis?

This question was answered at this year’s Global Leadership Congress, hosted by Corporate University Xchange, which encompassed three days of discussion and learning around the event’s theme: “Embracing Uncertainty.” I grew professionally and personally while attending this conference, and I believe other participants did as well. I know that I don’t welcome uncertainty into my life, so this theme prompted new thoughts and reactions for me.

If uncertainty is an asset, then its very existence must add value. Since we cannot eliminate it completely, we need to embrace it and use it to our advantage. What could be the advantages of uncertainty?
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Defining Human Capital with Initial Research Results

The Lab’s research, seeking to measure the impact of a college education on employee performance, is revealing the “footprints” of human capital. I am working with other members of the Ph.D. faculty to identify ways to measure the impact, or return on investment (ROI) made by the employer.

The concept of “human capital” began around the mid 1960s with Nobel Prize winner Dr. Gary S. Becker at the University of Chicago. Until recently, human capital has been a little like the “Abominable Snowman.” People are talking about it but nobody has really seen it.

The Lab is taking steps to define human capital and create new knowledge through research that eventually will help identify and measure it. The Lab and its researchers want to be at the forefront, shaping intellectual and academic discussion about human capital measurement and management.

Does a college degree really make employees more productive? The Lab is currently theorizing that companies pay a premium for college graduates because they assume that they will get better performance from graduates, and they will reward the upfront premium paid by the employer with excellent performance in the future.
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Innovation - The Next Frontier on the Human Capital Agenda?

Innovation is a topic currently at the forefront of business leaders’ minds. The December 2009 issue of Harvard Business Review and a recent study, “The Innovator’s DNA,” both featured innovation and characteristics of innovators. Naturally I began thinking of the impact innovation might have on the growing human capital agenda. A few questions came to mind:

1. Are innovators more valuable to organizations?
2. Should everyone within an organization innovate?
3. If innovation is truly disruptive, how much disruptive activity can an organization tolerate?
4. If innovation is an element of human capital, how do we identify and measure it?

With these questions in mind, let’s focus on the human capital element of innovation. The DNA of innovative leaders can be summarized into five skills: associating, questioning, observing, experimenting, and networking. All of these skills can be learned, which means innovation can be developed in employees and fostered in an organization. From a human capital perspective, the questions become, “How can we encourage innovation in our organization and what is the impact of an innovative culture?”
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Human Capital Investments Hold Their Value

With a 270% rate of return, you might think that investments in human capital would be an easy sell at companies seeking improvements in their bottom lines. However, that is often not the case. Show me another investment that can hold its value that well. Part of the problem is short-term thinking in corporate America. Today the average tenure of a corporate CEO is just three to five years, and quick-fix downsizing often translates as cutting payrolls.

Competitive advantages gained through investments such as new technology, for example, tend to be short-lived. However, good employees retain their value. Although companies are looking for investments that will not lose value, they are willing to lay off some of their best people to achieve short-term cost savings. That can hurt in the long run.

Why fire people? It makes no sense. If you fire them, they will just go to work for your competitors. Then you have not only lost their knowledge and abilities, you have lost the investment you’ve made in them over time. I’m currently collaborating with Bellevue University faculty members and others elsewhere to document the ongoing impact of keeping quality people, even in today’s down economy. We hope to make the case for human capital in a professional development workshop at the National Academy of Management convention in Montreal next August.

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Realities of Measuring Learning Interventions: Recommendations & Challenges

As we enter 2010, I wanted to share with you some tips from ASTD. If you’re a member, as I am, I’d recommend accessing the entire article, “The Value of Evaluation: Making Training Evaluations More Effective.” I think it is right on target and frankly reinforces trends and practices regularly encountered at Bellevue University’s Human Capital Lab. From our experience working with learning leaders, the tips may not be quite so simple to implement so I’m offering our “take” for your consideration. The tips from ASTD are noted in BOLD copy and my take follows. I’d like to hear your thoughts too!

1. Collect data that is meaningful to leaders (ASTD). When talking with learning leaders, we find that learning what is meaningful to leaders may be a difficult first step. This recommendation also relies on the notion that learning leaders can retrieve data from multiple sources, normalize that data so it can be analyzed, analyze the data, and then interpret results for organizational leaders in a meaningful manner.

2. Where possible, standardize evaluation data across different functions within the organization to make it easier to use data effectively (ASTD). In our experience, this is one of the largest challenges and often leaves learning leaders evaluating only at levels 1, 2, and 3. Data will inevitably be derived from different sources, departments, and silos.

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Can Reduced Productivity Really Lead to More Productivity?

In some industries, such as retail, the holiday season is the busiest of the year and employee productivity is hopefully at its highest. In other sectors, the holidays bring days filled with decorating cubes, team potlucks, vacation days, and at times, lower productivity.

As I was scheduling meetings with coworkers for a project that is due the end of January, I kept trying to cram all meetings in the first week of January, which was stressful because time would be tight. Then it hit me – why? There is still time left this year and I didn’t even check availability. Why did I presume that a meeting during the holidays would be unlikely? It seems the holiday ‘break’ mentality struck and I was guilty.

The diversity of holiday productivity and its financial implications is fascinating when discussing managing a company’s human capital. For example, according to a survey conducted on behalf of ISACA (www.isaca.org), a nonprofit association of 86,000 information technology (IT) professionals, employees plan to spend nearly two full working days (14.4 hours) on average shopping online from a work computer this holiday season. One in 10 plans to spend at least 30 hours shopping online at work.

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Increasing Human Capital Value Through Non-rivalrous Change

During this economic crisis we have oftentimes been inundated with esoteric words and concepts. Derivatives, mortgage backed securities, underwater home owners, wage drift, and market equilibrium are terms we hear more frequently, even if their meaning is still a little unclear. However, a couple of terms recently caught my attention: rivalrous and non-rivalrous goods.

A rivalrous product is something that can be used or consumed by only one person or entity at a time. For example my cell phone is a rivalrous product. No one else can use it while I am. A non-rivalrous good is something that may be used or consumed without preventing others from using it. The radio frequencies used by my cell phone to communicate with the tower are non-rivalrous since many devices may access those frequencies simultaneously.

What does this have to do with human capital investment? It strikes me that sometimes we create learning interventions that are rivalrous when something non-rivalrous would be more effective. Classroom instruction is a rivalrous product. While a facilitator is interacting with the participants, no one else may access the information. In fact, the knowledge is often rivalrous and temporal. Small epiphanies and valuable dialogue are lost when the class is over.

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Starting Point of Analytics isn’t Statistics - it’s Logic

Although the notion of metrics for business outcomes has come a long way, predicting success is the next evolution of human capital metrics. Predicting success through people was the key message at this month’s Human Capital Metrics Conference hosted by The Conference Board. Jac Fitz-enz, Ph.D., the Conference Program Director, said it best, “Measurement is only good if it provides value to the organization. You must sell the executives with evidence, not just those feelings of what is valuable. Then the doors will open for new opportunities.”

The overarching message delivered by Fitz-enz and others was that HR and learning professionals are organizational Change Agents. Through the programs they deliver, they greatly impact the enterprise’s human capital value. Most importantly, measuring the value of those programs and initiatives is the name of the game.

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Using Sampling to Predict an Intervention’s Effectiveness

Determining the effects of a human performance improvement (HPI) initiative is always a challenge. We may have a sense that a training program or process change will positively affect everyone involved but before we roll it out, we’d like to have some level of surety. Programs cost money and we’re trying to determine if the benefit will be greater than the expense. Everybody wants to make the best possible decision but we need a little more information. Sampling might be the answer.

For example, we’ve all seen the evening news poll indicating 47% of the nation feels positively about the economy with an accuracy of plus or minus 3%. During the presidential campaign, commentators would say one candidate was ahead 53% to 48% but the lead was within the margin of error and too close to call. These conclusions are based on sampling and the amount of error expected.

When sampling there are a couple of terms to keep in mind: confidence level and confidence interval. Let’s examine the first national poll example. The newscaster has said 47% of the nation feels positively about the economy, plus or minus 3%. The “plus or minus 3%” is the confidence interval. They are saying the actual number might be in the range of 50% to 44%. Now, if you asked how sure they were about their conclusions, they would respond, “I’m 95% sure.” That is the confidence level. Confidence interval is the range, and confidence level is how certain we are about the range.

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Converting Intangibles to Tangibles

I am working with Dr. Jennifer Moss on a presentation for the November 18th meeting of the Omaha Organizational Development Network. We are going to discuss converting intangible intervention benefits to tangible measures, which is a great topic for the Lab since our research focus is the study of investments in performance improvement. However, from the beginning this subject felt a little like alchemy. Is attempting to convert the intangible into something tangible like trying to turn lead into gold?

Let’s define intangible and tangible. A quick Internet search revealed this definition of intangible: Incapable of being perceived by the senses; incapable of being realized. In contrast, tangible is defined as: Treated as fact; real or concrete; concepts, items or material that can be valued monetarily. As the definitions suggest, something intangible is hazy, fuzzy, squishy, indistinct, or even imperceptible. I don’t think it’s possible to turn ALL intangible benefits into tangibles. In fact, it may be inadvisable to try too hard to make the conversion.

What is possible is a broader understanding of tangible benefits and the ability to begin a project with end outcomes in mind. For example, innovation, initiative, employee development, and work climate all seem nebulous and difficult to measure initially. But we could measure innovation and initiative through the implementation of new processes, project completion, use of the suggestion program, goal setting, goal achievement, copyrights, and patents awarded. Employee development could be quantified through promotions, pay increases, percent of pay increase, learning program attendance, transfer requests, and performance ratings. Work climate can be measured by the number of grievances, discrimination charges, complaints, employee retention, and litigation. Bottom line - what we think of as intangible benefits are often soft-data tangibles.

Too often learning and performance professionals find themselves in meetings where the customer already has a solution prepared. I’ve worked with clients who open by saying they require a 3-hour customer service course. However, without a needs analysis and an understanding of where they want to go, it’s unlikely any learning leader would be able to help them get there. Analysis allows us to quantify the destination before starting. In this example, it might be call length, customer retention, product return rate, or some other metric that’s leading the executive to a training solution. Understanding the desired outcome allows a learning leader to provide an appropriate solution with measureable results.

I stated earlier that it isn’t advisable to try and turn all seemingly intangible benefits into something tangible. Some intervention attributes will resist quantification even with a broad understanding of soft-data tangibles and beginning with the end in mind. That doesn’t mean they are without value. Intangible benefits should be reported along with measurable, quantified, tangible benefits. However, if we push the limits of logic or common sense to make the conversion we may appear to be alchemists attempting the impossible.

Did I mention lead has more than doubled in value over the last year?

Joe J. Hare, CPLP, PMP