Without a doubt, the most important capital right now remains human capital. Organizations that will thrive after the pandemic are taking actions now to improve their future stock of this form of capital that delivers over 90% of organizational results.
As I write this, medical and financial fears abound. Much of the U.S. (and the world) is reeling from either the direct effects of the corona virus pandemic or the restrictive orders in many areas. Coming into sight is another fear – of the long-term losses in our personal financial and national economic systems. What degree of financial security do individuals and families still have?
Businesses have been forced to close or have lost many of their customers. Local and state organizations may face substantial reductions in budget. Cash is in short supply, and the future is looking murky, at best.
Under these conditions, what actions should hard-pressed leaders take? Accept government grants and forgivable loans? Cut costs and reduce full-time staff? Motivate shareholder or customer loyalty? Maintain or acquire tangible assets like machines or upgraded factories?
The answer might surprise you.
But first…
What Is Human Capital?
Many people are surprised to hear that something called “human capital” even exists.
That’s because, in the U.S., we don’t always think of developing our people as an intrinsic, necessary part of growing our organizations or our economy. This attitude is left over from the Industrial Age, when manufacturing was the primary driver of results, success was based on your ability to build a better, faster and cheaper widget, and manufacturing employees were considered just another cog in the process.
Old ideas die hard. But if we look at the past thirty years, it’s clear that our most successful organizations — from Amazon to Apple, from NASA to Walmart to Pfizer— aren’t thriving because of their superior assembly lines, but rather because of their superior ideas.
And who is it that generates ideas?
People.
To Understand Human Capital — and How to Develop It — Look to the Military
It used to be that — just like in the private sector — the world’s military organizations were competing to amass equipment. If you wanted a dominant military, you needed to have more ships, more tanks, and more munitions than your adversaries.
But today, military equipment, like all other tangible capital, has become a commodity. It’s reasonably cheap, readily available and in great supply. That’s why it no longer signals superiority. That’s why the U.S. military now understands that physical capital is no longer a differentiator for the world’s militaries and that superiority today isn’t based on having more equipment; it’s based on having better trained people.
Look at the example of education.
Does the Military Have a Human Capital Strategy for Education?
For more than eighty years, the U.S. military has led the nation with its efforts to optimize its human capital systems, adopt novel human capital strategies, and use analytics to assess and improve its human capital performance.
In keeping with this, our military has a simple and effective strategy for education: It makes education and training available to all recruits, based on their talents and desire to learn.
How has this strategy benefited our nation?
The “American Century” was kicked off by both our country’s technological advances during World War II and by the gains in middle class education that allowed us to turn those advances into global business dominance.
But the military’s commitment to education didn’t end with armistice. Every year, our armed services operate the world’s largest educations system, where male and female Soldiers, Sailors, Airmen and Marines engage in formal professional development. And as the cost of private and public colleges continue the skyrocket, the military’s training and education system, costing well over $30 billion per year, is free for service members and remains a major reason for enlisting in our all-volunteer military.
Does the United States Have a Human Capital Strategy for Education?
Yes. And it is also simple, though much less effective than the military’s. Our strategy allocates the quality and amount of education according to your zip code and family’s financial acumen. Facts are stubborn things and we need to own this one.
80-90% of our current high school students are qualified to earn either a college degree or a technical training certification. Yet many of them will not achieve that dream because it’s become unrealistically expensive.
How would things be different in this country if education were allocated based on your drive and desire to learn, not on line 42 (adjusted gross income) of your parents’ federal income tax return?
How much more would an educated and certified national population be able to contribute to our growth and resilience, during good times and bad?
I believe that our wealth and productivity would grow exponentially, along with the percentage of our citizenry that was vested in that growth. And perhaps the current pandemic will clear the way for developing bold new experiments such as student loan forgiveness, free virtual learning, even mechanisms for containing college costs to help us test that proposition.
Human Capital Will Light Our Way
Even before the corona virus pandemic, the United States was wrestling with major social issues such as inequality, the mismatch between workers skills and available jobs, apathy, alienation, and unnecessary displacement and despair. Too many, we’ve lost our way and we tend to fight over trivial issues, forgetting that long-term national success depends on perpetual strategic investments in national human capital.
The pandemic has laid bare, for those who choose to see, how impoverished our stores of both tangible and intangible capital had become. We’ve woken up to an understanding of how low our levels of not just medical supplies but also of leadership, truthfulness and problem-solving skills, have dipped.
Yet the pandemic has forced each of us — from business owners to employees, from policymakers to members of the public — to begin to develop our own human capital strategies. To ask: where, in these hard times, do we put our energy? Our creativity? Whatever money we command?
Do we compete to accumulate wipes and masks and tangible goods, confident in the individualized idea that “he who dies with the most toys wins”?
Or do we also support, help, train, educate and invest in each other — strengthening our families and work teams, sharing knowledge and know-how, coaching each other to higher levels of capability until this challenge begins to pass?
Our nation’s first responders and medics have already courageously answered this question.
Now it’s up to the rest of us to follow.
Let’s share experiences. Leave a comment below, send me an email, or find me on Twitter.
