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Power 2: The People

The only thing that truly differentiates a company from its competitors is its workforce.
Scott Leibs, CFO IT
September 15, 2005

You might think that putting the words "human" and "capital" together would be a surefire way to get a CFO's attention, but to date many CFOs have spent little if any time trying to square their company's workforce with corporate strategy. If employees represent a form of capital, it's a form that defies currency conversion and is thus deemed as soft as the Cuban peso.

I'd love for this second paragraph to begin, "All that is about to change," but that would be overselling it. The situation is changing, slowly, as executives begin to realize that the only thing that truly differentiates a company from its competitors is its workforce. But a mass awakening is probably not in the offing — as our survey found, CFOs aren't quite sure what to make of human capital (see "Survey Says").

That's good news for the forward-thinking executive, because savvy management combined with new forms of IT can help companies distance themselves from their more befuddled rivals. From making smarter hires and identifying top performers to linking pay to performance and grooming the next generation of leaders, the practice known variously as "human-capital management," "workforce optimization," or "talent management" is taking hold at companies ranging from global high-tech firms to auto-parts stores (see "Building a Better Workforce").

It doesn't hinge on new technology — in fact some companies we interviewed intentionally overhauled their workforce-management practices manually before bringing any kind of IT to bear. But software can make the practice vastly more efficient by capturing a wide range of data on individual employees, from their initial qualifications and skills to their subsequent training, job performance, ability to learn, and more. By matching this information to anticipated labor needs, companies can achieve that "alignment" everyone is always talking about, but that's just one advantage. Productivity, quality, innovation, and efficiency all loom as very real and tangible benefits. Suddenly, harnessing "human" and "capital" in the same buzz-phrase doesn't ring so hollow after all.