Human Capital in the Cloud

Your most pivotal human capital in the future may not be your employees, or even contractors or temps you hire.
John BoudreauFebruary 27, 2012

The world of finance and business is abuzz with the potential for the online “cloud” of computing capabilities and data to fundamentally alter commerce and the rules of competition. Most business leaders are at least evaluating the cloud’s impact on consumer research and data security, as well as the ability to purchase and access data and applications through the Internet, using any available platform.

Gone are the days when an organization considered software, data, and even intellectual property to be limited to the boundaries of the company. The promise is getting what you need, where and when you need it — even if that means getting it from outside your organization.

Business leaders should heed a similar evolution in the world of human capital. Your most pivotal human capital in the future may not be your own employees, or even contractors or temps you hire.

A recent article in Nature Structural & Molecular Biology listed Foldit Contenders Group and Foldit Void Crushers Group as two of the authors. Both were teams of online gamers playing a game called Foldit. In three weeks, the gamers solved a thorny retrovirus enzyme structure problem that had eluded scientists for years. The solution will have significant implications for the treatment of diseases like AIDS. The gamers were independent players who were not even compensated for their contributions by the organizations that will use the breakthrough to develop new drugs and other treatments.

Here’s another example: oDesk creates a virtual network of experts ready to address a wide variety of tasks and projects. Again, the human capital of oDesk is not held together by the traditional employment relationship. The organization facilitates connections between consumers with projects and those with the skills to address them. Your organization probably already farms out some of its projects involving web-page design and development, software development, and perhaps even routine accounting through such networks. Those who work on the projects never show up on your payroll system.

The implications are not limited to routine tasks or even technical specialties. Can your organization provide all the challenges needed to create the leaders with the requisite broad experience in the future? Increasingly, a dynamic competitive environment means that the challenges you face today will be very different from those you face tomorrow. Yet other organizations may have leadership positions today that embody precisely those challenges. Could many different organizations team up using the human-capital “cloud” to collectively create leaders for the future?

Khazanah, the strategic investment arm of the Malaysian government, provides a national leadership-development process that spans organizations. Their innovative idea was, “Why not transfer people between companies as a way to accelerate their development?” The heart of this notion is the recognition that the best learning often comes from challenging assignments. Yet any one organization may not have enough challenging assignments to go around.

Consider for a moment how much someone with a senior role in automotive might learn from a stint at an airline or what an experience it would be for a leader from a stable utility to be thrust into a management role in the world of high tech. By facilitating a leader exchange, Khazanah could have a huge impact on the development of high-potential leaders in Malaysia.

Khazanah has stakes in 50 businesses in a wide range of strategically important industries including agriculture, technology, utilities, and automotive. Its mission is not merely to invest in these businesses but to help enhance their management in a way that will ultimately benefit the whole nation.

Khazanah’s Orange Book initiative seeks to strengthen leadership development in Malaysia. The initiative extends beyond the companies Khazanah invests in, thanks to the support of other government-linked investment companies. Twenty companies participate in the Orange Book initiative, nine of which are owned by Khazanah. The underlying belief is that by working together, the organizations can do a better job of developing leaders with the different skill sets required for alternative business conditions than any single organization could do on its own.

Your annual planning and budgeting processes likely pay great attention to forecasting the supply and demand of individuals to fill positions in your organization, and you probably spend time developing succession plans that map development experiences for your leaders. Yet all these approaches assume that leadership and human capital will be built through an employment relationship — that your future human capital will be contained among your employees. Can your planning systems embody the cloud of human capital in the same way they embody the cloud of data and software? The human-capital cloud may hold your greatest opportunities.

You can read more about the Khazanah case in Transformative HR, by John Boudreau and Ravin Jesuthasan (Wiley & Sons, 2011). John Boudreau is a professor and research director at the University of Southern California’s Marshall School of Business and Center for Effective Organizations.