With the unemployment rate dropping and companies shifting their focus from survival to growth, those that don’t act soon to invest in human capital may give their competitors an edge.
Most companies are still leery of hiring big numbers of new employees. But depending on the industry, enough are doing so to jostle the competitive balance.
“Many of you are probably starting to see some of your best talent be recruited away, now that the storm is clearing,” said Bob Hostetler, national managing partner of CFO services for Tatum, addressing an audience of finance executives on a webcast about human-capital management offered last week by the executive-services firm. “This is happening because your competitors are making the decision to invest or retool. Part of that is cautionary: it’s necessary in order to preserve the capital you still have.”
Companies may be slow to rehire because they still don’t trust the economy. But another panelist, Dan Fogel, an executive professor of strategy at Wake Forest University Schools of Business, suggested as another factor the possibility that they are irresponsible in terms of macroeconomics.
Poor management of human capital, as manifested in layoffs that may have been premature and corporate waffling over whether to bulk back up now, makes for a lack of value creation. So some companies may not have been too smart about workforce decisions over the past few years. But even worse, at least on an extra-corporate basis, the costs of unemployment, both economic and psychological, are borne by society at large.
“Companies don’t tend to think of humans as capital, because they know they can pass those costs on to society,” said Fogel. He added that laying people off and then not hiring them in a timely fashion “creates societal stress and outcomes that are counterproductive to human survival.”
Even when companies do hire, they may limit the value new employees can provide by rushing them through the on-boarding process. That involves educating them on the company’s culture and goals and letting them get to know existing employees, who will then be better able to help them create value.
That’s too often a low priority, said Fogel. Companies are too impatient to begin realizing a return on investment on the newly hired, he said, adding they’d be better off in the long run by giving new people additional up-front schooling in value creation.
It’s hard for most CFOs to accept that concept, observed panelist Cynthia Jamison, a Tatum partner who’s currently finance chief at water-conservation firm Aquaspy.
“The cart goes before the horse,” she said. “You have to approve the spending in the belief that helping your human capital be more knowledgeable and better trained is going to produce better results down the road. I personally do believe that, but I think it’s a tough sell. Most CFOs are very short-term focused and spend conscious.”