What's the Big Idea?
Unless you are a government or a major monopoly there are very few markets your company can control. Human capital is a notable exception. And yet, even though workforce expenditures tend to be the largest investments that a company makes, this is an area that many executives know the least about. Haig Nalbantian, author of the book Play Your Strengths: Managing Your Internal Labor Markets for Lasting Competitive Advantage and a senior partner at Mercer, calls this a 'blind spot.'
Nalbantian is a data evangelist who argues that companies need to develop fact-based estimates of their return on investment. "The new science of human capital management puts in place the methods to do just this," he says.
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What's the Big Idea?
Human capital management is a 'new science' in the sense that until recently people who studied human capital simply didn't have access to the right tools. That has all changed now. Not only do companies have access to data, they are much more savvy about the way they use it.
Just look at sports. As Nalbantian points out, sabermetrics was "a little small cadre of people doing it 20 years ago. Now it’s the norm." What does that mean? It used to be that baseball scouts would use extremely subjective judgments to evaluate talent. As Michael Lewis recounted in Moneyball, old school scouts in the Oakland Athletics organization recommended the team not draft a player because his girlfriend was deemed unattractive. “Ugly girlfriend means no confidence.”
When another scout remarked that one prospect had "a soft body," he was overruled by data. "I repeat: we're not selling jeans here," said A's General Manager Billy Beane. The change that sabermetrics introduced to baseball was that teams would use actual data, not intuition about a player's intangibles, to predict future success at the Major League level.
The implications for this go well beyond baseball, of course. As Nalbantian argues, no business can leave talent decisions simply to gut. Thankfully, the improvement in workplace analytics over the last five years can help companies make fact-based decisions.
With this key tool, Nalbantian says "there is no reason all business leaders should not understand thoroughly how their internal labor markets work, and whether they’re working in the right way, or whether they need to be changed."
About “Inside Employers’ Minds”
“Inside Employers’ Minds: Confronting Critical Workforce Challenges” features a dedicated website (www.mercer.com/insideemployersminds) which contains a number of resources focused on addressing each key issue.