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Over
the last year, I’ve had the opportunity to hear and talk with Professors
Chris Bartlett (Harvard Business School) and Sumantra Ghoshal (London
Business School) about their newest book—working title Competing
on Human Capital. The research for the book is still in early
stages, but well enough along to understand the thrust and direction
of what should be another quiet blockbuster of business academic
thought. Like a rock&roll junkie who eagerly tapes bootleg recording
sessions, I’ve written this note summarizing some pretty exciting
thinking I’ve had the privilege to listen in on. It’s semi-authorized,
in the sense that they’ve both seen what I’ve written, but (full
disclosure) it is wholly my take on their own research as they have
sought to explain it. With all the usual caveats of “work in progress,”
I believe it will revolutionize how we all think about human capital
in today’s corporation.
Bartlett and Ghoshal’s
last collaboration—The
Individualized Corporation presented a then-radical framework
for organization that put the individual knowledge worker at the
center of enterprise design. Unlike many New Age business thinkers
who studied dot.coms and post-modernist organizations, these two
professors focused on large, industrial scale corporations—and they
highlighted leaders who are creating work environments that shape
behaviors to bring the most out of each individual’s skills and
knowledge.
The new book-in-progress
is a logical evolution of that work, and Bartlett and Ghoshal’s
continuing research with leading-edge corporations such as General
Electric, Enron, Microsoft, McKinsey & Co, and others. In lectures
and discussions, they have been presenting what they believe is
the emerging new paradigm of organizational strategy: the management
of human, rather than financial, capital as the new scarce resource.
What’s intriguing about their view, however, is not the focus on
human capital per se (many others are obviously onto the same idea,
and have been for some time); rather it is how they define human
capital. For Bartlett and Ghoshal human capital is not only about
knowledge and skills, but also about “social capital” (relationships)
and “emotional capital” (motivation and emotions).
Beyond The Individual
Corporation
In
The Individualized Corporation, the two professors argued
that large, leading corporations have begun to transition from an
“engineering-mindset” of organizational design based on strategy,
structure, and systems to one more organically framed around purpose,
process, and people. The shift is not so much an abandonment of
the classic framework (dating back to Alfred Sloan at GM), but rather
a broadened way of working that recognizes the enterprise as more
of a social institution—one whose center of gravity is people, their
working relationships, and their sense of meaning and values in
the workplace. This evolution, highlighted in the several large
companies they have studied, has brought forward a new style of
leadership whose success is based on managing and developing human
capital as the heart of strategy.
From “What” to “How?”
The
success and acclaim of The Individualized Corporation nonetheless
raised in many readers’ minds the inevitable “how to” question:
if the evolution described is now the new paradigm for success,
what are the specific practices and approaches one must take to
operationalize the vision? The Individualized Corporation did start
down the path of answering the questions, describing the core processes,
management roles and relationships, and a culture of stretch, and
discipline, trust, and support—but the discussion was necessarily
high-level, and lacked much of the granularity needed by practicing
leaders.
The
new book-in-progress seeks to address the operational challenges,
and addresses four key questions:
What
is “human capital?’
What
are the approaches one must take to manage it superbly?
What
is the role of the organization in doing that?
What
is the role of the individual toward the same end?
To date, these two researchers
have had the most to say about the first two issues. Their definition
of human capital gives full importance to the knowledge, skills,
and experience of workers. But, in recognizing the fundamentally
social nature of the new organization, they also insist that human
capital is about the “capital of relationships” and the “capital
of emotions.” Further, the three components of human capital work
together in a dynamic, interrelated system that must be treated
holistically by managers and leaders.
The “how” of Bartlett and Ghoshal’s
analysis is still very preliminary, and will not satisfy anyone
looking for hard-edged tactical advice. That said—their higher-level
outline is well framed. By their view, each dimension of the human
capital model raises its own challenge, each of which implies a
particular management approach.
The Three Challenges
of Human Capital Management
Accumulating
Linking
Bonding
The
first challenge implied by the human capital framework is how to
win the competition for talent, and also develop talent internally.
Noting that every hiring decision is potentially (considering opportunity
upside and not just costs) a multi-million dollar decision, the
stakes of winning on this dimension are high. The authors identify
three directional imperatives implied by the challenge: moving from
simple “recruiting” to more “holistic talent acquisition strategy”
(such as Microsoft’s ferocious cultivation of software developers);
from “management training” to creating an “embedded development
culture;” and from a process of “routine annual performance evaluation”
to one of “continuous upgrading” of talent (a la McKinsey &
Co.).
On
the social dimension of human capital, Bartlett and Ghoshal described
the so-called “linking challenge,” fostering relationships supportive
of knowledge and learning. Here action directions include such things
as creating new channels and forums of knowledge exchange, championing
rewards for learning, and leading the development of a trust-based
organizational culture.
The third, emotional
dimension of human capital similarly implies other, complementary
initiatives. Here the challenge is one of “bonding”, and shifting
the focus of management away from “battling for free agents” towards
building “committed communities of employees.” This will require
such things as rewards for the development of the “social infrastructure”
of a company, and connecting individuals’ activities and beliefs
to the values and vision of the overall organization.
The New Management
Mindset and “Volunteer Investors”
Rising
to these challenges will require new ways of thinking and acting
for leaders. If the new strategic resource is human, not financial
capital, top management must portray the new focus by changing its
role from shaping strategic content (“what we should do”) towards
framing behavioral context (“the environment in which we act and
develop”). Bartlett and Ghoshal offer an intriguing new metaphor
for the employee of this new organization: no longer “assets” they
should instead be seen as “volunteer investors,” choosing to invest
their talent in the success of the enterprise they have joined (see
Thomas O. Davenport’s article on “new
metaphors” in this same issue). And correspondingly, leaders
of these new organization will have to change traditional views
about value creation and wealth distribution—shifting away from
a sole focus on shareholders to a more equitably partitioned distribution
of rewards among shareholders, employees, partners, and other contributors
to the overall success of the enterprise.
Assessment
of the New Model
The
directional thrust of the Bartlett and Ghoshal argument seems broadly
right and, given all the caveats of “work in progress,” represents
a great foundation for thought leadership about a new paradigm of
organization. That said, it falls short of being a complete and
totally satisfying explanation of all we want to know about this
next generation.
First,
the model, at least as far as presented to date, underappreciates
the role of the more extended enterprise in shaping the organization
of the future; we have heard too little discussion about partners,
channels, or other allies aligned with today’s complex organizations.
Next, the research, by design, is focused on large corporations;
do the same propositions necessarily hold for midsize and even small
companies who also have aspirations for becoming learning organizations?
If not, what would be different, and what would be the management
implications, especially for these traditional “engines of innovation”?
Finally, the model-in-progress still lacks real operational detail.
Anyone who has ever had to lead a major change effort will hunger
for a lot more specifics on creating an “embedded development culture,”
and also more discussion of the role of any of the new technologies
that promise to revolutionize how learning is pursued in the age
of the Internet. The authors’ desire to make this research much
more “how to” than their first book will also be tested by the level
of detail most practicing managers will desire.
With
that said, as the research continues to unfold we can certainly
hope for fuller treatment and answers to thus far unanswered questions.
In daring to take the debate about human capital beyond rehashed
discussions of intellectual capital and skills, and raise the historically
forbidden topics of social and emotional behavior, Bartlett and
Ghoshal are on their way to institutionalizing a much needed perspective
that truly puts “human” in human capital. We look forward to more.
Christopher
Bartlett is the Daewoo Chair of Business
Administration at Harvard Business School where he also serves as
Chairman of the School’s General Management Area. He is the author
or coauthor of five books, and maintains ongoing relationships with
several major corporations as both a board member and as a consultant/management
advisor.
Sumantra
Ghoshal holds the Robert P. Bauman Chair in Strategic Leadership
at the London Business School. He has also taught at the MIT/Sloan
School of Management and INSEAD. The author of numerous books, articles,
and case studies, he was named by The Economist as one of
the "EuroGurus" in management.
Brook
Manville is the publisher of LiNE Zine, and is always on the lookout
for interesting, groundbreaking ideas. Share some with him at brook@linezine.com.
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