Monday, January 19, 2009

Profitability Through Human Capital

It's a new year and our blog has a new name. We changed our name from "Find Your Metrics that Matter" to "Profitability Through Human Capital.”, which more accurately reflects our work, our customer feedback and even posts in this forum.

When you think about your business’s definition of success, there are many variables that impact outcomes such as profitability, market share or growth. Measuring and tracking those variables is a part of a good strategy but the focus has to be on the things that "enable" and "facilitate” your business outcomes. We believe the enablers of high performance are:

1) Customers
2) Employees
3) Leadership/Strategy
4) Culture

These enablers are also the source of your competitive advantage and the key components of your company’s profitability. HR has the key role in "managing and impacting" these enablers. In last week's blog, I discussed the spillover effect from employees to customers. Without an effective customer-focused strategy and a culture that celebrates the customer, that can't happen. When culture, leadership and strategy support the employees’ efforts to service the customer, you’ve got the "spillover effect".

The following are facilitators to high performance and profitability:

1) Processes
2) Products
3) Technology
4) Financial Capital

The facilitators are necessary but easily duplicated. If they are not efficient, meet needs or support a customer-focused strategy, facilitators could sabotage the enablers and the customer will know it. For example, if your technology is old and slow, employees get frustrated and this spills over to your customers who experience disgruntled employees and slow service.

I believe that you have to take a holistic approach to the organization by examining desired outcomes, enablers, facilitators, strategy and mission, to determine what is working and what needs to be tweaked. Metrics that matter allow you to monitor high performance and create an early warning system when areas need attention.

Human Capital is the unique capabilities and expertise of individuals, which applies to our employees and our customers. Another reason for our name change: we believe that we must understand the cause and effect between these two groups of people as our business outcomes are dependent on both.

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