3 Simple Questions Investors and Analysts should be asking about Human Capital

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About the vlog:

I have been listening to analyst calls for public companies for years and have been part of leadership teams that are raising capital and I am always amazed at the lack of questions around a company's human capital / talent mgmt practices.  

 Yet I know that investors recognize how important the human capital assets of an organization are but there's very little attention paid to it. I have seen companies that are human capital intensive literally implode when these basics fundamental talent mgmt. strategies aren't in place.

 I can only surmise that there's a lack of understanding as what to ask as well as difficulty with measurements and benchmarks. In fact, if you have been following the public meetings that the SEC has been posting,  you'll see how many smart people are focused on this topic and still don't really have many answers for  quantitative measures for human capital requirements.

Today I'd like to share my point of view and what I would look for as an investor or an analyst when evaluating the long-term value of a company especially if that company is heavily dependent on their people to make their numbers. For example, consulting or Professional Services, technology, Healthcare, Construction. In fact, there's probably not a single business today that still does not heavily rely on their talent and after the last 31 months of talent constantly being in the news, I think you'll agree with me how important this is.

 Here's the deal: we don't have to overcomplicate it. 

Having spent my entire career in human capital-intensive businesses, I know having the right Leadership and culture is critical and is nothing new.   But what fundamentally enables a strong culture and Leadership is the ability to execute on foundational talent management strategies. Even the best leaders can’t accomplish this on their own - no matter how charismatic they are.  

Don’t wait for the SEC to put requirements in place.  Here are the 3 simple areas that I would focus in on immediately as an investor or analyst…

1. Does the organization have a chief HR officer or chief people officer reporting to the CEO and if not do they at least have one or two Chief HR officer has on their board of directors or Advisory Board providing the expertise and governance needed? This is very simple question to answer. Yes or no
2. Does the c-suite meaning the CEO, CFO, COO and CIO know how to leverage strategic talent management resources to help them grow their business. The reason this is important is that HR leaders will spend years just trying to educate C suite leaders on how to leverage strategic HC.  Imagine that friction is not even there and the CHRO can hit the ground running with strategies that will drive top line and margins?  Now this one is not as easy to measure but there are certain questions you can ask the c-suite to understand if they View human resources An administrative function or a strategic partner. You might say, well what if HR isn’t strategic? And this question is irrelevant if the CEO gets it because they will hire the right strategic CHRO and they have a better chance of this if there is one on the board BTW.
3. And finally the third point is stop asking the DE&I question.  Most of you aren't going to like hearing this but many companies have had to put programmatic diversity equity and inclusion initiatives in place and if they aren’t grounded in a solid talent mgmt. foundation, it is just Window dressing in order to respond to ESG requirements. If a company doesn’t have strong talent management strategies in place which are fundamental to being able to ensure a diverse slate and pipeline of leaders to pay equity, there is no hope for long term change. 

Lack of resources is a common challenge HR leaders face because HR  is really two major departments that gets funding for only 1 dept. The first dept is what i call “the keep the lights on” HR dept to make sure people get paid and the company doesn't get sued - the compliance side. 2. But the other dept in HR is strategic talent management that creates structures that produces pipelines of talent, ability to promote people in an Equitable way, ensure that there is the right representation at the top, make sure that candidate slates include diversity and there is pay equity. To create a company that employees will refer their friends and family to. None of these things can happen without a strong talent management Foundation. There's way too much to go into in this video but imagine trying to build a house and being worried about what your windows or roof looks like when you don't have a foundation, I will hold the frame of the house.

 If you're interested in digging deeper into this topic, feel free to contact me and I would be thrilled to have an opportunity to share the fundamentals of talent management that drives business with any CEOs, boards, investors or analysts. 

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