Executives in a boardroom discussing recruiting and investing in human capital

Building an organization, role by role, from the ground up is hypothetical for an already-operating business, but it is nonetheless vital to determining whether you are investing in the right people and whether that human capital investment delivers return.  People that don’t meet the requirements across all of the Role Variables of their position will deliver sub-optimal results.  Sub-optimal results lead to a sub-optimal, even negative, return on the financial capital invested in human capital.

Why would anyone knowingly make a sub-optimal investment?  Do executives assess their human capital investment in the same way they would assess their investment portfolio? Most organizations don’t make the assessments of their existing human capital, let alone the new investments they make when they hire.

Build or Buy

Return on the financial capital that is invested in human capital is imperative whether you’re a public or private company owned by shareholders, a government entity that wants to maximize impact or a not-for-profit that needs to continually demonstrate that donor dollars are put to best use.

Large enterprises or government entities are organizations that can justify the training and skill development that each person in each function needs in order to deliver ROI on investment in their salary, benefits, and overhead.  They “build it”.

These entities can take the fundamental capabilities of an individual and develop their Learned Skills, Learned Skill Aptitude and Learned Skills Mix.  Those are all variables that can be developed with training, coaching and experience.  Cultural Fit and Personal Attributes, not skills, will then remain the variables that determine who succeeds in delivering ROI on the financial capital invested in their role.  Those who don’t succeed will exit, voluntarily or otherwise.  It is relevant to note that Cultural Fit and Personal Attributes can also be shaped (rather than “built”), but it is an enterprise-wide endeavor, not specific to skills and aptitude.

Some examples of the “Build It” strategy for maximizing return on human capital include:

  • Large corporations that recruit recent college graduates to enter their sales training programs. They identify a group or “class” of new hires with fundamental skills and vet at the outset for a degree of Cultural Fit and Personal Attributes.  Through training courses, on-the-job training, coaching, evaluation and feedback, they build the Learned Skills, the Learned Skill Aptitude and the Learned Skill Mix that drive ROI for every individual.  Only those that meet the ROI threshold retain their position over time.
  • The U.S. military has probably the most extensive and varied training programs. They are at the extreme end of the spectrum for the “Build It” philosophy.  They develop individuals across all six professional variables.  They actually build Fundamental Capabilities, Cultural Fit and Personal Attributes before they allocate resources to investing in any Learned Skills, Learned Skills Aptitude, or Learned Skill Mix.  Each step of the way, individuals that are identified for further investment are selected and others remain in roles where the organization gets the maximum ROI for their combination of effectiveness in a given position’s Role Variables.

Most companies and organizations, however, don’t have the scale required to justify the investment required in functional, let alone organization-wide training and development.  Some can afford the training investment in one or two Role Variables and usually only at the margin.  Most companies need to buy (hire) the mix of Role Variables that they need in an individual, for each position.

Alexandra Zaporozec is the Managing Partner or Marengo Hampshire Partners, a best-in-class recruiting and executive search firm that works with clients to maximize their investment in human capital.  The firm helps clients to bring people with the right skills, experience and potential to each and every role in their organization, from C-Suite to middle management to line staff, based upon the premise that each and every investment in human capital needs to deliver incremental return.