As we move rapidly from a manufacturing to a service-based economy, the importance of human capital as a key marketplace differentiator has become increasingly evident. Companies have come to realize they need to hire, develop, and retain superior talent if they are to differentiate themselves from others and achieve competitive preeminence in the marketplace.
There should be little question in people’s minds about the importance of human capital to organizational success. Companies such as Microsoft and General Electric have long demonstrated that having a superior workforce is key to sustained market preeminence and business success. In fact, studies by McKinsey and others have consistently proven a factor frequently differentiating successful from unsuccessful companies is the time spent by their senior management in “talent management”. Leaders of highly successful organizations are known to spend better than 50% of their time in
the assessment, development and selection of their firm’s human assets.
What is not clearly understood by many, however, is the tie-in between people and profits. There should be no mystery here. There is a direct relationship between people and profits, and that relationship is captured in one word - “competencies”. It is the competency level of the workforce that determines how well that workforce plans, organizes and controls all other business assets (i.e., capital, raw materials, equipment, technology and people). A highly competent workforce will tend to manage these assets well, rewarding their employer with higher productivity and profits. Low competent workforces do just the opposite, draining profits away.
