The Issue: Managing Tomorrow Today

Global competition, market volatility and declining labor pools make investing in people a high risk gamble. Still, future success is dependent primarily on your ability to attract, retain and productively manage a shrinking pool of talented, motivated people.

Currently, human capital investments are sub-optimized by three factors:

1) Each human resources (HR) unit operates primarily within its own silo at its own pace, resulting in nonintegrated and mistimed outcomes.

2) Pressure to perform concentrates HR on daily operations with little attention devoted to future consequences, leaving many companies continually behind the curve in human capital management.

3) There is no future-focused, strategic HCM model. Unlike production, finance and marketing, HR does not have an integrated model from which to design strategies, carry out operating initiatives and drive competitive advantage.

The lack of a strategic, unifying model limits HR's internal efficiency and greatly inhibits its ability to positively affect the people and organizations it services.

State of the Art

All major organizational functions from production (MRP) through finance (GAAP), marketing (CRN) and information technology (ERP) operate on the basis of a professional, strategic model. Still, HR is noticeable for its lack of such a strategic model and operating system. HR has a body of knowledge, a code of ethics and numerous theories of human and organizational behavior. Yet, a strategic model, operating system and generally accepted principles of evaluation have not been available.

Therefore, it is time to launch HCM:21®; Human Capital Management for the 21st Century.  This breakthrough was enabled by the Predictive Initiative, a consortium of major organizations committed to transforming HR into a strategic function.2  HCM:21 is both a strategic model and an operating system.  The model identifies the organizational entities and then operationalizes how they interact and need to be managed. 

The HCM:21 model is comprised of 5 modules.  Each module has strategic significance in and of itself but is far more powerful when combined and integrated. 

1) Strategic Capacity Scan
The future of human capital investment planning requires an understanding of all aspects of the market, including compensation, technology advancements, pending regulations and economic and human capital trends. This is why HCM:21 begins with a strategic scan of external forces and internal factors that might affect the three fundamentals of the organization: human, relational and structural capital.

The strategic capacity scan module includes sample worksheets and definitions designed to help you determine your organization’s external forces and key issues. Also included is a worksheet to help senior leadership review their current Vision, Mission and Values statements and to amend or modify them as needed. Both sets of worksheets comprise an Organizational Analysis.

2) Capability Planning
The Strategic Capacity Scan told you who and what you have to compete with and where your internal processes and structures might need recalibration. Now you are armed with the data to make plans to build capabilities across essential functions.

The first step in planning divides the workforce into four categories in terms of valued capabilities: The categories are as follows:
• Mission Critical (MC): Those capabilities which are essential to survival and competitive advantage.
• Differentiating and Unique (DU): Those capabilities that set your organization apart in the marketplace.
• Important for Sustained Operations (SO): Those capabilities that are operational necessities for success.
• No Longer Critical Skills (RR): Those capabilities that can be reassigned, retained or released outsourced or eliminated.

The next step in planning is to apply our advanced succession planning system, which is built around four principles:
1. Assigning a line executive the primary responsibility for managing the system.
2. Identifying high potential (Hi-Po) personnel as far down the organization as possible.
3. Designing personal growth programs and reviewing and updating the Hi-Po list at least annually.
4. Monitoring advancements and their effect on mission accomplishments and revenue growth.

3) Process Optimization
This module of HCM:21 is designed to help you analyze any process, in any function. In human resources it can be applied to hiring, compensation, development or retention. It will aid you in determining which combinations of source and method yields the best results for your organization. When you have very large data to analyze you will need to apply the sample algorithms included in the HCM:21 package.

4) Service Integration
The greatest leverage opportunity for human capital is found in how HR services are delivered. As many as 95 percent of HR departments deliver their services and support in a fragmented manner, each function operating in its own silo.

The problem with this is that there is no synergy.

The secret to integrated delivery is leadership on the part of the CHRO. He or she must lead by showing how integrated delivery is best for HR’s customer: the managers and employees. The main barrier to such synchronization is not structural it is human.

5) Predictive Measurement
Most HR departments today are engaged in some type of measurement. However, they do not interest management because they focus on expensive activities and not on value-adding results.

The latest and most exciting value added measurements are leading indicators and intangible metrics. These predict what is most likely to happen in important future events. With these data points, C-level can strategize and invest with a minimum of risk. Given the volatile markets today and into the future, risk management is at the core of human capital investment.

Most data generated by companies today is lagging information, reporting on past periods. While this can be useful in some instances it does not lead directly to future expectations or requirements.

To manage for tomorrow, you need new metrics that are inherently predictive. We call these “leading indicators.” There are a number of indicators that can be turned into leading indicators.

Predictive Management White paper

This page offered a simple overview of the HCM:21 model and the concept of predictive management.  For a more detailed analysis and instruction on HCM:21 and Predictive Management follow this link to download the free white paper:

Predictive Management - "How to Optimize Human Capital"