Today’s executives spend a lot of time managing the balance sheet, despite the fact that it doesn’t represent their company’s scarcest resource. Financial capital is relatively abundant and cheap. According to Bain’s Macro Trends Group, the global supply of capital stands at nearly 10 times global GDP. As a result of capital superabundancy, global quantitative easing and relatively low demand for investments in R&D and capital projects, the after-tax cost of borrowing for many companies is at or near inflation, making the real cost of borrowing close to zero.
What If Companies Managed People as Carefully as They Manage Money?
Make investments and monitor their performance.
May 24, 2017
Summary.
Financial capital is abundant, cheap, and rigorously managed. Human capital is scarce and not found on the balance sheet — and therefore not managed as rigorously. In this era of nearly free financial capital, what separates the best from the rest is leaders’ ability to manage human capital: the more talented people a company attracts, the more effectively it focuses their time on value-adding missions, and the more energy they bring to the workplace, the higher the quality of their ideas and the quantity of output they produce. To get better at managing human capital, executives have to manage it like financial capital – they need to measure it, invest it, monitor it, and reward it.
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New!
HBR Learning
Attracting and Cultivating Talent Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Attracting and Cultivating Talent. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Discover how to attract, hire, develop, and keep talented people who will grow and thrive throughout their employee journey.