Growing an Organic Human Capital Strategy with the Organic Business Guru—CJ Coolidge
By Cara Whedbee, Ph.D.
This article is an excerpt of my interview with the Organic business expert, CJ Coolidge. For over 30 years, Coolidge has been an entrepreneur, business owner, manager, sales associate, counselor, teacher and consultant. He is a pioneer in the field of creating profit through human assets, specializing in exploring the relationship between a company’s people and its profitability and discovering huge untapped potential in most enterprises. Coolidge has been speaking on these topics across America and is the author of the upcoming (Summer 2008) revolutionary business book The Squaredime Letters. You can find out more about Coolidge on his Web site: www.cjcoolidge.com
CW: Thanks for taking the time to talk with me today, CJ. In your book, The Squaredime Letters, you make a strong challenge to conventional business wisdom in which employees are handled as expenses rather than as assets, or capital. You suggest that such a practice causes a company to waste time, energy and money. It seems to most businesses that handling employees as expenses is the best way to minimize any associated expense, so I think we need some more information.
CJC: Well, Cara, I don’t merely suggest it; I scream it from the rooftops. It really makes perfect sense. What we’re talking about is dealing with what we think about the outlay of cash necessary to secure a service. We’re talking about the difference between expense and investment, the difference between minimizing and maximizing, and this attitude will make all the difference in the world when it is applied to everything we do in our businesses, especially with our people.
There are two different models at work. One is a mechanical one, which has been formed to serve the production of “good” financial reports; the other is an organic one, which is designed to produce a good business. The key difference lies in its view of employees. In the mechanical model, employees are expenses to be minimized, as are all expenses; in the organic one, employees are assets, or capital, to be maximized. In the former, the primary focus is on the cost of the employee expense; in the later, the primary focus is on increasing the return on monies invested in an employee asset. The mechanical model limits profitability potential; the organic model explodes it.
It isn’t a bad thing for management to make every effort not to waste resources. No one wants or needs to spend more than they should for anything. However, if our attitude toward a particular expenditure is purely as an expense, we will attempt to make it as small as possible, and we lose sight of the most significant possibilities, the outcome, or the contribution to our profitability. If, on the other hand, we focus on that significant possibility, that is the outcome, our interest will be in “investing” at the most significant level possible. This is rarely the case as it pertains to our people.
CW: So that corresponds a bit with your concept related to the ROI of money spent on a human capital strategy. Tell me about that.
CJC: My pleasure, Cara. Let’s first describe what I mean by human capital strategy. Simply, it is knowledge by which an organization can begin to identify and quantify the relationship between the money spent to have employees (Human Capital) and its resultant financial benefit. The strategic part comes when, having this knowledge, the organization intentionally orchestrates the maximization of the return on what is then able to be viewed as an investment
Some client surveys at Administaff show, over a five year period, an average return on monies spent on workforce to be around 36 percent. That means for every dollar “invested” the company was able to realize a $1.36 return. This is an interesting reality because it says that, dollar-for-dollar, it would be smarter to invest in your employees than to invest in the stock market with all its associated risk and lack of control in hopes of a 10 percent return.
Accumulated evidence over a hundred years of industrial production in the United States alone points to the fact that contributions of individual employees can and do impact the growth rate, profit margins and maintenance of market share of a business. This comes primarily from an increase in what I call an employee’s discretionary effort.
CW: So how does a business owner go about developing an organic human capital strategy?
CJC: First they must ask the question, “Why would anyone want to work here anyway?” or better, “Why would the very best people want to work here?” If employees can make money working at any number of companies, why would they choose to work at your company, salary and benefits aside? A potential hire “wants” to know they are going to make a difference and that they are going to be different in their work. The best employees “need” to know this.
Mechanical model companies typically do not see all employees as part of the value chain, and therefore can’t consider them as productivity workers. I like to call those employees “overhead.” One way to identify your individual perspective is to see how you structure your compensation plans. If you are only offering salaries based on external criterion, such as “How much will I have to pay a person to do this certain role?” you probably view those employees as overhead.
An organic human capital strategy measures the employees’ ability to create imaginative solutions that make the customers’ lives better or easier. Employees who have this as their focus are productivity employees. The organic strategy compares the productivity employee’s ability to increases in profits and then offers bonuses specifically tied to the employee’s solutions.
If a company fails to see the difference between overhead and productivity employees, and then manage to that difference, it will actually miss the greatest earning potential and will simply kill the proverbial golden goose. Thinking about employees as being direct profit accelerators is a new way of thinking. When you can do it, you can begin to make the connection between changes in your personnel management and business efficiency, i.e. profits.
CW: Obviously, an organic human capital strategy has to focus on getting as many productivity employees in the organization as possible. What can a business who wants to be organic do to retain these employees once they have them?
CJC: There are an infinite number of combinations available. Let me list just a few:
- Evaluate Employer Relations and Communication. The number one reason employees leave a job is their boss. Dealing with the “boss” burns out a high number of employees. Their boss may treat them like a machine, have rigid policies, micromanage their activities, have impossible or insufficient expectations, refuse to listen to them or all of the above.
- Handle Performance Reviews Properly. There is nothing more difficult and more potentially damaging than the mishandling of employee performance reviews. Employers don’t know how to communicate less-than-optimal performance and employees don’t know how to deal with appropriate criticism. Employers handle performance reviews as HR boxes to be checked and offer less-than-beneficial feedback. Often employees receive the less-than-objective information and wonder how to improve their lot.
- Avoid the Blame Game. When a process that’s been in place begins to fail, it’s often easier to blame the people individually rather than reevaluate the process. Because they refuse to face it, or the prospect of “major” change is so daunting, they fire employees in key positions and hire new, “better” ones.
- Use the “Reward without Movement” Solution. The answer is to provide opportunities for higher salaries and greater recognition and status to a key player without changing their job responsibilities or their title significantly. This “promotion,” and promotion is the real word, is based on an ever-increasing and realized value the employee brings to the organization and to its customers. You replace hierarchy with reward based on impact, without movement. In this way, the entire team gradually evolves into a winning machine far greater than any you could train or hire. They are contributing discretionary effort; they are solving problems, increasing efficiency and feeling good about their ownership of the organization’s success.
- Get on the Same Page. Not connecting with what the employee needs and wants subtracts from your bottom line. In one case, I worked with an employer who liked picnics. He hosted elaborate picnics for his employees who hated them. They didn’t like taking time away from home and family pursuits to do a work-related activity. In this case, an increase in health benefits would have made them much happier than a barbecue on a Saturday afternoon.
- Grow Old Together. Most jobs have some potential for creativity and growth. Most employees bring their own desire and potential for creativity and growth. Consider the aspirations of the individual employee. These exist, whether acknowledged or not. It is easy to believe that, once understood, these aspirations are static. But this is absolutely not the case. Aspirations change with time, with experience, with maturity, with age. Aspirations change, yet companies often have no recognition of this reality. They make no provision for the different, often uncontrollable external events going on in their employees’ lives. They treat them all the same, yet different stages of life can make you good or bad, a fit or not a fit, for different roles at different times.
CW: Well, CJ, thank you so much for this great conversation on growing an organic human capital strategy. I learned a lot and I know I, and our readers, can learn a whole lot more about getting more “green” using the organic business model in your new book!
CJC: Definitely! It was my pleasure.
<p>This article is an excerpt of my interview with the Organic business expert, CJ Coolidge.</p>
Growing an Organic Human Capital Strategy with the Organic Business Guru—CJ Coolidge
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