When it comes to developing your human capital (your employees), it’s important to first understand the strategy you have planned for your business. Whether there is an exit plan, succession plan, a potential sale or potentially no end in sight in some rare cases, the ultimate success still hinges on meeting your short- and long-term objectives.
Executing your strategy plan is really the exclamation point of success in business.
Aligning Human Capital with Your Strategy Plan
As with most things in business, I always recommend that companies try to get back to the basics. And if you align your leadership development objectives with your rank-and-file development, as well as your desired outcomes of your overall strategy, your business valuation can grow exponentially.
So when thinking about successful strategy plans, in many cases, there’s a “carrot” at the end of the road that a business owner is trying to reach, and this, in turn, will drive the value of completing this strategy as high as possible. And companies that use effective strategic human capital development plans throughout the organization generally have higher valuations.
With that said, I think the greatest mistake companies make regarding human capital development is they don’t keep their end-goal in mind. Many companies stray from their path very early in the process and then end up forgetting what they initially set out to do and the goals they wanted to achieve.
Knowing your end-goal and staying on the path are the two most critical factors to human capital development success.
Steps to Developing Your Human Capital
There are three key steps to successful human capital development. Listed below are the first two steps; I will discuss the third in my next Insight:
- Know Your Strategy—By this I mean you should know all of your strategies, from why you started your business to how you plan to exit your business. You want to understand what your short-term and long-term goals are; you want to understand if you are a short-term business or not; you want to understand if you’re valued against increased earnings per share or earnings per employee over a certain period of time; you want to understand what your desired valuation is and what types of metrics come into play to make that happen; as well as you want to be sure of what your Board of Directors and your investors expectations are.
- Identify Potential Roadblocks—After you know all of your strategies, you want to identify what your potential roadblocks are, such as time. Poor time management can be the death of a great strategy, so you have to make time to implement all of your strategies, both at a tactical level and at a strategic level, in order to have success over a long—or short—period of time.
Something to keep in mind is that, although you will get a return on investment (ROI), you will be committing a certain amount of time, as well as resources, to your human capital development. There’s a lot of training and there’s a lot of personal, as well as business, development that will be happening that isn’t primarily focused on the production of day-to-day business, but in the long-run will add value.
You also want to understand what roadblocks may potentially get in the way of having the right resources to facilitate the development of your employees. In many cases, companies have key identifiers they can use to train employees on how the business works.
It’s always a little more difficult for a business to find individuals who are fit to train members of leadership about how people work. So when it comes to teaching supervisors how to be supervisors and teaching managers how to be managers, as well as leading and coaching executives to be strong, you have to make sure you have qualified resources at your disposal. And you need to plan for those early on.
In my next Insight, as mentioned above, I’ll discuss step number three to successful human capital development.