by Michael Schrage

Why CEOs Don’t Get More Value from Their “Human Capital” (a.k.a. People)

Sep 26, 20075 mins
Collaboration SoftwareSmall and Medium Business

At Microsoft’s CEO Summit this May, Bill Gates took a few moments to talk about time management. He noted that, somehow, his calendar seemed to be filled with commitments that—upon reflection—only seemed like a good idea at the time. In retrospect, he had been foolish to make them.

Things changed for the better, he said, when he began sharing his calendar with his colleague—and now Microsoft Chief Executive Officer—Steve Ballmer. “Steve would ask me why I would want to schedule that and I would look at his calendar to review what he was spending time on,” Gates recalled. This peer review, he observed, made both of them more efficient, more effective and more collaborative time managers.

This struck me as a singularly intriguing way for a pair of colleagues to challenge and get more value from each other. How many C-suite executives have the kind of relationships where they can do a peer review of each other’s calendars? How much more value could be gained by this kind of reality check on intended priorities versus actual time spent?

This vignette resonates well with a theme increasingly articulated from CEOs worldwide. For decades, CIOs have sold IT as an investment to boost the strategic and operational competitiveness of their firms. That’s a good thing. With Web 2.0, blogs, wikis, networked CAD and VOIP, IT’s internal value proposition has expanded to embrace enhanced communications within the enterprise. That’s also a good thing.

But listening as CEOs talk about their challenges and priorities reveals subtle but significant shifts in emphasis. Yes, CEOs are concerned about global competitiveness; yes, they want improved internal communications. However, they now are much more concerned about getting more value from their best people. They even seem more motivated to get better results from their “average” people. In short, CEOs seem both more nervous and more ambitious about getting greater returns from their firms’ “human capital” portfolio. Augmenting human performance now appears even more important than automating business process.

But are executive teams following through on these priorities in truly meaningful ways? Comparing these stated priorities with what CEOs and CIOs actually spend their time and resources on reveals a disconnect.

For example, the CIO of a global bank set up a lovely technical infrastructure to support blogs and wikis worldwide. The professed goal was to make the firm’s internal communications platform more vibrant, diverse and participatory. The bad news? The new blogosphere/wikisphere was built with the approval of—but with no guidance from—the CEO and the operating executive council. Yes, there are individuals—and individual departments and projects—taking healthy advantage of this resource. But, no, there is no integrated or coherent corporate understanding of how blogs and wikis should transform how people should communicate or collaborate within the firm.

Ironically, his C-level peers criticize the CIO for launching the platform before they were “ready” to take advantage of it. The CEO points to the platform as “yet another way our organization is empowering our people” without citing any best practice worthy of enterprise emulation. This is fake empowerment. Instead of exercising leadership by defining what kinds of benefits he expected to gain from these blogs and wikis, the CEO jumped on a fad and got wikis for the sake of wikis, which is rubbish. The CIO responded by saying, sure, I can build that. They created capacity without understanding the underlying value.

It’s time for a new kind of internal audit. CIOs have acquired great expertise in IT asset management and articulating how the firm gets good returns from its IT portfolio of software and systems. Systems to support the human capital portfolio demand comparable treatment from IT. CIOs need to push their people—and their C-level colleagues—to identify what the key elements are in the firm’s professional development and talent management portfolio and match up the systems investments with the people ones.

What does that mean? Professional development must now be explicitly aligned with systems development. Two weeks of training is neither synonymous with nor the sine qua non of professional development. Teaching you how to use Outlook or set up a wiki or create e-mail Listservs is not the same as you learning how to use them effectively. Not to be too cynical, but training is how IT has conveniently (and often to its detriment) “outsourced” its investment in the human capital of its users.

Indeed, many CIOs do a fantastic job of investing in and developing their own staff. They do a less than stellar—or nonexistent—job of investing in their internal clients and users. CIOs need to focus more of their attention on how to make their customers smarter and how to give their internal clients tools and training to make them smarter as well.

Not doing so is bad for two reasons: The first is the obvious one—when you underinvest in your users and customers, they are unable to get the value they need and you want from your systems investment; the second reason is the CEOs. CEOs—and even CFOs—now grasp that one cannot divorce the return on the physical or virtual asset from the return on the human asset. Whether CIOs like it or not, the systems, apps and platforms they build and procure are as much media for human capital development as they are mechanisms for global competitiveness. In reality, a portion of their global competitiveness potential is a function of how well people-as-people utilize that asset. That’s professional development as human capital investment.

Every IT proposal of note should come with a human capital impact statement, not just a training budget, curriculum and schedule in the appendix. Does this pose an added burden on an already overstressed CIO? Perhaps. Does this better reflect what the CEO is now telling his direct reports, your colleagues, your company and your investors? Absolutely. It’s time to coordinate your calendars so that the CEO’s priorities are better embedded in your own.