The case against ‘human capital’ (Guest commentary)

Term 'dehumanizes' and 'demeans' work of HR professionals
By Diane Wiesenthal
|Canadian HR Reporter|Last Updated: 02/11/2011

Last fall, I gave a presentation at the World HR Congress in Montreal where I asked my audience from around the world: “Who likes the term human capital?”

One-half the room liked it (sort of) and the others hated it. I’m with the hate it group. Ordinarily, I don’t subscribe to the word “hate” but it’s entirely justified here because of its detrimental influence on our profession.

Human capital is one of the most offensive terms in the HR language. You can’t put a price tag on people, like you would with a herd of cows, on a company asset sheet. But you can put a price tag on the work environment — and there is a profound difference, with enormous implications for the future of our profession.

How this term started is a bit of mystery. But it’s safe to conclude, in our desire as a profession to demonstrate ROI, we drastically overshot the mark. Or more than likely, we missed the mark altogether. This is not atypical of things we as a society tend to do — a problem appears and we go to extreme measures to address it.

Consider the notion of privacy and access to information. A new, ineffective and inefficient bureaucracy has been built and it’s not even achieving the desired outcome and adds no real value. Instead of just taking steps to do what is reasonable or right, we tend to go to elaborate measures and make things even more complicated. The mistakes of a few companies, whether intentional or unintentional, are now smothering business with rules and regulations that are counterintuitive to common sense.

This is a direct flashback to the policy police days of administrative HR where reams and reams of policies, rules and forms were essentially built around a few really bad apples, versus just dealing appropriately with the offenders. And here we are again — we talk about accountability all the time, but we severely lack the ability to “just do it.”

In our zealous quest as a profession to speak the language of business, we’ve gotten the methodology and our profession mixed up. We understand measurement is required to demonstrate a tangible ROI and clearly illustrate the cost benefit. There are also very effective ROI measurements to demonstrate the cost of doing something versus the cost of doing nothing. The secret is in finding the hidden budget bleeds in organizations, fixing those and calculating the savings.

Now why is this important? If you think this terminology caper is the least of our worries as HR practitioners, think again. This is a direct reflection on our profession and it’s not a good reflection. We are all attempting to show the strategic contributions HR or organizational development can make to business. How ironic this term “human capital” is dehumanizing and demeaning to the work we are all entrusted to perform.

Sadly, the term is a direct hit, unintentional or intentional, that discredits the basis of our professional work. Over the years, HR has taken a lot of heat from business with typical complaints boiling down to the fact it can impede business. Most HR programs were introduced in the industrial relations era and programs became more complicated, consuming more time and resources. Well, the world is moving a lot faster than it did in the 1950s, so HR not only has to speed up but race ahead, to ensure it’s positioned to enable strategic business success.

The answer is not administering an accounting methodology or terminology to the HR profession, but for the HR profession to do the hard work to re-engineer itself out of the 1950s. Being completely versed in financial management and understanding accounting principles are critical to all HR professionals, from line support through to the C-suite. However, HR is not, nor should it ever be, an accounting practice.

The new frontier for HR is being a value-added business enabler. By enabling both people and organizational success and wellness, we are also ensuring operational effectiveness. Re-engineering HR, and traditional HR programs, is essential to the strategic effectiveness of both organizations and the profession.

Building capacity in people and building healthy work environments are on the path to the future of the “people business.” Design jobs to challenge versus merely process, and actually engage brains to think. And have the courage to design and build your own HR programs to address the specific needs of the organization. Then apply a good dose of genuine accountability, a spark of ingenuity and expedited service to boost organization success.

It’s time to start the movement to stamp out human capital — and demonstrate HR is creative, innovative and strategic in its approach to building people and organizational effectiveness to add profit to the bottom line.

Diane Wiesenthal is vice-president of people and organizational services at the Canadian Wheat Board. She is conducting a webinar on practical ROI for HR with Canadian HR Reporter on March 9, 2011. For more information, visit www.hrreporter.com/webinars.

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