Many leaders, and in particular HR professionals, are renowned for saying that “people or human capital are the companies greatest asset” or “the source of competitive advantage”. This was more or less the opening line in the report on The Best Company to Work for in the latest Sunday Times.
In the modern world this is simply not true. Any company can buy the necessary skills and talent from anywhere in the world. It may be expensive, but they can be bought and people are increasingly moving between different companies as their career progresses. A company’s own human capital can walk out of the door today.
In the modern economy such skills and talent are just a prerequisite to staying in business!
The source of competitive advantage is what I call “organisational capital”, more commonly known as culture. Culture cannot be bought! It cannot even be replicated in a short space of time, if ever.
Culture is the chemistry that enables smart, skilled and talented people to have an impact that is greater than the sum of individual skills and talent.
The problem is that companies, and in fact the whole HR profession, focus on designing a “human capital” strategy; on selecting individuals based on a competency model for a job; on individual performance counselling; and on individual development – also based on competencies. These things are important but seldom differentiate a company from competitors or even significantly improve performance because they focus on the individual elements of the organisational system and not the whole or the chemistry that makes it a system.
One of the greatest systems thinkers of all time, Russell Ackoff, gives this analogy:
Take 20 different models of cars. Determine which has the best engine, suspension, braking system etc. Take the best of these from the different vehicles and put them all together. In theory it should result in model of car better than all the others. Of course we know that the parts won’t even fit!
There are many football teams that have the best players in each position but they lose their games; there are many Executive teams that have the best Accountant, Marketing, Operations etc skills in their sector – but they underperform! In fact they are often totally toxic.
Leaders need to shift their thinking from focusing on individual performance and development to organisational capability and performance. Yes individuals are important, but organisational capital is sustainable; it cannot be bought or copied; and it is the chemistry that makes the whole greater than the sum of the individuals who make up the organisation...
Once this shift of thinking has been made, culture / organisational capital is treated as a key asset of value to be nurtured and leveraged for competitive advantage. Many top global and South African organisations understand this.
In the modern economy where organisations are more networked and collaboration an increasing necessity, organisational capital / culture / organisational chamisry will be one of the great competitive differentiators.
Terry Meyer is a strategy and leadership consultant, academic, author, blogger and keynote speaker. He is also a part time Faculty member of USB-Ed where he is responsible for the HR Executive Programme.
His areas of expertise include strategy, organisational design, leadership, and human capital strategy. He has written and edited 6 books, the latest being Strategy, Leadership and Change: A Practical Guide for Busy Executives”.