I was recently watching Yasheng Huangs TED Talk Does democracy stifle economic growth, and it really changed how I thought about people not just being key to a business and it’s effectiveness, but into being a key driver of corporate growth. Yasheng identified key components of human capital to explain the difference between China and India.
[ Population ] x [ Literacy Rate ] x [Working Years] x [ Culture ]
I added culture based on a similar TED talk on the Economy, Neil Ferguson’s 6 Killer Apps of Prosperity.
When he compared the fundamentals of India and China he highlighted key points:
- China has a larger base population than India (as per a popular movie reference, there are more honour students in China than total students in the USA)
- China has a substantially higher literacy rate (30%) and a higher requirement to be considered literate
- Longer life expectancy (China has had ~10 years longer life expectancy historically)
- Growth stalled in India during the 1975 emergency when the government took temporary, authoritarian measures. Chinese growth has accelerated as they’ve become more open/free in policies.
These same practices can be modified for businesses, and can be used for creating a framework for generating organic growth.
Framework for Generating Growth from Human Capital
| Factor | Explanation | Case Studies |
| Literacy Rate | For a country Yasheng used the basic literacy rate/information from traditional sources. For a company, this needs to be a common set of business skills, competencies, and technical skills. The better your employees hard skills, soft skills, and general business knowledge (including understanding how your business creates value, and its strategy to compete).A few tools for this would be competency profiles, recruitment standards, emotional intelligence training/development, technical skills training, performance management / alignment to business strategy etc. | Strategy Alignment / Speaking the Same Language |
| Number of People | While there is a limit (committee’s are terrible for decision making) for certain circumstances having more people in an organization is an advantage. In particular in early stakeholder assessments, research & development, brainstorming etc. In fact McKinsey Quarterly highlighted the productive rivalry stimulated artistic innovation during the Renaissance, and how according to the director of General Electric’s Global Research Group, it also has helped his company develop better products and services. | McKinsey Quarterly – Using rivalry to spur innovation |
| Working Years | In an organization, this may be better viewed as the tenure of employees. In particular, the tenure of high performing leaders and employees. There has been significant research that shows internal CEO’s are far more effective than “celebrity” CEO hires. While some turnover and freshening of ideas is good, too much means an organization is hemorrhaging tacit knowledge. High turnover is costly and lowers productivity. | AT Kearney – “Home-Grown” CEO: One key to superior long-term financial performance is managing leadership succession |
| Culture | Culture and employee engagement. This may be the most powerful lever available to managers and HR for improving performance and driving growth. As an HR professional I am positive you have read significant amounts on engagement in recent years and how it helps measure discretionary effort and can be used as a leading indicator of productivity. | Hr-Central.ca – What motivates employees?Financial Post – Does Engagement Really Drive Productivity |
So, while this may not be the most eloquent or immediately purposeful article for most HR people – I do think it helps highlight how human resources are an important driver of an organizations success, at least equal to marketing, finance, and operations.
Until next time,
“The postings on this site are my own and don’t necessarily represent PwC’s positions, strategies or opinions.”