5 Things You Need to Know About Your Human Capital Strategy

“Human capital” is a broad field that encompasses many issues—everything from pursuing a long-term vision for growth to complying with labor laws and timely delivery of paychecks. As the long-time leader of Insperity who has helped countless small and medium-sized businesses craft a winning people strategy, I have a veteran’s knowledge of the ins and outs of human capital management, including those things that many business leaders don’t know. The following are critical points that will spur growth and spare your business from costly mistakes.

#1. Human capital as the foundation of everything: There are five major strategic areas that are key to any organization’s success: sales, finance, operations, technology, and human capital. Human capital is the most frequently neglected of the five, which is unfortunate because all the other strategic areas depend on it. That’s also why problems within a business are often misdiagnosed. For example, if revenue is flagging, do you have a “sales” problem or is it because you don’t have the right people to generate new business.

#2. Managing risk: We like to think of our employees as assets, and of course, they are. But each employee, from the moment an application is submitted until years after they depart, represents a level of risk given the myriad laws and regulations governing the workplace. Failure to adhere to requirements may result in fines and penalties, or even litigation or criminal prosecution. Further complicating the picture is that workplace laws are always changing, and it’s tough to keep up.

Two especially fraught areas of compliance involve background checks and discrimination laws. Certain corporate or employee actions, even ones that are unintentional or done with the best of intentions, can unwittingly run afoul of discrimination laws. The best way to mitigate legal risks is to let experts handle all matters related to compliance. There’s just too much to know, too much at stake, and too many ways to err.

#3. The right leadership style: Leadership is much more than delegating responsibility and giving orders. For human capital strategy, good leadership depends on the right leadership style. An authoritarian style, which is rigidly top-down and coercive, might achieve compliance in the short term. But in the long run, it can backfire, creating a workforce that is resentful, fearful, and only work to avoid being disciplined or getting fired.

#4. Recognition and rewards: People are motivated by more than a paycheck. One of the most rewarding types of “compensation” comes in the form of acknowledging individual employees’ contributions. “Employee of the Month”/“Year” prizes, celebratory award ceremonies, and other such gestures provide team members with a deep sense of satisfaction and convey to the whole company that this is a place where individual dedication is valued. It can form a powerful part of your human capital strategy.

#5. Keep the doors open: No human capital strategy can thrive without effective communication—among executives, between executives and the employees, and between employees themselves. An open-door policy is the best way to achieve this. That also means communication runs both ways: speak to your people, but provide a forum for them to speak to you. Your strategy is strengthened when healthy, respectful dialogue, even about sensitive matters, is encouraged.


For a more detailed discussion of what makes a winning people strategy, pick up your copy of Take Care of Your People: The Enlightened CEO’s Guide to Business Success.

  • Share this story: