In today’s fast changing business environment a company’s talent is its most valuable and reliable asset.
An article in the McKinsey quarterly suggests that in today’s business, human capital is just as important as financial capital to a company’s success.
The McKinsey authors have published a book entitled “Talent wins,” which looks at the importance of this topic to today’s businesses. They state that leaders, at what they have called “talent-driven companies”, are as focused on talent and people as they are on strategy and finance.
Given their belief that having the right people in place is as important as having the right strategies and capital allocation, McKinsey recommends companies set up a “G3” leadership team consisting of the CEO, CFO and CHRO (Chief Human Resources Officer). They believe that “HR and finance must work in tandem…… With that foundation in place, CEOs can turn their attention to the two most critical aspects of leading a people-first company: finding, recruiting, developing, and deploying key talent; and ensuring that talent is truly integral to every major strategic decision across the organisation”.
The McKinsey article also suggests involving the board more broadly in talent matters. They note that many boards focus on strategy and compliance first, and limit talent discussions to the question of CEO succession and executive compensation.
As a way of driving this change in focus, they suggest transforming the mandate and scope of the compensation committee into a group focused on the recruitment, deployment, and development of talent. They suggest a name change, which they believe can have more than symbolic value, “such as the talent and rewards committee, or perhaps the people committee”. This can give emphasis to the focus on talent at board level.
As Greg Case, President and Chief Executive Officer of Aon says, “pure capital allocation is essential, but that’s not enough. Do we have the right talent in place? How should we think about talent development?”
Human capital and financial capital are both essential for the success of a business.
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