Nurturing a new kind of capital.

• Author: Johnson, Mike
• Position: Human resource management

While it may be common knowledge that the CFO's mission is to ensure that all the assets of the organization produce the maximum return on investment, there is one key asset on which many CFOs seem to stumble and fall. That asset is human capital.

And it's common sense that in a global business world, dominated by massive labor movements and talent shortages, the best financial management skills are useless unless organizations have the right people in the right place at the right time and use them wisely.

The effective use of an organization's human capital isn't just a leadership problem for CFOs, trained in measuring and counting complex financial data; the other denizens of the C-Suite are just as culpable for often only following their line of functional expertise:

Marketing VPs position brands

R&D VPs innovate and develop

Sales VPs push product and service

The CFO counts the cash

The CEO sweats strategy

Putting their hard-earned expertise aside, all the individuals in the roles listed above have one thing in common: they are all senior managers charged with leading their organization to be the very best it can be. In today's global environment, that very best includes knowing how to invest and develop human capital--the asset that doesn't sit on the company's books at night, but goes home and has the option of whether it comes back the next day.

The stark reality is that many organizations still leave the strategic management of human capital to the human resources (HR) department and operationally to mid- or low-level HR and line managers.

Often, the presence of a few visible strategic HR initiatives lulls the CEO and other senior executives into assuming, incorrectly, that the business is working hard at maximizing the human capital return. But that is rarely the case.

There needs to be a proactive human capital strategy to turn the potential into bottom-line results. Such a strategy doesn't begin in HR, but rather, it begins at the top, with the CEO, CFO and the rest of senior management.

Human Capital Strategy

The objective of a human capital strategy is the maximization of the return on investment (ROI) on the human capital of the organization to impact the bottom line in the best way possible. And, that's easier said than done.

It can be accomplished, however, by making sure that all your people are better motivated, more engaged, supported, skilled, customer-focused and more qualified than your competitors, and in a way that can be measured. Such a task requires a hands-on, proactive CEO and CFO, other senior management and HR, all acting together.

In such a scenario, the CFO and his or her top management team is deeply involved--and not just cheering from the sidelines. In this hands-on leadership approach, this human capital strategy gets turned into an agenda that is driven by the business but delivered by line managers and ultimately, every employee.

There are a number of factors why CFOs have not traditionally been involved in the development of human capital returns, but primarily because their early professional training tends to make them more likely to focus on numbers than on people--a natural focus to reduce costs and maximize income and profit. Unfortunately, professional training as a finance executive will probably not have included understanding the potential of human capital returns and how to release them. As a consequence, many CFOs feel that it is not their place to work on this type of people-centric agenda.

More than that, human capital investment--and the time lag to deliver returns--are often not in line with the traditional cycles of annual financial and corporate planning processes and are often perceived as a distraction (a "nice-but-not-necessary") to real business activity.

Additionally, visible, concrete benefits from human capital initiatives are difficult to attribute to specific financial results using traditional financial measures, so they seem to fall outside the comfort zone of tried-and-true areas of measurement. When viewed from such a lens, it's not surprising that most CFOs feel it safer to leave these "esoteric" projects alone.

But no true professional CFO can afford to leave this human hot potato alone for very long, especially now. Now the business case for driving the people agenda cannot be ignored, as it links directly to share price and other key financial measures.

Indeed, corporate researchers like Wayne Brockbank and Dave Ulrich (co-authors of The HR Value...