What if relational capital really mattered? Would it change your talent management strategy?

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Permalink Reply by Fahd Khan on December 28, 2009 at 11:28am

I think people are the most important intellectual capital in today's knowledge based economy. They form the brand's value but uptill now no number value is given to human capital and hence balance sheets are without it and therefore it is just a capital without any tangible information. This is the reason CEOs and CFOs do not give it any weight. I wonder how they decide the future of the company/business while keeping their eyes and minds in the past. I suggest to put it in the P & L and Balance Sheet some how or the other and associate stocks value with the acquired talent.

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Permalink Reply by Theresa M. Welbourne, Ph.D. on December 28, 2009 at 12:08pm

You point to a critical issue - in our society if you don't measure it, or don't count it, no one knows it exists; thus, it is not valued. That's the case with relational capital. We have only recently started to find ways to quantify relational capital, with much of the work centering around the measurement of social networks and nodes of influence. However, you can use less complex and time consuming ways to assess relational capital, and that's what I'm finding very interesting today. Think about the last year of recession and layoffs; would firms have made the same choices about who to let go if they had some way of measuring the type of relational capital associated with each employee? And what about the way we train people? My guess is that the development cycle would look much different if a stated purpose was to optimize the relational capital of the employees over the course of their first five years with the firm. I'm working on an article now that focuses on how talent management would change if relational capital could be counted (which it can). I'd be interested in any stories you have about where relational capital (quality of relationships with stakeholders inside and outside of the firm) really made a difference to firm survival or performance.

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Permalink Reply by Fahd Khan on December 29, 2009 at 2:50pm

There is another issue that people usually do not stick to any organization for such a long period now. The current generation Y is highly stimulated, they are in constant move state. Number of years and experience is no more required or "Must Have" in many new positions. We need to come with a fast development cycle with an inventory having most critical, critical and non critical competencies across all the departments. All talent management should be done keeping in mind that inventory and than we can calculate our relational capital easily.

I would like to contribute in your article if possible. One concept I can share which I applied during our production worker development program that we increased our internal hiring rate to 90% and the results were outstanding. People started believing the program and morale went high. The program got momentum which eventually improved quality of product with less errors.

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Permalink Reply by Bob Dodge on February 19, 2010 at 11:02am

Theresa,

Your choice of words is intriguing to me. I am in the middle of rebranding my practice and I have been focusing on the relationship with our employees. We focus on Customer Relationships, but how many pay attention to the relationships with their people? If individual behavior is driven by their feelings and thoughts, one can not affect their behavior with one-way communication. One must have a relationship, to listen to the Voice of the Employee.

I am about to engage a few executives in a discussion on this topic as a part of my branding excercise. If you know of a C-level person that could help, I'd love to talk with them.

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Permalink Reply by Theresa M. Welbourne, Ph.D. on February 22, 2010 at 9:58pm

I've done some research on this topic - studying large samples of leaders, and the work to date shows that if you compare human capital and relational capital, it's relational capital that wins. But we don't measure it; we don't even pay attention to it when it walks out the door when we layoff employees. We don't develop people with it in mind. This is the case even though many C-level executive will tell you stories about how their firm survived because of the quality and intensity of relationships with customers, partners, vendors and yes, employees.

Relationships need to be negotiated and constantly renegotiated, where capital is managed. I am convinced that if we really believed relationships mattered it would dramatically change how we manage, how we develop and how we practice HRM and leadership in general.

Thanks for the reply and good luck with your work.

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