The ONE Thing: Human Capital Management


Publisher’s Note: When Howard wrote this article, we knew it was a great topic for a deeper dive! Check out the Restoration Today podcast episode on Human Capital Management vs. Traditional PR above, and also check out his article on the topic!

My team and I have had the pleasure of leading and working with some very high-performing companies. We have many case studies of companies doubling and tripling in size and value in three years in the restoration industry. And many double their value in one year. I am often asked, “what is the one thing that causes these results and separates the companies that achieve these results and the rest.”

You would think “what is the One Thing” would be a hard question. After all, there are so many factors that affect businesses. Does size matter? Does industry matter? However, I would argue that most, if not all, obstacles you contend with stem from the One Thing.

The One Thing, above all others, is the proportion of key seats filled with the right people. I can assure you that this measure is the most crucial factor in your organization’s ability to deliver consistent growth and extraordinary profit. Taking it further, the company with the most seats filled with the right people wins. Our clients who have made this their focus experience increased profits, over three times the growth of industry averages, and the leaders work fewer hours with less frustration.

Companies with The Most Seats Filled with the Right People Win

While this should seem obvious, the great companies are maniacal about filling their seats with the right people. They have realized that management gets easier, customers are happier, quality of work is better, you make more money, you can pay top dollar, and business is more fun when you have the right people in the right seats. One notable distinction between wrong and right people is that the former see themselves as having “jobs.” While the latter see themselves as having responsibilities. Also, while no one leader can single-handedly build an enduring great company, the wrong leader vested with power can almost single-handedly bring a company down. Choose well!

I am sure you would agree with the above, yet most companies would at best get a “C” grade in how well they fill seats with the right people. Why is that?

Are You Still Relying on a Traditional Human Resources Mentality?

Are you still relying on a traditional human resources mentality to grow and manage the people within your organization? If so, it’s likely keeping you from acquiring and retaining top talent. Effective human resources departments have embraced a new paradigm, “Human Capital Management” (HCM). This ideology recognizes that employees are assets managed and developed through a system of activities. Such a system considers acquiring, growing, keeping, and optimizing your workforce. It is essential to understand the difference between a resource and an asset. We use resources, but we grow assets. Leadership must refine all elements of their system to extend the life of those assets and achieve a maximum return on investment in them.

Understand that “the right people” are only those who live out all your core values and can consistently achieve reasonably high performance standards. Your organizational structure must support its strategy, and the right people should be in the proper roles and asked to do the right things. The CEO is accountable for ensuring a robust process for hiring the right people, having the right structure, filling positions quickly, rewarding the right people, and removing the others. This is where stewardship and HCM intersect. If your business needs different results around HCM, learn how the tone set from the top is causing wrong outcomes. Your problems never start at the bottom of your organization.

Are You Properly Measuring Success in this Area?

When I ask most CEOs how they measure success, it usually comes down to they don’t. They are mostly looking at revenue and profit. However, these numbers would always be much higher if you measured and addressed your people issues. When I ask leaders how many positions they have open right now, how many positions were open more than 30 days, and what is your turnover rate in key positions (e.g., water technician, program managers, and so on), I typically hear, “I don’t know.” Worse, when I get an answer, after careful investigation, they were often not even close. While these are measures, you should know the one that is never available is how many “non-performers do you have right now?” More importantly, how many of them are managers? The other measures are symptoms of the “non-performer” and “open positions” questions. Typically, leaders are so focused on the symptoms from the nonperformance like delayed jobs, poor quality, cost overruns, low margins, and angry customers, that they never address the root cause.

Last year, a client missed their first-quarter profit goal by $325K. For perspective, their actual profit was only $95K. Yes, that is not a typo. They would have increased profit by 3.4 times. It was not a marketing problem; they were turning away business. It was not a sales problem; they had the work but could not turn the jobs. The sole reason was they had 15 open positions. One open water technician position costs you seven times the salary you are not paying because you do not have the resource. Worse, our clients were keeping the wrong people because they were short on labor.

In all cases, having the wrong person costs you a lot more than you realize—often more than having an open position, particularly when it’s the wrong manager. The right person produces two to three times the work of one average worker. Average is better than completely wrong, but right is a multiplier.

What About the Labor Shortage”?

I won’t skirt the issue. Leaders passionate about and committed to HCM realize the competitive advantage they get from solving their people problems. They recognize finding and retaining the right people takes hard work! And they do whatever it takes. They don’t allow this labor market to get in the way of the HCM job getting done. Instead, they double down. It requires great preparation and marketing skills to attract candidates. It requires great screening and interviewing skills to identify the right people. It takes diligence in onboarding those people properly.

The right people won’t work with the wrong people. If you have the wrong managers, they will quit. If you don’t cultivate a place that treats employees as a collaborative community of assets, they will quit. Offering top dollar is worth it when you get the right people on board. And yet, it does not resolve the wrong people problem. This is why many reading this find it easier to focus on what you know, producing work.

Are You Investing Enough Into Recruiting

One strategy that works is full-time recruiters. Yes, you can leverage outside recruiters, but having inside recruiters is the strategy that wins. When I ask most leaders how many people are focusing on recruiting full time, the answer is none or not enough. I had one client realize multiple full time recruiters were needed to achieve their goals. Most of you think you can’t afford someone to do this, and I would argue you must. During the height of the great resignation, that client grew from $3.5M in revenue to almost $10M in one year. The company grew from 30 employees to over 150. That would never have happened had they not invested in focusing on HCM.

If you want to have an enduring great company, you have to commit the time and resources to solve your biggest challenge, HCM. Remember, the company with the most seats filled with the right people win!

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Howard M. Shore

Howard M. Shore, Founder and CEO of Activate Group Inc., is a bestselling author and serial entrepreneur specializing in liberating leadership teams from the barriers holding them back personally and professionally. Howard has helped create over $1 Billion of value and authored two best-selling books, The Leader Launchpad and Your Business is a Leaky Bucket.

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