Monday 3 August 2009

HR and asset management


   One of my readers asks:

“Working in HR in an Investment Management company, I had the opportunity to share some of the posts of your blog with some people working in our Responsible Investment team (managing some funds with one dedicated to Human Capital). Following various discussions with some of them and having no feedback from some others, I have the impression that the gap between financials and HR is quite big. Though I have a feeling that the influence of asset management in the HCM approach could be key to promote HC.

I would be interested in having your view on the following topics:

- Do you think the asset management world could participate significantly to the promotion of HCM? What could be their real influence?

- Do you know HR managers interacting externally to promote and defend their approach in front of Investment analysts?

- According to you, how these two worlds could communicate more, especially at the research level?

- Are you aware of initiatives where a combined reflexion is done, emphasising the practice (more than the theory)?”


Asset management’s role in promoting HCM

I’d like to think that the asset management world will progressively become more interested in human capital management.  I think the move has probably suffered a set-back this year, with financial capital once again becoming more important than human capital.  But I think it will swing back.  And even if it’s not the major factor, human capital certainly remains a major factor in informing organisational success.  So asset managers are going to want to understand it better.

But I still think the lead has to lie with the asset owners themselves, and in particular with those who are most responsible for managing these organisations’ human capital, ie their HR functions.  Investment analysts are only going to see it worth talking to HR if these HR people can describe for them a clear idea of what they trying to do, ie how they’re trying to accumulate human capital, and why they expect this to be useful for them.


HR managers interacting with investment analysts

Secondly, yes, some Heads of HR definitely do met with investment analysts on their company visits to present what they’re doing in HCM.  I’ve not had any conversations with any of my clients or other contacts about this recently, simply as it’s not been a major area of concern, so I don’t have any quantitative or qualitative evidence for this, but I do know it’s happening.  And If I were one of your analysts, particularly if I was associated with your HC fund, I would personally want to meet the person in the organisation responsible for this.

It would tell me something if the organisation didn’t suggest this themselves (maybe that they don’t have an advanced view of HCM) or if they didn’t want me to meet the person responsible for developing it (that they’re not investing sufficiently in this theoretically, but perhaps not for them, practically important area.


Improving communication, particularly at the research level

As I noted before, I think to make communication possible, HR needs a clear idea, or a model, to explain how it intends to provide competitive advantage for the organisation through its management of people, and the accumulation of human capital.  Conversations between HR and investment analysts can then focus on how well this model is doing in generating the desired outcomes, as well as its predictions for the future.

I suppose the alternative is that asset management firms develop their own models for HCM, and seeks to apply these to companies in their portfolios (see for example, Bassi Investments’ approach).  However, I believe each organisations’ and external commentators’ models tend to be so different (just look for example, at the debate between Ulrich’s RBL and myself over their HR Transformation book) that a bespoke approach to each organisation will be most appropriate and useful.  So I’m not a big supporter of investment analysts trying to compare metrics across different organisations either – as I don’t think these comparisons tend to mean very much without an understanding of what a particular organisation is trying to do.


Initiative for combined reflection

Again, I don’t have any good examples of combined reflection, although in my book, I suggest that there perhaps some better examples within multi-divisional corporations, and other large organisations (eg the capability reviews taking place across UK government departments).  It’s also something I think some private equity firms do quite well, although from a very short-term perspective.

However, it is something I could see becoming more prevalent, as investment firms seek to understand the true drivers for the success of the firms in their portfolios.


I hope this helps!




Photo credit: Bukk



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    1. Great post, Jon. In particular I like your observation: "to make communication possible, HR needs a clear idea, or a model, to explain how it intends to provide competitive advantage for the organisation through its management of people, and the accumulation of human capital." This has always been a challenge, but I think, with the added pressures of generational changes, and the benefit of new tools to provide better analysis and reporting on their existing talent, HR professionals have more incentive than ever to develop and communicate such a model.

    2. Hey Louise. Thanks for the return visit.

      Yes, I agree. The gap between the opportunity and reality of HR just keeps getting bigger and bigger.

      The profession is going to have to change, or be changed!


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