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Five Eyes on the Fence: Human Capital

Friday, 24th March 2017


Protecting the five core capitals of your business

 

In my book Five Eyes on the Fence, I debunk the myth that the health of a business can be judged by its bottom line alone – by its financial capital. Instead, I assert that financial capital is a by-product of four other capitals:

1. Human capital includes the personalities, intelligences, behavioural traits, values, attributes, and motivators of a person, a family, or a company.


2. Intellectual capital is a company’s and its employees’ knowledge and experience.

3. Social capital is a company’s network of people and associates.

4. Structural capital includes a company’s processes, systems, and ways of delivering its products or services.

A company that pays attention to only its financial capital has a high probability of failing. The company is keeping only one eye on the fence. The recipe for a company’s success is much broader and includes the interrelationship between all five capitals. In this series of articles, I will examine how the five capitals form an intricate web, and how you can make decisions based on how the five capitals interact.

I will start by looking at human capital.

Human Capital

Who you are as a person means a lot. Not only do you possess certain intelligences (the things you are good at) and values (the core and aspirational motivators to behaviour), you have an internal wiring that describes how you put your intelligences, as anchored by your values, into action. This striving instinct that describes your action is called ‘conation’.

The components of intelligences, values and conation define you as a person. Let us consider these components further.

Intelligences

We all display intelligence in different ways. The noted educator, Dr. Howard Gardner, has written extensively on the fact that individuals display varied intelligences. One person may be intelligent musically while another may possess great interpersonal skills. In other words, we are not all good at everything, but we are all good at something.

When applied to the right setting, a person’s intelligences can create huge value. Sadly, we primarily recognise people with verbal, linguistic, logical and mathematical intelligences to the exclusion of others. Yet, successful businesses recognise that all the intelligences are valuable, and they take time to identify and put to use the intelligences of the people who are the members of that business.

One person’s intelligences, whatever they are, are just as important and valuable as the next person’s. All can be put to good use in a business.

However, recognizing intelligences is not enough. How one uses his or her intelligences also matters. This brings us on to the second component.

Values

We can tell a lot about people and organisations by looking at how their values direct their intelligences. Whatever your values, they will often underlay how you express your intelligences.

We can classify values into two sets:

1. Foundational. You either acquire these values genetically, or you absorb them into your being from your parents and other role models. Regardless, they feel innate.


2. Aspirational. These are values you wish to express. Sometimes, these are borne from negative experiences with respect to your health or security. Sometimes, they come from a desire to emulate positive strong images in your life, e.g. heroism or spirituality.

Your values are not fixed. You will prioritise, reprioritise, and change your values depending on your stage in life. Your priorities as a young parent, for instance, will differ from those as you approach retirement.

We all have values, but failing to identify them stops us from using them to their fullest extent. By recognising and naming our values, we can make decisions that better reinforce and honour our values.

Now we will focus on what translates knowledge and desire into action.

Conation

Your conative strength is the third part of your personal human capital. Think of it like this: if you want to do something (your values) and you know how to do it (your intelligences), conation is the way you look when you do it. It is one’s instinctive make up.

Your conation is your striving instinct, a term coined by Kathy Kolbe who created the industry standard for measuring conation – the Kolbe System™. Her two early books, Conative Connection and Pure Instinct, explain in detail that, able to act freely, people will initiate or resist according to their conative attributes.

The Kolbe System™ describes a person’s striving instincts and how a person will go about solving a problem being free to act without restraint. Kolbe segments these characters into four types of energy:

1. Gathers and shares information: Fact Finder

2. Arranges and designs solutions: Follow Thru

3. Deals with risk and uncertainty: Quick Start

4. Handles space and tangibles: Implementor

We all go about solving problems in a way that feels right to us as individuals. What feels right will be determined by an in-built natural wiring that drives us towards a particular style of problem solving. Kathy Kolbe proved, scientifically, that if someone asks us to act in a way that runs contrary to our natural wiring we will feel strain and stress.

The Kolbe System™ points out that what we identify as workplace burnout could well arise from a situation where someone with a particular conative make-up is in a position of having to act for long periods of time outside a natural mode of operation. Burnout occurs when that person has no option but to find relief by getting away from the situation causing the stress.

Applying human capital in a business setting

You should start examining the human capital in your business by asking these questions:

1. Do you understand your employees? Do they understand you?

2. Do your employees understand the core foundational and aspirational values of the business?

3. Do you have the right people doing the right things?

It pays to know your employees; you are more likely to retain them if you treat them as individuals rather than cogs in your machine. Plus, your team will be stronger if your employees work within their value set, intelligences and conation.

Consider drawing up an alternative organisation chart based around the intelligences, values, and conation that each role demands. This might seem like a lot of work, so start with the departments or employees that are under-performing. You will likely find a gap between the intelligences, values, and conations you need them to show and those that they have naturally shown.

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Tony A. Rose, Los Angeles, USA


Tony is a Certified Public Accountant and founding partner of Rose, Snyder & Jacobs, the Los Angeles member firm of Russell Bedford International. His client responsibilities include tax and management consulting advice to closely-held corporations, family-owned businesses, partnerships, and the high-net-worth individuals who own them. He is author of the business guides Say Hello to the Elephants and Five Eyes on the Fence: Protecting the Five Core Capitals of Your Business. trose(at)rsjcpa.com

The views expressed in the articles in this website are those of the authors and do not necessarily reflect the opinions or policies of Russell Bedford International or its member firms. The information contained in this website is provided for general purposes only and does not constitute professional accounting, tax, business or legal advice. It may not be applicable to specific circumstances. Laws and regulations change rapidly, so information contained herein may not be complete or up-to-date. Please contact your professional adviser before taking any action based on this information.