Human Capital: A Cost to Manage or Investment to Embrace?

Human Capital - A Cost to Manage or Investment to Embrace - People Development Network
Human Capital - A Cost to Manage or Investment to Embrace - People Development Network

Is human capital a cost of doing business, or an investment you make in your organization’s future?

That depends on, in part, on how you approach human resources and talent management.

It may seem like a permanent workforce is expensive compared to the scale and diversity of talent that is pooling online and only a contract away. The explosive growth of the Gig Economy, after all, depends as much on the spunk and entrepreneurial gusto of workers as it does on organizations opting to utilize the virtual labor force, eschewing traditional employment to get things done.

At the same time that businesses can avoid the costs of employment mandated by the Affordable Care Act and payroll tax laws, they access highly specialized, experienced, and frankly skilled human resources that, as a permanent asset, they may not have been able to recruit nor retain. From the workers’ point of view, the shift to gig-based labor means a given person can stay relevant and active in the workforce for longer, by selling time, skills, and expertise on-demand. That can certainly be empowering.

From an organizational perspective, however, there is a very real risk of ceding relevance. Without committing human resources to growth, change, and evolution, you may be dooming your organization to a pattern of problem-solving that burns through its relevance before it has time to adapt.

The Icarus Paradox

You may recall the ancient fable of Icarus, who escaped from imprisonment with makeshift wings, but then flew too close to the sun, only to have his wings, adhered by wax, melt off and send him plummeting to his doom.

In business, we talk about the Icarus Paradox: the tendency for organizations to get caught up in the apparently limitless momentum of early success, only to fail dramatically soon after. This isn’t just a cautionary metaphor for hubris; alternatively, one might think of it as the temptation to treat organizational potential as something that must be fulfilled, rather than taking a long-term perspective that balances growth with maintenance. In other words, if Icarus went for distance rather than height, perhaps he wouldn’t have lost his wings.

A big idea for today’s start-ups can feel a lot like the wings of Icarus: the temptation is to soar ever higher, attracting more funding, scaling and deploying, growing and growing. Ensuring your organization is resilient, creative, and capable of adapting to an ever-changing environment means capitalizing on more than a good idea, investing in human talent through recruitment and training perpetually.

Having a labor pool made up of permanent workers, rather than just gig workers, isn’t inherently beneficial; capitalizing on permanent employees means investing not just in the obligatory costs of human resources, but in their continued development as skilled workers.

The Agrarian Revolution

Relying on gig workers and digital task distribution may seem cutting edge and tech savvy, but it actually looks a lot like the old hunter-gatherer societies of the stone age. Specialization occurs when there is stability–ie, permanent dwellings, a more reliable source of sustenance from crop cultivation, and freeing up time and labor to hone skills and scale production.

What this means is that your organization, like a community, stands a better chance of long-term evolution and development if you invest in employee development continuously. If your game is making a quick buck or controlling overhead, the tools are there. If you want to build something that will last, that is capable of keeping up with change and dynamically growing, you are better served with a cultivated talent pool, a cohesive culture that values employees, and an emphasis on constant learning.

Apple and Google–the most highly-valued companies in the world–have enough capitalization that they can simply acquire new companies and create whole new divisions in order to ensure they stay nimble and relevant. Smaller organizations (i.e., the rest of us) have to take a different, more cost-conscious strategy to keep up with a dynamic economy and global environment.

Part of the appeal of the Gig Economy to workers is that as the market for their skills shifts and fluctuates, they are not tethered to a single way of doing things or a single source of demand. They bring themselves to the marketplace every day and stay fresh and loose to respond to a tumultuous labor landscape. Permanent jobs, by contrast, can appear stale, prone to atrophy, and counterintuitively risky compared to the real-time marketplace of gigs.

When retraining opportunities underlie retention efforts, your organization offers workers a shot at stability (of employment) coupled with relevance (through learning-based adaptation). It is a balancing act, but one that treats human capital not just as an upfront expense, but a long-term investment opportunity. In creating this value culture at your organization, you encourage your workforce to value themselves, and their roles on the team as well. That is a recipe for longevity on both sides.

Edgar Wilson

Edgar Wilson

Consultant at (Independent)
Edgar Wilson is an Oregon native with a passion for cooking, trivia, and politics. He studied conflict resolution and international relations and has worked in industries ranging from international marketing to broadcast journalism. He is currently working as an independent analytical consultant.
Edgar Wilson
- 2 years ago
Edgar Wilson