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Thought Leader: Scott Pollak on Key Global Trends In Human Capital

Scott Pollak is senior manager and site leader of the Saratoga Institute, which was recently acquired by PricewaterhouseCoopers. In his role, he is responsible for strategic business development, client relationships, research development and managing day-to-day operations. He has been instrumental in the development of Saratoga's Decision Guidance model and its implementation by clients. He is a frequent speaker at conferences on the topic of workforce measurement, including, SHRM, HR Planning Society, HR Technology, our own HR.com's Employers of Excellence, and ASMI.

KE: Scott, why don't you begin by giving us some brief background on the human capital study your organization conducted?

SP: At Saratoga, we primarily work with clients to help them measure and assess the impact of the HR department and the impact of their workforce. We benchmark our client organizations and examine how they compare to the rest of the market. Once a year, we take a step back from that and look at what we see going on overall in the marketplace: what are some of the key trends, and what are some of the key issues that people should be paying attention to? We call this our global effort and indeed from a workforce survey and measurement perspective, this is a global effort.

The report itself was co-written by our UK colleagues and our European colleagues including input from others around the globe. As part of PwC, we are able to bring in some of the other research efforts that are conducted throughout the firm and pull those together into these key trends. We then put a summary of our findings in a white paper.

KE: What are the big themes you discuss in the white paper regarding human capital?

SP: A lot of press is being given these days to scary issues such as whether or not we are going to have enough talented employees to do what we need to do. We hear that everyone is going to start retiring; all the good jobs are going elsewhere. The findings we communicate in our key trend report are perhaps more mundane, but more realistic. One theme from our findings is that there are simply huge opportunities for HR departments and for companies to be deriving value from their workforce and to make a significant contribution to the bottom-line of their organizations by making some changes to the way that they operate and the way they invest in their resources.

This is easier to think about for publicly traded companies, but certainly applies for all companies. What we find is that with publicly traded companies, 85% of their value is tied up in non-physical assets or intangible assets, and the study of intangible assets breaks down intangible assets into three primary components. The first of these will we will discuss is processes. For example, if you are a retailer, your processes would include what methods you use to get goods to the back of your store, get them on to the shelves, through the back of the store and then processed out through customers to the front of the store to make a sale. So, one of the main intangibles is how well companies are managing their processes and deriving efficiencies from the processes. Most companies have been focused on optimizing their processes for say, the last 30 to 40 years. They did this through TQM in the 70's, business process reengineering and ISO 9000 in the 80's, or six-sigma, which got started earlier but is certainly very much relevant today to help companies derive efficiencies from their processes.

The next major intangible for most companies is their customer base, or their brand value. We have seen over the course of the last decade and a half companies really looking at how we drive value from our existing relationships. Given that it is frequently cheaper to keep our existing customers than to go get new customers, how can we drive greater value from our existing customer base, especially our most profitable customers?

The third major intangible is the workforce itself and the investment that's made in employees. Basically, we see no major initiatives that have been underway except for maybe the perfunctory saying, 'our people are our more important asset.' The question is really, 'how do we optimize the return in the workforce investment?' How do we make sure that for the 28% of revenue that we are spending on our people, that we are driving as much output as we can? We would argue that it is going to be the companies that are focused on driving improvement from the workforce that are going to be able to separate themselves from their competitors and separate themselves in the mind of future employees as well as shareholders.

KE: What other findings came from your report?

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Karen Elmhirst is a Senior Analyst with HR.com focused on learning and leadership. She is also co-host of our weekly Thought Leader Live interviews delivered via webcast each week. For a complete listing of our Thought Leader interviews,
click here.

Karen has over a dozen years of experience as a sales and marketing executive in various industries including recruitment and training; work as a communication coach, a writer, and editor. Karen graduated with a business degree from the University of British Columbia.

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Thought Leaders - October 19, 2006