Human Capital at Work – The Value of Experience
The most important resource in any economy or organization is its human capital — that is, the collective knowledge, attributes, skills, experience, and health of the workforce.
Human capital is much more than a macroeconomic abstraction. Each person has a unique, living, breathing set of capabilities. Those capabilities belong to the individual, who decides where to put them to work. The degree of choice is not limitless, of course. People are the products of geography, family, and education; their starting points matter. Having career options also depends on an individual’s abilities and attributes, their networks, their family obligations, the health of the broader labor market, and societal factors.
While we recognize these constraints, career moves are nevertheless an important mechanism for expanding skills and increasing earnings. Moving into a new role pays off, even more so when someone lands a new position that stretches their capabilities or represents a match that better utilizes their skills.
Not all companies are equally good at developing people. Size is not the differentiator, small companies can be just as adept as their larger counterparts in this area. But companies with the strongest organizational health, those that offer more structured training for their employees, and those that provide more opportunities for internal advancement seem to stand out. People join these companies to build knowledge and networks, understanding that their experience will provide a valuable signal to other employers for the remainder of their careers. Early career experience at these companies helps employees go on to become more upwardly mobile.
Companies can help individuals grow, and establish themselves as great learning organizations and magnets for talent in the process. In attracting and retaining talents, three priorities stand out: recognizing potential, embracing mobility, and strengthening learning.
Understand the potential in people as well as their current knowledge and skills. Most employers can benefit from challenging the status quo of how they select people for open roles. Instead of searching for “holy grail” external candidates whose prior experience precisely matches the responsibilities in an open role, leading organizations create systems for evaluating candidates based on their capacity to learn, their intrinsic capabilities, and their transferable skills. This requires designing assessments that are fit for purpose, focusing on the few core skills that matter for success in the role. It also involves removing biases that pigeonhole people into the roles they are already performing; this point is particularly important when it comes to existing employees. If someone’s track record shows the acquisition of new skills over time, it probably means that person is capable of learning more. Employers should be less constrained about recruiting candidates from traditional sources and backgrounds and more open to people who have taken unconventional career paths.
Embrace mobility. On one end, employers can attract the best candidates among the big talent pool that is always searching, on the other, they can boost the productivity and engagement of valued employees who stay. To ensure that proven employees don’t have to go elsewhere to advance, organizations should set the expectation that part of a manager’s job is developing people who will go on to other things. Each role should have clear paths toward future roles, with skill requirements delineated at each stage. One way to do this in a large organization is to create an internal digital platform where employees can access learning modules and find their next opportunity. Mobility is experience, not just upward progression. Lateral movement is a neglected opportunity for many organizations. When talented employees do move on, celebrate them as success stories — and don’t close the door on welcoming them back in a different capacity in the future.
Strengthen coaching, particularly early in an employee’s tenure. A great deal of skills development happens day to day on the job. Coaching and apprenticeship can maximize this effect. The first few years of a career are foundational, and the same is true for the first year in any new job. Formal onboarding is not just an orientation session but a six-month to one-year period that should involve a thoughtfully created journey. Organizations can provide the tools for a running start, even after hitting their stride, employees need ongoing opportunities to learn. Formal learning and development programs that prepare employees for future roles are part of this, but it is difficult to make them effective. Companies that are true learning organizations build their own formulas, customized to their needs.