Are We Human Beings or Human Capital?

Human-Capital-BETH BANKS COHNNot long ago a colleague shared a story with me about a layoff that happened in her company. All employees in the affected departments were called into a meeting room and told that immediately after the meeting notifications about who would be fired would go out via email. If you didn’t receive an email, you still had your job. She described the scene of people silently filing out of the meeting room and going back to their desks and waiting to hear the “pings” signifying a new email being received. My colleague talked about this event as if it had just happened, but in fact, it had happened a few years before.

And that, my friends, is the difference between treating your employees as human beings or as human capital. And just so we’re all on the same page, this story is an example of treating your employees as human capital.

My hope is that you are as equally appalled that a corporation (a major one by the way who should, in my opinion, know better) would do this to employees, just on humanitarian grounds alone. How humiliating, how soul-sucking, how inhumane can it be to do this to someone? And for what reason? If we keep in mind that we are all human beings then we would know better than to treat people this way. As if they don’t matter, as if they aren’t worth a short conversation, in private, that lets them keep their dignity if not their job.

Now I’m sure those of you who are “human capital specialists” are probably incensed at me right about now. Because you know that the term Human Capital wasn’t supposed to do that at all. It was supposed to do the opposite. The term was first coined in the mid 1960s by American economist Theodore W. Schultz. He used the term to refer to the knowledge and skills workers possessed that could be expanded or utilized differently by organizations. The theory of human capital was furthered by Gary S. Becker, a student of Schultz who, according to the Encyclopedia Britannica Online, treated human capital as the outcome of an investment process. In other words, individuals and organizations could invest in their human capital by sending them for training or education that would give them better skills (which in turn would benefit the organization). HCM professionals will tell you that their job is to humanize employees even more, not the opposite.

On the other hand looking at the origin of the phrase (from economists), as well as how it is often used today, can you see how the “human” in Human Capital got lost? So although it was possibly meant to actually re-humanize the way workers were treated, over time it has had the opposite effect. Organizations have taken the term and used it in just the opposite way. When they are thinking of downsizing or merging or assessing their workforce in some way, they bring in HCM consultants who help them analyze the skills and abilities of their workforce. Not a bad thing, but it is what comes after that I have an issue with. Through these processes, organizations lose sight of the humanity in their human capital. They look at the spreadsheets and the numbers and forget that everything they see represents an individual, like Joe from Accounting, Jane from Marketing.

And they forget that we are more than just a list of our skills. We are whole human beings who use all three parts of our mind – the affective, the cognitive and the conative – to take actions and solve problems at work. Human Capital really just looks at skills and knowledge, which is only cognitive. What about the other two parts of our minds? Why aren’t the values of those things put on our workforce planning spreadsheets?

And here’s another aspect of this that really puzzles me. That layoff which I mentioned before, which was meant to save the company money, actually cost them money. If you are going to be inhumane at least don’t completely undermine your original goals! It makes absolutely no business sense at all. In case you aren’t following, here’s why it cost them money. By calling all employees into a room and delivering a generic message, they caused a disruption to the entire workforce and everyone’s productivity. Even those who felt relief when their computers didn’t “ping” were still negatively affected by the way the layoff was handled. The inhumanity of the action caused them to feel bad and to continue to feel that way, even though they got to keep their jobs. That causes a huge dip in productivity, even more so than usual. And not only that, that dip lasts a lot longer. So instead of working, they were distracted, feeling bad about how the whole thing was handled, feeling bad for their colleagues who lost their jobs, wondering if they were going to be next, wondering if they were going to also be told in front of everyone else. Feeling badly and worried is natural, and in any layoff eventually tapers off and people get back to work. But when a layoff is done in a way that is so counter to how you want to be treated, or thought the company would treat you, it doesn’t go away so fast. So you don’t work as hard. You don’t stay late. You finish projects, but you don’t go that extra mile or two that is needed. Maybe you call in sick a few days. Maybe your work pace slows exponentially. Often employees aren’t even aware of what they are doing differently. They just know it is harder to walk in the door, harder to concentrate, harder to stay past those long eight hours.

The treatment of those involuntarily leaving directly affects the productivity of those who stay. Am I the only one who knows that? When I hear stories like this, I sometimes think I am. But I know there are more of us out there – there just has to be.

When we start to think of employees not as human beings but as human capital, it is easier to forget about the human part of the equation. We treat them like capital – like the machinery we own, or the desks or the chairs. Businesses don’t categorize their employees as capital on the balance sheet, yet for some reason we are talking about them and treating them accordingly – like we would that forklift on the loading dock (which really is capital). This is a troubling trend… one we need to reverse. Even if that wasn’t the original intent of the term, that is the reality that exists today. Not everywhere, of course, but in enough organizations to make it troubling.

Originally published on bizcatalyst360



Beth Banks Cohn

Beth Banks Cohn

Beth Banks Cohn, PhD, is President and Founder of ADRA Change Architects. As a recognized expert in change as well as corporate culture, Beth consults domestically and internationally with a wide range of disciplines and businesses. She is the author of two books: ChangeSmart™: Implementing Change Without Lowering your Bottom Line and Taking the Leap: Managing Your Career in Turbulent Times…and Beyond (with Roz Usheroff).

1 Reply to "Are We Human Beings or Human Capital?"

  • Marcy Pleu
    August 5, 2015 (5:17 pm)

    Thank you for sharing this. It’s relevant in most every space…