Human capital as defined by Nancy R. Lockwood (SHRM 2006) is “the collective knowledge, skills and abilities of people that contribute to organizational success.” This imperative, to maximize human capital in a way that gets productive results, has been the recent topic of discussion among several leadership experts and authors as the number one issue facing leaders today.

There are three main reasons that have propelled this leadership issue to the forefront. One of the most significant reasons is the changing nature of work. This change is characterized by a cultural shift from the Industrial Age to the Information/Knowledge Worker Age (Covey, 2004). In this new era people are the organization’s main asset, not the tools and equipment of the old Industrial Age assembly line. People possess the raw skills, talents and abilities that are essential in the production of today’s marketable goods and services. The major difference between the knowledge worker and the industrial worker is in the way they think and how they see themselves. (see Figure 1)

Figure 1. Power Point Slide from Covey’s, The 7 Habits for Managers Workshop

The Two Mindsets

Peter Drucker (1999) said the following:

The most important, and indeed the truly unique, contribution of management in the 20 th century was the fifty-fold increase in the productivity of the MANUAL WORKER in manufacturing.

The most important contribution management needs to make in the 21 st century is similarly to increase the productivity of KNOWLEDGE/ WORK and the KNOWELDGE WORKER.

The most valuable assets of a 20 th century company were its production equipment. The most valuable asset of a 21 st century institution, whether business or non-business, will be its knowledge workers and their productivity.

The traditional work of leadership--setting vision and direction, clarifying goals and objectives, defining organizational values and setting the overall context within which organizations function--will fall short if leadership doesn’t also seek ways to unleash the potential, imagination and creativity that lies within today’s knowledge worker. This will require leaders to maximize human capital. This is the new work of leadership.

The second reason maximizing human capital is such a pressing leadership issue today is because of the enormous, global, and often unforeseen complex problems (Alexander, 2006) leaders face. They can be characterized as the complexity of crises (Alexander, 2006). A few examples of complex crises are the 9/11 terrorist attacks, continued terrorist threats, the 2005 hurricane Katrina, the unbelievable South Asian Tsunami. It became painfully apparent that new solutions are needed to address these unprecedented challenges.

In the non-profit sector there continues to be complex changes as well. The ever present need to address the poor and oppressed of the world, let alone in our own neighborhoods, is mounting. The rise of the AIDS epidemic and the escalating numbers of orphaned children left behind present a global crisis. The ever present need for the church to change methodology to reach today’s generation without losing its unique identity holds its own leadership pressure. Lastly, another especially complex issue that will require church leaders to maximize human capital to resolve is the widening gap between the needs of the spiritually mature and the needs of the seeker. If their needs are not properly address with a new and better solution then currently being offered, both groups will suffer spiritual apathy and become disenfranchised from the church

John Alexander (2006) sums up the Challenge of Complexity:

Beyond the extraordinary challenges posted by crises-including natural disasters and terrorist- change and uncertainty in the business, political and social environments of the United States and the rest of the world are a fact of life now. Globalization, technology and the relentless pace of change challenge the strategic and tactical skills of executives and managers each day.

The third reason maximizing human capital is such a pressing leadership issue today is because finding, developing and engaging the next generation of leaders is more important and more challenging then ever before. In a recent Harvard Business Review article by Linda Hill, she claims the very nature of leadership is changing. It will be defined in part by two ideas; “Leading from behind and leadership as a collective genius.” If this is true, and I think it is, leadership will rise and all on a persons ability to cast a cause driven vision, set the work and cultural context that allows people to flourish within, establish clear values and can guide all of the different personalities focused and moving in one direction, combining the talent, skills and ideas of those young leaders who want a chance to participate in shaping the future too. The next generation leader will rise to the top when current leadership is willing to develop the skills needed to find and develop new young leaders. When current leadershiop is be open, listens to, learns from, investing their time, talent and experience into a potential new leader, the next generation leader will be found and developed.

Because the challenges leaders face are so complex they will need to think and act collaboratively and interdependently in order to effectively address today’s issues. In other words, leaders must find ways to maximize human capital or they will minimize their own potential and effectiveness.

These three challenges, the changing nature of work, the rise of complex challenges, and the need to develop the next generation leader will force pressent day leaders to develop the kind of skills needed to turn the raw material of human resources into capital. This will mean a paradigm shift from authoritative leadership and position power to collaborative leadership and knowledge power (SHRM 2006). This will require “new” leadership skills consisting of relationships building, fostering collaboration, and networking across disciplines. These kinds of leadership skills are more crucial now then ever before. Leaders who will make this paradigm shift will be the most effective and be able to address the most difficult challenges facing them today. They will achieve greater level of effectiveness because they understood and had the foresight to address the most pressing issue of leadership today, maximizing human capital.

References

Alexander J. (2006) Leading in a Time of Crisis and Complexity (Review of the

book The Leader of the Future 2). Executive Book Summaries, vol. 28, No 12, p. 5

Alexander J. (2006) The Complexity of Crisis (Review of the book The Leader of the

Future 2). Executive Book Summaries, vol. 28, No 12, p. 5

Alexander J. (2006) The Rise of Complex Challenges (Review of the book The Leader

of the Future 2). Executive Book Summaries, vol. 28, No 12, p. 5

Covey, S. R. (2004). The 8 th Habit: From Effectiveness to Greatness. New York,

London, Toronto, Sydney: Free Press. P 14

Covey, S. R, (2005) The 7 Habits for Mangers Workshop, Power Point Presentation,

slide no. 4

Drucker, P. (1999). Management Challenges for the 21 st Century. New York: Harper

Business, p 135

Kouzes, J. M., Posner, B.Z. (2002) The Leadership Challenge. San Francisco: Jossey-

Bass. p 322.

Lockwood N.R. (2006). Maximizing Human Capital: Demonstrating HR Value with

Key Performance Indicators. Society for Human Resource Management Quarterly no. 3, p 2.

Lockwood N.R. (2006). Leadership Development: Optimizing Human Capital for

Business Success. Society for Human Resource Management Quarterly no. 4, p 2.