By Aaron Weiss
The traditional theory of investing is pretty intuitive to Americans. You purchase an asset that you predict will appreciate, give it time to mature, and enjoy the profits over time. This principle is not limited to stocks, bonds, art and real estate. People are investments, too. It’s not just a metaphor!
Investing in people is among the most powerful and rewarding ways to strategically allocate organizational resources. It achieves a trifecta of serving the business, the recipient, and the moral imperative.
Here are just a few reasons to invest in people:
- Supply: Potential leaders are more plentiful and inexpensive than seasoned leaders.
- Loyalty: The resources devoted to developing people are repaid in commitment and engagement.
- Teaching the “Way”: Core organizational values are imparted, assimilated, and reinforced over time.
- Creating “Hometown Heroes”: Leaders built from within become aspirational examples of what is possible.
Next week, I’ll be working with a group of senior level professionals at a financial services firm. They know a lot about investments. The program is designed to assess and develop their leadership potential–not their subject matter expertise or technical abilities, but their future growth. The client is so ardent about investing in people that they’ll invite some of their best and brightest talent –responsible for managing trillions of dollars—to step away from their posts for a couple days to think only about leadership.
To appreciate the ROI of investing in people, consider the firm’s executive leadership: The CEO has been with the organization since the mid-1980s, the Chief Investment Officer since the 1990s… nearly every member of the senior leadership group has a tenure exceeding 20 years of service. In other words, the investments made in talent decades ago have now yielded an entire management team!
You might recognize this as a human capital argument. Many organizations loosely ascribe to the philosophy with rhetoric like, “talent is our competitive advantage.” And they go out and buy “talent” off the shelf from high profile suppliers as if they are filling a garage with classic cars. But people are not static objects, and they require more than just careful preservation to increase in value.
While you can’t buy a CEO in her twenties, you can actively invest in a person who might advance to such heights over the next couple of decades. In order to nurture a prospect into a fully realized star targeted support is required. What to do with people to ensure their “appreciation” is the work of leadership development professionals, and consultants like us. It involves diverse exposure, advanced education, coaching, and chances to fail and recover.
Like any asset class, making sound investments in people requires appropriate due diligence. That’s where assessment comes in, which is another part of our work. How do you know if a law associate can run corporate strategy some day? How do you separate visible skills and credentials from predictive attributes that are beneath the surface like motives, thinking, and personality? Assessing prospects is an important way to see that opportunity costs are managed effectively.
As technology, cost, and specialization flatten, talent actually is the competitive advantage. To realize the advantage, organizations must orient people on paths that target future outcomes, rather than immediate ones. Peter Drucker said, “The best way to predict the future is to create it.” By investing in people, an organization can design just what it will need to ensure ongoing growth and success.