Analytical and precise by nature, CFOs are famously averse to anything that can be deemed “squishy.” Subjectivity, vagueness, wiggle room, these are qualities that CFOs routinely attempt to expunge from budgets, briefings, and business plans. They seek clarity as relentlessly as Sidewinder missiles seek heat, and that’s generally to their credit.
That may be one reason why many tend to regard “human capital” as a euphemism for “personnel” or “labor” rather than a legitimate strategic issue. It’s not that CFOs don’t regard the collective capabilities of their workforces as critically important — they simply aren’t sure what they’re supposed to do about it. As a result, many leave the “soft” side of human capital to the human-resources department and fixate on the salary, benefits, and other costs associated with all those bodies.
While a recession may seem a curious time to get religion regarding the strategic side of HC, it is, in fact, the ideal time. For one thing, many CFOs are about to become acquainted with a task that many identify as the single most difficult part of their jobs: laying people off. The second-hardest task may be what follows: making sure that the employees who remain are focused, motivated, and as upbeat as possible. In both cases, human capital suddenly becomes anything but an abstract concept. The ability to communicate effectively (perhaps even compassionately) is the sort of “soft skill” that many CFOs lack, but senior writer Kate O’Sullivan offers a wealth of advice in “How to Talk about Layoffs.”
Our special report on human capital also offers a look at how (and why) companies may want to hire even as they conduct layoffs, and how companies are reining in employees’ health-care costs.
As tempting as it may be to hunker down, companies interested in building a better workforce may find that they can make substantial progress toward that goal in these difficult times, and emerge much stronger for it. CFOs who work with their HR departments to squish the squishiness out of workforce planning efforts may ultimately conclude that there is, in fact, no capital as valuable as human capital.