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The vast majority of the 1,500 or so higher education institutions that merged, were acquired under duress, or simply closed since 2010 did not explore or implement options for reinvention. Some engaged in deep expense cuts, layoffs, elimination of programs, or launching Hail Mary new programs, etc., but those were band aids on gaping flesh wounds. They were last ditch attempts to manage liquidity rather than efforts to transform themselves to meet the structural challenges of a declining market and huge shifts in buying decisions by students.

Even before the pandemic, many, many college administrators were engaged in fire-fighting and crisis management—admittedly exhausting work—but not work that solves systemic problems and a diminishing value proposition for customers.

In my work and dialog with a wide-variety of higher education leaders, one very disturbing trend that I see permeating all sectors of higher education, is the decision to delay or simply avoid initiatives that will increase the likelihood of thriving in the future due to challenges faced in the present. In short, most institutions are genuinely risking their futures because they are too busy with the present. While this same phenomenon resulted in the outright closure of over 1,200 institutions between 2010 and 2020, the risk is even higher now because[1]:

• The number of post-secondary alternatives available to consumers in the market is greater.
• Public opinions about traditional higher education and its related ROI are worse.
• Average institutional financial health is worse.
• Demographics are less favorable.
• The number of potential students who can or will pay or borrow for credit-bearing, degree programs are fewer than in the previous decade.
• In fact, the enrollment decline between 2020 and 2021 alone is approximately half a million students, taking the ten year total over 3,000,000.

Tragically, over the last ten-plus years, the vast majority of schools that merged, were acquired in distress, or closed, met their fate without engaging in any transformative initiatives. They simply rode a dying horse into the ground. Potentially more tragically, because we should know better, I see the same dynamic in play today.

Of course, managing through disruption and crisis consumes huge amounts of energy and bandwidth. Moreover, most leadership teams had no previous lived experience of running the daily operation, managing through disruption, and planning for a transformed future all at the same time before the pandemic. However, my greatest fear is that many colleges and universities will win the battle (survive the short-term crisis) and lose the war (enter a state of irrelevance and fiscal paralysis or simply cease to operate) because they were too busy in the present to ensure relevance, sustainability, and prosperity in the future.

In effect, many leaders are currently on a path in which their legacy will be that they kept the doors open during the crisis, but were at the helm when the ship foundered and sank.

A Call to Action

When thinking about transformative opportunities for the future, if you’ve heard yourself or your leadership say things like, “We’re just too busy,” “There is too much on our plate,” “We don’t have the resources,” “We’re too tired from the pandemic,” “We need to fix other things first,” or other versions on a similar theme, BEWARE: you are rehearsing your excuses for when it’s too late. Just change each of the statements above to the past tense and you’ve moved from today’s lost opportunity and leadership failure to tomorrow’s regret.

What I’ve also observed—and this is equally critical—is that although few higher education institutions are both willing and able to engage in the kind of reinvention that will greatly increase the likelihood of surviving and thriving now and into the next normal, for those that are at least willing, there is a path forward. There are ways to “borrow” bandwidth, resources, expertise, etc. for assessing the current state, identifying the highest ROI initiatives, and executing on those opportunities. The Transformation Collaborative™ was designed from the ground up to be an embedded partner, with access to many individual and organizational affiliates, who, unlike typical consultancies, share accountability for execution and results. At least talk to us. Even if you’re busy. There is no obligation and you may be just in time to save your future.

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[1] https://www.chronicle.com/article/undergraduate-enrollment-continues-its-slide-dipping-3-2-percent-from-last-year?utm_source=Iterable&utm_medium=email&utm_campaign=campaign_3087091_nl_Academe-Today_date_20211026&cid=at&source=ams&sourceid=

https://www.highereddive.com/news/moodys-lowers-higher-ed-outlook-to-negative-amid-coronavirus-crisis/574414/

https://hechingerreport.org/analysis-hundreds-of-colleges-and-universities-show-financial-warning-signs/

Dr. Joel English, Exec VP at AIM, Centura College, and Tidewater Tech, and Advisor at the Transformation Collaborative™, just published a new blog post on the importance of being willing to frequently step outside whatever you’ve been led to believe is your “lane.”

He astutely notes that, “Stark dividing lines might be good for street traffic. Lanes may be good for bowling. But I don’t think they are great for institutions, nor for impactful leaders within institutions.”

Excerpt

I’m not a fan of the phrase, “Stay in your lane.”  It’s certainly an easy phrase to say, especially when you’re feeling criticism or conflict from someone outside of your department.  “Stay in your lane” is a common phrase used in many different situations—that’s what makes it a cliché.  And using clichéd phrases, because they are familiar, punchy, and commonly accepted, can make us feel like we need no further justification.  When we tell someone to stay in their lane, we have the sense that we need no other argument:  They should stay out of areas where they have no business, authority, or experience.

Continue Reading…

As organizations become more complex and the success of leaders becomes more tied to what their employees accomplish than to their own technical skills or task completion, building and retaining your human capital is becoming central to the viability and success of all leaders. And, unlike technology or fiscal capital, human capital (and teamwork) is a competitive advantage that cannot be commoditized. If you care about your own success as a leader, you’ll care about keeping your employees and particularly your best people! If you need a financial argument, replacing employees can cost as much as 200% of annual their salary.

There is a spectrum of commitment to employee retention across organizations, with some basically ignoring retention as a purposeful activity and others investing significant effort and resources. What is interesting is that most employers misunderstand what employees actually value most. As a result, even where there are employee retention efforts, they often focus on the wrong things. Most typically organizations believe that compensation and benefits are core to employee retention. While the research confirms that employees need “adequate” compensation and appreciate generous benefits, actual employee retention is usually driven by other factors. And it seems that we fail to get this right early on because over 30% of new hires quit their jobs within six months! Likewise, at any given time, about 25% of all employees are “retention risks.”

What the research shows is that while employees will leave a job for improved compensation and benefits, those are actually lower on the list of importance of what they want from work than other items. Most studies put compensation anywhere from number 4 to 8 on employee lists of priorities.

So, what should you do to keep more of your employees?

Assuming that compensation and benefits are “adequate,” your leadership focus needs to be on the work environment and the work experience. There will always be turnover, but it’s become clear what factors limit the loss of employees over time.

Crunching lots of data, Facebook recently found that people stayed with the company when the following three things were true: They enjoyed their work, they used their strengths more often, and they believed they were growing professionally. All of these factors superseded compensation and benefits. As Lori Goler, Head of People at Facebook says, “If you want to keep your people — especially your stars — it’s time to pay more attention to how you design their work.”

Although there is some variability in the research, there is also a strong consensus about what factors support employee retention over time. The most important variables tend to be:

• Flexibility and Autonomy
• Appreciation/Recognition
• Professional Growth and a Visible Career Path
• Engagement and Purpose
• Compensation and Benefits
• Rewarding Relationships
• Job Security
• Ethical, Transparent Managers

Even though the prioritization is often somewhat different from individual to individual, compensation almost always shows up in the middle of the list or lower. As a manager, while you must compensate people equitably, it is liberating to know that your retention efforts are not only about money. On the other hand, creating an environment and work experience that will retain your people is a lot harder than just writing bigger checks!

The good news is that much of your effort toward employee retention also applies to other leadership imperatives around healthy organizations, empowering employees, sustainability and a number of other things you need to be doing anyway. And, in the end, improving retention is a win-win proposition that provides a positive, re-enforcing cycle for everyone involved.

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By Anda Goseco & Wallace Pond

“When you get people right, you get the business right.” Guy Bell

Most organizations claim that people are their greatest asset. When those claims are actually true, those businesses, schools, institutions, etc. benefit from the single greatest competitive advantage possible—an advantage that cannot be commoditized or easily adopted by competitors.

So, what sets apart businesses and other organizations for whom human capital is their greatest resource?

First of all, those organizations are led by people who understand that human capital is as valuable and usually more valuable than any other kind of capital or asset. As such, they are as strategic about people as they are about the business itself. They invest purposefully in human capital development, which includes both professional development and personal wellbeing.

Such leaders focus on people before numbers because they know that whatever the organization’s key performance indicators are, none will be achieved without the commitment and productive engagement of people. The simple truth is that there are always people behind the numbers.

People-focused leaders have also discovered that in addition to achieving strategic and performance objectives, focusing on human capital provides direct, tangible benefits such as increased employee retention and much greater engagement by those retained. In effect, these organizations get the trifecta of experience (long tenure), engagement (productivity and quality), and dedication (loyalty and advocacy) from their employees. Specifically, when people are engaged at work there is 21% higher productivity, 37% lower absenteeism and employee turnover, and 22% higher profitability.

When leaders see people as their most valuable assets, they find ways to support them and bring out their strengths, but what is required for the many leaders who are not yet as people-focused as they need to be?

Who Are You as a Leader?

The first task requires taking a good look at your current strengths and purpose as a leader to determine to what extent those strengths actually support people. Do you understand human capital? Do you see employees as an investment to be maximized or a P&L expense to be minimized? Is your emotional intelligence well developed? Can you express empathy and compassion? Do you pursue success through self or through others? Do you always have to have the answer? Do you listen to respond or listen to understand? Do you hoard information or share it? Do you micromanage others or empower them? The answers to this short list of questions can paint a picture of the extent to which your current leadership profile is people focused or process focused. You can see a more comprehensive lists here.

Do You Have a People Strategy, and if So, What Is It?

Do you invest in individual experts or highly effective teams? Are your primary HR activities designed to measure behavior and rate performance or support personal and professional growth in your employees? Do you encourage diverse opinions and healthy conflict? Are you strategic and purposeful about Equity, Diversity, and Inclusion (EDI) or is it a “side bar” initiative? Is your organizational culture aligned with your professed values or is there a “hidden”culture that drives behavior? And maybe most importantly, do you actually know what your people need to feel connected, engaged and successful or are you projecting onto them what you think they need?

Maslow’s Hierarchy of Needs

Although common in education and psychology, a very famous developmental/motivational model of human needs that is rarely used or understood in corporate or other organizational settings is Abraham Maslow’s Hierarchy of Needs. Maslow described his theory as a hierarchy of ascending needs, with the most basic at the bottom of the list and the highest-level human need at the top. This can actually inform inquiry into the extent to which the needs of people in the organization are being met or not. We have developed an instrument for assessing these needs in an organizational setting and invite you to contact us at either of the email addresses below for more information.

While the most basic physiological needs are typically not the direct purview of an employer, even the second level of safety and security needs may apply in many organizational settings and enlightened organizations recognize that the employees desire for belonging and esteem can also be fostered in the workplace. Of course, the highest level need in Maslow’s hiearchary is growth focused and addresses realizing one’s full potential through self-actualization. This is powerful for both the employee and the employer because it not only takes the individual far beyond the basic knowledge, skills, and abilities of their role, but according to Gallup, it supports a much deeper level of job satisfaction, engagement, and productivity. It feeds internal reward and an evolutionary kind of personal development. Some might ask, is supporting self-actualization really the role management in the workplace? Historically, it rarely has been, but as with a focus on human capital in general, supporting an employee’s full potential as a human being is a means of creating insurmountable competitive advantage for the organization. And the good news is that most of the heavy lifting comes from the employee. Leadership just provides the right environment and resources.

A Silver Bullet – Yes, There is One

Interestingly, supporting employees is actually a lot less complex than it seems, and, in fact, there is a single thing you can do that will drive greater results than any other activity. A recent meta-analysis by Gallup of data from 100 million employees worldwide determined that the single most powerful tool for increasing employee engagement is regular coaching, which can also be the primary vehicle for strategizing self-actualization opportunities. In fact, all the other stuff managers do is fine and often helpful, but coaching by itself accounts for up to 40% of the difference between engaged and disengaged employees. Most of the administrative stuff is of little consequence to engagement and performance.

One significant challenge that many leaders face related to “people strategy as business strategy” is that it is contrary both to what they were taught and what their organizational cultures actually value. Managers are rarely, if ever, rewarded for developing people or building teams or even achieving high levels of EDI. They are typically rewarded for short term KPIs, growth, and profitability. The irony, of course, is that a sound people strategy will support all of those objectives, plus sustainability and human capital as a core competency and competitive advantage. It just takes perseverance and a genuine belief that it is the right thing to do.

Lastly, as noted earlier in the article, we are not advocating an either or approach, but the evidence is overwhelming that whatever else you focus on (finance, planning, technology, P&L, product strategy, etc.), you will achieve much greater results if you lead with a strong people strategy and build out human capital as your greatest organizational asset. As Patrick Lencioni so astutely observes, you can’t fake it, buy it, or replicate it. You can only build it, but once you do, it is powerful.

About the Authors

Anda is an ICF PCC credentialed Executive Coach with 1,800 hours of coaching, who has been coaching for over a decade. She is a Certified Professional Coach (PCC) with the International Coaching Federation (ICF) and has been coaching and creating workshops for teams for over a decade. Her goal is to give her clients value by being effective and efficient– pinpointing root causes and providing solutions in a short amount of time. Her ideas on LinkedIn made her recognized as one of the top 100 Influential Filipino Women on LinkedIn.

Anda Goseco

As a recovering C-suite executive and educator, Wallace has come to understand that high performance and respect for humankind are not mutually exclusive. His primary motivation is for people who associate with him to be better off because of that association and that the world be a better place as a result of his efforts.

Wallace K. Pond, Ph.D.

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As awful as the pandemic has been for higher education, some of the worst-case scenarios have not yet come true, which may have led some in academe to think that the worst is over. That would probably be a mistake.

In one of my earlier articles, way back in 2017, I identified three tipping points that suggested troubled times for colleges and universities. All three are still in play. In a more recent publication I identified several external factors (demographics, negative public opinions, cost & debt, the economy, and alternatives to traditional degree programs) that were conspiring to suppress enrollment and drive down revenue. Unfortunately, four of the five are getting worse and one, cost, is flat. And all of these were in play well before the COVID crisis.

At least as importantly, a substantial numbers of institutions were experiencing significant financial stress before the pandemic, with almost a third operating in the red. This is significant, because it means that many colleges have been operating at a deficit for up to several years and have already employed many of the options at their disposal to preserve liquidity. They were laying off staff, borrowing money, deferring maintenance, delaying accounts payable, and spending down endowments prior to the current crisis, which has further stretched compromised institutions.

A False Sense of Security

Although enrollment declined about 4% and revenue fell 14% overall in 2020, it was 10% in community colleges and the drop in first time enrollments for students of color was approximately 30%! Surprisingly, these numbers are quite a bit better than the worst case estimates for enrollment declines overall, which has contributed to a false sense of security. A bigger factor, however, is the recent emergency federal aid for higher education, totaling about $77 billion, close to $40 billion of which were direct payments to institutions with the balance going to students. As a result, the depth of the financial stress in higher education has been temporarily masked. The problem, of course, is that these are temporary payments that have helped colleges and students stay afloat. The federal relief funds also masked substantial state-level cuts in funding that are not likely to rebound soon. There will be no equivalent rescue next year or in coming years, yet enrollment will be even lower than it is now and years of financial stress that was temporarily papered over will come back quickly for many institutions. We might think of the federal funds as an overdraft line on an already empty checking account.

Of equal concern, recent research by Strada Education Network found that disruptions to education plans from early in the pandemic have not only not subsided, the number of people who say their plans have changed has actually increased over the last year. And of critical interest to colleges and universities, of those adults, 18 and older, who intend to pursue some kind of post-secondary education, over 50% said they will choose employer based or online non-college training options. In fact, only 33% said they would choose a community college or four year institution, suggesting that the pandemic has dramatically accelerated the move away from traditional higher education to other post-secondary alternatives.

One potential advantage from the pandemic is that many institutions made cuts to expense that they found impossible to make before the crisis. In fact, higher education in the U.S. laid off 13% of the entire workforce, totaling about 650,000 people! Schools also cut academic programs, sports teams, cancelled construction projects, refinanced debt and engaged in other expense reductions that will provide longer term decreases in overhead. While this may be helpful in some institutions going forward, it will be inadequate for the most distressed.

In short, neither 2020 nor 2021 are meaningful measures of the likely reorganizations, mergers, and closures to come. Ironically, the COVID crisis provided significant and unexpected emergency funding that has delayed insolvency for many institutions, but none of the structural challenges, other than modest reductions in overhead, have been addressed, leaving many schools uncompetitive in a shrinking market.

The Need for Transformation

About 85% of all traditional institutions of higher education are on a spectrum of risk from “some things need to change,” to “we can’t make payroll next month.” Because almost all traditional colleges function on a model that is structurally built for a different time and market, surviving and thriving will require far more than preserving liquidity. In fact, even before the pandemic, higher education was facing an existential moment in which the market was no longer capable of supporting all of the providers vying to enroll students and even those that had fairly stable enrollment were operating with unsustainable business models—and still are. When the emergency federal funds are used up, some material number of institutions will find themselves insolvent.

So, we will continue to see the higher education market shrink as fewer institutions serve fewer students overall. Some colleges are too far gone to recover and some will technically survive, but function as “zombie” schools, unable to grow or innovate. Those on the more dangerous end of the risk spectrum that survive and thrive will do so because they make a purposeful decision to reinvent themselves. Again, with the exception of the most exclusive and wealthy institutions, the current business, revenue, and operating models are so compromised that incremental change will simply not suffice. For institutions that are up to the challenge, the future could be incredibly exciting and innovative. If you’d like to chat about how we can support transformation in your post-secondary education click here or email wkp@ideapathway.com.

Image Credit: eSchool

I have written many articles on the current state (and decade long decline) in higher education, identifying what external factors have precipitated the deep contraction, even before the pandemic, and, importantly, what successful institutions are doing to navigate the incredibly difficult landscape. However, one reality that deserves more attention is the extent to which most traditional institutions of higher education (credit-bearing, degree granting) must pursue truly transformative thinking in order to remain relevant, let alone to thrive going forward.

In terms of enrollment and the number of providers, the higher education “industry” is about 20% smaller today than it was ten years ago. If current trends continue—and some, such as demographics, are already baked in for years into the future—the industry will likely be another 20% smaller in 2030. What this means is that the market for credit-bearing, degree granting post-secondary education will include fewer institutions with fewer students overall, and that will fall primarily into a trifurcated market of 1) a small number of extremely wealthy and exclusive institutions, 2) another small number of “mega” universities with six figure enrollments, and 3) the remainder (majority) of colleges and universities, existing somewhere on a spectrum of risk to their operating model and even their very existence.

The reality is that for most colleges and universities in the U.S., the incrementalism of the past, and even the short-term crisis management changes of the pandemic, will not be nearly sufficient to maintain relevance and sustainability over time in the market as it exists now.

Why is this?

Quite simply, higher education is at an existential crossroads in which a combination of external factors has conspired to render the traditional financial and operational models obsolete for a majority of institutions. In fact, about a third of all colleges and universities were operating in the red even before the COVID crisis and roughly 1,300 closed or merged between 2010 and 2020. Of potential greater importance, however, is that traditional colleges and universities are built on a model designed to perpetuate the status quo. That same model represents severe structural impediments to addressing both internal and external threats, and thus has to be completely restructured in order to meet the depth and breadth of the current and future challenges putting so many colleges at risk. In short, a majority of colleges and universities must re-evaluate even the most basic and long-standing elements of what they do, such as delivering content over academic terms, credit-bearing courses, grades, degrees, faculty control of curriculum, tuition as the primary revenue source, credit transfer and prior learning policies, accreditation as an imprimatur of “quality,” the “one and done” relationship with graduates, and a host of other examples. Institutions that have the capacity and the courage to engage in transformational change will dramatically increase their likelihood of surviving and thriving going forward. Frankly, those colleges in the 85% or so of at-risk institutions that aren’t willing or able to reinvent themselves are likely to end up on a spectrum from marginally relevant to zombie institutions to merged or closed.

So, what next?

The mega institutions have already engaged in forms of transformative change, the super wealthy and exclusive schools (less than 10% of higher ed) can do mostly what they want, and the remaining 85% or so will be in a street fight for enough students who can pay the bill, either themselves or via some third-party mechanism. Although it is anathema in higher education to say this, the industry has become a retail business on the consumer side and that is one area of necessary reinvention for most institutions. Most students will simply no longer pay exorbitant rates for a poor, high-friction customer experience that requires many years of deference to often irrational institutional rules, and results, even when successful, with a degree that often has marginal relevance and comes with long-term debt!

The good news is that millions of people will still want (and need) a college degree for the foreseeable future and many millions more will need some form of ongoing post-secondary education. Although traditional higher ed is shrinking, post-secondary writ large, is growing, and will continue to do so for at least the next couple of decades. It’s obvious then, that a big part of the necessary transformation for many colleges and universities is to completely redefine how they think of the market, whom they serve, and what they sell. In some cases, this means abandoning very long-standing notions about what is “sacred” in the institution. And from a cultural perspective, many colleges and universities have to learn to want to avoid failure more than they want to avoid change.

Ultimately, we will hit an equilibrium point in which fewer colleges are enrolling more students and the supply and demand equation will become more balanced. Colleges who get into new markets will be well positioned to serve both degree and non-degree students (individually and through B2B engagements), potentially with shared content, learning experiences, credentials, partnerships and other synergistic opportunities that provide a value proposition that enough customers will choose such as to support a robust business model and sustainability for the institution.

Lastly, in my work with and visibility into hundreds of institutions of higher education over my career—and dozens during the pandemic—it has become clear that many colleges and the people in them misunderstand what transformative change is. They often think that a change in process or technology reflects transformation just because it was hard or expensive or took a long time or resulted in automation, etc. While such initiatives may provide innovation in the sense of a new way of doing something, the something itself rarely changes in a fundamental way. As an example, one institution viewed the adoption of a mostly automated document imaging system for admissions and financial aid as “transformational.” While it was a big difference from students mailing and emailing and faxing documents, which were previously manually put in analog files, then copied digitally one by one, nothing in the admissions or financial aid processes themselves changed. More importantly, nothing changed in what the students were applying for—hundred-year-old model degree programs on the same academic schedule with the same credit-bearing courses, the same multi-year time commitments, the same atrocious credit transfer and prior learning policies, the same faculty-controlled curriculum, etc.

Fortunately, for the few institutions that do understand and have engaged in transformative change, the process itself can be incredibly energizing and validating, particularly in a time of crisis! One client-institution of mine in the Mid-west chose to engage in a completely new strategic planning process that focused on the future, new markets, technology for the student experience, M&A, industry partnerships, diversified revenue streams, non-degree programs, and other items during the heart of the pandemic. What they discovered was that not only did the process and focus energize the university community, it also made them less stressed and anxious about the current crisis!

At Idea Pathway and the Transformation Collaborative™, we understand that among the population of post-secondary institutions that need to pursue transformation, many do not have the bandwidth, expertise, or experience to do so on their own. That’s where we come in. Our approach to supporting reinvention includes partner level experts, industry leading advisors and functional area experts that collectively support foundational change and operational excellence as a path to long term relevance and sustainability. If you’d like a confidential conversation about how we can support your institution through unprecedented disruption and change, please go to this contact form or reach out directly to Dr. Pond at wkp@ideapathway.com or call 719-344-8195.

The Current State

Most organizations, regardless of what they do or how they’re structured, have figured out that they are supposed to say how important their people are. More often than not, however, those organizations have mastered the platitudes, but struggle with the delivery. This is not because leadership wishes ill will on its employees; it’s just that most senior leaders have never had genuine care for and investment in human capital modeled for them, nor are they typically rewarded for such behavior.  This reality is actually quite ironic because it is objectively clear that human capital is the greatest asset an organization can have. If only for self-interest, the most rational thing businesses and other types of institutions could do is make people their number one focus. Because most organizations favor and reward short term gains over long term sustainability (again, despite claims to the contrary), and businesses are generally more driven to meet the demands of shareholders than the needs of employees, when faced with difficult situations, they usually make decisions based on near term financial performance rather than on professed values. This is why profitable entities lay people off or eliminate training programs or decrease benefits at the first hint of revenue or margin challenges—despite the claim that “people are our greatest asset!”

The fact is we can always improve a process or a tool or a technology. We can tweak automation and cost. But when all is said and done, people (human capital) make or break organizations. In fact, according to the Gallup organization, tangible assets have dropped in S&P market value from 68% in 1985 to an average of 13% today. Why is this? The short answer is that what used to be material competitive advantages such as fiscal capital or technology or real estate have become commodities that can easily be adopted and replicated, or that simply no longer matter. An organization’s human capital, on the other hand, can either be an unassailable competitive advantage or an Achille’s heal that mitigates against other potential advantages. One thing the COVID pandemic has demonstrated is that in the midst of an existential crisis, the organizations that are surviving and even thriving are those who have walked the walk with their people.

So, if human capital is so critical to success, why is it rarely a core focus and area of investment? Several structural and operational reasons are shared below.

Failure to Understand What Human Capital Is

In many cases, C-Suite executives have been taught to see the people in their organizations as expensive “productivity tools,” or as interchangeable objects, like technology or physical plant, that can be moved around like pieces on a game board—and whose skills, engagement, use of other tools, etc., either add value to the production of products and delivery of services, or are a drag on the P&L. The relationship itself is often seen as purely transactional.

People are undoubtedly expensive (and complicated), but the words human capital represent a very powerful concept. First, is the notion of humanness or humanity, which goes far, far beyond labor. Our humanity is the source of everything from creativity to empathy to grace, as well as the sublime in human behavior and achievement. It is also the source of fragility, angst, conflict, and a host of other very problematic realities. It’s a package deal, but when people in healthy organizations are primed to excel, the impossible becomes achievable.

As for “capital,” using an analogy from physics, capital is stored energy or potential. As with fiscal capital, it is a resource, that when fully realized, can foundationally change what’s possible. Human capital, therefore, can be an organization’s greatest asset by far because it is nearly boundless. If the leadership in companies and other entities fully understood this, human capital development would naturally be one of their highest priorities and areas of investment. Ironically, even though the ROI on human capital is potentially magnitudes greater than on other investments such as marketing or technology, most P&Ls reflect people purely as cost, which makes investment in developing human capital structurally difficult. This causes further, downstream problems because it is human capital that drives things such as innovation, transformation, sustainability, and continuous improvement—the core of competitive advantage and growth—which cannot be commoditized.

Disintegrated View of Human Capital Support Systems

Related to the transactional view of HR discussed below, few companies or institutions are structured to support human capital in a way that recognizes what should be an interconnected system of activities and related initiatives. For example, most organizations approach things like hiring, training, employee wellbeing, equity, diversity & inclusion, and compensation & benefits as separate, siloed activities (if they happen at all). Again, there are people, often in HR, who understand the value of a more integrated approach and, given the opportunity, would operate that way, but few organizations make that possible. This is truly unfortunate, because in order for any company or institution to maximize the value of their human capital, the people in the organization have to get close to achieving optimal knowledge, skills, abilities, attitudes, productivity, mental and physical health, engagement, resilience, teamwork, shared values and a host of other things, which can’t be achieved in environments that take a fragmented and siloed approach to developing the people that comprise the humanity in their company or institution.

HR as a Transactional Cost-Center

When most people think of anything connected to employees, they think of Human Resources. Moreover, in most companies and other types of organizations, HR is viewed as a cost center that is primarily transactional in nature, even if the folks in HR themselves would prefer a different tact! In other words, HR processes payroll, benefits, hiring, termination, promotions, complaints, etc. They aren’t often seen as business or strategic partners. As a result, things connected to HR are seen as expenses to be minimized, rather than investments to be leveraged. And since no one else formally owns human capital development, it rarely happens in any systematic way. In short, although there are exceptions, HR doesn’t typically operate in ways that bring added value and the departments they serve don’t often see human capital development as their responsibility—all while the “bean counters” are trying to figure out how to “do” human resources more cheaply. Moreover, such an environment typically has no clear accountability, let alone shared accountability, for growing people in ways that help them individually and empower them within the organization. As an example, the vast majority of organizations are much better at checking the boxes on generic “performance evaluation” forms, usually at the last minute before the annual deadline, than they are in designing and implementing true development systems. Why? Checking boxes is a relatively quick transaction, while developing someone often requires a long term, team-effort between functional area managers, HR, and other stakeholders, as well as the person being supported.

People Decisions Based on Short Term Financial or Performance Issues Rather than Organizational Values

It is very common for organizations to profess certain values such as integrity or teamwork or loyalty, but behave in ways that suggest other things are actually more important. Culture and Values represent a much bigger topic than can be addressed in this article, but suffice it to say that when a company claims to value integrity, for example, but then rewards a sales leader who has ethical lapses, or when a university claims to value teaching excellence, but will not promote or tenure faculty based on teaching, then you end up with a collective dissonance that compromises the value that human capital brings to the organization. When employees see that “hidden” values trump an organization’s claimed values, or worse, are fearful that a temporary dip in revenue will result in layoffs or pay cuts, rather than trimming other costs that do not directly harm people, they become less engaged, taker fewer risks, and simply become less productive. They tend to be less inclined to support teams, and instead, rationally, “look out for number one.”

A Better Way

At Idea Pathway & The Transformation Collaborative, we’ve come to understand that turning human capital into a most valuable asset requires a comprehensive, coherent, and integrated approach—an approach that we have frankly never seen fully implemented in any organizational context. The most important element of a successful plan is that it address a broad range of interrelated items that collectively support the growth and development of people in organizations. These same efforts also happen to drive organizational health, so it is a “twofer.” We’ve also noticed that much of human capital development typically benefits from thoughtful outsourcing because so few companies and other entities have the scale to develop core competencies across so many areas.

In addition to the high impact items in the Human Capital Development figure, there are additional areas of potential focus such as “saving” struggling employees and supporting remote and hybrid work environments.

Other Elements of a Good Plan

Beyond the interrelated areas of focus discussed above, it is important that organizations understand what it looks like to actually value employees as much as they typically claim they do, employ a more rational distribution of “HR” responsibilities across the organization, and have a genuine belief that human capital is the ultimate competitive advantage. In fact, in the absence of such a belief and/or a values-based approach to how we treat people, it is impossible to turn human capital into a company’s or institution’s greatest asset.

Employing a More Rational Distribution of “HR” Responsibilities Across the Organization

Of all the things organizations can do to better support human capital, employing a more rational distribution of perceived HR responsibilities is one of the easier challenges—not because the effort is easy—but because it is the kind of change with which most organizations already have some facility. As noted previously, Human Resources departments are usually primarily transactional while functional area managers rarely see human capital development as their responsibility. That is a bad combination! To the extent that companies and other institutions move HR itself into a more strategic and business support role, while shifting accountability for human capital development to functional areas and business units, the more rational human capital development activities will be.

A Values-Based Approach to How We Treat People

We believe there are two primary sources that drive what is ultimately irrational behavior. The first is that most executive teams endure extreme pressure to produce financial results for owners, investors, shareholders, etc.—quickly and consistently. Relatedly, the average tenure of executive leaders across all industries, for-profit and nonprofit, is decreasing dramatically. As a result, the only thing most leaders can focus on is short term results! And because people stick out as a big, if not the biggest, cost in most any P&L, that is the first place most executive teams go to limit or cut cost in pursuit of higher (short term) profits. Secondly, and maybe more importantly, actual corporate values often bely their stated values. For example, most organizations proudly publish values such as integrity, professionalism[1], collaboration/teamwork, accountability, etc., and some even go so far as to enumerate things like compassion, people first, and other admirable claims. As noted in a previous example, however, most organizations find it almost impossible to subordinate financial performance to integrity or to put teamwork and compassion on the same level as sales quotas relative to incentive compensation. As a result, it becomes almost impossible for companies and other institutions to commit to a system that fully supports human capital development because in most cases neither P&L priorities nor values actually support that commitment.

Interestingly, the COVID pandemic provided an opportunity to almost all existing organizations to test their commitment to values. Some have passed the test admirably, sacrificing profits and/or growth to support employees and other stakeholders during crisis or paying bonuses regardless of achieving targets, or shifting fiscal resources to payroll and benefits, including direct support for employees experiencing personal crisis. And others have failed miserably, which may have long tern deleterious effects even for those entities that survive the pandemic. As Mark Cuban noted just a few months into the crisis, “The way companies treat their employees in times like these will be their defining feature in the coming months and years.” It will become a legacy that either buoys or compromises organizations going forward.

How to fully support human capital in an affordable way

The fact is that even well-meaning companies and other entities often don’t have the scale to support internal core competencies in all the areas related to building human capital. Some activities are episodic and infrequent and others require a level of specialization that may not be feasible on a regular basis. That does not mean, however, that leadership teams can free themselves of responsibility for fully supporting the human capital (humanity) in their organizations. Careful prioritization and outsourcing when appropriate are necessary. As life both outside and inside of organizations becomes more complicated and the needs of employees more complex and varied, supporting human capital requires a more comprehensive, coherent and purposeful commitment—and a reassessment of long held and counterproductive assumptions. Although organizations are unlikely to have core competencies in every support area, they do have to fully understand what human capital is and believe that the humanity in their company or institution is deserving of care and development. At Idea Pathway and the Transformation Collaborative, we make it possible for organizations to invest in human capital—and reap the rewards— without incurring the overhead and long-term costs of building internal competencies across every support area. If you’d like to discuss your situation, click here or send an email to wkp@ideapathway.com or call 719-344-8195. We’ll be in touch promptly.

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[1] Another significant problem in many organizations is the traditional, damaging way that “professionalism” is defined such that people are expected to leave their personal lives, their vulnerabilities, and their very humanity at the office door as if they were automatons of some sort, rather than people.

I have had significant visibility into hundreds of organizations over my career, both as a leader and as an external partner. In just the last year, I’ve had access to dozens of entities as they work their way through what, for many of them, is the greatest set of challenges they have ever faced. Even when it appears fairly obvious that traditional solutions will be inadequate for what, in many situations, are existential challenges, very few organizations have committed to transformative solutions. Why is that?

First of all, very few executive leaders or even leadership teams have the bandwidth or ability to run the daily operation, manage through disruption, and build for the future all at the same time, let alone build for a transformed future. It just demands more than most leaders have ever done or experienced. On the other hand, there are many recent examples of leaders who have managed to implement very effective, short-term responses to crisis, while keeping some form of the legacy business operating. Unfortunately, many of those solutions, as effective as they are, have a very short shelf-life and are primarily transactions to solve an immediate problem. They are rarely transformative in nature.

Moreover, in many cases, particularly in higher education, institutions misunderstand what their challenges actually are. Because they are structurally built and have been refined over centuries to preserve the status quo, rather than to engage in transformative change, they perceive their challenges—and solutions—to be within the framework of what’s always been. For example, many institutions see their declining enrollment as a problem with marketing or admissions or pricing, rather than the fact that the value proposition for a growing number of students is not compelling enough and/or the ROI is so dubious, that many potential customers are choosing other providers—including those outside of higher education. Even if a school figures that out, they are highly unlikely to question the role that credit bearing courses and degrees play in the disconnect between what they do and what the market needs. Some things are just off limits–either overtly or covertly.

Similarly, because the supply and demand ratio has fundamentally shifted in higher education the same way of doing things simply won’t work. In order to grow or even preserve enrollment, most traditional colleges and universities must behave as retailers, taking market share from other institutions in the short term and generating greater demand in the longer term. For now, there is simply not enough demand for the current supply. And the COVID pandemic has exacerbated an already exacerbated an existing ten-year decline in enrollment and revenue.

In short, a majority of colleges and universities must re-evaluate even the most basic and long standing elements of what they do such as delivering content over academic terms, credit-bearing courses, grades, degrees, faculty control of curriculum, tuition as the primary revenue model, credit transfer policies, accreditation as an imprimatur of “quality,” the “one and done” relationship with graduates, and a host of other examples. In this context, it becomes clear that most institutions cannot solve their problems with status quo solutions. It’s also clear that doing the kinds of things enumerated above is miles outside of the typical college or university comfort zone!

To be fair, there are also many elements of the transformational change process that are just really, really difficult. Because it’s so rare, most organizations have little or no core competency in what is a really complex process and they likely have a culture that mitigates against change as well! That’s a tough leadership challenge!

Some additional reasons that reinvention is so uncommon include:

• It requires people to go against their natural tendencies.

• It requires a level of transparency, honesty, and compromise foreign to most organizations.

• It requires a level of leadership commitment that most leaders have not experienced.

• It takes a longer-term commitment than most of organizations are used to.

• It’s high risk (although no higher than continuing to operate under the status quo!)

Fortunately, at Idea Pathway and the Transformation Collaborative™ we have led multiple organizations through transformative change. We are able to support institutions who are up to the very hard work of reinvention using a proven process. For a select few who have the resources and exclusivity, transformation is a choice. For most, it is required in order to survive through the current challenges and thrive into the next normal. If you’d like to learn more about the state of your own institution, please fill out the form here and we’ll get back to you soon! Alternatively, you can email us at wkp@wallacekpond.com or call 719-344-8195.