Human Capital and Sustainable Growth
- by David Capece
Technology companies lure venture capitalists with the potential to sustain tremendous growth and margins by achieving scale. The recent frenzy around social Web 2.0 value creation exemplifies the scale created through network effects. With extreme value created through scalability, there is opportunity to apply the lessons of scalability to other areas of the organization. We start with human capital strategy, the top one or two priority of CEOs, according to The Conference Board.
I believe that human capital can—and more importantly, must—be scaled for competitive advantage.
As the head of a digital marketing agency, Sparxoo, human capital is our key competitive advantage. We have sustained a compound annual growth rate of 40 percent for the past four years, with growth accelerating. To scale further, I am applying the lessons of technology scalability to our human capital-intensive organization to grow a high-performing organization.
1. Organizational Leadership
Peter Drucker, the founder of modern management, said, “Leadership is lifting a person’s vision to high sights, the raising of a person’s performance to a higher standard, the building of a personality beyond its normal limitations.” The first requirement to scale human capital is to have a vision that the team can believe in. A broad vision should excite and energize the team, and it should be championed by the organization’s leaders.
The second requirement to scale human capital is to find talented and engaged leaders who set the tone for an organization. The philosophies, skills and behaviors of leaders will be amplified through the organization, so it is imperative to have a diverse leadership team that exemplifies the desired scaling of human capital.
An AonHewitt analysis of companies with strong financial results shows that one distinguishing feature is the quality of their senior management, with engagement starting at the top. The authors of the Aon report write: “We see that senior managers’ levels of engagement are high and their ability to engage others in the organization, particularly those in middle management, is strong. And it does not stop there: engaged managers are more likely to build engaged teams.”
2. Cultural Architecture
In the technology world, systems architecture is a key to scalability. As you expand the system through new features and new connections, a strong foundation is critical. For more on that, see what The Art of Scalability author Mike Fisher has to say.
Indeed, when scaling an organization, the core culture and human capital will be amplified. The culture will be a magnet to attract candidates who share common values and ambitions. The more Sparxoo grows, the more valuable our cultural architecture becomes. Even in our short history, our reputation serves as an advantage in recruiting talent, and the connection between hiring advantages and the high status of firms is outlined in this recent Knowledge@Wharton blog post.
One of the unique aspects about growing an agency is the importance of creativity. We are defying the notion that creativity can’t be scaled. Instead, we believe that creativity represents the challenging of the status quo to embrace disruptive thinking. We are guided by the philosophy of John Maeda, a partner at Kleiner Perkins Caufield & Byers and chairman of eBay’s design advisory board, who believes that environments can enable creativity and a team member’s “ ”
One of Sparxoo’s five values is to “Be Badass.” What that means is that we have the courage to take risks and are unafraid to disrupt the status quo.
3. Connected Knowledge
Former IBM CEO Lou Gerstner is a proponent of activating values. As Gerstner puts it in his interview with McKinsey, “If the practices and processes inside a company don’t drive the execution of values, then people don’t get it. The question is, do you create a culture of behavior and action that really demonstrates those values and a reward system for those who adhere to them?”
I have been searching for ways to scale the execution of our values through repeatable elements that can be adopted by our extended team. We have embraced cloud sharing and advanced forms of remote connection to our offices in Tampa and Miami, which sit 300 miles apart. Among our initiatives are on-demand training and shared methodologies. In our knowledge-based economy, efficiently and effectively connecting brainpower is a tremendous opportunity to achieve scale and competitive advantage through human capital.