Contents

Part I Introduction, Definition, National and Global Perspective

1 Introduction 3

2 Human Capital and Employee Engagement—Global

and National Viewpoints 11

3 Board Capital and Leadership Capital 23

Part II The Eleven Critical Elements of the Human

Capital Imperative

4 Strategy and Culture 37

5 Organisation Structure and Design 45

6 Recruitment 51

7 Learning and Development 57

8 Employee Engagement 63

9 Communication 71

10 Performance Management 75

xiii
xiv Contents

11 Health and Safety and Psychological Wellbeing 83

12 Diversity and Inclusion 93

13 Technology 99

14 Remuneration 105

Part III Cross-Sector Leaders’ Insights

15 Public Sector Leader Insights 113

16 Private Sector Leader Insights 153

17 Not-For-Profits’ Leaders Insights 177

18 The Outliers 203

19 Institutes and Associations 219

Part IV Institutes and Associations

20 Introduction 241

21 The Human Capital Metrics 245

Part V Human Capital Analytics

22 Final Thoughts 263

Index 267
 List of Figures

Fig. 11.1 The business in the community Workwell model 91

Fig. 15.1 The Crown Estate Pictorial Strategy 119

xv
 1
Introduction

Definition of Human Capital

It took some time before the decision was made to include ‘human
capital’ in the title of this book. It is not a construct readily appreciated
in boardrooms, although it is used widely in academia. In 1992, Professor
Gary Becker, who received the Nobel Prize for his work on human capital
and allied topics, said that human capital is accepted and therefore
‘uncontroversial’, although he went on, somewhat controversially, to
allude to the potential of the human capital approach to the treating of
people as machines (Becker 1993). One key reason for deciding to use the
term was to appeal to the target audience of boards of directors, chief
executive officers (CEOs) and those aspiring to board membership; given
the finance-centric composition of boards and the debates within them, a
book with ‘capital’ in the title would surely be more appealing. It was also
an intent, upfront, to show that my focus is on productivity and perfor-
mance rather than on more abstract factors sometimes associated with the
human resources (HR) discipline. Finally, the term was settled on also
because there are some relevant objective measures already in place at the
macro level, along with a body of academic research which can be drawn
on to inform the discussion. There is even a Human Capital Global Index
published by the World Economic Forum, although it is a little too
general in nature to be of use in this organisational performance treatise.
Human capital has been defined as the ‘knowledge, skills, competencies
and attributes embodied in individuals that facilitate the creation of personal,

© The Author(s) 2017 3

A. Coppin, The Human Capital Imperative,
DOI 10.1007/978-3-319-49121-9_1
4 1 Introduction

social and economic well-being’ (‘The Well Being of Nations: The Role of
Human and Social Capital ’, Organisation for Economic Co-operation and
Development 2001). Ernst and Young, one of the ‘Big Four’ accounting and
consulting firms, which has a human capital practice, defines it as

referring to the skills and know-how of an organisation’s professionals as well as

their commitment and motivation and their ability to lead, cooperate or
innovate. The success of an organisation is tied to proper management of its
teams and care for their motivation and well-being. Excessive employee turn-
over or inadequate remuneration policies can damage reputations and impair
an organisation’s ability to create value.

It is interesting to note that in its publication ‘Human Capital Estimates:

2015’, the Office for National Statistics (ONS) (2016) considers it necessary
to measure human capital at

a whole economy level, [so] we can also consider the contribution of human
capital to economic output. Growth in an economy can be driven by increases
or improvements in either:

• land—the natural resources that we have at our disposal, for example, coal, wood
• labour—our workforce
• capital—the buildings and machines we use to produce goods and services.

In this context, human capital refers to labour and captures both the
number of people in the workforce and the abilities they bring with them.’

The ONS estimates that the value of employed human capital was £19.23
trillion in 2015, a significant contributor to the UK economy as a whole and,
of course, to its cross-sector organisations.
However, it needs to be pointed out that despite its usage in official
reports, along with the academic and other work undertaken on the topic,
there is no widely accepted definition of ‘human capital’. Accordingly, there
is some latitude to applying my own definition. I have settled on one based
on a 1966 definition provided by the instigators of the term—Gary Becker,
the Nobel Prize winner referred to above, Jacob Mincer and Theodore
Schultz. They suggested an explication, referring to ‘the stock of knowledge,
habits, social and personality attributes, including creativity, embodied in the
ability to perform labor so as to produce economic value’. The refinement of
this in the present book is derived from an assessment of a wide variety of
 Diversity 5

human capital elements, the ‘soft capital’ that drives the hard capital, and
their underlying methodologies, impacts and metrics.
There are a number of reasons I have chosen to take a cross-sector
approach in writing this book. The first is that I am extremely fortunate to
have significant experience of all three sectors: public, private and not-for-
profit. In particular, I have been associated with the Windsor Leadership
Trust as a patron and have seen first-hand the real benefits gained from
sharing leadership experiences. Always at the heart of the programmes is the
perennial question of how to engage people and optimise their performance.
That is not to say that there are not structural and size differences as well as
similarities between the different sectors’ human capital dimensions, as
shown by the workforce analysis set out below.

Cross-Sector Workforce Analysis

To give some sense of the scale of the differences in human capital resource
between the sectors, I provide a tri-sector workforce analysis using data from
the ONS ‘Labour Force Survey’, ONS Statistical Bulletin, 2016 and the UK
Civil Society Almanac 2016, published by the National Council for
Voluntary Organisations (NCVO).
ONS data indicate that the public sector employed 7 million staff in 2014,
an increase of 32,600 (0.5%) since 2004. The private sector employed 22.2
million people, an increase of 1.4 million (7%) in approximately 2.55
million active businesses, an increase of 102,000 active businesses from 2013.
The UK Civil Society Almanac 2016 states that the headcount of the
voluntary sector’s 2015 paid workforce in the 162,965 voluntary organisations
was 827,000; of these, 62% were full time and 38% part time. These numbers
are swelled by volunteers, and the almanac suggests that in 2014/15 the
proportion of people volunteering once a month was 27%, and at least once
a year 42%—thus demonstrating another informal link between the sectors.

Diversity
According to the ONS, by March 2014, women comprised 40% of the
private sector workforce. By comparison, women make up 68% of the not-
for-profit sector workforce and 65% of public sector staff. Some 8% of
voluntary sector employees are from black and minority ethnic groups, a
lower proportion than both the public (10%) and private sectors (11%).
6 1 Introduction

Age Profiles
Voluntary sector employees are on average slightly older than those in other
sectors. Those aged fifty and over comprise 38%, compared with 34% in the
public sector and 28% of private sector employees.

Contractual Bases
By the end of March 2014, 89% of not-for-profits’ employees were on
permanent contracts, a lower percentage than both the private (95%) and
public sectors (92%). In terms of fixed contracts, 67% of not-for-profits’
temporary workers were on one, which was a higher number than in the
public sector (60%) and considerably more than in the private sector (30%).
With regard to temping through an agency, the private sector percentage was
highest at 25% followed by the public sector at 12% and not-for-profits at 4%.

Part-Time Employment
At the end of March 2014, about 40% of not-for-profit sector employees,
some 323,490 individuals, were part time. The comparable percentages for
the private and public sectors were 25% and 30% respectively.
In terms of the reason for working part time, 73% of not-for-profits’
employees did not work full time because ‘they did not want to’. The
comparable percentage for the private sector was 62%, and 80% in the
public sector.

Size of Organisation
One major difference is in the size of organisation for which cross-sector staff
work: 48% of not-for-profit sector employees work at organisations of fewer
than twenty-five employees. Employees in the private and public sectors are
far more likely to work for large organisations, 13% and 34% respectively.
The National Council for Voluntary Organisations points out that only 300
charities have a turnover exceeding £30 million per annum and only 20,000
have a turnover exceeding £100,000 per annum, so the sector is not
homogenous.
 Some Personal Insights 7

Finances
According to the NCVO, the total income of the voluntary sector in
2013/14 was £43.8 billion, with net assets of £105.1 billion—so these
represent some significant businesses, making an added contribution to
the economy of about £12.2 billion. Moreover, net assets, along with
human capital, require similar leadership and management skills to opti-
mise performance as they do in the private and public sectors, particularly
since the government funds the not-for-profit sector to the tune of £15
billion a year.
There is little doubt that the three sectors have similar issues to deal with in
terms of managing human capital and that there are transferable approaches
between them that can add value; for example, and as will be explained in
Chapter 3, the way public limited companies deal with corporate governance.
Furthermore, the interdependency between the sectors is shown by the govern-
ment’s funding of the not-for-profit sector, to the tune of around £15 billion per
annum. There are signs that a cross-sector approach—collaboration between
public, private and not-for-profit sectors—is increasingly required to help resolve
some of the key economic and social problems faced by countries around the
world. As the Singapore Management University puts it, ‘we have tri-sector
problems which require tri-sector solutions’. The university goes on to say that
this will only happen if ‘our leaders are tri-sector athletes able to engage and
collaborate with business, government and civil society’.

Some Personal Insights

I thought an outline of a few of my own human capital philosophies and
personal approaches to getting the best from people might provide readers
with an understanding of where I am coming from in writing this book.
My views on the people who make an organisation successful are
unchanged since they were set out in Timeless Management, the book I co-
wrote with John Barratt for Palgrave Macmillan. They hinge on the fact that
results are always achieved by people and that, whatever the sector,

organisations should always be about people and relationships. It is these

human dimensions that make the difference between sustained success and
obscurity. People and relationships bring joy, learning and pleasure. They are
also capable of bringing pain and frustration. At work and at home, it is easy to
be drawn into valuing things more than people. (Coppin & John Barratt 2002)
8 1 Introduction

Furthermore, I consider that people at work are using up their most

precious, finite asset and therefore the institution that employs them has a
sort of moral duty to offer them more than just money. As James Autry wrote
in Life and Work: A Manager’s Search for Meaning’, Avon Books (1995),
‘Work can provide the opportunity for spiritual and personal, as well as
financial growth. If it doesn’t we’re wasting too much of our lives on it.’
You will be able to contrast and compare numerous corporate and indi-
vidual methodologies for optimising human capital—getting the best from
people—and below are three attitudes and devices (hopefully, all incredibly
simple and easy to understand) which I like to think are in my toolbox and
which I have tried to call upon throughout my career.

Positivity
My keyring includes a dog tag I had to wear while I visited Afghanistan when
I served on the Royal Air Force Board, and on this tag is my blood group, B
positive. My own personality structure has, in my view, been blessed with a
‘be positive’ attitude to work and life, reflecting the description of my blood
group. I should point out that my family is not always sure that constant
positivity is a good thing but I am buoyed by the remark made by General
Colin Powell (the former US secretary of state and four star general):
‘Perpetual optimism is a force multiplier.’ Some academic research suggests
that there really can be a quantification of this and that a praise to criticism
ratio of 5:1 is most effective in helping motivate people to keep doing well,
but that a blend with constructive criticism is also important.
But I think my attitude to life, as reflected on my tag, is in my DNA and
not something I have learnt or worked on. It has stood me in good stead and
has conditioned my approach to dealing with and managing people.
Furthermore, I hope and believe it has helped to make me more of an energy
zapper than an energy sapper.

Respect and Listening

I should like to share two particular methods that I have found useful and
effective. The first I have used since becoming a manager of people for Strutt
& Parker on Lord Montagu’s Beaulieu estate when I was twenty-one. It is a
method of putting ‘respect’ into practice and is simply about treating older
people as you would treat your parents, people of the same age as your
siblings and, as you age, younger people like your children.
 References 9

I consider listening to be the most underrated leadership tool and I have

always wondered why we are taught to read, write and add up at school but not
taught to listen—it is a teachable skill and one that we will return to in the final
section of this book. I have twinned it here with ‘respect’, as listening to people is
a mark of respect and, indeed, in my view should be on the job specification list
of every board director and trustee of a company. There follow two examples of
how I have used this tool. At both Historic Royal Palaces where I was CEO and
at the Royal Air Force (RAF) where I was a non-executive board member, I
asked people the same two questions: what is great about working here and what
could we do a little better? In the first instance, the response helped me, on
taking up the appointment, to understand the ambitions of the staff and some of
the key issues to tackle; in the second, it gave me a feeling as to how RAF people
felt, in order that I could report back to the board.

Gratitude
I have always found that being lavish with thoughtful and deserved praise is a
no-brainer. If genuinely meant and communicated, this is a no-effort and no-
cost device. Not only does praise make colleagues feel better but it has a double-
whammy effect in making the giver of praise feel better themselves—at least
according to psychologist Deborah Serani, who writes: ‘studies show that
consistent positive interactions, particularly ones that involve gratitude, increase
happiness and decrease levels of depression’ (Serani 2012). I believe the impact
is also much greater if thanks and praise are given face to face or by handwritten
letter, rather than through email. This is a conclusion I arrived at by observing
how positively people reacted to receiving one of the ‘black spider letters’ from
HRH The Prince of Wales when I chaired one of his charities. I believe
ordinary mortals can impart and evoke a similar reaction too.

References
Autry, J. (1995). Life and Work: A Manager’s Search for Meaning. Avon Books.
Becker, G. (1993). Human Capital: A Theoretical and Empirical Analysis (third
edition). Chicago: University of Chicago Press.
Coppin, A. & Barratt, J. (2002). Timeless Management. Basingstoke: Palgrave Macmillan.
Office for National Statistics. (2016). Human Capital Estimates for 2015. www.ons.
gov.uk
Serani, D. (2012)._How Gratitude Combats Depression. Psychology Today, November.
UK Civil Society Almanac 2016. National Council for Voluntary Organisations.