There is no greater impact on a business than people. No greater competitive advantage if you get it right. No greater disadvantage when you get it wrong

Here’s how I learned the importance of culture through two board meetings.

When Boards think about what keeps them up at night, there are a few human capital questions that are right at the top of the list.

Is our culture in good shape?

Do we have the right talent for the future?

Are we attracting and retaining diversity?

Do we have great leaders?

In the case of talent, culture, and leadership, am I asking the right questions?

And finally, if someone is doing the wrong thing, will we catch them before they hurt us?

What I’ve learned in thirty years of loving this ‘people’ space, is that these questions all relate to the same thing.

If you have good culture, you’ll have good talent. If you have good talent, you’ll have good leaders. If you have good leaders, you’ll have diversity. If you have diversity and inclusion, someone will call out the bad guys long before they go too far.

Every component impacts every other.

To get it right is incredibly hard. To get it wrong can be done accidentally.

What I’ve also learned, is that it is really hard for Boards to get to the heart of the human capital in their business because (and I apologise in advance for the CWA reference, but I am a farmer’s daughter), is that they keep looking at the ‘ingredients’ and not at the whole cake.

How many times have I fronted up to a Board, in either the USA or Australia, with a very impressive presentation and conversation on Diversity, or Recruitment, or Rewards, or Technology, or some other ‘ingredient’ of good human capital. Yes, it fits on the regulation three pages, (plus one table attachment) and we have exactly twenty-three minutes to discuss it, but I’ve always wondered whether it gives the Board enough information to seriously challenge or review consequences, conflicts, opportunities, and impacts. I’ve often wondered whether it was like inviting the Board to review one tiny fenced-off bench in the kitchen, or one ingredient, and then expecting them to understand the whole meal.

There are two points that I refer to as my ‘epiphanies’ of understanding human capital.

One happened in a warehouse in Moorabbin in Melbourne.

The other in a Board Room in Milan, Italy.

The Moorabbin Moment

Let’s start in Morabbin. I’m 28. I’ve had my first HRD role for almost a year, and my boss the MD, a crazy chemist, offers me a ‘move to the business’. There is nothing like a ‘move to the business’ to help you appreciate what HR ought to be doing (and a whole lot about what we’re doing wrong). As I took on my new role in Purchasing and Supply, Logistics, and Distribution, I also took on APICS accreditation. If you want to understand systems, go with the experts…right?

The next few years, grappling with leading warehouse teams, truck drivers, demurrage costs, the mathematics of production planning and the leanest of supply chains, taught me so much about systems design. It also taught me where those lean and mean systems interact with human beings. Sure you can design a system as lean as you like, but if the popular guy in the warehouse, who has a longstanding reputation for keeping everyone safe at work, thinks you’re trying to shaft him, or his mates, he’ll show you who’s boss by overstaying lunch break just long enough to mess with the entire trucking schedule.

So, that was the moment I understood, mean and lean systems – everything that is not absolutely essential stripped from the design, leaving it so clear, intuitive, and logical that there was no training required. Even with 16% turnover, four new people, 15% of your team having a bad day, and 50% totally engaged and giving you massive voluntary effort, it came together well. It is that perfect intersection between design and human beings. Between logic and emotion. Compliance and relationships.

Every mistake you made, every time you didn’t account for the human element, cost you. Every time you got it right, with a perfect balance between the employee experience and customer expectations, put some cred in the bank for another day. And as a fellow human, you knew you’d need it.

And that brings me a Board Room in Milan.

The Milanese Board Room

I’m now just into my forties, and I’ve been all over the world, working and living in Asia, the USA, and Europe. I know stuff. I can write and execute a people strategy, in my sleep. I could build a business case, present it, and have it into action in less than three months. Component by component. Ingredient by ingredient.

Charged with writing a global HR strategy for 67,000 people, I hit the books. I have a great team and I think we nail it. We powerpoint it. We write the speech. I turn up to that Board Room in Milan, and I get a lesson.

Around the room is a super experienced Board, and an awesome CEO. All international. All open to ‘new’. All obsessed by culture and human capital and how critical it is to this business. All completely uninterested in my presentation. All much more interested in the longest discussion. For five hours we meander through not just every component of human capital, but every intersection and every impact and potential impact and every potential consequence. We have questions on questions, challenges on challenges, and we constantly look at the possibility of stretch and the risks that go with it.

We talk Culture, Talent, Leadership, and Risk. And for each topic, we run right across the processes – Recruitment, Performance, Talent, Development, Reward, Change – and back again. We run through the human reactions to each and every piece, the theory being, if they like it, and it works, they’ll do it. If it doesn’t work, or it’s not liked, you’ll have to fight the culture to get compliance.

The questions are not just ‘how efficient, cost-effective and fast is recruitment?” but also “how many applicants are there and what happens to those we don’t recruit? Are they left as potential customers?”

The reward questions are not just “what behaviour does this reward drive?”, but “What behaviour might this accidentally drive?, How would you work around the process or cheat the system? What are the checks and balances? What are the consequences?”

The Performance questions are not just “how do we determine KPIs and accountability?”, but also “Are we appreciating collaboration and generosity?”

And that is how a Board seriously understands human capital. As a system. As consequences. As inter-related. As social. As ‘owned’ by the culture, or as counter-culture. As simple and as complicated as it can be. In a long conversation, that finds the gaps and the holes, by patiently questioning impact at every step.

It’s not a roped off little piece of bench that wins a Michelin Star. It’s a whole kitchen. A whole team. A hundred perfect ingredients. And a deep appreciation of how it all comes together.

There is no greater impact on a business than people. No greater competitive advantage if you get it right. No greater disadvantage when you get it wrong.

That’s what I’ve learned. That’s what I love.