Originally published in AICD. Three decades working in the people business teaches you a lot about the importance of setting the tone at the top, here’s what I learned.

When directors reflect on what keeps them up at night, these human capital questions 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 diverse skills? Do we have great leaders? In the case of talent, culture and leadership, are we asking the right questions?

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

What I’ve learned in 30 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. With good talent, you’ll have good leaders. With good leaders, you’ll have diversity.

With 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.

I’ve also learned that it’s really hard for boards to get to the heart of the human capital in their business because they keep looking at the ingredients and not the whole cake.

How many times have I fronted up to a board, with an impressive presentation on diversity, rewards, technology or some other ingredient of good human capital?

We have exactly 20 minutes to discuss it, but I’ve always wondered whether that gives the board enough information to seriously challenge or review consequences, conflicts, opportunities and impacts.

It’s like inviting the board to review one ingredient and expecting them to understand the whole cake.

I’ve had two “epiphanies” in understanding human capital — one in a warehouse in Moorabbin, Melbourne; the other in a boardroom in Milan.

The Moorabbin moment

I’m 28. I’ve had my first Human Resources Director role for almost a year when my boss the managing director, 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 lot about what we’re doing wrong.

As I took on my new role in purchasing, supply, logistics and distribution, I also took on APICS (American Production and Inventory Control Society) accreditation.

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 much about systems design.

I take the approach that everything not absolutely essential is stripped from the supply chain and its design, leaving it so clear, intuitive and logical, no training is required. It also taught me where those lean-and-mean systems interact with human beings.

You can design a system as lean as you like, but if the popular guy in the warehouse 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 up the entire trucking schedule.

There is no greater impact on a business than people; no greater competitive advantage if you get it right.

That was the moment I understood: lean-and mean systems are based on human capital. It’s that perfect intersection between design and human beings — logic and emotion, compliance and relationships. Which brings me to…

The Milanese boardroom

I’m now just into my 40s and have been living and working in Asia, the US and Europe. I can write and execute a people strategy in my sleep.

I can build a business case, present it and have it in action in less than three months. Charged with writing a global HR strategy for 67,000 people, I hit the books. I have a great team and we nail it, PowerPoint it and write the speech. Then I turn up to that boardroom and get a lesson.

This is a super-experienced international board with an awesome CEO — obsessed by culture and human capital and how critical it is to the business.

All completely uninterested in my presentation; much more eager to have a long discussion. For five hours we meander through every component of human capital, every impact, intersection and potential consequence. We challenge everything, constantly looking at risk.

We run through the human reactions to 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.

That’s how a board seriously understands human capital — as a system, as consequences, as interrelated, as social. As “owned” by the culture or as counterculture; as simple or as complicated as it can be.

It’s not a roped-of piece of bench that wins a Michelin Star, but the whole kitchen, the entire team, 100 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.