Wednesday, December 22, 2010

Why do we need a Human Capital Index?

Do you remember the that last time you had to pick a specialist? How did you do it? Did you call friend for a recommendation? Did you call a professional association? Did you research the web? Did you look on the yellow pages? Did you wish you had more time?

If you are one of those that thinks that these problem should have been resolved a long time ago, you will be happy to know that there are some new tools on the web posed to facilitate you next talent search. I will talk about them, how we got there and what the future will bring.

The "Educated Guess" Way

For individuals finding talent in never easy. It is especially hard when it is an urgent matter. Whether looking for a doctor or a plumber, individuals, to this day, have no proven way to systematically find the talent they need. For most, the preferred method ends up being educated guessing based on the advice of friends. In the absence of it, individuals will take on the web and will use search engines to know more. In the end, individuals are ultimately influenced by cost and some type of marketing.

Even though there are a myriad of websites to allow people to review and score the results of the work of others, the reviews tend to be highly subjective. When things work well, people tend to be too busy to share, and so there's a tendency to express negative opinions, which contributed to a somewhat distorted image.

The Traditional Way

For organizations, finding talent is a critical process. Human capital is simultaneously the most valuable and most expensive asset of an organization. Educated guessing is risky but not unheard of. For the most part, organizations have been relying on the combination of resumes and interviews to discover talent. With the internet, the process was significantly simplified and allowed the globalization of talent discovery services.

Résumés, whether online or not, are a low-resolution and unstructured description of people’s skills and expertise. Those who write them can exaggerate or omit facts, and some claims require manual validation by a third party. Because of that organizations have to invest in interviews and recruiters to find and assess talent. All of these processes represent a significant investment that penalizes both the individual and the organization. At the dawn of the knowledge revolution, organizations still relying on the traditional process to identify talent will soon realize that it is too expensive, slow and error-prone to compete in the global “just-in-time-economy".

Using social networks

Social networks are starting to take an increased role in talent discovery. Among them Linkedin is quickly emerging as the dominant player. Besides offering the individual's professional history, it also allows talent seekers to assess individuals' social connectedness, an important factor on today's highly competitive economy. Recent changes on Facebook, making it easier to identify users' interests, leads one to believe that the social Goliath will also be entering the talent discovery business.

There is an innate problem with this type of approach. Even though social networks represent incremental progress over traditional résumés, they were not thought to represent individuals skills and expertise. They were designed to connect people. Even though LinkedIn is trying to come up with new ways to mine their data, finding talent in a social network still requires a lot of human effort. Additionally, the LinkedIn business model allows search results manipulation, which rewards those with the best marketing skills and not necessarily the needed talents.

A new generation of social networks

A new wave of social networks is emerging to address the talent discovery challenge. They are the questions and answers sites. Unlike LinkedIn, or Facebook, these sites are designed to identify experts on specific topics: sites like Quora (started by ex-facebookers), Starckoverflow, Trueknowledge and Vark (a google company). In a way they are all inspired in the Wikipedia model but are a lot more focused on aspects of social networking. Whereas Wikipedia wants to present something to the community that has high quality, these new generation of tools seek to classify and index the expertise of individuals, facilitating their interaction.

Even though these new tools represent a significant leap forward in finding talent, they are unable to respond (in a deterministic way) to a basic question - "How do we know that a given person has the necessary expertise to respond to a given question?" To resolve this issue, these search engines turn to more or less complex computer algorithms that utilize the feedback from the community and the activity of the user, to score and index human capital. Another important factor is that these tools are, at their core, social networks. They are extremely influenced by popularity driven factors. For the most part, there's no way to accurately assess whether the answers given lead to the expected results or not. That reduces their accuracy.

The evidence-based Human Capital Index

The accumulation of skills and expertise (knowledge) is a lifelong process. People become experts on a specific subject because they are exposed to knowledge and use their cognitive abilities to establish their own expertise. A person that has never enrolled into a learning program, or has never been involved on a project, about a certain topic, cannot be an expert on that same topic. The most accurate way to assess individual's expertise is by tracking knowledge accumulation and utilization. In other words, human capital value shouldn't just be the result of answering questions, but the result of a evidence of work and results over time.

As society quickly evolves towards the knowledge economy, organizations and individuals will have to do a lot more than be able to prove their ability to answer questions. They need to be able to demonstrate how they accumulate expertise and how they use it to achieve their results. Simply put individuals need to make their their cognitive abilities more transparent. Without this it will impossible to determine whether the individual is just mere knowledge developer or a knowledge holder.

In summary, finding talent is getting easier by the day. However, that alone is not enough for the challenges posed by the knowledge economy. In this new era, it is critical to know what people know, how people acquire and apply knowledge. The individual's human capital index is a combination of all of the three.