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The TWO Invisible Hands of Human Capitalism


The TWO Invisible Hands of Human Capitalism
February 17, 2020, 7:41:54 AM EST   By Mike Russiello

One Hand

The Invisible Hand of the Market

Think back to your high school Social Studies classes, when you learned about the father of modern capitalism. His name was Adam Smith.

In his most famous work, "The Wealth of Nations," which, coincidentally, was published in 1776, Adam Smith describes the invisible hand of the market, which allocates capital to where it can be used most efficiently. And what guides the invisible hand? That would be individual self-interest. What else could it be?

This simple mechanism has been the basis of our economy since the Founding Fathers drafted another famous 1776 document we are all familiar with. As Michael Douglas, acting as the notorious corporate raider Gordon Gecko famously said: greed is good.

Does it really work that way? I believe most economists would say "yes, mostly." While there are countless examples of wasted investments across business and government, in general the invisible hand works as advertised.

Is Human Capital Different?

So, let's assume we agree it takes an invisible hand to allocate financial and other hard resources to their best possible use. What about human capital? Is that any different?

As a matter of fact, it is! That's because human capital is the only element of production that has a mind of its own.

Most resources are inanimate objects that can be moved around like chess pieces. Humans, however, can get up and walk off the chess board. What's more, they can also decide not to show up for the game in the first place.

Therefore, you might say there are TWO invisible hands that guide human capital. The first is the powered by the candidate's self-interest and the second by the employer's needs and objectives.

Two Hands

Two Hands are Tougher than One

These two powerful, yet sometimes competing influences make managing human capital a greater challenge than other types of resources.

It's no fun to not be in control. But that's the way it is when it comes to people. In addition to defining productive jobs, you have to make the right people want to join your organization, and you have to make them want to stay once they get there.

Why Should Hiring Managers Care?

Organizations succeed or fail by their people. In today's tight labor market, failure to consistently attract the right talent due to poor policy-making or leadership can be fatal.

In other words, ignore the second invisible hand at your own risk.

What's the Take-Away?

Don't forget that people are independent thinkers, and that this makes human capital the most difficult resource to manage.

Be sure you have a solid employer brand.

Be sure your selection process provides as much information back to candidates as it gathers from them.

And, of course, be sure to treat your staff well once they are onboard.

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