In a previous discussion, The ‘Seed of Connectedness Towards a Psychological Revolution’, we highlighted how connectedness can transform South African workplaces. Rooted in five psychological constructs: belongingness, relatedness, trust, identity resonance, and purpose integration—this shift fosters cognitive and emotional alignment with colleagues and organisational goals. Here, we examine how connectedness drives collaboration, delivers value to both individuals and employers, and addresses challenges within South Africa’s diverse context.
Connectedness, a deep psychological state, underpins collaboration by fostering trust, shared purpose, and mutual care. Employees who feel emotionally invested are more likely to share ideas freely, address challenges collectively, and align with organisational goals. The five psychological constructs create conditions for synergy: trust supports openness, while purpose integration aligns personal and collective objectives.
Practical examples include cross-functional projects that address local sustainability, where relatedness drives joint action. Yet connectedness alone does not guarantee effective collaboration: strong bonds may form cliques, and unclear goals can hinder progress. To prevent this, organisations can design workflows that encourage task interdependence, ensuring connectedness translates into genuine teamwork.
Building connectedness in South Africa’s diverse workforce
Creating connectedness requires intentional practices tailored to South Africa’s diversity. Inclusive leadership fosters belongingness and relatedness, while recognition and open communication strengthen trust. Aligning organisational values—such as fairness and community upliftment—with employees’ beliefs builds identity resonance. Shared goals, including social responsibility initiatives that address inequality, tie personal effort to broader missions and enhance purpose integration.
Beyond the workplace, societal and political values also shape connectedness. In South Africa, where justice and equity are central, alignment with organisational initiatives deepens engagement. A company investing in local education, for instance, can amplify employees’ sense of purpose. However, political divisions may strain bonds. Respectful dialogue and a focus on shared professional goals can help mitigate such tensions.
Value Congruence vs. Connectedness
Value congruence, the alignment of personal and organisational values, is closely linked to connectedness but distinct from it. Congruence is primarily cognitive, while connectedness encompasses social and emotional bonds such as belongingness and trust. Strong ties may persist despite partial value differences, making connectedness the broader concept. Recognising this distinction helps employers foster deeper, more resilient relationships.
The benefits of connectedness
For individuals, connectedness enhances well-being, reduces stress, and increases job satisfaction by meeting needs for belonging and purpose. It also builds resilience, engagement, and personal growth. For employers, connectedness fuels productivity, innovation, and retention. Research shows connected teams collaborate more effectively, sustainably improving profitability. In South Africa’s competitive market, it also strengthens agility and helps attract and retain top talent.
Connectedness is a powerful catalyst for collaboration and value in South African workplaces. Through trust, shared purpose, and emotional bonds, organisations can harness the strengths of a diverse workforce. Practices such as inclusive leadership and values-aligned initiatives ensure connectedness produces real outcomes, while addressing risks like cliques or polarisation. In today’s constantly evolving world, nurturing connectedness is not optional; it is essential.
A psychological revolution begins with the seed of connectedness, a shift in how one perceives oneself in relation to others. In the workplace, this revolution is not an upheaval but a personal transformation, rooted in the alignment of individual and collective values, fostering a sense of belonging, trust, and shared purpose.
Connectedness in the workplace is a subjective, emotional, and cognitive experience where individuals feel meaningfully linked to their colleagues, teams, and the organisation’s mission. At its granular level, it comprises five psychological constructs:
Belongingness satisfies the innate human need to be accepted and valued
Relatedness reflects emotional closeness and mutual care
Trust enables vulnerability without fear of harm
Identity resonance aligns personal values with those of the organisation, reducing internal conflict
Purpose integration ties individual efforts to a larger mission, creating meaning.
Value congruence, the alignment between personal and organisational values, could be the spark that ignites this psychological revolution. When an individual’s beliefs about fairness, collaboration, or innovation resonate with their workplace’s culture, they experience psychological safety and authenticity. This alignment creates a feedback loop: feeling understood fosters trust, which deepens engagement, reinforcing a sense of shared identity. This congruence triggers a transformative shift in the individual’s mind.
This psychological revolution is subtle because it unfolds within the individual, often unnoticed by others, yet its impact is profound. It redefines how one processes information, relates to others, and finds meaning in life. Unlike societal revolutions driven by collective discontent, this internal upheaval is sparked by personal experiences of connection perhaps a leader’s recognition, a team’s shared goal, or a moment of feeling truly included. These moments create cognitive dissonance, challenging old beliefs (e.g. “I must work alone to succeed”) and fostering new ones (e.g. “Collaboration amplifies my impact”).
The revolution manifests as heightened self-awareness, emotional resilience, and a restructured worldview. An employee might move from transactional engagement to passionate advocacy, driven by a sense of purpose and trust. This shift, while personal, can inspire others, creating a ripple effect across teams. This aligns with the collective consciousness often seen in broader revolutionary contexts.
Organisations can cultivate this seed of connectedness by embedding systemic practices that reinforce value congruence. Shared team goals, task interdependence, team-based rewards, and low tolerance for value misalignment create environments where psychological connectedness thrives. For instance, designing workflows that require collaboration ensures employees rely on each other, fostering trust and relatedness. Recognising collective achievements over individual wins reinforces shared identity, while facilitating value alignment eliminates dissonance that fractures the connection.
The seed of connectedness, rooted in value congruence, increases the possibility of a quiet psychological revolution in the workplace. By fostering belonging, trust, and purpose, organisations can nurture this seed, enabling individuals to undergo a profound internal shift. This revolution, marked by new ways of thinking, feeling, and relating, does not shout but whispers, transforming one mind at a time. Yet, its power lies in its potential to spread, creating workplaces where individuals are not just present but deeply, meaningfully connected, driving both personal fulfilment and collective success.
Empowering women in leadership: the role of training in building inclusive workplaces
The call for gender equality in the workplace is louder than ever. But true equality goes beyond equal pay—it’s about creating environments where women are supported, empowered, and equipped to thrive at every level of the organisation.
As we enter August—a month dedicated to honouring women in South Africa—the focus often shifts to how women are expected to show up, whether workplaces offer safe spaces for authenticity, and how we celebrate their contributions. But perhaps a more important starting point is this: what does true gender equality actually look like?
“Equal compensation is critical,” says Khomotso Sapi, “but it’s really about creating a holistic environment where everyone regardless of gender—feels valued, supported, and given the same opportunities for growth and success.”
Witty Seripane adds, “True gender equality means women have the same opportunities to lead, grow, and be heard—not just earn the same. It’s about fair hiring, unbiased promotions, flexible work options, and creating spaces where women feel safe, respected, and empowered.”
Despite progress, women still face persistent, often invisible barriers—especially in leadership and decision-making spaces.
Sapi points out challenges such as the unequal distribution of leadership opportunities, the constant balancing act between being assertive and being likeable, and the lack of sponsorship in the workplace. Seripane highlights other common yet overlooked obstacles: being interrupted in meetings, not being taken seriously, limited access to mentorship, and assumptions about family responsibilities—all of which create an uneven playing field.
These subtle forms of bias limit many talented women from advancing. And while the solution—upskilling and training—may sound simple, it requires a deeper mindset shift at all levels of the organisation. Building inclusive workplaces starts with equipping people with the tools and awareness needed to do better. Training isn’t a tick-box exercise—it’s a strategic imperative.
“We need to prioritise emotional intelligence, unconscious bias training, leadership development, and clear paths to advancement,” says Sapi.
Seripane adds that mentorship, coaching programmes, and promoting women into leadership roles are powerful levers for real change. “It’s about ensuring women’s voices are not just heard but considered in decision-making.”
Practical steps toward inclusion
HR leaders, people managers, and executives all have a role to play in driving inclusive cultures. Some of the most effective actions include:
Implementing pay transparency and equity
Supporting women’s career development and leadership training
Promoting flexible work arrangements
Establishing mentorship and sponsorship programmes
Measuring and tracking gender diversity metrics
Cultivating a culture of continuous feedback and development
While these may seem like obvious steps, many organisations still lag behind in implementation. Leadership must commit not just to policies, but to a culture shift—normalising shared leadership and moving away from outdated top-down hierarchies.
“I hope to see more women in leadership—not as tokens, but as key decision-makers shaping strategy,” says Seripane.
A message to the next generation
As a younger generation of women steps into the workforce, Sapi encourages them to own their voice and value. “Find mentors and sponsors. Be strategic about networking. And most importantly, don’t apologise for taking up space—embrace failure as part of the journey.”
Seripane echoes this: “Grab the bull by the horns. Speak up. Take up space. Don’t wait for permission to lead.”
Gender equality in the workplace is not a destination—it’s a continuous journey that requires commitment, introspection, and courageous leadership. Investing in women’s growth through training and upskilling is one of the most powerful steps any organisation can take.
“Hold yourself accountable,” urges Sapi. “Foster a culture of feedback, support work-life balance, and ensure equal access to opportunity so women can truly thrive.”
Seripane concludes, “Gender equality doesn’t happen by accident. It takes intention—and organisations must create environments where women are heard, mentored, and positioned to grow.”
“Trust comes first when you choose someone to accompany you on any journey.” –Phelekeza leadership team.
July 12 marks a meaningful milestone for Phelekeza, as the company celebrates nine transformative years of walking alongside individuals, teams, and organisations on their journey to growth, resilience, and purpose.
For Founder and CEO Mackie Makitla, this anniversary is more than just a celebration—it’s a moment to reflect on the vision, people, and perseverance that have brought Phelekeza to this moment.
Born out of uncertainty and inspired by shared purpose, Phelekeza was established in 2015 following a wave of retrenchments. What could have ended in defeat instead ignited a new beginning. A small group of passionate professionals chose to build something far greater than themselves. United by a desire to bring harmony to human relationships while delivering meaningful results, they gave birth to what would become one of South Africa’s most dynamic people-focused consultancies.
“The vision hasn’t changed—but the people, the process, and the perseverance along the way have shaped every chapter of this journey.” – Mackie Makitla.
Anchored in purpose
From day one, the philosophy behind Phelekeza has been rooted in its name: to accompany. Over the past nine years, that philosophy has come to life through every engagement, project, and partnership.
According to Mr Makitla, trust is at the heart of every relationship—whether with clients, collaborators, or community members. “When someone chooses you to accompany them on any journey, it’s a sign of deep trust. And we honour that trust by focusing on impact, particularly within the human capital space, which is the lifeblood of every organisation.”
Whether working with a startup or a major corporation, Phelekeza’s team brings empathy, strategic insight, and innovative thinking to help organisations elevate their people and purpose.
Key milestones & memorable moments
Among Phelekeza’s proudest milestones was navigating the COVID-19 pandemic. Long before the world shifted to virtual engagement, Phelekeza was already operating efficiently in that space. But what followed after lockdowns eased was a true test of resilience. “Operating effectively during the pandemic was one thing,” Mackie shares, “but maintaining momentum afterwards took every ounce of perseverance. That we made it through is a credit to the team and the community we’ve built.”
One especially proud moment came during Phelekeza’s 5th anniversary. Mr Makitla adds, “That year gave me clarity—not just for the next few steps, but for the next 100 years. It was a powerful confirmation that we were on the right path.”
From the beginning, Phelekeza has approached innovation not as a trend but as a necessity. The team has consistently integrated science and technology into their service delivery, ensuring that client outcomes aren’t just intuitive but measurable and validated.
“We don’t innovate for the sake of it,” Mr Makitla explains. “We do it to ensure our clients experience real, tangible results.” Whether through data-driven coaching models, digital facilitation tools, or adaptive learning platforms, the team continues to transform how individuals and teams grow.
“Our clients value our ability to align with their needs—technologically, strategically, and emotionally.”
This adaptive mindset enables Phelekeza to help clients navigate their digital transformations. As the world shifted, the Phelekeza team pivoted with it, bringing not only their systems online but guiding others to embrace new ways of working.
Central to Phelekeza’s story is its people. The organisation is built on collaboration, mentorship, and partnership. The team has benefited from the wisdom of a dedicated business mentor and worked closely with a network of highly skilled associates and solution partners. These relationships have expanded the company’s capacity and enriched its offerings.
“Our partners don’t just amplify what we do—they help us continually evolve and improve,” says Mr Makitla. “It’s a mutual investment in progress.”
As Phelekeza celebrates its 9th birthday, Mr Makitla has a heartfelt message for the people who have helped shape this journey:
“To our clients and broader community, thank you for walking with us. We’ve made it to nine years because of you. Your trust and support fuel our growth. To our team—let’s forge ahead relentlessly. The impact we make together is lasting.”
Looking ahead
The vision for the next chapter? One word: Africa.
With deep roots in South Africa, Phelekeza is setting its sights on the broader continent. The goal is to expand its footprint, partner with like-minded organisations, and bring its brand of people- first innovation to every corner of Africa.
“We’re ready to explore Africa, fully,” says Mr Makitla. “Not just as a market, but as a community we want to grow with and contribute to.”
The vision is clear and the goal is set. As the organisation moves forward, it remains committed to purpose, grounded in trust, and defined by the meaningful impact it creates while walking alongside others.
Phelekeza is a human capital consultancy dedicated to inspiring, developing, and impacting individuals and organisations. Leveraging a team of experienced HR practitioners, organisational psychologists, and talent development experts, Phelekeza combines data-driven insight with
practical tools to elevate performance through psychometric assessments, soft skills training, and SETA/QCTOaccredited learning solutions.
To thrive, organisations must ensure this value is equitably shared among legitimate stakeholders — employees, customers, shareholders, and communities. Achieving this requires careful resource allocation and a balance between stakeholders’ perceived contributions and their expected returns.
Human Resources (HR) leaders operating in South Africa’s complex socio-political and economic landscape must demonstrate strategic vision and bold leadership to shape and implement effective HR strategies. The forces driving relentless change are best understood through the PESTLE framework: Political, Economic, Social, Technological, Legal, and Environmental.
Politically, evolving regulations and shifting trade dynamics create ongoing uncertainty. Economically, inflation, unemployment, and market volatility challenge sustainable growth. Social expectations are rapidly changing, with increased demands for diversity, equity, inclusion, and workplace flexibility.
The shifting landscape
Technologically, artificial intelligence (AI), automation, and digital platforms are transforming job roles and the skills required. Legally, stringent labour laws and data protection regulations present compliance challenges. Environmentally, the drive toward sustainable practices is redefining corporate priorities. By anticipating these drivers, organisations can align their strategies with emerging realities and build long-term resilience.
HR must play a decisive role by executing strategic human capital management practices. In South Africa, the stakes are high. Persistent inequality, socio-political volatility, and slow economic growth underscore the need for inclusive and innovative HR approaches. Policy uncertainty complicates long-term planning, while widespread skills shortages hinder productivity and transformation efforts.
Effective HR leadership means aligning talent development strategies with organisational objectives, fostering adaptability, and ensuring value creation for all stakeholders. This includes workforce development, nurturing agile organisational cultures, and leveraging data-driven insights to navigate constant change.
HR leaders must champion investment in people development that delivers maximum impact. Upskilling initiatives, for example, address technological disruption while enhancing employee engagement and retention. Inclusive workplace policies meet evolving social expectations and strengthen organisational credibility. Embedding flexibility into talent management through hybrid work models or adaptive leadership programmes—helps organisations remain competitive amid legal and environmental challenges.
South Africa’s unique context demands culturally sensitive and locally grounded HR solutions. Talent acquisition and retention strategies must address historical inequalities and current socio- economic realities. In doing so, HR becomes a key driver of sustainable, long-term value creation.
HR’s role also extends to developing the next generation of leaders. Mentorship, tailored development programmes, and cross-functional exposure prepare emerging talent to face future challenges. By fostering empathy, innovation, and adaptability, HR ensures that leadership pipelines are equipped for an era influenced by constant transformation.
Leading HR in a constantly evolving world demands more than operational expertise — it calls for courage, foresight, and an unwavering commitment to people. By actively navigating the complexities of the PESTLE landscape and embracing agile, inclusive, and future-focused practices, HR professionals become architects of resilience and progress.
In South Africa — where challenges are layered and urgent—bold HR leadership is essential for organisational survival, but pivotal to shaping a more equitable, empowered, and sustainable future for all.
It is tempting to think we have outgrown formal leadership. After all, humans are wired to collaborate. Evolution shaped us to survive not through hierarchy but through connection, coming together to share knowledge, support one another, and pursue common goals.
From ancient hunting parties to modern project teams, cooperation runs in our blood. So, if working together is so instinctive, do we still need leaders?
The answer is a resounding yes because instinct alone does not scale, especially in a complex, high-stakes world, clarity, accountability, and strategic direction are not just helpful—they are essential.
Our collaborative nature is powerful. We are naturally empathetic, quick to build trust, and adept at navigating group dynamics even beyond our families or social circles. These traits fuel informal leadership, where influence comes from character, wisdom, or expertise not titles.
While instinct works well in small groups or everyday situations, it can’t carry the weight of an organisation. When you’re coordinating hundreds or thousands of people, managing risk, aligning diverse teams, and navigating legal landscapes, something more is needed. That’s where formal leadership steps in: to set strategy, ensure structure, and drive sustained results.
Humans need structure
We don’t just crave collaboration, we crave clarity. Defined roles, reliable structures, and a shared sense of direction help us make sense of complexity. Formal leaders don’t just manage—they make meaning. They interpret change, chart the path forward, and help teams understand not only what’s happening, but why it matters.
In uncertain or fast-changing environments, this function becomes even more vital. Good leadership transforms ambiguity into alignment—not through force, but through perspective.
Leadership amplifies collaboration
Great leaders don’t create collaboration—they unlock its full potential. By setting clear goals, creating safe spaces for dialogue, and encouraging diverse viewpoints, they turn cooperative instincts into high-impact action.
They build strong teams, cultivate trust, and design systems that allow collaboration to flourish at scale. Formal leadership isn’t a replacement for collaboration—it’s the force that enables it to thrive across an entire organisation.
In pervasive global political and economic uncertainty, the imperative for organisational resilience has become particularly pronounced for South African enterprises.
Resilience, in this regard, refers to an organisation’s capacity to anticipate, adapt to, and recover from disruptions while maintaining continuity and pursuing sustainable growth.
For South African businesses, this attribute is not merely strategic but essential, given the volatility and complexity of the local operating environment.
From volatility to vitality: why resilience matters
Organisational resilience is the equilibrium between an organisation’s internal strengths and resources and the external risks or disruptions it faces. At the individual level, employee resilience depends on the balance between accessible support mechanisms and personal or occupational challenges. The interdependence between organisational and individual resilience is cyclical, though the former largely depends on the latter.
Cultivating employee resilience necessitates deliberate, multifaceted interventions, with Human Resources (HR) departments serving a pivotal role in this process. Contemporary research underscores the importance of fostering adaptive organisational cultures that embrace change and the utility of scenario planning and robust systems to ensure operational continuity. Prioritising employee well-being is critical, as it enhances morale and loyalty, particularly during periods of crisis. Furthermore, strong and agile leadership is indispensable for guiding teams through uncertainty, while continuous learning initiatives ensure that employees remain equipped to navigate an evolving business landscape.
The HR blueprint: driving adaptive culture and talent
HR departments are tasked with recruiting talent that not only satisfies technical requirements but also reflects the organisation’s stakeholder diversity, thereby enhancing collective problem-solving capacity. In the South African context, where skills shortages are acute, HR’s responsibility for talent identification and development is especially significant. This includes the design and implementation of training programmes to facilitate upskilling and adaptability, particularly in response to technological advancements and shifting market demands. HR also fosters a supportive work environment through transparent communication, mental health support, and wellness initiatives, vital for sustaining morale during uncertainty, disruptions and setbacks.
Moreover, HR departments are instrumental in developing resilient leadership.
The socio-economic intricacies of South Africa necessitate leaders who are adept at navigating cultural diversity, managing heterogeneous teams, and making decisions under pressure. Targeted leadership development programmes facilitated by HR are essential for cultivating the agility and empathy required for effective leadership in such contexts. HR also leads change management processes and supports employees through transitions – whether technological, structural, or operational, which results in sustained organisational competitiveness.
HR’s sphere of activity fosters organisational commitment, job embeddedness, and psychological hardiness among employees. These factors are identified in the literature as critical for talent retention and overall organisational resilience, as employees with a strong sense of belonging and engagement are more likely to persevere through adversity.
In summary, organisational resilience is fundamental for the sustainability of businesses facing both global and South African challenges. Through strategic talent management, diversity integration, leadership development, and change facilitation, HR departments constitute the backbone of organisational resilience, enabling firms to transform adversity into opportunities for growth and long-term success.
As the world evolves, two transformative forces that continue to have a significant impact on workplaces are artificial intelligence (AI) and one of its subsets, large language models (LLMs). However, while AI offers immense potential, its integration into the workplace raises crucial questions—especially concerning the preservation of human-centric skills such as emotional intelligence and critical thinking.
AI/LLM in the workplace: benefits & drawbacks
The question at hand isn’t whether AI is beneficial. It’s been proven that when it comes to automating repetitive tasks, AI allows employees to focus on more strategic, creative, and value-driven responsibilities. Technology also empowers decision-making by providing instant access to vast datasets and generating insights that would otherwise take considerable time to uncover. For example, HR and talent development experts can leverage AI-driven tools to streamline psychometric assessments or tailor professional development programs more efficiently.
However, if unchecked, AI has its risks. Over-reliance on these technologies can unintentionally dampen creativity and originality. If employees increasingly defer to AI-generated outputs, there is a risk of cultivating a homogeneous work culture where authentic, innovative thinking becomes less prevalent. This is particularly concerning in leadership development and talent management, where human judgment and nuanced decision-making are indispensable.
Why critical thinking matters
One of the key concerns is the potential erosion of critical thinking skills. These technologies, though powerful, are not equipped to evaluate context, challenge assumptions, or make ethical decisions—hence human involvement is crucial.
Critical thinking enables individuals to assess the validity of AI-generated content, ensuring it aligns with organisational goals and values. For instance, while an LLM might generate a thorough training manual, HR professionals ensure that the manual meets the specific needs of their workforce. Without this critical oversight, there is a risk of implementing solutions that, although technically sound, may be irrelevant or counterproductive in a given context.
The role of Emotional Intelligence (EI)
While AI and LLMs excel at processing data and generating text, they fall short in areas requiring emotional intelligence—such as leadership, team dynamics, and stakeholder engagement. These processes are inherently human, requiring empathy, self-awareness, and interpersonal skills. For example, AI can identify development gaps using psychometric data but cannot guide an employee through a challenging career transition with the multi-layered understanding that a human mentor can provide.
As such, organisations must strike a careful balance by leveraging AI capabilities without neglecting the development of human-centric skills. Investing in soft skills development programs is key—programs that enhance self-awareness, emotional intelligence, and interpersonal skills ensure that employees are not only technically proficient but also effective leaders, collaborators, and communicators—traits that are critical for long-term organisational success.
Implementing AI and LLMs can boost organisational efficiency and decision-making, but can’t replace human expertise. Cultivating a workplace culture that blends technological innovation with essential human skills will help organisations navigate the future with agility, creativity, and resilience.
Market value often outweighs a company’s book value, reflecting investor confidence in future growth. This growth hinges on intangible assets like brand reputation and, most importantly, human capital – the knowledge, skills, and attitude of the workforce.
Human capital, unlike machinery, is an intangible asset that’s difficult to quantify. Employees leave, taking their expertise with them. So why is it so crucial? Because skilled, motivated employees drive innovation, productivity, and ultimately, a company’s market value.
The Human Centric Approach
Organisations should transform their perspective. Instead of a closed system perspective, see the organisation as an open system where organisations and society are interconnected.
Here’s how:
Align organisational purpose and resulting strategy with legitimate stakeholders’ values: Recognise that companies create value for various stakeholders, both internal (employees) and external (customers, suppliers, investors, communities, etc.).
Focus on sustainable value creation: Financial success is crucial, but it shouldn’t come at the expense of employee satisfaction. Aim for a win-win situation. Balance resource allocation to ensure that, over time, all legitimate stakeholders are satisfied.
Encourage openness: Support managers in being more inclusive towards all stakeholders, fostering collaboration and understanding, predominantly with their team members.
Invest in developing emotional intelligence: All organisations are essentially social systems since hardly any production is possible without social interaction. Assist your organisation’s leadership and team members to develop emotional intelligence, allowing them to manage themselves and relationships effectively.
Building a more scientific approach: Human Capital departments need to be more data-driven. There is a strong link between company performance and psycho-social factors like employee well-being. By focusing on these aspects in a more scientific way, we can unlock the true potential of human capital.
Conclusion
Human capital is the heart, head, and hands of any organisation. It’s the driving force behind innovation, productivity, and ultimately, a company’s market value. By prioritising employee well-being, fostering collaboration, and adopting a data-driven approach, Human Capital departments can transform from custodians to catalysts, propelling sustainable business success and societal well-being.
One of our most valued assets is not even on the balance sheet.
S&P 500 companies’ market value to book value averaged a multiple of 3.5 over the last 10 years. A reminder: The market value (share price) of a company reflects investor expectations of future growth and profitability.
Book value, on the other hand, focuses on the net asset value (balance sheet bottom line) of the company based on historical costs.
The main factors that contribute to the healthy 3.5 multiple (that is, the contributing factors that are not on the balance sheet) are brand recognition and reputation, research and development and human capital.
There are a couple of reasons why human capital, that is the knowledge, skills, and experience of a company’s employees, isn’t listed on a traditional balance sheet namely:
Difficulty in valuation – Human capital is intangible. Unlike plant and equipment, you can’t easily put a monetary value on an employee’s experience or creativity; and
Lack of control – A company doesn’t own its employees, when they leave, they take their knowledge with them, and the value of human capital disappears from the company’s perspective.
Any CEO worth their salt will probably argue that human capital is their most important asset – even in less capital intensive industries. So, what should the human capital department’s approach and subsequent role be towards the sustainable maximisation the company’s market value?
Herewith a few thoughts:
Acknowledge that organisations exist to create and trade value (economic and social value) for the benefit of all their legitimate stakeholders – external (e.g. customers, investors, suppliers, communities, trade unions) as well as internal (that is, its staff).
Acknowledge that the creation of sustainable economic (financial) value is still the most reliable and comprehensive measurement of success – and since it is not a paradox, support and broadcast the hypothesis that human capital is the company’s most important and utilisable asset – and therefore the most valuable.
Acknowledge that to achieve the aforementioned, resources must over relevant time periods be allocated in such a way as to meet the relevant marginal conditions with respect to inputs and outputs, thereby maximising cash flow.
Ensure management understands that meeting employees’ expected economic and social value return expectations (measureable with employee satisfaction assessments) is not necessarily mutually exclusive.
Ensure management understands that in their pursuit to maximise cash flow, productivity and employee satisfaction (financial and social) is not necessarily mutually exclusive either.
Functioning within an open system environment, an organisation is enclosed by its external environment implying that, to some degree, the external environment (society) is represented within the organisation. It is therefore advisable that Human Capital departments transition from viewing organisations as closed systems to viewing said as open systems. Subsequently, managers’ journey to be more inclusive towards all legitimate stakeholders of the organisation should be encouraged and supported.
Reference and support the organisation’s stated purpose and strategic objectives as part of all human capital planning, acquisition, retention, and development activities. Be the loud counter voice should the espoused or even worse, the stated purpose, not aspire to improve collective human satisfaction in the regions they operate in.
Acknowledge that adaptiveness (that can also be considered as a form of resilience) is a reliable predictor of success, in all forms of life, and the absence thereof results in not only personal-level stress but potentially lost opportunity. The future will for generations be ‘’moving faster’’ and agility and resilience will be key to survival.
Human Capital departments need to assist managers and their team members with the requisite support to enable them to know and manage themselves and managing their relationship with others, that is, emotional intelligence.
On all the previously mentioned points, Human Capital departments will be well served by being even more science-based. A case in point; sufficient objective evidence routinely suggests organisational performance is sub-optimal largely due to psycho-social aspects. Yet very few business improvement projects focus primarily on the mentioned aspects. It’s time to make the most valuable asset more tangible.
In closing, harmony is a treasured goal shared by the vast majority of stakeholder groups. Harmony implies absence of conflict within oneself and among us. It implies the need to balance, to trade-off, to collaborate. The role of the Human Capital department has never been more critical, not only for their contribution to sustainable organisational performance but also for the benefit of the communities and even larger the societies they operate in.
