Return on Human Capital: Why Leadership Plays a Big Role

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leadershipBusiness leadership often exclaim, “Our people are our most important assets.” Assets do turn into capital, and human capital holds the potential to bring a great return on investment in terms of innovation, efficiency, and productivity. But return on human capital is not always easily achieved. One of the many factors that can make or break that return on the investment in human capital is the role that leadership plays.


A recent Harvard Business Review blog identified two types of leaders – results focused and those with strong social skills – and discussed how leadership styles impact return on human capital.


Results focus

Leaders considered results focused typically have strong analytic and project management skills. They use these skills to solve the problems that get in the way of moving the company and its assets forward. However, studies show that a results-focused leader’s intense passion and motivation does not, in fact, bring out the best in employees.


Social skills

Leaders considered strong in social skills promote communication and empathy. Despite these softer skills, they, too, do not strike most employees as great leaders.


The ultimate combo

A 2009 study by James Zenger revealed that the most effective leaders are those who combine their results focus and social skills in a way that fosters a positive work environment and gets results.

These leaders share four common characteristics. They are:


  • ANALYTIC: Data from the past helps leaders maximize tasks in the present and forecast a successful future. Your expertise conveys trust and confidence.


  • PASSIONATE: Inspiration begins in passion and enthusiasm. Without it, you are a bureaucrat.


  • COMMUNICATIVE: Leaders talk, train, and mentor. You succeed with employees to the extent that you understand their work, their motives, and their frustrations – inside and outside the workplace.


  • EMPATHETIC: True listening is focused hearing, valuing what you hear, and making behavioral and organizational changes based on employee feedback.



The path to leadership saves human capital.

There is no evidence that business leadership is a genetic skill. Some leaders may naturally develop their talent over time, while others may be nourished through education, training, and experience. Successes and failures are great teachers, too. Either way, there are a number of reasons that leaders should work to balance their results focus and their social skills.


  • Strengths in social and emotional intelligence directly impact the effectiveness of human assets. Socially and emotionally grounded leaders are better at diagnosing and solving social and team problems.


  • Strengths in analysis and organization can be leveraged, through leadership by example, to teach employees how to set and achieve goals.


Candidates for leadership roles should be tested and assessed for their ability to manage and develop human assets with clear accountability for achieving a significant return on human capital. There is more to this than good project management. People are integral to reaching corporate goals, but leaders only begin to inspire once they understand their specific role is to align corporate goals with individual goals.


Image credit: maigi/ 123RF Stock Photo

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