The trillion-dollar difference

An economic analysis commissioned by the firm and conducted by the Centre for Economics and Business Research finds that human capital represents to the global economy a potential value of $1,215 trillion. It is 2.33 times that of physical capital, which includes tangible assets like technology, real estate, and inventory. Physical capital, the analysis performed for Korn Ferry indicates, should be valued at $521 trillion today. Nothing can match the greatest asset of any organization: its people, says Gary Burnison, CEO of Korn Ferry (read “People Are No Longer The CEO’s Most Important Asset” for more of Burnison’s insights).

“Leaders are placing a high emphasis on technical skills, technological prowess, and the ability to drive innovation in their new senior recruits–elements critical for modern organizations,” says Korn Ferry’s Alan Guarino, vice chairman CEO services. “However, the financial reality proven by this study–that the value of people outstrips that of machines by a considerable distance–must give CEOs pause for thought. So-called ‘soft skills,’ such as the ability to lead and manage culture, will become critical factors of success for companies in the future of work as they seek to maximize their value through their people.”

As part of its study, the firm also commissioned detailed opinion research to capture the thinking, knowledge, and experience of 800 CEOs, Chief Commercial Officers, and Chiefs of Strategy around the world. They have illuminated where they perceive value today and tomorrow and where people factor into their vision for success. Survey respondents, perhaps swayed by shareholder demands, said they are putting a priority on thinking, planning, and investing in technology—with significantly less effort going toward the people in their workforce.

But human capital is also the greatest value creator available to organizations: For every $1 invested in human capital, $11.39 is added to GDP, the Korn Ferry economic analysis finds. The return on human capital—value versus cost—should give a clear signal to CEOs: Investing in people can generate value for the organization over time that significantly exceeds initial financial outlay.

“How to measure return on people has long been a challenge for leaders,” says Korn Ferry senior partner Tania Lennon. “Faced with an information vacuum, leaders are mistakenly concluding that, because they can’t easily measure the value generated by people, it’s not there. The current approach taken to managing people as a bottom line cost will, in the value paradigm of the future, fail to create a high-performance team. People are the cornerstone of superior performance, but organizations are not investing the time or resources needed to unleash it.”