PROGRAMME: MASTER OF BUSINESS ADMINISTRATION

MODULE: LEADERSHIP AND HUMAN CAPITAL DEVELOPMENT

Total Marks: 100

QUESTION ONE [40]

Read the following article and answer the questions that follow:

Human capital management research: how people are our greatest asset

Our new research, released today, suggests that effective human capital management can
lead to improved outcomes for organisations and their stakeholders.

It argues that human capital can act as a clear driver of company productivity and profitability
and that companies with durable management frameworks create stronger returns and value
for investors.

From communication, networks, purpose, career development and inclusion, it has identified
key human factors that can drive change.

It also highlights the importance of combining quantitative and qualitative assessment when
analysing human capital.

Key findings on the importance of human capital

Companies interact with a diverse set of capitals to create value – financial, physical and
human. The latter is increasingly talked about but rarely analysed in detail.

There are multiple structural and cyclical factors underpinning the materiality of human
capital.

To further our understanding of the value of sustainable human capital management, we

have conducted detailed research into this field in collaboration with CalPERS and the
Oxford Rethinking Performance Initiative at Saïd Business School, University of Oxford.

Below are our core views and findings on this topic so far:

1. Human capital is a critical source of competitive advantage and fundamental resilience;

2. Effective human capital management requires the stewardship of a variety of systems,
including operating models, culture and inclusion, incentives, talent and learning, and
innovation;

3. Qualitative and quantitative analysis of human capital management allows us to ask

different questions about the drivers and sustainability of value creation;

4. Human capital return on investment (HCROI) is an accounting-based quantitative

measure that can be used alongside employee economic value added (EEVA) and other
metrics to assess the effectiveness of human capital management;

5. HCROI is positively correlated with forward excess returns over multiple time horizons and
across sectors, even after controlling for a variety of factors;

6. Companies with stronger HCROI create more value through the cycle;

7. HCROI analysis can be used as part of a broader investment and engagement process;
helping us interrogate why companies with similar levels of labour investment can achieve
different fundamental outcomes;

8. Corporate disclosure of human capital-related data remains poor; richer and more
pervasive disclosure would benefit market participants and asset owners.

A new framework to assess human capital value creation

This research tells us that investors cannot ignore human capital management in evaluating
investee companies. As we approach continued economic volatility, we expect that
companies with strong human capital management are likely to be more capable of
navigating the future effectively. Even as the integration of artificial intelligence across
industries evolves, the relevance of people as the stewards of value creation will remain
high.

Nicholette MacDonald-Brown, Portfolio Manager and Head of European Blend, has been
incorporating the analysis into her investment process.

She says: “Unlike environmental factors which have transparent values, human capital has
traditionally been difficult to quantify, especially when looking at the lower end of the market
cap spectrum where data is extremely opaque. This framework allows active managers like
us to gain greater insights into companies within our investment universe. We can identify
those which are leaders and laggards in human capital management to make informed
allocation and engagement decisions.”
(Source: https://www.schroders.com/en-gb/uk/intermediary/insights/human-capital-
management-research-how-people-are-our-greatest-asset/)

Questions:

1.1. “Even as the integration of artificial intelligence across industries evolves, the
relevance of people as the stewards of value creation will remain high.” Evaluate
what the above statement means for human capital management. (20)
1.2. “Effective human capital management requires the stewardship of a variety of
systems, including operating models, culture and inclusion…”. Explain the
importance of managing culture and inclusion in the contemporary organisation. (20)

QUESTION TWO [30]

A recent HBR article about the distinction between managers and leaders quotes, “CEOs
need to manage, not just lead. Middle ‘managers’ need the skills of leadership, too.”

Now more than ever, following the shifts the workplace has seen, the importance of an
effective leader and manager has grown by leaps and bounds. The current scenario
demands empathetic, adaptive and authentic leaders for their employees.

Welcome to the era of “human” leadership!

What does it entail? Reworked lists the following ways to encourage leaders toward human
leadership:

• Improve company communications

• Prioritize teamwork and collaboration

• Invest in people

• Encourage feedback

• Give recognition, rewards and compliments

Besides company initiatives, leadership expert Kerry Azar suggests looking inward:

“While our world is becoming increasingly complex and unpredictable, it’s also providing us
with countless opportunities to reflect on what leadership means and to actively develop the
mindset, skills and tools that support outstanding leadership.
“If leadership is about becoming ‘radically human,’ then there’s one thing we can do daily.
Ask ourselves, ‘How am I getting in my own way?’ Answer truthfully and be prepared to act.”
(https://www.selecthub.com/hris/hr-trends/)

Question: Explain the meaning of “radically human” leadership and evaluate its significance
and necessity in the contemporary organisation.

QUESTION THREE [30]

When a whopping 80% of jobs are never posted online but filled through referral or internal
hires, your current employees play a large role in who gets hired next. If the majority of the
staff is one demographic, increasing diversity through a referral-based hiring program
becomes more difficult, and culturally skewed. The reality is that neighborhoods,
communities, and schools remain largely homogeneous. In a 2014 survey from the Public
Religion Research Institute, 75% of Whites identified as having no friends outside of their
racial group. When a manager asks their team for a referral, the majority of their White team
will only have White referrals.

Aside from referral systems, a large body of research shows that the hiring process is unfair
and full of bias. A candidate's name alone has shown to immediately cause bias. Applicants
with White sounding names like Emily or Greg were 50% more likely to receive interview
requests than Black-sounding names, like Lakisha or Jamal. While much of this bias has
been unconscious, if left unchecked, it can harm your company.

When considering employment, 67% of job seekers deem workplace diversity as an

important factor in their decision process, especially for Millennials who make up the majority
of the workforce. According to a Deloitte survey, 75% of millennials believe an organization
is more innovative when it fosters a culture of diversity and inclusion, and are thus more
likely to leave if the company doesn’t meet their standards of diversity. If you want strong
talent, you need diversity.

Considering the above, evaluate the importance of creating a diverse workplace from the
moment an organisation begins its recruitment process (and the consequences should an
organisation not approach diversity in this way).