Ep #2: What is Human Capital?

Hey, everyone, I'm Chris Plackey and this is how to Lead for Female Entrepreneurs and Founders. Because the best way to grow a business is to grow the person who's running it. Let's go ahead and get started.

Hello and welcome to the second episode here of how to Lead for Female Entrepreneurs. I'm excited to have you here. So I help you with the people part of your business. That's, that's who I work with. Right. So as I mentioned before, there's a lot of experts on the planet who want to help entrepreneurs, which is great because we need a lot of help. And the little unique place that I sit is in all things related to people or human capital. Right. The human capital that helps your business realize its goals and objectives and really realize its scalability. So I want to talk to you about what I mean by human capital and why that definition, the words of human capital are so much more valuable to me than just calling your people your employees. Now, certainly I will reference them as employees, but if we're going to go on this journey together, I want to really impress upon you why human capital is the way that I want you to think about everybody in your business. Okay. And we're going to talk about human capital first, from the perspective of you being part of that human capital. I want to talk to you about what I mean by that and then we're going to look at them. Okay? But let's first just even talk about what capital means. I did a little Google search and I looked it up because like, oh, what does capital mean? I use this word. What does it actually mean in the world? So I was happy to find that capital, of course, means wealth.

Right. So if we're going to talk about human capital, we're talking about human wealth. Oh, that's so interesting. And a further definition says that capital is the assets that add to the long term wealth of a company or corporation. The assets that add to the long term wealth of a corporation or a company. Okay, so why, why am I stressing this? Well, first of all, when we're running a business and we're just getting started and we're making, you know, a few hundred thousand dollars and we finally realize we need some help, we tend to think about hiring people. Just like I said, like, I need some help.

I need another hand, I need a right hand. And so what happens then? If we're very, very.

Thoughtful about our expenses and we're really worried about the expense that we're going to incur, I certainly have gone through this in my own business, right? We think about hiring help, but we think about it as an expense. And so that's when in our brain, we get all messed up because we think, well, wait a minute, do I want to incur that expense? Because they're really just helping me, and maybe I could just do the work myself, or maybe I could find someone cheaper, or maybe I don't even really need that done. And so we go through this whole exercise of minimizing what investing in human capital will do for our business. Instead, we're looking at it as a cost, as an expense. And this is unique, I think, for a lot of women. A lot of women tend to minimize that and would rather just take on the role or the responsibility themselves. Because you do that anyway, right? How many other roles and responsibilities do you already have in your life? You're running a business, you're running a family. Not just your immediate family, but probably people, your extended family you take care of. You're probably involved in your community.

Right? So you overextend yourself already. So it gets very easy when we think about hiring people to help us. We can then justify not needing it because we see it as an expense. Now, what if instead I said, no, no, no, we're going to look at anybody that you bring into your business as an investment into your wealth?

So when you add someone into your business, this role, not the person, and this is work you and I will continue to do together, but this role is investing into the wealth of your business. Now, first of all, what happens in your brain when I ask you to think about it that way, I want you to notice. So instead of thinking about somebody in the team as an expense that we have to incur, that we have to allot for.

What if instead we're thinking about this role in our business as an asset, as an investment into our wealth, how does that change how your brain thinks about it? Well, here are the steps I want you to really consider. So, first of all, when we think about adding a role to our business as an investment into our wealth.

Do you see how that, first of all makes you go, do I need this? Is. Is this role going to invest into my wealth? Is this role going to invest into, as an asset into the wealth of my business? And how do we know that?

We know that because we know that the work that this role produces multiplies your results.

Now, the only way we're going to actually be able to determine that is if we're thoughtful about the role before we add it and this is the piece that I wish most of my clients. Clients would hear way before we even meet because we have a tendency to add, quote, unquote, bodies. We go get help. And we're not strategic about how we're investing in the wealth of the business. And so one of the things I say all the time, if you have a position in your company and you cannot directly measure how that position is contributing to the results of your business, then you have to ask yourself why you have the position.

Every position in your business should contribute to the result of your business. So, for example, even an assistant, right? So all of you, if you're making more than $300,000 a year and you don't have a personal assistant.

You are overindulging expenses in a way that is incur. You're incurring more expense at your salary level than you should. You are not maximizing your time, which is your biggest asset right now. Right? So every time I talk to a potential new client, I ask them, do you have an assistant? Because if you don't, you're gonna. Because you. Absolutely. First of all, you have to have one. And second of all, hiring the assistant is everything to determine how you think about your human capital and how you prepare your human capital to deliver.

Into your business. So when you have an assistant, let's just think about that, you make $800 an hour. You're paying them $400 an hour, or you're paying them $40 an hour, whatever, it doesn't matter. You're still paying them less than what you pay yourself. Yeah, theoretically. And so we're already now investing, because if I'm spending $40 an hour instead of $800 an hour, I'm investing the work that needs to be done, the results that need to be achieved, into.

A much more sound investment.

Right? So just that position is an excellent time for us to be reflective, not just on the expense of the position, but on what are you investing? Because you've got now somebody who can do a lot of the things that you used to do. Now, the pushback, of course, is. But wait a minute. No, no, no. They don't get it done like I want them to. The results are not the way I want. They're always making mistakes. Right. Well, this is a problem that we're going to continue to solve together. But the first. But that can't be the reason why we don't hire an assistant. That's an outcome of us not doing our work on thinking about why this position is investing. In our business and how to design the position in a way to make that happen. So step one is we just have to think about what. What is the result I'm trying to achieve with this role?

Step two is how will I know this role is. Is achieving that result? How can I track and measure the results of the role? It doesn't have to be complicated, but it's. It's like if you put an. If you invested in Facebook or you invested in Apple or any other company, right? You put $100 in, don't you track the performance of that hundred dollars?

Even if you put your money in the bank in a cd, don't you track the performance of your money? I want you to think about your human capital the same way. This is wealth. If I'm paying someone $40,000 a year or $200,000 a year, I am investing. And it's like Darren Hardy says on the entrepreneurial rollercoaster book, which I love, if you haven't listened to or bought or read, it's exceptional. But he talks about the fact that our human capital should essentially.

Right. So if you pay someone 100 grand a year and you get $101,000 worth of results back, the position's free.

Now, in most cases, we should get more than that back, right? But I want you to really think about that. Not what most people think, which is, oh, I can't afford $100,000 employee. I would argue if you're scaling your business, you can't not afford a $100,000 employee.

Right? So this first step is we have to think about what is the result I want. Then we have to ask ourselves, what am I trying to achieve? Because if we're thinking about our people, our team, as human capital, they are the wealth. They are the assets that's driving wealth in our business. So we have to be able to track those outcomes. Which also then is. Step three creates objectivity. Step three is, have I clearly def this assets job.

Or have I just been in a mess, in a frantic mess, saying, I just need somebody. Get me a warm body. Please help me. I just need help. We don't do the strategic thinking around what this position is going to do. We don't define it. And then what ends up happening? They don't meet our expectations. And who is responsible for that? You always you. When someone is not meeting the expectations of their position.

It'S because you either haven't clearly defined the expectations or you're not holding them accountable. When they don't achieve your expectations and that's work we'll continue to talk about on this podcast. But I just want to give you that in like two seconds or less. Right? So we have to define what is the result this position is going to make happen in my company? How am I going to make that happen? And do I have a really clear description that outlines very specifically what this role will do?

Right. When we ask ourselves.

About our human capital and we ask ourselves, how is this human capital an asset to our wealth of our corporation, it changes how we think about.

Elevates you as a business owner and leader. And I want you to also notice, like, it changes how you think about that role. If I have somebody on my team and I see them as contributing to the wealth of my business, I have a very different level of expectation of that position versus someone who' just helping me with my graphic design. Versus someone who just helps me with my website. Right? Does hiring a human to help you design your website contribute to your business's wealth? I would argue it does. But doesn't that change how we even think about who we would hire, what we want our website to look like, what we want our website to do? It change all of it? I think it does. It changes it for me. And then there's the last piece about this, which I think is. So this is my favorite thing. So several years ago, I was sitting in a Starbucks with a girlfriend of mine who was just on the beginning trajectory of her business, and we had this conversation about she wanted to make $5 million. And I asked her, I said, what does the woman who makes $5 million think about? What does she do? How would she solve this problem? How would she handle this, right? And that was one of these conversations that she and I still both remember, because it was kind of one of those moments for her where her brain went like it turned sideways, right? And so I think for all of us, right, especially for women, we're so focused on where we are. And if you're anything like me and most of the women I work with, that's all you could do to be right where you are, because you have so many other things calling to your attention, right? So. So we get really focused on who we are today and what's happening in our business today and all the things that need to be done today. And we're just kind of hoping. And honestly, most of the people I talk to, even people are making 5 and 11 and $15 million don't even have a revenue goal for the frickin year. You guys they're like, well, we did 10 million last year, so we're hoping. What? No. So your, your responsibility as the owner of this business is to really take care of your business. And so I want you to think about what is it that you're trying to achieve in your business? What is your revenue goal? What is that big goal you're working towards? What is it? Is it 5 million? Is it, is it 12, is it, is it 1.4? Whatever that is. I want you to think about yourself as the woman who's earned it. So if you're, if you're currently making 1.4 million and you want to make 10, that $10 million woman, she's very wise. She has a lot that she would share with you, if you would connect with her. And when you're in the midst of trying to decide if you should hire that chief operating officer, that chief marketing officer, that administrative chief of staff, when you're, when you're trying to make the decision to hire an executive level assistant versus just a VA, and you're looking at paying $25 an hour versus $65 an hour and you're thinking, oh my gosh, that's so expensive, I don't have the money for that. I don't know how I'm going to pay for that. That feels like a real burden to my day to day you know, income. I want you to go out and ask the woman that you are working to become and I want you to ask your 10 million dollar self, what do you think about spending $65 an hour on this roll? 9 times out of 10 she's going to tell you that's a no brainer. Is that role going to help you develop wealth? Is that role literally going to add wealth to your business? And if the answer is yes, then it's a no brainer. The reason it's not going to be a clear yes is because you haven't defined the role. You haven't defined the results that you expect from that role. You haven't defined how you will measure the results of that role. And so when you haven't done that, it's very hard to say yes to a $65 an hour employee versus a $25 an hour employee because to you they're no different because you haven't defined them. Or worse yet, you're letting them tell you what their job should be. That's a no. This is your business, this is your asset. Your human capital is your responsibility.

Your defining how your human capital will contribute to the wealth of your business is your responsibility. And as soon as you make that shift and you really start to think about this, there's things that will stop happening. You will stop just hiring random people. You will stop promoting people who have worked for you for four years that you feel like we should just. Well, they've been with me long enough, so I'm just going to put them in the role.

You will stop tolerating subpar performance.

And you will get crystal clear on what you want and what you expect. Having that belief. My human capital is my wealth in my business, it is contributing to the long term growth and wealth of my business. You believing that wholeheartedly is going to shift everything. And the one other thing I should say that it's going to do is it's going to stop you from hiring people that you can grow. And we'll talk about this again more and more. But as a female entrepreneur with a small growing team, this is not the time to be mentoring people.

Unless you want someone to take over for you. And I would really want to talk to you about that. But unless you're like apprenticing someone.

You'Ve got to hire people who are experts. You've got to hire people who know what they're doing. It is not that you do not have time to develop people's skill sets. You can develop their acumen about your business. You can develop their understanding about how to move around in your business. And it may be in your industry, but not in the work that they do.

That's their. They have to come that way. And so honestly, that usually means you have to hire people at a higher level because they have more experience. And you need that. You can't be hiring someone who's learning how to use WordPress or learning how to use lead pages or is learning how to use Facebook ads. You don't have that kind of time. You've got to hire experts. And experts are going to be more expensive from an investment perspective, but you're going to get more out. Yeah. More quickly, especially if you're clear. So when we think about the people that we hire, I'm going to invite you to really think about them as human capital. They are the assets that add to the long term wealth of your business.

And if I'm thinking about adding an asset, I want to really think about what is this asset going to do for my business? How will I know they're doing what I want them to do? How will I clearly define what I expect from this role? On a regular basis. What does that mean in terms of who I need to go get and what does that require of me as the business owner to do so? Okay, so I hope you've had a little bit of a brain moment.

It's been awesome to spend time with you again today, and I'll talk to you again next time.

Hey, don't miss a thing. Make sure you join my community@chrisplackie.com connect. Once you join, you'll get all the information on exclusive and private experiences that I'm offering to my clients. I can't wait to see you there. Radio.