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Human capital dynamics

It's a business truism that people are the most important assets of the company. Despite this, the impact of the way the firm's human is managed on overall business performance is usually poorly understood.

Different firms have different human-capital systems: their grade ratios, human resource policies and growth rates differ and will develop differently over time. Soft factors such as capabilities and employee morale vary too. As a result, the human-capital policies - recruitment, promotions, training, building motivation, etc - that work in one firm may be unhelpful or even counterproductive in another.

But determining the ideal structure for your business is not hard with the right toolset to hand. The trick is to keep it there.

Maintaining that structure for your business requires you to set very particular relationships between your overall growth rate, the promotion and attrition rate at each level in the firm and your grade structure. If any of these factors changes, the firm’s hierarchical structure is deformed, and its ability to perform its work suffers.

  • If your growth rate slows (for example, in an industry recession), promotion policies and expectations continue to pull staff up into higher grades, warping the firm’s structure and decreasing its efficiency.
  • If your promotion policies are changed (for example, to reflect changes in the availability of staff in the labour market), the balance of the firm’s hierarchy is again disturbed with similar effects on its financial efficiency.
  • If your ideal grade structure is to change (for example, when changing the type of work that you conduct or the roles involved in it), the firm’s promotion and recruitment policies need to be re-designed well in advance of the change.

The invisible dynamics of human capital have shaped the business success of rival firms over the years and defined their 'pecking order' in today’s marketplace.

In the past, the reasons for the success of some firms over others have only been seen – if at all – with the benefit of hindsight. But Powersim's strategic simulation solutions provide real insights into human capital dynamics and their impact on overall business performance, allowing managers to foresee the consequences of their current policies and to design a better future.

Powersim's human capital dynamics toolkit builds on our extensive experience in this area. Equipped with the toolkit, firms can now exploit the invisible dynamics of hierarchical-firm growth to generate informed debate on their future profitability under alternative manpower policies, foresee the effects of such policies, and implement more profitable, robust and shared strategies.

Click here to see recent case studies.

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Human Capital Case Studies

British Army
Building the manpower plan to support the development of the 21st century Army.
Ministry of Defence
Clear, communicable and cost-effective strategic pipeline management