Anyone who has ever had the dubious task of managing a large number of people, say, three or more, will testify to the vagaries of the task. Just when one believes he or she can predict employee or managerial behavior something unexplainable, illogical, and even eerie can happen. Although human psychology has been thoroughly charted from many angles, it cannot account for or predict with a high degree of confidence the behavior of people in various situations. People vary from things in that people are affected by external forces. People are active. People make choices. People’s needs, values, and attitudes change thereby driving unforeseeable behaviors.

This unpredictability makes investing in people a high-risk adventure. As Jack Phillips demonstrates, there are different value systems regarding the utility of employees. These tend to lead organizations to under- or over-invest in their human capital. The interesting point is that any value system can be effective. Still, the question remains for the executive who must make the investment decision, “Which approach is right for my organization now?” Phillips provides a thorough and basic explanation of human investment options from which an executive can make a better decision.

Among many examples of how different companies invest, from a learning standpoint, the most telling are Dell and Nike. In both cases, these companies made a strategic decision early on as to what type of organizations they would be. Beyond low or high priced, they structured themselves in a unique way to deliver what they were best equipped to provide. Although both fall into the broad manufacturing category, they don’t actually make something. In Dell’s case they are an assembler with a just-in-time parts delivery modus operandi. Nike is a design and marketing company. All their products are manufactured by others. Based on these clear visions of themselves, they have been able to craft a human capital investment philosophy that has proven effective over the long term. Stating who we are, provides an answer to where and how we should invest.

In the forty plus years of my organization experience, I have found one flaw that affects the utility of human capital investment. The universal defect is called misalignment. Logically, there should be a clear, unbroken line of communication and resource allocation between the vision and brand commitment of the enterprise, its strategic initiatives and goals, functional objectives, individual targets, and resource management. I doubt there is an organization that is so tightly structured with the possible exception of the military. Even there, among the discipline and rigidity, there is a wiggle of room and waste. And that comes from idiosyncratic human behavior.

The value of an aligned enterprise is that the wiggle room is minimized. People, in all their glory and frailties, will always find a way around even a direct order. But alignment helps to direct uncalled-for innovation. If a company decides that customer service is the principal initiative, then investment decisions to strengthen service are obvious. This would include human capital programs to reduce unwanted turnover of talent, training in customer service, incentives to provide extraordinary service, and so forth.

As far back as I can remember, many decisions to invest in human capital have been based on current fads and isolated problems. Rather than parallel organizational alignment, investments are often made because there is a people problem of some unexplained source. Wage and salary increases are an example. One large financial institution was suffering from intolerable turnover of key people. It called in a consultancy who delivered a plan to raise pay across the board along with a large invoice for their wisdom. A year after accepting this solution in search of a problem, the bank found itself with both unacceptable turnover and profit levels.

In other cases the commitment of funds is based on what the competition is thought to be doing. Even if a competitor is spending heavily on recruitment, compensation, or employee development that does not necessarily mean we should do it. This is the downside of benchmarking. Trying to emulate General Electric, Wal-Mart, IBM, or others is often a fool’s errand, since we do not bear any resemblance to them. Staying true to our vision is the lesson.

This country was founded by people who were revolutionaries. It didn’t take any great deal of intelligence to decide that bowing to and supporting an absentee monarchy was an unfulfilling destiny. Less than one hundred years after the revolution, Americans flooded west in search of land and still more freedom. The results that we carry in our national DNA are what I call the gunslinger gene. If there’s a problem, we out a metaphorical gun and shoot at the irritant without understanding it. In short, we don’t cater to analyzin’ pardner. As Nike says, “Just do it!” We admire action over contemplation. While other nations love to philosophize, we love to act. In many cases this works well, but in some high-risk situations we need to commit to a better understanding of the issue.

Before we make human capital investments we need to recognize that we do not operate in a closed system. The point in question is not isolated. It is affected by and affects productivity, service, quality, processes, systems, technology, finances, brand, and external forces. The complexity of such analysis is not appealing to many of us and the reward system often punishes us for taking time to do it right the first time. The quality movement of the 1980s greatly aided our manufacturing capability. Unfortunately, now that it is no longer in fashion and since it was aimed at process more than people, its lessons and values have eroded.

For the human resource executive the ongoing problem has been to sell top management on human capital investments. The answer is extremely obvious: show return on investment. There are several books on the subject, including this one. At the end of the day, what does anyone want? They want their needs fulfilled. In the case of senior executives their needs revolve around the profitability, stability, and predictability of the enterprise. Human resource programs usually contribute to that, but seldom show how and how much.

The great truths of life are simple. One of the most basic is a derivative of the Golden Rule: Do unto others as you would have them do unto you. As applied to requests for investments in human capital, the point to be advanced is that this investment serves the needs of the organization and the executive better than another investment.

Let me offer a case to make this final point. There is a successful company in the food service industry that began to see a fall off in same store sales year to year. It was rightly diagnosed that the store manager needed more support in the way of employee relations in order to improve customer service. At first, the CEO agreed to a study of what employees needed from supervisors as a means of improving their service skills. Then, in a sudden change of heart he decided to bring in a couple of high-priced speakers to motivate the supervisors and to have successful store managers tell what they had done to retain customers. This is a classic entertainment ploy. But what can a store manager in the barrio of East Los Angeles learn from a Boston, Augusta, or Miami manager? In short, the cowboy gene took over and bought cheerleading over training—with predictable failure.

Investment decisions require analysis and alignment to reduce risk and yield optimal return on investment.