Maximize Human Capital

Being able to maximize human capital to optimize employee engagement is the unspoken goal of every business.

Yet not all talent is created equal, and too often entrepreneurs, especially those in startup mode, rely on their gut feel and past experience in assembling their teams.

But today’s guest says a data driven approach to decision making helps sidestep predictable people problems and can actually accelerate your business success. Discover what data you need and how to use it.

What You’ll Discover About how to Maximize Human Capital:

* What you need to know before collecting data to maximize human capital

* 5  non-financial metrics that help maximize human capital

* How to create healthy work environments to help maximize human capital

* And much more.

Guest: Dr Nikki Blacksmith 

DR. NIKKI BLACKSMITH is co-founder and CEO of Blackhawke Behavior Science and an adjunct faculty member at American University in Washington, D.C.

She has nearly 15 years of experience as a scientist-practitioner, focusing on psychometrics, selection, decision-making, and entrepreneurial performance.

She has also published over 80 conference papers, book chapters, and journal articles, and her scientific research has been featured in top-tier academic publications, including American Psychologist, the Journal of Business and Psychology, Personality and Individual Differences, and the Journal of Behavioral Decision-Making, and media outlets including New York Magazine, Real Simple Magazine, and BBC.

She’s the co-author of the new book: Data-Driven Decision Making in Entrepreneurship: Tools for Maximizing Human Capital (CRC Press; April 2, 2024).

Related Resources:

If you liked this interview, you might also enjoy our other Human Resources episodes.

Contact Nikki and connect with her on LinkedIn and Instagram. 

Also check out her website and her new book, Data Driven Decision Making in Entrepreneurship: Tools for Maximizing Human Capital.

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How to Maximize Human Capital and Identify Preventable People Problems

Being able to maximize human capital to optimize employee engagement is the unspoken goal of every business. Yet not all talent is created equally, and too often entrepreneurs, especially those in startup mode, rely on their gut feel and past experience in assembling their teams.

But today’s guest says a data driven approach to decision making helps sidestep predictable people problems and can actually accelerate your business success. And when we come back, we’ll find out what data you’ll need and how to use it. Stay tuned.

This is Business Confidential Now with Hanna Hasl-Kelchner helping you see. Business issues hiding in plain view that matter to your bottom line.

Welcome to Business Confidential Now, the podcast for smart executives, managers and entrepreneurs looking to improve business performance and their bottom line. I’m your host, Hanna Hasl-Kelchner, and I’ve got a truly fascinating guest for you today. She’s Doctor Nikki Blacksmith.

Nikki helps organizations attract and select high quality employees, entrepreneurs, and leaders. She’s a scientist practitioner focusing on psychometrics, selection, decision making, and entrepreneurial performance. She’s also the co-founder and CEO of Blackhawk Behavior Science and an adjunct faculty member at American University in Washington, DC.

Her research and consulting focuses on understanding the way personality and cognitive ability predict decision making and job performance in startups and other organizations, for that matter. And she’s published extensively, including in some very top tier academic publications. Nicki is also the coauthor of a new book called Data Driven Decision Making in Entrepreneurship: Tools for Maximizing Human Capital. It is a pleasure to have her join us today.

Welcome to Business Confidential Now, Nicki.

Hey, thank you for having me. So happy to be here.

I’m glad to have you because I am so curious. And I love the work that you’re doing and helping businesses identify the right talent for their ventures. And I’m wondering, what are some of the common things that you’ve seen go wrong when organizations don’t engage in data driven decision making to maximize human capital?

Oh, where do I start?

Anywhere you want.

Honestly, I think probably the first place I would start is that you have people in positions that maybe they’re not right for, or you’re not leveraging those opportunities, because without the data, you’re putting people in a position without really understanding why. And I can give you an example if you think about, you let’s say, myself, for example, I’m very introverted. I like to play with data.

If you put me in a role where I’m interacting with people all day long, every day, I’m going to be so exhausted by the end of the day. And I’m not sure that’s going to give you my best performance. And I’m not sure you’d be leveraging my skill set because you lack the blueprints of who I am as a person and where and how I can best contribute.

Well, that makes perfect sense. And that sounds good in theory but help us understand how to reduce that to practice, because I know people have these interview questions and so forth, but you focus on data and it’s one thing to say you’re introverted and I totally respect your assessment.

But some people are introverted, they can act extroverted. And so in an interview, that could give somebody the wrong impression if they really prefer more solitude, more think time. And as you said, being around people yapping all the time, just exhaust them because it drains them. Now can they participate? Yeah, sure. They could be the life of the party for a short time, but they will be wiped out. And as you said, that’s not really tapping into their biggest strengths.

So no, I think that’s great. You bring up so many good points. For one, that example with over simplified. Certainly, you want to know all of the traits that people have. And when I’m talking about data, I’m really talking about quantification of the skills, knowledge, abilities, and other characteristics that are predictors of performance, and that’s not something that’s easily gathered.

You mentioned interview questions. I see a lot of times people just see Google doing some fun puzzle and they think like, oh, well, that’s how to hire the best way. Well, unless that person is going to be doing a lot of cognitive analysis and puzzle solving on the job, that might not be the best interview question.

So when I’m talking about data, it’s almost starts before the data. It’s understanding what is it exactly that makes somebody successful in this particular role, and defining and understanding what those characteristics are. Because you can’t measure something, you can’t get metrics around it unless you understand exactly what it is you’re trying to measure.

So it all starts with the data part. And like you said, if somebody is introverted and they’re in a role I present, I go to conferences, I’m talking to you now, I have no problem being around people.

But that’s not necessarily like where my fit is. So it’s really about identifying the traits and figuring out do they fit the particular role that the person is in and then finding ways to measure it? And practically speaking, there’s lots of different ways to do it. So there’s lots of assessments out there that are available.

The self-report people answer questions online, and your listeners probably have taken many of them applying to different jobs that they’ve been in. There’s interview questions, but they have to be designed in a very structured format. They can’t be a free-for-all discussion. Every question has to be carefully designed and administered to every single candidate so that you’re comparing them on the same things.

So those are just a couple ways to gather the data. But practically speaking, there’s a lot of other ways too, like getting rating from work sample, which is asking somebody to do just a portion of the job and then having subject matter experts or supervisors rate their performance.

Wow. That covers a lot of ground because I totally see your point about you have to know what it is. You need to be successful in a particular role. And I think sometimes especially smaller organizations. And in a startup, a startup founder, they sort of intuitively know, but they aren’t necessarily articulating it and, and maybe making assumptions about, well, they’re supposed to know x, y, z when in reality they don’t a, b, c.

I guess what I’d like to follow up on is when you talk about the characteristics, okay, let’s say we’ve identified what the characteristics are. But how do you measure some of this stuff? Isn’t this really objective, subjective, I should say.

Actually, no. It’s so I’m an industrial organizational psychologist and my field is psychologist. My field have spent decades trying to figure out how to measure these things. And what’s most important is understanding what you’re measuring. So it’s one thing to say we need a team player. Let’s measure team skills.

Well what exactly are those skills? And there has to be precision around the definition. And I’m just trying to think of an example like curiosity maybe to somebody that means asking a lot of questions and gathering information from various sources to another person. That might mean carefully analyzing something and scrutinizing it. And so you really have to define what do you mean by that particular concept? What is that particular concept?

We see it all the time in scientific literature where people create new things like grit, for example, grit. There’s lots of books written about it, but it’s not a single trait. It’s actually a combination of different things and knowing that it’s a combination of those traits and you can measure those traits directly. And we have designed statistical methods, and I’m going to try to keep this short as it can get really technical, real fast.

But basically statistical methods to remove the error that’s associated with any kind of psychological assessment. And that way we can home in on that, like actual true measurement of if they were measuring curiosity, they’re going to be a lot of room for error no matter what path they’re taking. The person could be tired and they misread a question or, you know, their room is dark and they’re dimly lit and they’re not giving their full attention to it.

So many different reasons for error. But we’ve created statistical methods to actually remove that and get that true score. And that’s what we call psychometrics, which is really my favorite thing is figuring out how do you measure something that’s so intangible in an objective way?

Wow. That’s sounds like a real mystery.

Yeah, I’m trying to distill it into make it make sense, but basically we’ve created different psychometric tests, things usually where people are responding to questions, and each of those questions taps into a desired trait. So for example, if we’re looking at curiosity, somebody who is curious is likely to ask questions.

They are likely to seek out information because they want more information. So we have every question tapped into kind of a different behavior that might be associated with that trait. And then we can look at those questions, combine them, and say, okay, what do they all have in common? That curiosity aspect.

And so that’s why I get nervous when I see survey assessments with just a single question because there could be so much air in it. But the trick is that we know what it is. We create multiple questions to measure the same thing, so that we can look at the commonality in those questions and really extract a statistical number to quantify it.

I’m just thinking about somebody in a startup mode or in a, you know, got a little bit past startup mode and they’re gaining some traction in their business. Everything is pretty lean when it comes to organizations in that in that mode, and they have the best of intentions.

But somewhere I recall in some materials that had been forwarded to me about your expertise, that there were like five non-financial metrics that people can focus on or at least keep on their radar screen, because I understand what you’re saying. You really have to do a deep dive into the characteristics and the traits that’s going to make somebody successful.

And especially in a startup, you really you’re not looking for this specialist necessarily. You’re looking for someone that can do a number of things that sort of has six fingers on one hand and knows how to use them.

So can you tell me a little bit about what these five non-financial metrics would be? So even if somebody isn’t quite as precise as you are in terms of measuring them, they can at least say, well, yeah, we should be looking for how these types of things rank.

Absolutely. And certainly wouldn’t expect anybody to go and create their own tools. That’s why there’s lots out there that they can utilize and some for free. The non-financial metric has different aspects. And this brings us back to that first question you asked about what could go wrong.

So one, I talked about the fit for a person to a role. Do you have the right person? The other things that we need to think about is, are these people that you are working in your organization and your startup, are they engaged? Are they satisfied with their job? Because if they are not, they start to lose motivation and don’t meet their potential in terms of performance because they check out basically.

So measuring the engagement levels with the survey is one way to do it. Another important thing is to understand, and you do a lot of work around this is, uh, the team functioning. So like, how healthy is your team in terms of the way it operates together? You know, a few different aspects of teams that if these conditions exist, then teams perform better.

So for example, if you have a team that has a psychologically safe environment, which means that people are they feel comfortable asking questions that they’re not going to be made fun of for not knowing something. If they make a mistake, then they can bring it up and address it without any consequences. And if those things are in place, then the team is more likely to perform. You can measure the functioning of the team and you can also measure leadership behavior.

So leadership has been studied for over a century in terms of what does a good leader do on the job. And so for example, one thing would be communication.

A good leader communicates to her followers. Here’s the state of the organization so you can measure things like are they communicating the vision, the mission, and the purpose? Are they communicating about updates and to the people that are working with them always know which direction they’re going in? So that’s another thing that can be measured.

One thing I like to think about a lot, especially with startups, is health of a culture. So does the startup have a strong culture in the sense that everybody knows what the culture is, they know what they’re expected to behave, and that the culture aligns with the overall business model. And a lot of these things can be done simply with a survey.

So you have the different aspects of human functioning in an organization. Are they motivated? Are people getting along and cooperating? Are people adhering to the cultural standards? And if you have those things in place, then they’re much more likely to perform and people will stay longer because they enjoy their job. They’re motivated to see the progress. So you save money on the retention, which I know is a big problem for startups. Employees come and go and that is time consuming and very costly.

So to create a culture and an environment where people feel safe and motivated, that’s basically like money in the pocket.

Definitely, and certainly a way to help maximize human capital because there is an investment and it’s all about being able to grow the business into the future. And you got to have the right people. Someone once told me, take care of your people. They’ll take care of your business. So it’s really vitally important.

I’d like to talk a moment for about your about your new book, The Data Driven Decision Making and Entrepreneurship: Tools for Maximizing Human Capital. It has a ton of valuable information in there. In your view, what do you think the most important thing is that you’d like readers to learn about how to maximize human capital.

The most important thing is that people are people. We need to treat people like a human being. They need to be healthy in order to be productive. And so the book talks about, you know, every chapter is really a different way to create a healthy workplace.

Basically, we want to,  there’s a chapter on inclusion with what does inclusion look like in terms of the behaviors that are expected out of them? Not just do you have DNI quotas, but does your organization truly embrace the diversity? Include all people. And there’s chapters about professional development, one of the most important things. And this maybe gets lost a little bit in the startup world because everything is survival mode moving so fast.

But people in jobs are in those jobs and they want to get something out of it. And usually that means they’re growing and they’re learning professionally. So there needs to be a sense of like development and opportunities and not just, oh, sitting in front of your computer and do this task ten hours a day and then close up if they’re not getting anything out of it in return, they’re going to be quick to leave.

So I think it’s just the recognition that people are complex, but there are things that we can do to nourish and help them really feel like they belong, that they enjoy being at work. And that’s when you’re really going to see people’s top potential is when they’re excited to open their computer in the morning and get to work.

Well, that’s true. That engagement, that excitement, that enthusiasm translates into creativity and productivity. So those are all good things. I’m wondering in your research what you have found to be sort of the biggest mistake people make in this area of maximizing human capital, is there?

I mean, I understand there is multiple chapters in your book and each of them contribute something valuable in terms, another dimension and another way to look at how to maximize human capital. But if there was like one real culture killer out there, what do you think it would be?

I think it would be co-founder conflict. Conflict starts at the top, but it trickles down and other people feel it. So even if it’s between two people, they can really influence memory analysis, performance, and co-founder. Conflict is one of the things that we come up against a lot early on.

There’s so many issues like power dynamics and personality differences, but the co-founders are the leaders of the organization. So their whatever behavior they’re exhibiting, the people below them are going to mimic and follow that. And so I would say that the probably most important decision, people wise, are those first one, two, three, four people on the team that will serve and active leaders and make sure that conflict is inevitable.

You can’t like, get rid of it. It’s going to happen no matter what, but that they have the skills to navigate and manage the conflict. Conflict gets a bad word. People think of it negatively, but actually it can increase performance if it’s focused on the task or the job that they’re doing. When the conflict becomes interpersonal, like personalities or people are getting personal with things, that’s when it really, really, really detracts from performance.

So co-founders if they can learn to manage positive conflict and prevent interpersonal conflict. And that’s really where you start to see kind of the teams, the founding team really coat the conflict. That personal conflict, I think, really gets in the way. And from anything from a founding team all the way up to corporate leadership.

I remember reading Steve Cases book on the Third Way, where he talks about reasons why the AOL Time Warner merger failed, and he basically brought it back to trust and conflict on the leadership team. I hear a lot of people say like, having a co-founder is like being in a marriage. I’m not married, so I don’t know. But it certainly should be treated with care. And the communication lines need to be open and conflict needs to be managed well.

And that is really the key to starting a good team is having the positive functioning at the leadership level.

That’s kind of been my experience, too, in terms of conflict management. When it’s not done well, it leads to all kinds of unfairness, and then it just kind of goes down the tubes from there.

Nikki, thank you so much. This has really been fantastic. I appreciate your time and what you shared with us about how to maximize human capital, especially using data driven decision making to sidestep those predictable people problems.

And I love the factors that you shared with us about the engagement, the team functioning, the leadership behavior, and really making an effort to focus and nurture a healthy culture within the organization.

And yes, you’re right, conflicts happen, but it’s all about how you manage them and get things back on track because you don’t want to squelch conflict. It actually helps surface ideas. So it’s just a matter of, well, maybe you don’t agree with it, but tell me more to be able to have that conversation and that collaboration instead of a confrontation, which then starts getting very ugly, so covered a lot of ground here, a lot of important concepts.

So if you’re listening and you’d like to know more about Doctor Nicky Blacksmith, her book Data Driven Decision Making and Entrepreneurship: Tools for Maximizing Human Capital, and her firm Blackhawk Behavior Science, that information, as well as a transcript of this interview, will be available in the show notes.

Thank you so much for listening. Be sure to tell your friends about the show and leave a positive review. We will be back next week with another information packed episode of Business Confidential Now.

So until then, have a great day and an even better tomorrow!

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