10 Signs Your Capital Investing Strategy May Be Upside Down

Since the design of the first tool, men and machines have experienced a dynamic interplay characterized at various times by harmonious synergy and contentious strife.

The Middle Age craftsman was both owner and laborer and oversaw the manufacturing process from start to finish. The craftsman viewed the manufacturing process and the machines within that process from a holistic perspective. He decided to build or buy machines based on the impact to both the machine and his labor; not the machine or his labor. He also considered how any machine might better leverage his time and talent to improve the quality and/or quantity of his finished product (not just any particular step in the manufacturing process).

The Industrial Revolution severed the relationship between owner and labor and also introduced a new layer into the decision process, the professional manager. The Industrial Revolution also disaggregated the craftsman’s role across multiple individuals who only performed discrete steps of the entire manufacturing process. These narrowly constructed roles separated laborers from the output of their work with adverse consequences for everyone. Laborers felt stymied in their ability to contribute and stopped thinking (“just do what you’re told”). Unsurprisingly, managers began viewing laborers as low-value, interchangeable elements in the manufacturing process and used people only to perform work which they had not yet figured out how to automate. This disrespectful mental framework sank to such a depth that for much of the past few decades some industries chased cheap labor all over the world. I call this the Human Capital Paradigm.

In attempts to improve manufacturing some firms turned to an alphabet soup of new techniques and tools — 5S, TQM, TPM, PDCA, QIS, DMAIC, SPC, DOE, etc. Most of those efforts failed, because manufacturing leaders continued to apply those tools from the mental framework of the Human Capital Paradigm. What’s needed is a Human Capital Paradigm, which is best explained by comparison to its failed predecessor in the table below.

Financial Capital Paradigm Human Capital Paradigm
Improvements achieved by investing financial capital (money) Improvements achieved by balancing investments of human capital with financial capital
Discipline/repeatability for high quality sought through machines; managers do not believe people can be disciplined Discipline/repeatability for high quality achieved by people using reliable processes (as the late Bob Galvan of Motorola was fond of saying “People may make mistakes, but teams can be perfect.”)
Machines designed for high repeatability, but offered low flexibility (hard automation) Machines designed for flexibility (easily reconfigurable and capable of performing a range of tasks)
People perceived as highly flexible (able to perform a wide variety of tasks), but with low reliability People are highly disciplined without losing flexibility
Managers think; Laborers do Every team member expected to think and contribute toward continuous improvement


In the Human Capital Paradigm machines provide flexible discipline and people contribute disciplined flexibility. The challenge of building such a culture has implications that touch almost every aspect of designing, staffing and running an organization of any size. That challenge is too large for this post. However, I will close by sharing a sample list of attributes you might use to assess how your organization stacks up against the capital investment paradigm? While not an exhaustive list, these behavior-based markers can provide clues to your progress along this journey. I encourage you to use the list below to expand or jump start your own list of markers:

  1. Expectations and related consequences established by agreement, not edict
  2. Accountability for meeting expectations belongs to individuals, not managers
  3. A focus on what we want, not what we don’t want; managers focus on catching people doing things right and recognizing them for it; not discovering and punishing wrongdoing
  4. Team members measure themselves, rather than a manager or third-party
  5. Indicators of performance visible to everybody; most notably those performing the work
  6. Opportunities for improvement often identified by people doing the work not just engineers or managers
  7. Customer-driven variety, not changeover considerations predominately influence production scheduling
  8. Disciplined adherence to standard work procedures facilitates reliable outcomes
  9. Processes highlight abnormal process variations and trigger corrective action
  10. Repeatable processes used to test and verify the efficacy of ideas before widespread implementation