THE VALUE OF Human Capital.

People are the key to success in the new economy, say respondents to a Chief Executive/ Accenture survey--but only a minority of companies have made significant changes to their recruiting and retention strategies.

It's no secret that companies are attaching greater importance to human performance today than ever before. And while corporations have presumably always valued their employees, in today's fast-moving new economy, people have gained even greater stature and are now seen as possibly the most important factor in a company's success or failure.

That recognition, and the extraordinary efforts some companies are making to attract and retain top talent, represent fundamental shifts in employer-employee relationships. And nowhere has this been truer than in the high-tech sector, with its insatiable demand for knowledge workers.

But the focus on human performance now stretches across all industries and all levels, from the front lines of customer service to the highest executive ranks. The fact that almost half of the 433 Chief Executive readers who responded to a CE/Accenture survey consider attracting and retaining talent to be their greatest challenge--more than twice as many as chose strategy and planning-is evidence of this shift.

One reason CEOs have begun investing in human performance improvement is that they now have quantifiable proof of a sizable return. Research by Accenture has shown that even a modest uptick can have a significant bottom-line impact. Furthermore, there are new tools for increasing and measuring human performance. The result: HR is fast changing from an internal service department to a strategic partner in improving a company's competitive position.

The breadth of this viewpoint throughout industry is perhaps best reflected by the fact that only 2 percent of respondents were from pure-play Internet companies. Fully half of them said they run conventional bricks-and-mortar companies, while 48 percent work for "bricks-and-clicks" hybrid businesses. Manufacturing (28 percent) was the largest primary business area represented, with financial services (13 percent) and consumer goods and retail (9 percent) following behind. Most all of them reported annual revenues of under $1 billion, with 74 percent less than $250 million, 9 percent in the $250-499 million range, and 7 percent in the $500-999 million range. In terms of geographical scope, 59 percent called themselves national, 21 percent multinational, and 20 percent global.

What Readers Said

* Giving further evidence of the changeover from classic "command-and-control" management, only 21 percent said that strategy was developed annually by senior management and passed along to employees. Nearly one-third called strategy a continual process that involves many levels and is initiated throughout the company, and 50 percent described their companies' strategic planning as a mix of the two.

* When asked about speed of change, 71 percent described their company as better or much better than existing competitors, and 23 percent about the same. When comparing themselves with emerging competitors, however, only 50 percent said they were better, and 19 percent described themselves as worse or much worse.

* Providing leadership was said to be the more important requirement for a company's ability to change by 46 percent of respondents, compared with creating a culture aligned with strategic direction (25 percent) and managing the process of change (13 percent).

* Not surprisingly, then, leadership ability was said to be the most difficult type of talent to attract and retain (57 percent). The types of talent receiving next-highest scores were initiative/independence (45 percent) and managerial ability (40 percent). These results differentiate leadership from managerial skills.

* When considering types of skills vs. types of talent, knowledge workers were said to be the most difficult to attract and retain (47 percent). The next tier, which includes industry experience (39 percent), information technology (38 percent), sales/marketing (35 percent), and operations (30 percent), were grouped closely together. Interestingly, executive/board level skills were only cited by 16 percent of respondents.

* Asked to name what actions they were taking to improve performance, the top answer was improved communications (37 percent), perhaps reflecting the two-way process instituted by so many companies, as well as the shift to company-wide contributions to strategy development noted earlier. Other responses receiving strong mention were training and development (22 percent), compensation/rewards (20 percent), and performance targets/tracking (17 percent).

* In terms of how respondents were providing growth and development opportunities for existing employees, skills training (43 percent) led the list, followed by career paths (29 percent) and professional education (25 percent).

* Additionally, 70 percent reported information technology being always or often part of management discussions on human performance. The leading types of IT being used for performance improvement were Internet/intranets (69 percent), training applications (67 percent), productivity and business applications (65 percent), knowledge management (53 percent), and human resource systems (45 percent).

For a detailed look at the CEO's role in human performance, see "Optimizing Human Performance," a supplement included with this issue of Chief Executive.

                                They say...
             the greatest challenges in the new economy are...
Finding/retaining good people 47%
Strategy and planning         21%
Business partnering/alliances 10%
                                In fact...
             compared to three years ago, people issues are...
More important    84%
Equally important 14%
Less important     2%
                                CEOs see...
                          top people issues as...
Attracting the best talent     39%
Retaining/motivating key staff 26%
Managing the process of change 17%
                        Compared to three years ago
            recruiting and retention strategies have changed...
Significantly    26%
Somewhat         50%
Little/no change 24%
                          Will developing current
                talent become more important than training?
Agree            62%
Equal importance 34%
Disagree          4%
                            They say that more
               attention to compensation is required for...
Both               58%
Existing employees 23%
New talent         19%
                            The most important
                         compensation factor is...
Salary  12%
Bonuses 36%
Stock   21%