Ep 171 – Decision Making in Human Capital Investment

decision making in human capital investment

The psychology behind good and bad decision making isn’t just fascinating for those of us interested in human behavior. It’s also important for recruiting and human resource leaders for making better decisions when it comes to human capital investment in the workplace, whether supporting your existing workforce or in hiring. Whether you’re in finance or in HR, complacency is a huge roadblock to success. Before we jump into the podcast, I want to thank our sponsor, ClearCompany.

Episode 171: Decision Making in Human Capital Investment with Dr. Daniel Crosby (@danielcrosby)

Today I’m joined by Dr. Daniel Crosby, a behavioral finance expert and thought leader on market psychology, the founder of Nocturne Capital, and author of the new book The Behavioral Investor.

No matter what industry you are in your job, sound decision making is a critical skill that we can all use a little help in. Daniel says that our brains haven’t been upgraded in a 150,000 years so our decision making processes aren’t really wired for this immediacy and all the distractions that technology and social media bring. He says that no matter what we do we make decisions based on emotions. And if emotion has been sort of this risk tolerance guide for us throughout human history even our business and hiring decisions have an emotional undercurrent. I found this particularly interesting since in HR we try so hard to be objective and help guide the decision making process of the managers and leader we support. However, I think we can all agree that we’ve been part of some bad decision making of managers that was made when emotion got the best of us.

How To Make Decisions When Investing in Human Capital

Daniel and I go way back and he has an extensive history in workplace psychology and human resources. Financial investment decisions are no different he says than human capital investments. He says one of the biggest mistakes that people make in making hiring decisions, coaching decisions, and people development decisions is in thinking that people are static and that they kind of you know bring this immutable self around everywhere they go. Daniel goes on in the podcast interview to give us an example of decision making for a liquor store. The study he references in the podcast interview and in his book found that a liquor store’s music choice would influence the alcohol purchasing decisions of its customers. On days when the store played German music, people bought 50 percent more German beer. And on days when the store played French music, people bought 77 percent more champagne than average.

What does this have to do with human capital? Well, outside influences like this impact all our buying decisions and hiring someone for job or making the decision to promote an employee is in fact a buying decision. The environment you creates impacts your decision-making process. Let’s think about that the next time we are making promotion decisions, having conversations with our business leaders, and even HR technology decisions.

This was a great podcast interview and Daniels’ insights cut across business and personal decision making. This episode is excellent! Daniel uses his background in behavioral science and psychology to help companies make better investment decisions, and his research on how we make decisions can help us have better judgment for making the difficult calls we have to do so frequently in HR and recruiting. It’s fascinating to understand the science behind human behavior, but this self-awareness can also help us be better leaders.

Connect with Dr. Daniel Crosby.

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Jessica Miller-Merrell

Jessica Miller-Merrell

Jessica Miller-Merrell (@jmillermerrell) is a workplace change agent, author and consultant focused on human resources and talent acquisition living in Austin, TX. Recognized by Forbes as a top 50 social media influencer and is a global speaker. She’s the founder of Workology, a workplace HR resource and host of the Workology Podcast.

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