166 THE ROI OF HUMAN CAPITAL
degree of success. The goal is not to change the world over-
night. It is just to decrease the variance and increase the
certainty a bit at a time.
In general, people do not understand simple probability
statistics. Let’s use gambling as an example. The casinos in
Las Vegas make billions every year on just a percent or two
in favor of the house. However, when we apply that concept
to organizational improvement programs we can find simi-
lar incremental gains but not the same type of success. The
reason is that a couple percent of improvement in quality or
productivity in one part of the organization does not accu-
mulate to the same percent corporate-wide. In fact, in some
cases, the effect is only in the local process with no effects
elsewhere. To obtain that percent gain across the organiza-
tion and drop it to the bottom line we have to work holisti-
cally.
AModelandSystem
Consider that each year, barring some national or global
economic anomaly, most companies have anywhere from a
financial loss to a small profit. That leaves no more than
about 20 percent that have a good to better-than-average
year. Every population has only 10 to 20 percent on the top
end of the traditional bell-shaped distribution curve. It is a
law of distribution that never changes under normal condi-
tions. To be on top, all we have to do is to beat two out of
ten competitors. If we can increase our return on human
capital a couple of percent a year more than the competi-
tion, we will be in the top 5 percent of our industry. The best
way to do this consistently is to manage our greatest lever-
age point, which is people, more effectively than the other
two competitors. The secret is not to focus on transaction
efficiency. To attain this position we need the following:

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