The Challenge of Identifying Managerial Human Capital in Labor Markets
Effective managers lead teams, solve problems, allocate resources, and navigate organizational challenges effectively. Managerial human capital refers to an individual’s capacities that allow them to execute these tasks, and as such, plays a pivotal role in organizational performance.
So all organizations are interested in hiring people who have the willingness and ability to develop managerial human capital. But this is easier said than done, since managerial human capital is developed and enacted inside a particular company’s people, processes, and culture. How can hiring firms on the outside know whether a candidate has the willingness and ability to develop managerial human capital in their organization? It’s a classic “chicken and egg” problem!
How can hiring firms on the outside know whether a candidate has the willingness and ability to develop managerial human capital in their organization? It’s a classic “chicken and egg” problem!
The study we recently published in the Journal of Management focuses on two critical outcomes in an individual’s career history — early promotions to managerial roles and managerial tenure — and how they communicate to the labor market an individual’s willingness and ability to develop managerial human capital. Receiving and decoding these signals helps organizations navigate the complexities of talent acquisition.
Signal 1: Early Promotions — Indicators of High Potential and Embeddedness
A promotion to a managerial role early in an individual’s career often signals exceptional managerial human capital capacities. Candidates who rise quickly to a managerial role in their company demonstrate strong performance, leadership potential, and adaptability. These individuals are often viewed as rising stars, making them attractive to external hiring organizations.
However, early promotions also indicate organizational embeddedness — a deep integration in the candidate’s current firm. Embeddedness can make an individual less willing to move to another company as they may perceive more opportunities for advancement where they are. Organizations may find it challenging to attract such candidates unless they can offer compelling opportunities for growth or differentiation.
For hiring organizations, interpreting the signal sent by early promotions requires balancing two perspectives:
- High Potential: Early promotions are strong indicators of an individual’s ability to develop managerial human capital capacities. These candidates are likely excel in dynamic and competitive environments.
- Barriers to Mobility: The same candidates may have stronger ties to their current organizations, making them less likely to accept external offers. Organizations can address these barriers by tailoring value propositions that emphasize career acceleration and unique opportunities not available in the candidate’s current firm.
Signal 2: Managerial Tenure — Depth of Experience or Risk of Stagnation?
Managerial tenure reflects a candidate’s ability to sustain performance and navigate leadership challenges over time. Prolonged tenure in managerial roles is often viewed as a marker of stability and experience. It indicates that the candidate has successfully developed the capacities that allow them to successfully navigate the complexities of managerial roles.
However, tenure can also raise concerns about stagnation or a lack of dynamism. Candidates with extended tenure may be risk-averse or overly comfortable in their roles. Hiring organizations must assess whether the candidate’s managerial human capital is transferable to new contexts or if it is deeply tied to the specific conditions of their current organization.
When evaluating managerial tenure, hiring organizations should:
- Consider industry norms: In industries with rapid innovation, shorter tenure might indicate agility, whereas longer tenure could signal stability in traditional sectors.
- Examine growth within roles: Assess whether tenure reflects continuous development or stagnation by looking for evidence of expanding responsibilities or skills.
Key Takeaways for Organizations Looking to Hiring Managerial Human Capital
The infographic below summarizes our study. Some additional take-aways from this work:
- Early promotions signal high potential but may indicate stronger ties to the current organization.
- Managerial tenure reflects stability and experience but requires scrutiny to rule out stagnation.
- Context matters: interpret career signals in light of industry standards and organizational needs.
- Invest in tools and strategies that allow for deeper evaluations of managerial human capital.
Managerial Human Capital: Reading and Interpreting Signals in Talent Acquisition
Both early promotions and managerial tenure provide windows into a candidate’s willingness and ability to develop managerial human capital capacities. However, these signals must be interpreted within the broader context of the candidate’s career trajectory and the hiring organization’s strategic goals.
Both early promotions and managerial tenure provide windows into a candidate’s willingness and ability to develop managerial human capital capacities. However, these signals must be interpreted within the broader context of the candidate’s career trajectory and the hiring organization’s strategic goals.
But understanding and leveraging career signals is not just about individual hiring decisions. It’s about creating a more strategic approach to talent acquisition. By focusing on the signals of a candidate’s managerial human capital, organizations can improve their ability to identify and attract the right leaders. To make smarter hiring decisions, organizations can adopt the following strategies:
- 1. Evaluate Signals in Context
Neither signal should be viewed in isolation. Organizations must analyze early promotions and tenure in light of industry norms, company practices, and the specific requirements of the role.
- A rapidly promoted candidate from a high-growth startup will likely have different managerial capacities than one with steady tenure in a large multinational corporation.
- A candidate with long tenure in a managerial role might bring depth of experience, but organizations should confirm their capacity for adaptation.
- 2. Go Beyond Surface-Level Assessments
Use structured assessments and organization-specific problem-solving exercises to measure how well a candidate’s managerial human capital aligns with the company’s needs. Behavioral interviews, case studies, and leadership simulations can reveal skills and attributes that résumés and promotions cannot.
- 3. Customize Recruitment Offers
To attract candidates who will be successful developing managerial human capital capacities, organizations should address their unique needs and motivations. For early-promoted candidates, emphasize opportunities for fast growth and leadership impact. For tenured managers, highlight the chance to innovate or apply their expertise in a fresh context.
- 4. Leverage Data and Analytics
Advanced analytics can help decode career signals and predict candidate fit. By analyzing the career paths of successful managerial hires, organizations can refine their understanding of which signals correlate with performance in their specific context.
Turning Insights into Action
Organizations face growing pressure to build leadership pipelines that align with their long-term goals. Decoding career signals like early promotions and managerial tenure offers a way to reduce labor market information asymmetries and make more confident hiring decisions.
By understanding how these signals reflect managerial human capital, organizations can take a proactive approach to talent acquisition, ensuring they attract leaders who not only excel in their roles but also drive organizational success.
