When executive coach and author Paolo Gallo is asked about leadership, he likens it to hot water in a shower: You only realize it’s missing when it’s not there.
“People tend to confuse being in a position of power with being a leader,” says Gallo, speaking at a virtual conversation hosted by Fortune in collaboration with Diligent. “But, it is fair to say, being a leader is very different from having a position where you have a lot of power, both in corporate life and politics.”
Last year, Gallo published The Seven Games of Leadership: Navigating the Inner Journey of Leaders, a guide for those interested in understanding the seven key phases of personal and professional development. The advice was meant not only to help an individual climb the corporate ladder but to find satisfaction while doing so.
“You need to have leaders who are able to engage missionaries, not mercenaries,” says Gallo, asserting that leaders are responsible for shaping a workforce that is not just merely qualified for the work they do, but that truly believes in the mission of the company.
Gallo, who previously served as chief human resources officer at the World Economic Forum in Geneva and as chief learning officer at the World Bank in Washington, says companies today should be focusing more on the professional value of their talent.
He shares the example of tech firm IBM. Nearly 50 years ago, Gallo asserts, as much as 85% of the company’s market value was linked to physical assets. But today that same portion of value is assigned to intangible assets, like human capital management.
Corporate boards appear to be paying attention to the shift. In fiscal 2022 proxies, one study found that half of Fortune 500 boards and 40% of those in the S&P 500 had altered the title of their compensation committee to include human capital management topics, including management development, DEI, and culture.
Gallo says that during his time as a human resources director, the issue of human capital management would usually be buried deep on a board meeting’s agenda. “It was limited to, from time to time, ‘Please let us know how things are going,’” says Gallo. It wasn’t part of the business model or a daily topic of conversation among board members and other senior leaders.
But that has changed, partly due to the fact that Wall Street valuations are more closely tied to workforce talent, as at IBM. Another factor is that for decades, economic growth correlated closely with job creation. For the past 15 years, that has no longer been the case. With job growth less certain today, Gallo says, the right talent is more prized by the market.
But Gallo says that premium shouldn’t just be placed on workers who perform well as individual contributors. He says there’s value in collaboration and that companies should devise policies and strategies that support stronger relationships between colleagues. Businesses should also be investing more in learning and development courses for their workforce and maintaining a keen focus on retaining a stellar reputation.
“If able to produce some understanding along [those lines], I think you preserve, grow, and develop the human capital in your organization,” says Gallo. “And this, to me, is what the board should be doing.”
