Three Critical Questions


These realities—the sheer size of the human capital asset, its enduring character, and its competitive advantages—are pushing people both inside and outside organizations to try to better measure the value and drivers of workforce performance. From the inside, organizations have long measured productivity in either broad financial terms (revenue per employee, etc.) or on an individual or operational basis (units produced per hour, etc.). Such measures are easily made, but they don’t provide much insight into what tactics produce the outcomes. The real question is: What does it take for an organization to create more value, more effectively and more predictably with human capital? To respond to that issue, companies must answer a whole set of questions that typically aren’t asked in most organizations:

  • What are we actually spending on human capital (cost), and what is it buying us (value)?

  • Are we sure our human capital strategy is aligned with our business design?

  • What can we change in the way we manage people to generate greater returns by cutting, reallocating, or increasing investments?

The answer to those questions in virtually all companies is that no one really knows, but that fact gets clouded by historical storytelling, anecdotes, speculation, or questionable “correlations.”

Look inside any company and the worst, least reliable performance metrics are those used for people tactics, practices, and policies. It is difficult to know what’s working and what isn’t because there is no science to it. This is not the case in most critical areas of business. Financial economists in universities and on Wall Street over the years have provided CFOs with solid techniques for optimizing the use of financial capital and managing risk. On the operating side, the disciplines of statistical quality control and process engineering have improved product quality and cut cycle times. Thanks to advances like these, the physical and financial assets of today’s organizations are in general much better measured and managed. Thus, most managers can answer these questions when they are focused on financial or physical assets. They know what to measure and have the tools and systems to measure it. They have developed disciplines for tracking and evaluating their activities. The same thing cannot be said for human capital, and this makes comparably good decision making on major outlays practically impossible.

Because basic questions on the human capital side seldom are asked, let alone answered, companies end up tolerating more variance in the performance of their human capital investments than in the performance of any other asset they manage.

In light of the history of business and protocols of most companies, the chances are great that these questions will remain unasked until perhaps CEOs or board members—maybe even institutional shareholders—start demanding answers. This is the case because there are strong biases against and even structural barriers to such inquiries.




Play to Your Strengths(c) Managing Your Internal Labor Markets for Lasting Compe[.  .. ]ntage
Play to Your Strengths(c) Managing Your Internal Labor Markets for Lasting Compe[. .. ]ntage
ISBN: N/A
EAN: N/A
Year: 2003
Pages: 134

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