Human Capital: Value Creation and Risk

AAAAA+AA- AAA+AA-BBB+

An introduction to Organization Maturity Ratings

Stuart WoollardCEO OMR Group & Council member, Maturity Institute

How much does human capital matter?

Understanding how human capital drives value & risk:

The paradox is that by not pursuing profitability to the exclusion of all else, the Great Engine companies in their Golden Age would achieve enormous increases in value...whereas, by single-mindedly pursuing profit...these same companies and their successors actually created less genuine, lasting wealth; indeed, they would often destroy it.

(The Puritan Gift, Kenneth & William Hopper)

Value motive – short, long term; narrow or broad based?

“

”

Profit is critical for a healthy organisation but [societal] value is much broader, cleaner and sustainable

The Measurement Challenge: how people link to Value

• OMR assesses the extent to which an organization is designed around the goal of maximizing its value, while controlling risk, with respect to all its human capital.

• Value relates to the organization itself (i.e. productivity, quality, revenue, cost) and value generated by the organization in a societal context (e.g. economic, well-being, environmental).

• Human capital relates to an organization’s people and all people connected with the development, production and supply of an organization’s goods and services.

Maturity ratings & Value

8

Measuring or rating maturity:

“Art is about learning to see and to observe. And the sciences are about seeing and observing.” – Ed Catmull, Pixar

The Ten ‘Pillars’

OMR

Stage 2Good ProfessionalPractice

Stage 3Effective Management

Stage 4Human Capital becomes integral to business operations

Stage 5Transition: operationalto strategic focus

Stage 1PersonnelAdministration

Board & Executives resistant/unaware of people & human capital value up

to this point

Stage 6Organisation becomes a whole system

Stage 0No ConsciousPeopleManagement

Maturity spectrum:OMR ‘AAA’ Scale

©Paul Kearns/OMR 2013

LONG TERM - STABILITYSHORT TERM –

UNSTABLE

A+

to

AA

-

AA

A

BB

B

to A

BB

B-

BB

+

BB

C B

Maturity predicts value creation & destruction

Maturity drives higher value, lower risk & ‘good’ outcomes

“social, economic, environmental, and ethical factors directly affect business strategy—for example, how companies attract and retain employees, how they manage the risks and create opportunities from climate change, a company’s culture, corporate-governance standards, stakeholder-engagement strategies, philanthropy, reputation, and brand management.” – David Blood 2007

Maturity in practice: value outcomes

Early indicators:

Exec expectations of human capital & value now aligned

Organization now adopting a new language around HCM

10 Pillars embedded into assessment of planned HC activities

Maturity is new framework for decision making 

Senior execs now lead on HC initiatives

HR team now business focused rather than "best practice” 

Thank youwww.omratings.com

Stuart.woollard@omratings.com+44 [0] 7940585661