Linking human capital to business performance
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Transcript of Linking human capital to business performance
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Can Changes in Human Capital
Metrics explain Movements in
Organisations’ Value?
Linking Human Capital to Business Performance
Gail Sturgess – Workforce Architect / Human Capital Strategist
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How I Got Here
IT background– Business Analyst – Financial Systems
– Financial Modeller
But What about People?– There’s GOT to be a better way!
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www.hcminst.com
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What CEOs Want
Business Analytics
– Customer Intelligence
– Competitive Intelligence
– Workforce and Productivity
E-Commerce
Customer Experience
Business Reporting
Cloud Business Case
Business Process ImprovementSource: Gartner
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What CEO’s Want
Workforce and Productivity
– North America – 8%
– APAC – 4%
– EMEA - <1%
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Shocking Fact!
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How Do You Know?
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How do you Know?
How will you Know when you get there?
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If you Can’t Quantify ...
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The Truth ...
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The Truth ...
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HCMI Research
HCMI
– Better ways of measuring investments in Human Capital
– Transform Workforce data – Source of Value
Drives fact-based decision-making
Research
– Pepperdine University GSB
– Late 2012
– 16 year analysis period (1996 – 2011)
– Over 50000 companies included in the analysis
– 17 Variables Included
6 Human Capital Variables
– 12 of 13 industry sectors
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Key Questions
Can Human Capital be valued and contribution
Quantified?
Can Return on Human Capital be definitively
Linked to Business Results?
Can Changes in Human Capital Metrics
PREDICT Company Performance?
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Key Findings
Varies by Industry
• Average• 10% Human Capital
Metrics
• -.7% to 29% Share Price
Gain
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Key Findings
Human Capital
Contributions are Clearly
Linked to Share Price
• Top 25%• HC Metrics – 51%
• Share Price – 4%
• Others
• HC Metrics - -52%
• Share Price - -1.1%
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Share Price Performance
Finance and Insurance Sector
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Key Findings
TCOW Superior than
FTE
– Revenue / FTE
– Profit / FTE
Return on Human
Capital Investment
(Return on HCI)
– Most Significant
– Across Sectors
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Human Capital
Metrics
– 35% to 64% Share
Price Change
– 1% by Net Income
Human Capital
Metrics
– Show Different Picture
– “False” winners
– “False” losers
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Three Key Human Capital Metrics
TCOW (Total Cost of Workforce)– ALL costs associated with the workforce
– Including HR
Return on Human Capital Investment (Return on
HCI)– Compares TCOW with NOP
– Shows expected return of R1 HC investment
– All other factors the same
Human Capital ROI Ratio (HC ROI Ratio)– Measures Ratio of Return on Revenue (net of TCOW) versus
TCOW
– Measure of expected return on R1 invested in Workforce
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Traditional Financial Performance Metrics
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New Productivity Insights
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The Big Picture
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The Biggest Winners / Losers
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WinnersAdmin, Support & Waste Mgmt
Mining
Wholesale Trade
Transportation & Warehousing
Accommodation & Food Services
False Winners
Professional and Technical Services
Healthcare
Surprise Winners
Manufacturing
Utilities
Losers
Finance & Insurance
Arts & Entertainment
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Observations and Insights
Low HC-intensive
– HC Costs are significant
– But not largest
– High Returns possible on small changes
High HC-intensive Service-driven
– Greatest potential to increase Productivity
– Without increasing HC costs
Increase Commodity Prices
– Drive gains in HC ROI Ratio
– Without large HC increase
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Industry Focus
Finance and Insurance
Transportation and Warehousing
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Finance & Insurance - Traditional
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Finance & Insurance - New
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Vive la Difference – Finance & Insurance
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The Problem – Paying More for Less
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Transportation & Warehousing - Traditional
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Transportation & Warehousing - New
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Vive la Difference – Transportation & Warehousing
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What’s in it for ME?
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Scope of HR Today
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Personnel
• Control
• Compliance
• Administration
• Payroll
Service
• Recruitment
• Remuneration
• Talent Management
• Performance Appraisal
DecisionSupport
• Return on Investment
• Organisational Performance
Expense Generator of Capital
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Questions
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Do we have the right number of Employees?
What is the right Workforce Cost?
What is the Marginal Return of R1 invested in the Workforce?
What is the ROi on our training investment?
Where does our Best Talent come from?
What percent of our Workforce is customer-facing or revenue-generating?
Is the ROI on Human Capital higher than the ROI for other business capital?
What are the Leading Indicators of Employee Turnover?
Are Management effectively managing our Human Capital?
Are we loosing the right people, or the wrong people?
Is internal mobility a source of value creation or turnover and cost?
What percent of the Workforce has a Defined Career Path?
Where can an investment in training improve productivity and profitability?
What is the ACTUAL Cost of Turnover to our Business?
What is our optimal pay/performance mix?
Is Productivity increasing/decreasing/static?
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The Amazing Race!
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The Right Questions
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Platform for Human Capital Management
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A Final Thought
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“Consider the discipline with which companies measure, manage, and grow
financial Capital. Now – think of how they manage Human Capital. The ‘most important asset’ is largely unmanaged.”
“The New Human Capital Strategy” Bradley W Hall
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LinkedIn: za.linkedin.com/in/gailsturgess/Skype: gailsturgess
Twitter: @gailsturgessFacebook: http://facebook.com/Gail.L.Sturgess
083 654 6480Website: www.talentalign.comEmail: [email protected]: http://ithrguru.com
Gail Sturgess