Maximizing Human Capital: Demonstrating HR
Value With Key Performance Indicators
Lockwood, Nancy R . HRMagazine ; Alexandria  Vol. 51, Iss. 9, (Sep 2006): S1-S11.
ProQuest document link
ABSTRACT
To drive value and optimize company performance, human capital-the collective knowledge, skills and abilities of
people that contribute to organizational success-is an asset to be leveraged. Based on corporate culture,
organizational values and strategic business goals and objectives, human capital measures indicate the health of
the organization. The effective use of key performance indicators (KPIs) that measure human capital outcomes,
such as talent management, employee engagement and high performance, illustrates the firm’s business, financial
and strategic goals, promotes partnership with senior management for organizational success and demonstrates
HR value to the C-suite. [PUBLICATION ABSTRACT]
FULL TEXT
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Headnote
Abstract
To drive value and optimize company performance, human capital-the collective knowledge, skills and abilities of
people that contribute to organizational success-is an asset to be leveraged. Based on corporate culture,
organizational values and strategic business goals and objectives, human capital measures indicate the health of
the organization. The effective use of key performance indicators (KPIs) that measure human capital outcomes,
such as talent management, employee engagement and high performance, illustrates the firm’s business, financial
and strategic goals, promotes partnership with senior management for organizational success and demonstrates
HR value to the C-suite.
Introduction
“In order to fully value human capital, we must go beyond the view of human effort as purely individual. We,
humans, affect each other profoundly, and it is the way we affect each other that determines our value to our
organizations. And, it is the way that strategic human resource professionals bring this understanding to the fore
of their organizations that determines HR’s value at the senior management table.”1
In 1995, the seminal study by management guru Mark Huselid linked high-performance work practices with
company performance and revealed that workforce practices had an economic effect on employee outcomes such
as turnover and productivity, as well as on short- and long-term measures of corporate financial performance.2
This study marked a new era of measuring the influence of HR to promote effective organizational performance,
sustainability and financial success.
As HR positions itself as a strategic business partner, one of the most effective ways to do so is to support the
strategic business goals through key performance indicators. Key performance indicators (also known as KPIs)
are defined as quantifiable, specific measures of an organization’s performance in certain areas of its business.
The purpose of KPIs is to provide the company with quantifiable measurements of what is determined to be
important to the organization’s critical success factors and long-term business goals. Once uncovered and
properly analyzed, KPIs can be used to understand and improve organizational performance and overall success.3
Why Measure Human Capital?
The primary motivation to measure human capital is to improve the bottom line. To design better KPIs, it is
essential for HR to understand what is important to the business and what key business measures exist. In
addition, the drive to measure human capital reflects the change of role of human resources from administrative to
that of a strategic business partner. In general, human capital measurement is a measure of effective human
resource management.
Broadly stated, HR metrics measure efficiency (time and cost) and the effectiveness of certain activities. Yet
mastering human capital measures can be a very complex undertaking. Today, HR professionals are expanding the
“traditional” metrics, such as head count, time-to-fill and turnover, to KPIs that align with corporate objectives and
create greater stakeholder value. However, KPIs often demand large amounts of data and technological support. In
addition, the trial-and-error required to set appropriate and meaningful measures comes into play, as well as
patience and education of those involved. Yet despite these challenges, 84% of companies expect to increase the
application of human capital measures in the next few years.4
With a clear line of sight on workforce and organizational performance, effective use of KPIs also illustrates HR’s
in-depth understanding of the links to business success. KPIs help build the credibility of the HR department,
demonstrate HR value and foster respect and partnership with senior management and the C-suite. For example,
when an HR professional not only shows that a new recruiting program resulted in a lower time to fill positions in
the organization, but can also demonstrate that the program yielded an additional amount of revenue because
billable staff were able to start at client sites more quickly, he or she builds HR credibility. Credibility is increased
because HR is able to link HR activities to firm performance and communicate it in financial/business terms.
Additional critical reasons to measure human capital include steering human capital resource allocation, winning
business cases for human capital investment, tracking human capital activities to develop human capital
predictions, linking variable compensation to human capital best practices, delivering human capital information
required by law and providing investors with information on human capital performance. Some firms even use
KPIs to enhance their company image as a progressive employer of choice.5
Further, with many HR functions increasingly being outsourced, credibility is earned through activities and
outcomes that result in “deliverables” that promote and lead to organizational success.6 Consequently, it is
important to select KPIs that are most meaningful to the organization. For example, logical KPIs to select are
those that reflect drivers for human capital measurement, such as financial outcome measures (e.g., revenue
growth and cost reduction) and performance drivers (e.g., customer satisfaction, process technology innovation,
product technology innovation, globalization). Within that framework, the most common categories of people
measures include turnover, productivity (revenue, profit per employee), employee satisfaction/employee
engagement, recruitment, diversity, remuneration, competencies/training, leadership, and health and safety. Most
frequently measured are turnover, voluntary resignation, average compensation, average workforce age, diversity
and compensation/ total cost. Such KPIs will help HR professionals predict what they need to know to act in a
timely and effective manner and identify ideas and areas where HR can develop new initiatives, or revisit others, to
obtain stronger results.7 Clearly, KPIs are the wave of the future for HR.
Culture, Stakeholders and KPIs
As the saying goes, “what gets measured gets managed.” The company culture and corresponding values define
what is measured. Therefore, when HR considers important KPIs, the first place to look is at corporate culture and
what is most valued within that culture. In addition, stakeholders (both internal and external) go hand-in-hand with
company culture. A stakeholder is an individual or entity with a stake in how the organization performs and/or
conducts itself. Internal stakeholders are employees, line managers, senior management, C-suite and the board of
directors. External stakeholders include shareholders, customers, vendors, the community and the government.
Working closely with internal stakeholders is beneficial for HR to 1) prioritize capabilities and create action plans
to deliver them; 2) focus on deliverables rather than doables; 3) build relationships of trust; and 4) help resolve
misconceptions of HR.8 Different stakeholders have different criteria. The key priority is to give business partners
the information they need to manage the company. For example, senior management values performance
measures that predict and lead to future organizational financial success and sustainability. On the other hand,
while one employee considers the availability of upward career mobility very important, another employee stays for
health care benefits. As a result, training to promote opportunities to move up in the organization and
informational sessions about employee benefits packages may be important. Overall, most important are KPIs that
track key business indicators of human capital issues. HR must focus on KPIs that best illustrate stakeholder
values that will lead to organizational success.
KPIs-A Strategic Management Tool
To think strategically about measurement and how best to use KPIs as a strategic management tool, it is essential
to understand the meaning of the measurements and their purpose. This approach will not only be beneficial to
help better manage the HR function, but also will naturally lead to aligning HR’s goals and objectives with those of
the organization.9
According to a recent national longitudinal study on the assessment of human resource organizations, strategy is
the top high-value add for HR. However, in only 60% of companies did the HR executive see HR as a “full partner.”
In addition, 24% of executives outside of human resources viewed their HR counterparts as working at lower levels
of strategic involvement, compared with 40% of HR executives. The study suggests that activities related to
strategy provide the most highend impact for HR to demonstrate its value (see Figure 1). In addition, the
relationship between business strategy activities and HR’s strategic role points to areas where HR can contribute:
growth, the core business, quality and speed, informationbased strategies, knowledge-based strategies, and
organizational performance. The study data also reveal key strategic HR activities that link business emphases
with the organization’s strategic focus: 1) having a data-based talent strategy; 2) partnering with line managers to
develop business strategy; 3) providing analytic support for business decision-making; 4) providing HR data to
support change management; 5) driving change management; and 6) making rigorous data-based decisions about
human capital management.10 From these HR strategy activities, key performance indicators can be developed.
At the same time, when determining strategic KPIs, it is essential to consider who designs human capital
measures and how they are created. Research by The Conference Board reveals key contributors to these metrics.
Overall, HR designs 94% of human capital measures, often basing them on measures in the company scorecard.
To create human capital measures, 77% of HR professionals meet with company business managers. For example,
finance, strategic planning, outside consulting experts, business managers and IT contribute to HR measurement
design. However, if HR lacks expertise with metrics, it is helpful to partner with groups such as marketing that have
considerable expertise in measure design and analysis.11
Alignment of people metrics with organizational strategy is still at an early stage in many firms. To move human
capital investments forward, several key points will assist HR to better strategically align with organizational goals
and garner support for human capital programs: 1) involve HR in the development of overall business strategy; 2)
enlist leaders outside of HR to help develop and back KPIs; 3) collaborate with business managers to ensure KPIs
link to business unit strategic goals; 4) focus more attention on links between people measures and intermediate
performance drivers (e.g., customer satisfaction, innovation, engagement); 5) increase manager acceptance
through training programs and concrete action plans; and 6) work with HR to simplify metric and automate data
collection.12
In addition, benchmarking can make human capital metrics more valuable. When used wisely, benchmarking data
can protect programs that are performing well, create support for organizational change and help executives in HR
and other disciplines make strategic decisions that affect their organizations.13 By focusing on internal
benchmarks, customized measures may help improve the alignment of activities to HR strategy. However, caution
should be used with external benchmarks due to mixing “apples and oranges”-that is, different industry sectors
and underlying issues in benchmarking measures. Also, external benchmarks tend to emphasize results rather
than processes. Because an external benchmark does not explain what part of the process can lead to better
results, the use of external measures may not always be appropriate for internal use. In the rapid expansion of
highly advanced e-learning programs, for example, different programs may deliver the same content at the same
low cost, but the quality of the programs is not revealed in the benchmark itself.14
Overall, the top KPIs for human capital and HR effectiveness can be used by all companies, regardless of size or
industry. For example, the Hay Group found that the most admired companies had effective business practices in
the following areas: organizational culture, strategy implementation, attraction and retention of talent, leadership
development, fostering innovation, and performance management. Successful companies assess performance by
balancing profit measures with measures of shareholder value, customer satisfaction and employee
satisfaction.15 Keeping this research in the forefront will help HR develop effective and strategic KPIs for their
organizations.
The Importance of Lagging and Leading Indicators
The purpose of measuring KPIs and determining what leads and what lags is to help the business make
predictions. To demonstrate HR value with KPIs, it is imperative that HR has a working knowledge of lagging and
leading indicators. These terms describe data regarding outcomes and/or events that affect organizational
performance. Lagging and leading indicators offer a way to understand and/or predict various aspects of firm
performance. However, to identify and quantify these relationships, it is essential to know more than HR is a
leading variable and customer satisfaction is a lagging variable.16 To accurately gauge the relationship between
lagging and leading indicators, a sense of the magnitude of the time lag between changes in the leading indicator
and subsequent changes in the lagging indicator is required. (see Figure 2 for an example of lagging and leading
indicators, with turnover as the lagging indicator in response to selection and supervisory training, the leading
indicators.)
To be more specific, a lagging indicator represents information that is the result of change or an event. Lagging
indicators, for example, are measures of profits, sales and service levels. They reveal various aspects regarding the
success or failure of a firm. Lagging indicators are particularly useful for shareholders, creditors and government
agencies. Lagging indicators do not, however, help a company react quickly, show what specifically went wrong or
right, or indicate exactly what needs to be done to improve. In general, lagging indicators are not useful in
managing on a day-to-day basis.17
In contrast, a leading indicator precedes, anticipates, predicts or affects the future. For example, higher employee
turnover can precede outcomes such as lower customer service scores. Of the two indicators, the leading indicator
is more useful for investments or predictions. The state of the major stock markets, for example, is a leading
economic indicator for the global economy. Figuring out how to measure events, practices, initiatives or outcomes
helps to determine the most valuable leading indicators-that is, those indicators that may lead to clear
outcomes.18 However, part of the difficulty is clearly proving what indicators lead and with what degree of
influence. For example, while the availability of talent is generally thought of as a leading indicator-as one can
measure the quality of hire from it (the larger the talent pool, the more likely you are to hire more qualified people)-
it is also a lagging indicator in comparison to certain political decisions. For example, consider how changes in a
local taxation rate, perception of crime and ratings of school quality affect people’s desire to move to a city and
become part of the talent pool. Here, political decisions lead and talent availability lags. In general, the most useful
measures are leading indicators, as they may predict future firm performance.
Scorecards and Dashboards
In recent years, HR scorecards and dashboards have gained popularity as a management tool. Documenting and
tracking defined metrics validates human capital investments. For example, firms are increasingly tracking
employee movement as a metric. Cisco Systems, Inc., the Californiabased communications giant, views building
talent as a priority and has added to its dashboard of people measures a metric to track how many people move
and the reason why, including revenue per employee. This KPI allows Cisco executives to quickly identify divisions
that are creating new talent. Another firm, Valero Energy Corp. in San Antonio, developed a recruitment model
using human capital metrics based on applying the supply-chain business process to labor. Scorecards help the
company track the labor sources that provide the most productive employees. Using a detailed analysis of these
metrics, the company can accurately forecast the demand for talent by division and title three years in advance.19
The HR scorecard, based on the format of the balanced scorecard, is a key management tool to strengthen HP’s
strategic influence in the organization. The scorecard has four perspectives-strategic, operational, financial and
customer-that help organize and track areas where HR adds value: 1) the strategic perspective focuses on
measurements of effectiveness of major strategylinked people goals; 2) the operational perspective reflects the
effectiveness of HR processes; 3) the financial perspective relates to financial measures of HR value to the
organization; and 4) the customer perspective focuses on the effectiveness of HR from the internal customer
viewpoint. Depending on the organization’s business goals, these perspectives also help determine KPIs that best
demonstrate HR value (see Figure 3).20 Additional key benefits of the HR scorecard are 1) reinforcement of the
distinction between HR “doables” and HR “deliverables” (i.e., a policy implementation is a doable and becomes a
deliverable when it creates employee behaviors that drive strategy); 2) HR’s ability to control cost and create value;
3) measurement of leading indicators; 4) assessment of HR’s contribution to strategy implementation and to the
bottom line; 5) support of HR to manage its strategic responsibility; and 6) encouragement of flexibility and
change.21
KPIs and Employee Engagement
Employee engagement is quickly becoming a critical success factor for competitive advantage. Using KPIs, HR
can demonstrate organizational success as well as gain support for initiatives related to employee engagement.
Research studies offer evidence that employee engagement is key to organizational success. In the SHRM 2006
Job Satisfaction Survey Report, employees identified four key aspects of job satisfaction directly linked to
employee engagement: meaningfulness of job, contribution of employee’s work to the firm’s business goals, the
work itself and variety of work.22 Watson Wyatt’s research, The Human Capital ROI Study, reinforces the link
between employee engagement, reward systems and retaining valuable human capital.23 A Carlson/Gallup study
on employee engagement and business success shows that employees who are extremely satisfied at work are
four times more likely than dissatisfied employees to have a formal measurement process in place as well as
receive regular recognition. Further, 82% said recognition motivated them to improve job performance.24 Thus, as
these studies highlight, employee engagement-whether through job satisfaction indicators, reward systems,
effective communication programs or succession planning initiatives-has the power not only to clearly
demonstrate HR value, but more importantly, to propel human capital investment to the forefront of the C-suite
agenda.
KPIs for Organizations With Small HR Departments-Mini Case Study No. 1
Not all organizations have the luxury of a dedicated HR staff to develop, track and analyze HR metrics. When an
HR staff of a small organization has limited time to track all possible HR KPIs, careful choices must be made about
which KPIs best serve HR’s needs. This mini case study illustrates the types of KPIs selected and tracked by a
small HR staff supporting a workforce of 400 employees of a firm that sells and leases health care equipment to
hospitals. With only an HR director and HR assistant, this tiny HR department tracks human capital measures that
reflect the state of the organization, selecting KPIs based on metrics that best reflect the company’s culture and
strategic goals. In this company, certain KPIs are tracked throughout the year, while others (e.g., absenteeism) are
reviewed on a quarterly basis. Overall, the HR department benchmarks progress against prior years, with the gcal
that the employee cost tracks favorably against .revenue and profit. The primary metrics tracked are employee
cost over sales revenue, employee cost over net income before taxes, turnover of full-time and part-time staff,
absenteeism, time-to-fill for critical positions, and HR performance ratings. Of these metrics, four are lagging
indicators: employee cost over sales revenue, employee cost over net income before taxes, turnover and
performance ratings. The other two metrics-absenteeism and time-to-fill-are leading indicators. The turnover of
full-time staff, for example, was 11% in 2004 and 16% in 2005, the difference reflecting the recent retirement of
several long-time employees. As a result of analyzing the turnover increase, HR developed a knowledge
management transfer program for employees close to retirement. Finally, to anticipate the possible effect on the
next year’s budget, HR reviews any changes in benefits programs against the cost of benefits per employee.
The Value of Qualitative KPIs-Mini Case Study No. 2
KPIs-as a simple tabulation of numerical indicators-do not necessarily provide management with useful
information. Moving from “bean counting” to strategic HR, a more qualitative type of key performance indicator
becomes essential. As this mini case study illustrates, turnover rate, as a leading indicator, is an excellent
example. In a mid-size manufacturing company with 650 employees, HR, using a qualitative assessment process,
asked questions to explore the true reason behind the high turnover rate of 30%. First, what was the value of the
employees who left the organization? Since the turnover rate was high, for example, were the employees who left a
drag on performance? If yes, then the hiring process was the next step to examine. Second, was the high turnover
among valuable employees? If yes, then the next step was to examine the nature of the employee-organization
interaction.
To begin, HR went back to its performance assessment process and considered people who left in each of the four
categories: 4-exceeds expectations, 3-meets expectations, 2-needs improvement to meet expectations and 1-not
performing even to minimal expectations. They looked at high turnover among the 3s and 4s, which represented a
loss of high performers who, assuming the performance assessment was valid, were more valuable to the
organization. They also considered high turnover among the 1s and 2s, a possible indication that supervisors were
doing a good job of weeding out those who could not perform. Looking at turnover rates over time, HR found a
need for supervisor training as well as the need to improve pre-hiring screening and the overall selection process.
After tracking turnover for a year following the supervisor training initiative and improvements in the hiring
process, the end result was that the savings in reduced turnover far outweighed the cost of the pre-hire
assessment and supervisor training.
Role of Technology and KPIs
Today, the increasing demand for HR technology runs parallel with the growing use of workforce analytics and
KPIs. HR technology systems are fast proving to be a critical vehicle for HR to contribute value to their
organizations. While initially used primarily by large organizations, more small and mid-size companies now use
software products to both effectively measure human capital investment and track a wide range of HR metrics.
Further, there is growing evidence of cost savings in organizations that effectively use HR technology.
Consequently, HR in companies of all sizes will increasingly use technology to better showcase the effects of
human capital initiatives.25
Research by management gurus Boudreau, Lawler and Mohrman points to the critical role of technology and the
corresponding strong relationship between HR and IT. Two key findings reveal that, due to technology, completely
integrated HR IT systems lead to the highest level of HR effectiveness, and the effectiveness of the HR IT system
is strongly related to the overall effectiveness of the HR organization. Further, the SHRM 2005 HR Technology
Survey Report emphasizes the importance of return on investment (ROI) to build a business case to incorporate
HR technology systems in the firm. The top five successes of HR technology systems are: increased accuracy of
employee information; decreased cycle time for processing employee information transactions; less time spent by
HR staff on administrative work; greater access by managers to employee information; and the HR department’s
ability to manage the workforce with the same number of HR staff. Yet, few organizations document the
advantages of HR technology systems:26
* 65% of organizations are not measuring the ROI for HR technology systems.
* Of those that do measure the ROI, 68% measure it by determining cost savings and losses and 31% consider HR
headcount.
* 10% of HR professionals do not know how the ROI is measured.
Recent Studies: Human Capital Practices Drive Performance
Increasingly, research finds that best practices around human capital can help companies successfully compete
with their peer organizations. The following studies highlight the importance of human capital practices to drive
organizational performance. Correspondingly, KPIs that measure these practices both validate the value of HR and
advance the profession at all levels.
* Achieving Strategic Excellence: An Assessment of Human Resource Organizations27
This national study, the fourth in a series on the HR function in large corporations, focuses on measuring whether
the HR function is changing to become more effective and, more specifically, whether HR is changing to become
an effective strategic partner. The key findings show a “strong relationship between what is happening in the HR
function and a company’s strategic focuses.” The degree to which the firm has knowledge and performance
strategies is the degree to which HR is viewed as a strategic business partner. Overall, with the importance placed
on talent management, the emphasis on human capital, knowledge and competencies creates a favorable
environment for the HR function.
* SHRM 2006 Human Capital Benchmarking Study28
This executive summary provides HR professionals with key human capital measures from nearly 600
organizations on HR departments and their expenses, employment, health care, compensation, and organizational
revenue and size. The key findings reveal changes and trends in the workplace. For example, of the 57% of firms
that expected their HR department expenses to increase, 11% were in durable goods manufacturing. For all
industries, the median for HR expense per full-time employee was $1,072. And in 2005, organizations also
increased their hiring by more than 50% from the previous year. Telecommunications, services (profit) and
biotechnology industries had the top three highest medians for percentages of positions filled in 2005.
* 2006 FORTUNE Most Admired Companies: The Effectiveness of Managing Globally29
This study of 74 companies worldwide found that successful global organizations exploit unique knowledge and
capabilities. They then effectively diffuse and adopt them worldwide to their strategic objectives, contributing to
competitive differentiation. Successful global leaders, for example, take a hands-on approach to develop talent
management and provide ongoing coaching to their workforce. Most admired companies have a better
understanding of their talent, and consequently, positions can be filled more quickly based on required skills and
career objectives.
* Maximizing the Return on Your Human Capital Investment: The 2005 Watson Wyatt Human Capital Index
Report30
This study of 147 organizations representing all major North American industries illustrates that companies with
superior human capital practices can create more shareholder value that substantially surpasses companies with
average human capital practices. Excellent human capital practices-such as recruiting excellence, employee
development, total rewards, turnover management and communication-make a difference, no matter the state of
the economy. Key findings, for example, show that companies that filled vacancies faster reduced disruption and
lost productivity from turnover. Organizations that filled positions quickly (in about two weeks) outperformed
those that took longer (around seven weeks) by 48% (59% three-year total returns to shareholders versus 11%).
Using KPIs in the Global HR Function
The value of global HR is assessed by how well global HR strategy, policies and practices link with, support and
forward organizational strategy (see Figure 4). In addition, global HR is often assessed by its effectiveness to
deliver major organizational change. HR is often called upon, for example, to help in the design of high-level
projects for major global business initiatives (e.g., talent management for expansion into new regions, a global
communications program regarding new organizational values).
Yet measuring the contribution of HR on an international level becomes ever more complicated due to factors
such as complexities of scope, authority level, and political, cultural and legislative barriers that directly affect the
link between organizational performance and HR. Two approaches are recommended: identifying and proving the
link between organizational performance and people management, and using methods of evaluation of the global
HR function’s contribution. The measure of the global HR function also often rests on “perceptions of
effectiveness” from key stakeholders-that is, the company’s worldwide employees and managers. Therefore, the
ability to market HR globally as a source of competitive and strategic advantage is fundamental to measuring the
contribution of the corporate global HR function.31
Measuring the value of international assignments, for example, is a critical success factor for global HR.
Companies measure the ROI of international assignments through cost estimating, tracking and comparison. A
recent global relocation trends survey, for example, found that 70% of companies required a statement of
assignment objectives prior to funding assignments. In addition, to minimize expatriate turnover-a global HR KPI-
64% of companies found opportunities to use international experience, with 50% of firms offering a greater choice
of positions upon return and 43% offering repatriation career support.32 However, as highlighted in an SHRM case
study on repatriation, different assignments have different measures of success and, consequently, different
results. A common KPI is the retention rate of expatriates following repatriation for one and/or two years. Other
measures may also reflect “softer” results, such as managerial approach shifts or cultural changes. The concept
behind using a variety of measures is to create a “report card” that can provide a broad view of the assignment
overall.33
In Closing
Becoming more facile with metrics in general is a goal of many HR professionals. Further, as more HR
professionals become immersed in human capital measurement, they can more effectively use key performance
indicators to illustrate the value of human capital investments through successful organizational performance at
many levels. These important steps will increasingly demonstrate the high value-add required by the C-suite to be a
true strategic business partner.
Acknowledgments
The author extends appreciation and thanks to members of the SHRM Human Capital/HR Metrics Special
Expertise Panel (Ronald L. Adler, Grist Berry, SPHR, Bette J. Francis, SPHR, Virginia C. Hall, SPHR, Janice Presser,
Ph.D.) and to Strategic Research at SHRM (John Dooney, Noël Smith and Belin Tai).
Sidebar
Recommendations
Selecting practical KPIs requires thoughtful consideration of the message behind measures and their
corresponding effect on the organization. The real-life examples below-starting at the idea stage and ending at
results with meaningful measures-demonstrate HR value through KPIs.
1. Qualitative measurement is one path to assess qualitative characteristics of the workforce, such as
engagement.
Example: A public agency was experiencing high customer complaints and low staff morale. A combination of
open-ended survey and focus group outputs was analyzed, and leading indicators were identified. Training was
specifically designed to target the key areas, and as a result, customer complaints fell as morale improved.
2. Employee feedback provides useful perspectives on HR efficiency.
Example: Health care cost? were unusually high and customer service was very poor for the last fiscal year. Six
months after a new health care provider was chosen, costs were down by 20%. The organization’s HR manager
developed a survey for employees to provide feedback about the new program relative to the previous one and
learned that employee perception of the new program was extremely favorable.
3. Whenever possible, the impact of recruiting is best described in terms of financial gains.
Example: An organization wanted to know the effect of its new recruiting program. The program was able to
reduce time-to-fill by an average of seven days, which meant new employees could start billing sooner to client
sites. Since the average daily bill rate per person was $900, the recruiting program was able to increase the firm’s
revenue by $6,300 per new billable employee hired.
4. Retaining older workers for future leadership roles depends on what they most value.
Example: A survey by a multinational corporation of its older worker population in North America and Europe
revealed the following top three key values: 1) support from managers; 2) ability to make one’s own job-related
decisions; and 3) opportunities for advancement. Leadership development programs were created to retain key
talent from this group. Over a two-year period, tracking of performance, mentoring and promotions of older workers
in the leadership development program found that turnover rates for older workers decreased by 28%.
Sidebar
Online Resources
2005 Watson Wyatt Human Capital Index* Report
www.watsonwyatt.com
Balanced Scorecard Institute
www.balancedscorecard.org
HR Technology Competencies: New Roles for HR Professionals
www.shrm.org/research/quarterly
Human Capital: The Elusive Asset
www.shrm.org/research/quarterly
Human Capital Institute
www.humancapitalinstitute.org
HR Metrics Toolkit
www.shrm.org/metrics/library
SHRM 2005 HR Technology Survey Report
www.shrm.org/surveys
SHRM Human Capital Customized Benchmarking Service
www.shrm.org/research/benchmarks
The Conference Board
www.conference-board.org
Understanding Expatriate ROI: Improving the Bottom Line
www.shrm.org/global
Footnote
Endnotes
1 Presser, J. (2006, February). Approaching a metric of human capital synergy [SHRM White Paper]. Retrieved June
10, 2006, from www.shrm.org
2 Huselid, M. (1995, June). The impact of human resource management practices on turnover, productivity and
corporate financial performance. Academy of Management Journal, 38, 3, 635+.
3 Glossary of Human Resources Terms, www.shrm.org/hrresources /hrglossary_published
4 Schneider, C. (2006, February 15). The new human-capital metrics. CFO Magazine, 1+.
5 Gates, S. (2002). Value at work: The risks and opportunities of human capital measurement and reporting. New
York: The Conference Board.
6 Ulrich, D., &Brockbank, W. (2005). The HR value proposition. Boston: Harvard Business School Press.
7 Gates, S. (2003). Linking people to strategy: From top management support to line management buy-in. New
York: The Conference Board.
8 Ulrich, D., &Brockbank, W. (2005). The HR value proposition. Boston: Harvard Business School Press.
9 Becker, B. E., Huselid, M. A., &Ulrich, D. (2001). The HR scorecard: Linking people, strategy and performance.
Boston: Harvard Business School Press.
10 Lawler III, E. E., Boudreau, J. W., &Mohrman, S. A. (2006). Achieving strategic excellence: An assessment of
human resource organizations. Palo Alto, CA: Stanford University Press.
11 Gates, S. (2002). Value at work: The risks and opportunities of human capital measurement and reporting. New
York: The Conference Board.
12 Ibid.
13 Dooney, J., &Smith, N. (2005). SHRM human capital benchmarking study: 2005 executive summary. Alexandria,
VA: Society for Human Resource Management.
14 Gates, S. (2002). Value at work: The risks and opportunities of human capital measurement and reporting. New
York: The Conference Board.
15 HayGroup. (2005, February). What makes the most admired companies great? Retrieved May 4, 2006, from
www.haygroup.com
16 Becker, B. E., Huselid, M. A., &Ulrich, D. (2001). The HR scorecard: Linking people, strategy and performance.
Boston: Harvard Business School Press.
17 Denton, D. K. (2006, March). Measuring relevant things. Performance Improvement, 45, 3, 33-38.
18 Ibid.
19 Schneider, C. (2006, February 15). The new human-capital metrics. CFO Magazine, 1+.
20 Becker, B. E., Huselid, M. A., &Ulrich, D. (2001). The HR scorecard: Linking people, strategy and performance.
Boston: Harvard Business School Press.
21 Ibid.
22 Esen, E. (2006, June). 2006 job satisfaction survey report Alexandria, VA: Society for Human Resource
Management.
23 Watson Wyatt and Human Resource Planning Society. (2006, April). The human capital ROI study. Retrieved
May 4, 2006, from www.watsonwyatt.com
24 The Gallup Organization. (1998). Employee engagement = Business success. Retrieved March 7, 2006, from
www.bcpublicservica.ca
25 Schramm, J. (2006, April). HR technology competencies: New roles for HR professionals. SHRM Research
Quarterly, 1.
26 Collison, J. (2005, March). 2005 HR technology survey report Alexandria, VA: Society for Human Resource
Management.
27 Lawler III, E. E., Boudreau, J. W., &Mohrman, S. A. (2006). Achieving strategic excellence: An assessment of
human resource organizations. Palo Alto, CA: Stanford University Press.
28 Dooney, J., &Smith, N. (2006). SHRM human capital benchmarking study: 2006 executive summary. Retrieved
June 29, 2006, from www.shrm.org
29 HayGroup. (2006, April). Leading the global organization: Structure, process, and people as the keys to success.
Hay Group Insight Selections, 11, 1-4.
30 Watson Wyatt Worldwide. (2005). Maximizing the return on your human capital investment The 2005 Watson
Wyatt human capital index report. Washington, D.C.: Author.
31 Sparrow, R, Brewster, C., &Harris, H. (2004). Globalizing human resource management. London: Routledge.
32 GMAC Relocation Services. (2006). Global relocation trends 2005 survey report. Woodridge, IL: Author.
33 Society for Human Resource Management. (2005, November). Measuring the success of a repatriation program
[SHRM case Study]. Retrieved May 9, 2006, from www.shrm.org/hrresources/casestudies_published
/GlobalHR.asp
AuthorAffiliation
Nancy R. Lockwood, SPHR, GPHR, M.A.
Manager, HR Content Program
AuthorAffiliation
ABOUT THE AUTHOR
Nancy R. Lockwood, SPHR, GPHR, MA, is manager, HR Content Program, for the Society for-Human Resource
Management. Her responsibilities include identifying topics and focus areas in need of additional human resource
management research and creating HR products of strategic and practical value for target audiences. She is
certified as a Senior Professional in Human Resource Management and a Global Professional in Human Resources
by the Human Resource Certification Institute. Ms. Lockwood can be reached by e-mail at [email protected]
ABOUT SHRM RESEARCH
SHRM Research, as part of the Knowledge Development Division supporting SHRM, produces high-quality, leading-
edge research and provides expertise on human resource and business issues. It acts as an advisor to SHRM for
the purpose of advancing the HR profession and generates and publishes cutting-edge research used by human
resource professionals to develop their knowledge and to provide strategic direction to their organizations. As
leading experts in the field of HR, SHRM Research works closely with leading academics, policy makers and
business leaders.
ABOUT SHRM
The Society for Human Resource Management (SHRM) is the world’s largest association devoted to human
resource management. Representing more than 210,000 individual members, the Society’s mission is to serve the
needs of HR professionals by providing the most essential and comprehensive resources available. As an
influential voice, the Society’s mission is also to advance the human resource profession to ensure that HR is
recognized as an essential partner in developing and executing organizational strategy. Founded in 1948, SHRM
currently has more than 550 affiliated chapters within the United States and members in more than 100 countries.
Visit SHRM Online at www.shrm.org.
© 2006 Society for Human Resource Management. All rights reserved.
This publication may not be reproduced, stored in a retrieval system or transmitted in whole or in part, in any form
or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written
permission of the Society for Human Resource Management, 1800 Duke Street, Alexandria, VA 22314, USA.
For more information, please contact:
SHRM Research Department
1800 Duke Street, Alexandria, VA 22314, USA
Phone: (703) 548-3440 Fax: (703) 535-6473
www.shrm.org/research
Disclaimer
This report is published by the Society for Human Resource Management. All content is for informational purposes
only and is not to be construed as a guaranteed outcome. The Society for Human Resource Management cannot
accept responsibility for any errors or omissions or any liability resulting from the use or misuse of any such
information. The Society for Human Resource Management does not endorse or imply endorsement of these
materials. Reference to any specific commercial product, process or service by trade name, trademark, service
mark, manufacturer or otherwise does not constitute or imply endorsement, recommendation or favoring by
SHRM.
ISBN #: 1-932132-41-4
06-0445
DETAILS
Subject: Talent management; Compensation; Strategic management; Corporate culture;
Performance appraisal; Human resources; Business indicators; Line managers;
Employee involvement; Executives; Workforce; Human capital; Employment
practices; Professionals; Stakeholders; Strategic planning; Economic indicators;
Business metrics; Corporate objectives; Success; Credibility
Business indexing term: Subject: Talent management Compensation Strategic management Corporate
culture Performance appraisal Human resources Business indicators Line managers
Employee involvement Executives Workforce Human capital Employment practices
Professionals Stakeholders Strategic planning Economic indicators Business
metrics Corporate objectives
Location: United States–US
Classification: 9190: United States; 6200: Training &development; 2310: Planning
Publication title: HRMagazine; Alexandria
Volume: 51
Issue: 9
Pages: S1-S11
Number of pages: 11
Publication year: 2006
Publication date: Sep 2006
Publisher: Society for Human Resource Management
Place of publication: Alexandria
Country of publication: United States, Alexandria
Publication subject: Business And Economics–Management
ISSN: 10473149
Source type: Trade Journal
Language of publication: English
Document type: Feature
Document feature: Graphs
ProQuest document ID: 205269574
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Last updated: 2021-09-09
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- Maximizing Human Capital: Demonstrating HR Value With Key Performance Indicators
