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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
 

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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