Human Capital Analytics: How to Harness the Potential of Your Organization's Greatest Asset

CHAPTER 7

Beyond ROI to Optimization

“At a time when companies offer similar products and comparable technology, high-performance business processes are among the last remaining points of differentiation.”

—Tom Davenport, Competing on Analytics1

Abig conceptual improvement over simple measurement is provided by return on investment (ROI).2 ROI has enabled countless trainers to demonstrate the valuable work they do in improving human capital for their organizations. Although ROI provides a valuable measure of success, we suggest going one step further. The next building block is optimization, a prescriptive analysis that identifies where investments are most needed and the intelligent allocation of those investments. ROI is sometimes criticized, not entirely fairly, for being a historical marker. It is not uncommon to find people who look at ROI only in a backward fashion—they want to clarify the value of what they have done, rather than prepare for the next year’s work. It is useful to know the outcome of past work so as not to repeat the same mistakes. However, even if successful, the past is not a predictor of the future. Still, the greater value comes not from knowing the past but from being able to predict the future.

OPTIMIZATION

By understanding where the investment is working—and where it isn’t—you can make targeted adjustments that improve impact over time. Optimization requires that an investment be isolated. Isolation is a historical finding, showing what has already ...