The ROI of Human Capital: Measuring the Economic Value of Employee Performance, Second Edition

When the human resources

department is truly support-

ing the enterprise instead of

just filing and smiling, it

becomes the host of human

capital.

END-TO-END HUMAN CAPITAL VALUE REPORTS 149

modity without which nothing happens. I deliberately use

the word lead to emphasize that human capital manage-

ment is not the sole responsi-

bility of the human resources

department. It is everyone’s

job from top to bottom in the

organization. Human capital

investment is optimized only

when all parties from the

board of directors to first-line

supervisors and the employees themselves play a role.

Staff departments such as information services, finance,

or human resources presumably develop systems, design

processes, and offer services aimed at supporting corporate

goals. It would be absurd and wasteful for them to do other-

wise. However, in all my years in and around staff groups, I

have often found it difficult to locate the connections. Most

often, it is a case of a general enterprise goal and a general

staff response devoid of direct, verifiable, point-to-point

links. This is okay if you want average returns on your staff

investments. That is what probability theory predicts—

general response and average results. In our case, we are

building direct, visible links all the way up and down the

pathway from the enterprise level to the human resources–

led response and back up again. With direct links, it is possi-

ble to assess results in explicit terms and thereby make

improvements that yield above-average results.

Three Ex am ple s

Let’s look at three examples of specific pathways between

enterprise goals and human capital management. The cases

I’ve chosen are important issues for any commercial en-

deavor. They are also points on which government and edu-

150 THE ROI OF HUMAN CAPITAL

cation should focus. Moving more quickly, serving the

constituents, and operating in a more flexible and humane

way internally would be a great improvement for many pub-

lic institutions. The three key issues are:

1. Time to market

2. Customer service

3. Great place to work

Each has a different focus: time, service, or employee re-

tention. They represent the basics that give us a number of

different angles from which to understand the multitudes

of connections along the pathway. Figures 5-2, 5-3, and 5-4

display the pathways of the three cases that follow. They

reveal only a small number of the many connections be-

tween human capital management outputs and various

functional units. They show a mix of activities and possible

measurable outcomes. Space (and mental exhaustion) pre-

cludes showing all the possibilities of all three cases. It

would be overkill, and soon you reach the point of diminish-

ing returns. By applying your experience with each of the

line and staff functions listed, you will be able to think of

many more relationships. But a few excellent connections

are better than numerous mediocre connections. Of course,

the outputs from the functional units relate to and support

the specific enterprise imperative.

Figure 5-2. Sample human capital-to-enterprise pathway for time to market.

ENTERPRISE GOAL

Improve (Shorten) Time to Market

Research &

Development

Administrative

Support

Customer

Service

Sales &

Marketing

Production &

Distribution

FUNCTIONAL ACTIONS AND OBJECTIVES

Automate test processes

to shorten prototype

time to production

Improve equipment

uptime

Get accurate market data Anticipate customer

needs by surveying

Finance: have

funds available

Team with engineering to

shorten redesigns

Reengineer processes

to reduce rework

Refer customer

preferences to Sales

R&D/Production

Shorten process

cycle times to

speed operations

HUMAN CAPITAL MANAGEMENT ACTIONS AND OBJECTIVES

Support

Shorten hiring

time to start

Acquisition

Retention

Development

Shorten process cycle time

for pay and benefits

Shorten response

time on training

Involve employees in

“time” goal solutions

Bring customers in to

work with R&D

Hire business intelligence

Figure 5-3. Sample human capital-to-enterprise pathway for world-class customer service.

ENTERPRISE GOAL

World-Class Customer Service

Research &

Development

Administrative

Support

Customer

Service

Sales &

Marketing

Production &

Distribution

FUNCTIONAL ACTIONS AND OBJECTIVES

Go out to meet with

customers on site

On-time delivery Listen, guide, suggest,

and sometimes hand-

deliver in emergencies

Be available Zero defects

in billing

Design in customer

preferences

Achieve Six Sigma quality

Solve problems on

first call

Quick fix and

adjustment of

problems

HUMAN CAPITAL MANAGEMENT ACTIONS AND OBJECTIVES

Support

Hire service-oriented

people

Acquisition

Retention

Development

Develop incentives

for outstanding service

Build service culture

and processes

Nonmonetary

recognition

Be there at installation of

major products/programs

Partner to test ideas

Figure 5-4. Sample human capital-to-enterprise pathway for employer of choice.

ENTERPRISE GOAL

Become a Great Place to Work

Research &

Development

Administrative

Support

Customer

Service

Sales &

Marketing

Production &

Distribution

FUNCTIONAL ACTIONS AND OBJECTIVES

Offer continuing

technical education

Train supervisors to be

supportive and respectful

Provide continuing

sales and marketing

training

Supervisors on hand

for support with

difficult customers

Zero defects in

payroll

Stay on leading edge

of technology

Coach and develop

employees for career

growth

Offer flexible work

schedules

Give employees

right answer first

time

HUMAN CAPITAL MANAGEMENT ACTIONS AND OBJECTIVES

Support

Hire for “fit” to select

types who will succeed

Acquisition

Retention

Development

Survey market for

competitive benefits

Offer self-directed career

development software

Be available for

employee support