Ultimate Performance: Measuring Human Resources at Work

Background

The Incremental Employee Contribution model (Chapter 4) provides an analytical framework for the analysis of employee value from the point of view of positive contribution associated with productivity, time to competency, and other factors. While providing positive value to the organization, employees also impact the organization in a number of areas not directly tied to productivity, most critically in the areas of risk and loss. The term risk is used here in the context of describing potential harm or loss.

The current trend in risk management is toward the development of an integrated framework for describing and discussing various aspects of risk with the goal of quantifying a risk profile, or portfolio of risks. This quantification is carried out in an effort to establish the total impact of risk and loss for an organization. Commonly referred to as Enterprise Risk Management or ERM (deLoach, 2000), modern risk management is focused on understanding the sources of risk from multiple perspectives. Under the ERM framework a risk exists if:

• It is specifically definable as an observable event or action that can have a material impact on the financial or operational performance of an organization.

• It is measurable using a standard unit of account (such as revenues, percentage of return, EBIT, etc.).

• It is observable over a period of time.

Organizations are moving from a paradigm where controls were the focus and action was generally discontinuous and after the fact, to ...