4G Human Capital
Linking Behaviour to Bottom Line Performance
Increasing Profits per Employee
While profits per employee are a good measure of human capital, the real
challenge is knowing how to increase them.
Human Capital Benefits Human capital formance over the long term.
> Increase profits per employee
> Link behaviour to the bottom line As organisations grow, retaining and As an antidote, one might place greater
> Quantify the amount of friction in teams improving financial performance emphasis on the role of intangibles and
> Optimise the deployment of people becomes increasingly difficult. The human capital as a focus for driving
> Raise the quality of working relationships need to develop efficient processes and continued success.
to generate superior returns are just
Please note, this document is intended to two examples of this. In light of this, the importance of intan-
accompany the human capital demonstra- gibles and their impact on financial
tion of the Visual Team Builder. This can be The challenge of balancing size and performance only increases. When we
found at the link below. financial performance is compounded speak about intangibles, we do so with
by two other factors. The first is that the idea that brands, technology, inno-
http://www.fourgroups.com/capital capital is no longer a scare resource. vation, knowledge and intellectual
While capital always seeks the best property all contribute significantly to
returns, its supply and availability has the profits and competitive advantage
increased such of their respective owners. What is also
An Example 4G Situation that it is unlikely apparent is that underpinning these
Degree of Psychological
Comfort to be a limiting intangibles are the people who make
factor on a com- them a reality.
1Si Significant effort pany’s growth.
The second is the If the superior management of people
2Ti increasing speed outlines one possible route to
of technological improved organisational performance,
innovation and how can we measure and define this
how it shapes financially? Perhaps the simplest
1Ne industries and answer is to look at profits per employ-
competition. The ee. When measuring intangibles or
upshot of these human capital, profits per employee
factors suggests has a number of advantages.
it is becoming
tougher to main- • It can be compared over different
3Fi tain superior per- periods and benchmarked against com-
Increasing Profits per Employee
petitors measure (you can’t manage what you Who are we?
• Comparing across different capital can’t measure), two broad applications Four Groups work with a new approach to human
structures and accounting rules is possi- for human capital follow. capital. Our focus is on measuring and increasing
ble the economic returns from intangibles such as
• It takes into account different sized The first application looks at linking behaviours, relationships and culture.
organisations behaviours to indicators such revenues
aggregate or segmented calculation of
or costs for example. The focus is on
profits per employee can also be used.
While profit per employee is a good how people are best deployed and
measure of human capital and the con- what tasks and roles provide the great-
Many organisations are likely to have a
tribution it makes to financial perform- est financial return. The formula for
combination of groups, some of whose
ance, the real challenge is knowing Relationship Friction makes it possible
performance is directly linked to a
how maximise its impact. to create more financially efficient cir-
financial measure and some whose
cumstances for teams and individuals.
performance isn’t. However, the two
Our solution In the case of teams, it is possible to
groups can be combined, allowing an
manage team composition, reporting
entire organisation to manage and
In order to raise profits per employee, lines and overall organisational design
increase their profits per employee.
Four Groups have created a formula against the backdrop of Relationship
This is done regardless of how the
linking people’s behaviour and their Friction and financial performance.
organisation is structured and how its
relationships to measures of financial From an individual perspective, lower-
financial information is measured.
performance. Called Relationship ing each individual’s Relationship
Friction, the formula allows organisa- Friction contributes to an increase in
How does Relationship Friction
tions to ask ‘what if’ questions about their own and overall group perform-
the best means of deploying their peo- ance.
ple. In answering the questions, the
The formula for Relationship Friction is
formula outlines a series of steps that While Relationship Friction lends itself
based on a new approach to behav-
generate an increase in profits and very well to groups and teams whose
iours, relationships and culture called
profits per employee. performance has a direct link to a
4G. Collecting the data pertaining to 4G
financial measure, showing a return on
is the starting point before one can cal-
What is the human capital applica- human capital when this isn’t the case
culate Relationship Friction.
tion for Relationship Friction? requires a different approach. In this
instance, activity based costing and
Collecting the data for 4G is a very
By linking Relationship Friction data to profits per employee provide a method
quick and simple process. People gen-
existing financial measures such as rev- to link the performance of these groups
erally need an hour, split between a
enues or costs, it is possible to link the back to a financial measure. Activity
short briefing, an online personality
behaviour of individuals and groups to based costing enables a more precise
questionnaire and a feedback session .
the bottom line. Having placed a finan- application of Relationship Friction.
When using 4G for Relationship
cial value on a historically intangible However, if this is not available, an