1. HUMAN CAPITAL
MANAGEMENT
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2. AGENDA
• Introduction to human capital management
• Human capital measurement
• Human capital reporting
• Examples of human capital reporting
• Practical implications of human capital management
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3. The provision of guidance on
effective people management
by the systematic analysis,
measurement and evaluation
of how people policies and
practices create value.
HUMAN CAPITAL MANAGEMENT
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4. HUMAN CAPITAL MANAGEMENT AIMS
Obtain, analyse and report
on data that inform the
direction of HR strategies
and processes
Use measurements to prove
that superior HRM strategies
and processes deliver superior
results
Reinforce the belief that
HRM strategies and
processes create value
through people
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5. HCM AS A BRIDGE BETWEEN HRM AND BUSINESS
STRATEGY
HCM
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6. Human capital
Intellectual capital Social capital
Organizational capital
THE ELEMENTS OF HUMAN CAPITAL
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7. It is the knowledge, skills and abilities of individuals that create value,
which is why the focus has to be on means of attracting, retaining, developing
and maintaining the human capital they represent, thus producing:
A human capital pool that cannot be imitated or substituted by rivals
Human capital advantage that results from employing people
with competitively valuable knowledge and skills
Competitive advantage
THE SIGNIFICANCE OF HUMAN CAPITAL
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8. THE PROCESS OF HUMAN CAPITAL MANAGEMENT
Measurements Reporting
measurements
Drawing conclusions
about the significance
of the measurements
Guide to future
action
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9. HUMAN CAPITAL MANAGEMENT QUESTIONS
What are the key
performance drivers
that create value?
How are we going to
get, develop and
keep these skills?
How can we capture,
record and use the
knowledge we
create?
What skills have
we got?
What skills do we
need?
How can we develop
a learning culture?
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10. HUMAN CAPITAL MEASUREMENT
The process of finding links, correlations and causation between
different sets of HR data.
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11. APPROACHES TO MEASUREMENT
• Analyse sources of value.
• Analyse relationships between people management practices
and outcomes and organizational effectiveness.
• Measure impact of people management practices on
performance, not just the efficiency of the HR function.
• Keep measurements simple.
• Only measure activities if it contributes to decision making.
• Analyse trends not just actuals.
• Focus on easily available quantified data.
• Remember, measurement is a means to an end not an end in
itself.
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12. MEASUREMENT ELEMENTS
• Basic workforce data – demographic, race, age, working
arrangement, absence and sickness, turnover and pay.
• People development and performance data – learning and
development programmes, performance/potential assessments,
skills and qualifications.
• Perceptual data – attitude/opinion surveys, focus groups, exit
interviews.
• Performance data – financial, operational and customer.
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13. NON-FINANCIAL VARIABLES
• Quality of corporate strategy.
• Execution of corporate strategy.
• Management credibility.
• Innovation.
• Research leadership.
• Ability to attract and retain talented people.
• Market share.
• Alignment of compensation with shareholders’ interests.
• Quality of major business processes.
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14. WATSON WYATT HUMAN CAPITAL INDEX
Four major categories of HR practice that could be linked to an
increase in shareholder value creation:
Impact on market value
1. Total rewards and accountability 16.5%
2. Collegial, flexible workforce 9.0%
3. Recruiting and retention excellence 7.9%
4. Communication integrity 7.1%
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15. Attitude about the
job
Attitude about
the company
Employee
behaviour
Serving
helpfulness
Merchandise
value
Customer
recommendations
Customer
impression
Customer
retention
Return on
assets
Operating
margin
Revenue
growth
Employee
retention
A compelling
place to work
A compelling
place to shop
A compelling
place to invest
THE SEARS ROEBUCK MODEL EMPLOYEE-CUSTOMER-
PROFIT CHAIN
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16. THE BALANCED SCORECARD
Financial perspective
How do we appear to
our shareholders
Customer perspective
How do customers see us?
Innovation and learning
(people) perspective
Can we continue to improve
and add value?
Internal perspective
What must we excel at?
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17. HR competencies:
• administrative experience
• employee advocacy
• strategy execution
• change agency
HR systems:
• alignment
• integration
• differentiation
HR deliverables:
• workforce mindset
• technical knowledge
• workforce behaviour
HR practices:
• communication
• work design
• selection
• development
• measurement
• rewards
Strategic focus:
• operational excellence
• product leadership
• customer intimacy
HR SCORECARD
Source: R W Beatty, M A Huselid and C E Schneier, Scoring on the business scorecard, Organizational Dynamics, 2003
18. HUMAN CAPITAL REPORTING
Strategy Acquisition Development Leadership
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19. Human capital strategy
Acquisition and retention Learning and development
Human capital management
Management and leadership
Human capital performance
HUMAN CAPITAL REPORTING FRAMEWORK
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20. 1. Set out quantitative and qualitative information.
2. Set out measures of employee satisfaction and engagement.
3. Analyse benchmark data.
4. Identify key performance drivers and indicate how HCM is creating
added value in these areas.
5. Review how well HR strategy and practice are contributing
to achieving business goals.
6. Set out returns on investment in people management programmes.
7. Draw conclusions on implications for HR strategy and practice.
HUMAN CAPITAL REPORTS
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22. DRIVING BUSINESS
PERFORMANCE
How am I
recognized and
rewarded?
How do we attract
and retain the
best talent?
How are we expected
to do things here?
How am I doing?
How do I develop
my strengths?
STANDARD CHARTERED BANK:
MANAGING HUMAN CAPITAL ROAD MAP
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23. NATIONWIDE ‘GENOME’ CAPITAL INVESTMENT MODEL
• Quantify impact of employee commitment on customer
satisfaction and business performance.
• Use existing data, eg employee opinion surveys, customer
satisfaction indices, business performance statistics and
employee metrics.
• Prove statistically that the more committed the employee the
happier the customer.
• Predict that increasing employee satisfaction with basic pay
would produce a rise in customer satisfaction of 0.5% and an
increase in personal loan sales of 2.3%.
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24. NATIONWIDE: ‘DASHBOARD’ FOR AREA MANAGERS ON
KEY DRIVERS
Area Key drivers of committed employees Outcomes
Pay Length of
service
Coaching Resource
management
Values Retention Customer
commitment
1
2
3
4
5
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25. Global high-performance norm 60
Division A 50
Division B 45
Division C 45
–10
– 15
– 21
UNILEVER
HIGH-PERFORMANCE COMPARISONS
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26. PRACTICAL IMPLICATIONS OF HCM
• High-performance working.
• Talent management.
• Human resource development.
• Performance management.
• Reward management.
• Knowledge management.
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28. You cannot
manage
unless
you measure
But the measures
must be
meaningful
And they must
lead to action
HUMAN CAPITAL MANAGEMENT:
BASIC CONSIDERATIONS
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29. THE SEVEN ‘MUST-ASK’ QUESTIONS:
CENTRICA
1. What is the strategic agenda?
2. What are the key people issues driving the strategic agenda?
3. For each people issue, what would be the successful
outcome? What would ‘good’ look like?
4. What information do we need to show that we achieved
‘good’ ?
5. Where will the data come from?
6. How will this information be analysed/presented?
7. Who is going to drive this?
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