HR Metrics That Count: Aligning Human Capital Management to Business Results

Article excerpt

This research explores the current capability of HR to report on human capital metrics and the capability needed to report in the future. The study was conducted with 246 HR professionals and business leaders in the United Kingdom and Canada. Although HR professionals and business leaders overwhelmingly believe human capital metrics are important, organizations are not currently focusing on the measures that count. Today, metrics inform rather than drive strategy. Tomorrow, the metrics need to drive strategy. Our research concludes that human capital metrics and reporting need to align to the business strategy to be useful as a driver of business outcomes.

Has human capital management (HCM) found its way to the boardroom agenda at last? Many believe business leaders acknowledge the critical role HCM plays in business success. They believe there is a link between people management and business performance; however, that assumption still needs to be demonstrated.

The challenge to test that assumption escalated with the announcement of the Accounting for People Task Force in the United Kingdom, instigated by U.K. Secretary of State Patricia Hewitt, and chaired by Denise Kingsmill, CBE. This taskforce explored methods of requiring publicly traded organizations to report on their investments in people. The Accounting for People Task Force (report on November 3, 2003) defined human capital measurement as follows:

   Human Capital Management (HCM)--an approach to people
   management that treats it as a high level strategic issue and seeks
   systematically to analyse, measure and evaluate how people policies
   and practices create value.

At the outset, The Accounting for People Task Force appeared intended to develop a list of employee-friendly companies. Investors then could use the list as a guide to their investment decisions in the same way as an "environmentally friendly" list of companies (from best to worst) guides some investor decisions. The hope was that companies would invest in HCM because it could have explicit economic and investment implications.

In preparation for The Accounting for People Task Force report, a joint U.K. and Canadian study explored the current and desired future state of HCM. The primary focus of the study was to explore the current and intended behaviour of organizations with respect to current and preferred human capital metrics. This article presents the results of that research conducted from September to October 2003.

Method

The research was carried out simultaneously in the United Kingdom and Canada. Self-completion surveys were sent to managing directors (line executives) and human resources directors in the top 2000 U.K. organizations, ranked by total sales. Senior leaders in 202 organisations completed the surveys. Respondents were from across the United Kingdom and represented the professional services, IT, and telecoms, manufacturing, and public sectors.

The same survey was distributed through a web-based survey in Canada to senior HR managers in 200 companies mostly in Ontario. Senior leaders of 44 companies responded to the Canadian survey. Exhibit 1 summarizes the respondents who participated in this research.

Demographic statistical comparisons showed that there were no differences between the following groups:

* Between the HR respondents in Canada and in the United Kingdom

* Between the respondents from different levels within HR (i.e., VPs, directors, and managers)

* Between the private sector and public sector respondents

Results

The results of this research are sub-divided into two sections:

1. Current HCM reporting

2. Preferred future for HCM reporting

The findings are presented for the HR respondents in Canada, the managing directors (MD) in the United Kingdom (line managers), and the HR respondents in the United Kingdom. …