Measuring the Return on Your Human Capital

Article excerpt

Byline: By Ian Lithgow

Although many organisations state 'people are our most important asset' it is surprising that with employee costs amounting to as much as 80% of total costs to a business, many aren't measuring the return on this vital resource.

The question is; how do you find meaningful metrics with which to benchmark your organisation? Organisations often focus on measuring the costs and numbers of staff in the HR function.

Such metrics are vitally important to assess efficiency, however the cost of the HR function may equate to only around 1% of the total cost of an organisation which can mean a disproportionate amount of effort is spent on one area of measurement.

More meaningful data can be gleaned from measuring what HR delivers to an organisation, how well HR delivers against customer (eg employee) expectations and how well key elements such as leadership, talent management, innovation, engagement and behaviours, corporate and social responsibility and organisational capability support the objectives of the business.

For example, talent management is something that many organisations talk about and, in the increasingly competitive employment market, how well organisations attract, develop and retain employees can be a major differentiator. …