Academic journal article SA Journal of Human Resource Management

Changing Domains in Human Capital Measurement

Academic journal article SA Journal of Human Resource Management

Changing Domains in Human Capital Measurement

Article excerpt

Introduction

Measurement frameworks for the measurement of human resource (HR) and human capital are in transition. (For clarity, the term human capital is employed where HR denotes management practices to manage human capital, the latter signifying a collective of unique attributes of employees or the workforce.) This transition is due to the fact that contemporary frameworks have different purposes and no longer reflect the Balanced Scorecard's (Kaplan & Norton, 1996) perspectives and subsequent developments. These transitions echo Becker, Huselid and Ulrich's (2001) observation 12 years ago that:

there is little consensus, ... and no real framework for thinking about the subject ... [and] we have seen little improvement in this over this over the past eight years. (p. ix)

This study explores the changing human capital measurement domains.

The awareness of human capital and its measurement practices have diverged, despite Becker et al.'s (2001) observation that they have all converged. This is clear in the different purposes of frameworks, which are mainly driven by advancement in measurement. Rooted in the performance management paradigm, with the main (and transactional) aim of implementing the business strategy, we observe various scorecards (see Becker et al., 2001 and Huselid, Becker & Beatty, 2005, for discussion of the HR Scorecard and the Workforce Scorecard). Not all scorecards in the literature are complementary (see Phillips, 2005, for examples of transactional scorecards applicable to human resource management). The complementary scorecards paved the way towards the transformational approach embedded in a human capital contribution paradigm. Different strands in this paradigm aim to show the impact of people and people-related initiatives on the bottom line (e.g. Bassi & McMurrer, 2008; Boudreau & Ramstad, 2007; Cantrell, Benton, Laudal & Thomas, 2006) and on the financial value of human capital (people as assets) (e.g. Scholz, Stein & Müller, 2007). This is in acknowledgement of human capital as the primary source of value creation as opposed to physical and natural resources (Bassi & McMurrer, 2006).

The above presentation of impact and value necessitates management questions, information and decisions. Boudreau and Ramstand (1998) argue that management information is used to support decisions, to persuade others and to set a fashion. D. Davis (2005) propounds specific information needs at strategic, tactical and technical (operational) levels, each associated with their own types of decision. The roles of the business and strategic partners (Ulrich, 1997) emphasise the integration between the HR function and the business to aid in decisions regarding the workforce. Consequently, this issue has certain implications for the measurement and management of employee-related data and information, as well as for employees, and thus needs some explication.

Similarly, a shift in the view regarding the source of value has impacted the conceptualisation and measurement of the workforce and the HR function. This shift includes the intangible people aspects, such as culture and employee engagement. In addition to transactional management of processes and best practices, an additional issue is the understanding of the economic value of people in human capital analytics. These developments have created a need to understand people as an asset, as will be highlighted next.

The changing context has created challenges for measurement frameworks. There is the necessity for an ongoing evaluation of HR practices, as there is no universal approach to improving organisational performance and it will thus vary between organisations (Bassi & McMurrer, 2007; Brown, 2007). The purpose of this research was to answer the question: 'What are the domains to consider in managing and measuring people?' 'Domain' here refers to a territory under rule, control or influence (Domain, 2013). …

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