Academic journal article SA Journal of Human Resource Management

Principles in Selecting Human Capital Measurements and Metrics

Academic journal article SA Journal of Human Resource Management

Principles in Selecting Human Capital Measurements and Metrics

Article excerpt

Introduction

Senior and line managers and human resource practitioners (HRPs) are experiencing a difference between the demand for and supply of human capital information due to inappropriate measurements. Physical and natural resources have been surpassed by human capital as a resource of wealth creation (Bassi & McMurrer, 2006). As a result, management information is essential to support decisions. On the demand side, information supports decisions to drive strategic success (Cascio & Boudreau, 2011), the allocation of resources (Becker, Huselid & Ulrich, 2001) and investment in people and practices (Cascio, 2006; Cascio & Boudreau, 2011). Information, thus, not only drives strategic change (Cascio & Boudreau, 2011) and financial success (Becker et al., 2001), but also focuses attention on value creation, the human resource (HR) function's credibility and their value as a strategic asset (Becker et al., 2001).

Yet, the supply side presents challenges. Becker, Huselid and Beatty (2009) articulate issues of inappropriate measurements that 'generate more questions than answers' (p. 145). Measurements rarely drive strategic change (Cascio & Boudreau, 2011). Lawler and Boudreau (2009) highlight that measurements are also used to justify investments in HR processes or programmes and to support the utilisation and deployment of resources. These contribute to a limited view of organisation-wide information. In addition, measurements lack sophistication and cannot provide objective evidence (Boudreau & Ramstad, 2007; Burkholder, Golas & Shapiro, 2007). This leads to HRPs facing challenges in selecting suitable measurements.

The purpose of this research was to answer the question 'what are the principles in selecting human capital measurements?' and the concomitant research objective was to explore and describe themes amongst a selected panel of expert practitioners at executive level (or engaging at executive level) who belong to a community that specialises in human capital measurement, in which they were directly involved, exerted leadership and consulted in the field of human capital measurement. For clarity, human capital refers to collective attributes of employees (the workforce), as opposed to human resource management, which refers to the management practices of human capital. This study employs the term human capital to refer both to employees and the HR function.

Literature has progressively addressed HR measurement. Rooted in Kaplan and Norton's (1996) Balanced Scorecard, measurement has been systemically expanded to focus on the HR function in Becker et al.'s (2001) HR Scorecard. Subsequently, measurement has been done using the people aspect in Huselid, Becker and Beatty's (2005) Workforce Scorecard and, more recently, an integration of the three scorecards (Becker et al., 2009). These scorecards, to some extent, point to principles to consider in developing strategic workforce measures. However, little empirical work exists on the principles with which to select measurements. The main contribution of the study was to identify descriptive themes around principles to consider in selecting human capital measurements for a measurement system.

Literature review

Literature on measurement principles can be considered as an intercept between four elements, namely the value proposition of an organisation's competitive strategy, the value creation logic, the value proposition of the HR function and workforce and, lastly, the integrated measurement system, as illustrated in Figure 1.

Value proposition of an organisation's competitive strategy

This element underscores the centrality of an organisation-specific strategy (Becker et al., 2001, 2009; Huselid et al., 2005; Kaplan & Norton, 1996; Lawler, Levenson & Boudreau, 2004). Measurements should be strategically valid to answer important strategic questions (Becker et al., 2001, 2009; Huselid et al. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.