How do you determine whether the costly investments you make in leadership development, workforce engagement, and employee training are worthwhile? All high-performing organizations budget for these and similar efforts, but do you know the specific value and payoff they bring to your particular business?
It's not an easy question to answer! Research in human capital management (HCM), does however, provide some tools you can use to explore this important topic. (Bassi and McMurrer 2004)
To begin, it's vital to acknowledge that with the exception of training expenditure per employee, most traditional human resource metrics such as turnover rate, annual hours of training per employee, and average time to fill vacant positions are not correlated with and do not predict organizational performance.
By contrast, empirical research has identified a core set of HCM drivers that do predict performance that cuts across a broad range of organization types and sectors. The drivers can be classified into five major categories: leadership practices, employee engagement, knowledge accessibility, workforce optimization, and organizational leaning capacity. Within these categories are 23 related HCM practices such as hiring, training, supervisory skills, communication, and collaboration.
In general, improvements or declines in organizational performance can be tied directly to improvements or declines in HCM practices. What's more, however, when tracked and correlated, it is possible to identify which HCM factors are most closely associated with desired performance outcomes in an organization. For example, high HCM maturity scores in innovation and learning capacity may correlate to the desired outcome of employee satisfaction, but not with productivity. In that case, an organization would need to determine which of the other HCM factors drive increased productivity--also a desired outcome.
Among all the analysis, trending, and outcomes, it's important to remember that at its core, HCM is about people—most always an organization's greatest asset, and increasingly its only source of long-term competitive advantage.
An organization's strengths and weaknesses in human capital management can be scored quantitatively using a simple, 23-item maturity level assessment.
Human capital management maturity scores have been shown to directly link to a range of organizational performance outcomes including sales performance, student achievement, and stock performance.