Sailesh Menezes, Country Manager- Human Resources, Hewlett Packard
The genesis of any approach to Human Capital Management (HCM) in the country lies in the way an organization perceives the value attached to its employees. Is an employee considered just a ‘headcount’ or an ‘item of inventory’? If either of these is true, the organization will be pained to appreciate the true significance of a sustainable and beneficial HCM strategy.
To define an effective HCM strategy, one needs to first answer a few fundamental questions.
• Are the employees integral to the organization’s ability to deliver high quality products or services?
• Is the character of an organization defined by the combined intellect, knowledge, skill and creativity of its employees?
• Does the culture and beliefs of the organization advocate the need for the employees to learn, innovate and perform?
With services constituting a very significant percentage of the country’s GDP, the employee has become integral to the existence of the organization. In the services industry, an organization’s most critical asset is human talent, and without doubt the most complex of all its assets.
The core of any HCM strategy is an organization’s ability (through effective investment) to register gains in performance and productivity. Unlike machinery or IT systems where upgrading technology or hardware is, relatively speaking, effortless and cost-rewarded, when it comes to human talent, productivity gains come at a more significant cost, primarily on the basis of one simple assumption: an organization’s relationship with its employees is solely based on mutual benefit.
Unlike physical assets, talent is only bound to the organization for the period the employee sees value in the relationship. Hence, it is even more important to drive sustainable gains in a limited time frame and through tailor-made methodologies and interventions, to suit the different demographic groups that exist in organizations today.
Since volumes have already been written about the need to invest in human capital and the various methods of managing human capital (including the numerous ways to identify and develop talent), let me rather focus on a far more pertinent aspect of human capital – the importance of measuring the return on these investments. We are in an era characterized by scarcity of resources and an abundance of knowledge. Measuring and analyzing return on investment can improve an organization’s performance, help to identify areas for further investment and drive organizational effectiveness.
Too often we see organizations measure the return on human capital investments through archaic metrics of new hire numbers, retention rates, and number of individuals’ training days, process adherence, and HR checklists.
These, though well-meaning, measure the quality of ‘input and effort’ and help to manage compliance but rarely stand up to scrutiny in any high performing organization. On the other hand, an effective HCM strategy will strive to measure outcomes and predict business results.
To effectively measure the return on human capital investments, organizations need to measure wins through the lens of business outcomes. It’s about the ability of such investments to drive significant gains in four key ‘outcome oriented’ parameters, namely:
• Business Performance – through talent optimization and performance management
• Employee Productivity – through effective skill enhancement
• Cost Optimization – through structured retention and hiring programs
• Customer Satisfaction – through an engaged, quality-conscious workforce
Understanding how HR parameters drive key business results is essential to the success of any human capital intervention. Intuitive HR analytics will aid in developing this critical link between the investment and the outcomes and is very often an underutilized tool in the repertoire of the organization.
Let’s not forget that HCM requires a significant amount of leadership commitment and ownership, and that meaningful outcomes are a result of sustained investment over a time horizon. In most ‘people-centric businesses’, HCM is no longer the prerogative of just the human resources function, but rather integral to every people manager role. There is no denying that every dollar investment in human capital plays a pivotal role in driving meaningful business outcomes.