If HR is to become more ‘strategic’, measuring the value of staff to an organisation is a ‘no-brainer’.
But while human capital management (HCM) has been high on the HR agenda for at least two years, many organisations are struggling to get to grips with how best to do it. More than a quarter of senior HR professionals in the UK admit they conduct no HR measurement, citing confusion about how to approach it, research by Personnel Today has shown.
There was hope that new government regulations on company accounts, the Operating and Financial Reviews, would force companies to include HCM in company reports, but there was a lack of meaningful requirements on staffing in the rules.
The government was criticised for ignoring the recommendations of the Accounting for People taskforce, which said HCM should be central in company reports.
The taskforce, which cost 277,000 (Personnel Today, 31 May), was one of many attempts to measure the difference people make to an organisation, but, said HR consultant Paul Kearns, there has never been a universal set of indicators that can be applied using a common framework.
He claims his Newbury Index Rating (NIR), which is launched next week, will fill this void.
This rating is based on viewing organisations from a range of perspectives, with the sole aim of producing a measure that clearly indicates how well the organisation is managing to capitalise on the value of its people.
The NIR currently has 50 organisations that have received an initial rating based on three aspects: human capital maturity; human capital strategy that is directly influencing business strategy; and people measures.
Kearns said all organisations, whether in public or private sectors, should measure themselves against Toyota, the highest rating company in the NIR with an A+ rating in all three categories.
“Toyota has become the benchmark in the Newbury Index, because it has managed to develop a complete management methodology in which getting best value out of people is a crucial element,” he said.
A selection of the organisations as rated by the Newbury Index Rating
A: Honda, Marriott Hotels (US)
B: B&Q, Motorola, Unilever
B-: AstraZeneca, Cadbury, GSK, Pfizer
C+: RBS, Asda, Aviva, Barclays, HSBC, Lloyds TSB, O2, Orange, CStandard Life, T-Mobile
C: Local authority (typical), Microsoft, Morrisons, Sainsbury’s
C-: BAE Systems, BBC, British Airways, Daimler Chrysler, DEFRA, Ford, GM, Marks & Spencer, NHS, Police, Rolls-Royce, Royal Mail, Ryanair, Siemens, Vodafone
Questions the Newbury Index Rating asks
- Who is your dedicated HCM strategist and does that person have a full seat at board-level?
- Can you demonstrate a value-added, performance improvement from all of your employees over the past 12 months?
- Does all of your training expenditure produce an acceptable rate of return on investment?
- What methodology do you use to answer question 3?
- Does your organisation have a clearly defined and effective learning system in operation?
- What is your projected added value (in monetary terms) from HCM practices over the next three years?
- What methods do your employees use to improve the value you receive from your supply chain?
- If you use a balanced scorecard, or similar management model, do you have a discrete measurement category for ‘people’ measures? If so, provide examples.
- Do you clearly distinguish between activity, performance and added-value measures?
- What system do you have in place to capture added-value ideas from employees?
How would you rate your firm on these indicators?
How mature is the organisation as a whole from a human capital perspective?
- Got all the HR basics right
- Learning organisation understanding
- Systems thinking
- Learning systems in place
- Line manager education
- Employee education
- Employee engagement
- Psychological contract
- Consensus decision making
Is there a complete business/HCM strategy in place?
- Business strategy
- Business management model
- HCM strategy
- HR strategy
- Line of sight
- Causation v correlation
- Organisation structure
- Organisation design
- QA system
- Supply chain
How does the organisation measure its performance and the contribution of people?
- Added value concept
- Activity/performance/added value measures
- MIS integration
- People measures
- Three box system
- Return on investment
- Ideas generation