Lending weight to people Measurement

It is now more crucial than ever before that in-house development professionals
can account for skills and competencies. Alison Thomas explains why 

Do you believe that people are a company’s greatest asset? Of course you do,
and your board probably agrees. But how does this translate into action?
"Most organisations pay lip service to the idea, yet few measure it or
manage people in a way that allows them to give of their best," says
Denise Kingsmill, chair of the DTI’s Accounting for People Task Force.

Its aim is to come up with a framework which will help firms to give
investors and other stakeholders an accurate picture of their human capital
management, and hence their potential for sustainable growth. Since May, the
group has been gathering the views of interested parties, including readers of
our sister magazine Personnel Today. Now the time has come to draw conclusions
and the task force will report to Patricia Hewitt in the autumn.

So what sort of measures is it likely to recommend and where does training
and development fit in?

The consultation document identifies motivation, commitment, knowledge and
skills as key drivers of superior business performance and suggests a range of
indicators such as recruitment, retention, diversity, fair employment and
remuneration. Training and development also features, including the match
between skills acquired and business objectives.

"Our workforce is very underskilled compared to our major European
competitors so training is extremely important. It is vital that companies
spend more time identifying and filling the gaps," says Kingsmill.

Standard metrics

Human capital may be too valuable to be ignored any longer, but defining the
specifics is not easy. "We strongly support the substance of the
initiative. What gets measured happens," says Margaret Murray, head of learning
and skills at the CBI. "However, there is such diversity of practice, we
don’t believe standard metrics are feasible and are urging the task force to go
down the road of voluntary qualitative reporting."

Sharon Copland-Jones, personnel director of Shepherd Construction, agrees.
"It will raise the agenda and that has to be good," she says.
"But what should we measure? Is stability relevant to success, for
example? It is in our industry, but that’s not true for everyone. We must also
beware of churning out figures. Measuring is not an end in itself, it is a
means of making other decisions."

Linda Holbeche, director of research, Roffey Park, is even more ambivalent.
"This is a positive way of putting the pressure on directors and managers
at all levels to sit up and pay attention, so the principle is sound," she
says. "In practice, I am not quite sure how we arrive at something that
will command wide acceptance. Most theorists suggest it is virtually impossible
to isolate any individual human resource practice such as training, except
where it’s crystal clear that employees embark on a programme with no skill and
emerge proficient. What interests city analysts are the broader issues, like
the calibre of leadership, innovation, intellectual capital and succession
plans. These are much more difficult to evaluate and very context

The task force is fully aware of these concerns. "Lots of people have
told us they would like reporting to be mandatory but to have a relatively
blank canvas," says Kingsmill. "We have to tread a careful line
between some sort of tick-box approach – which I think would be disastrous –
and producing a bland model. So we are not going to be prescriptive, but will
try to come up with some best practice guidelines."

One fear she would like to allay is that this could end up as a
bureaucratic, number-crunching exercise. Instead she wants to encourage
companies to set metrics in context, explaining what lies behind them and what
action is being taken.

It is not enough to report on training expenditure or hours of training per
employee, for example, what really matters is how organisations define the
skills and competencies necessary for success and how they identify their
capability within these.

"They must ask themselves, ‘What do we need? Do we have it and if so,
where? What do we have to do to align these capabilities with the corporate
objectives of the organisation?’ It requires real strategic understanding of
the contribution training makes. Not just inputs or even outputs, but
outcomes," says Hibachi.

One firm which uses training as the driver for business is Telford-based
office supplies company, Lyreco. "In our market everyone has big
warehouses and powerful software. We even buy the same products from the same
suppliers, so our only unique selling point is our people," explains
training and development director Ian Lawson.

Lyreco makes every effort to improve skills and effectiveness and to ensure
employees are well cared for, as without commitment they will not put their
training to good use. Lawson also encourages his team to see themselves as
business consultants who analyse business problems and identify how training
and development can make a difference.

Interventions are measured against objectives such as productivity,
reduction in accidents and absenteeism with some remarkable results. Lawson is
also a great believer in the power of competition to focus the mind and the
company has several people development awards to its credit.

Evaluation skills

National Training Awards, Investors in People, return on investment –
training departments have ample opportunity to hone their evaluation skills.
Will this experience help them to make a meaningful contribution to external

Angela Baron, adviser on organisation and resourcing at the Chartered
Institute of Personnel and Development (CIPD), hopes that it will. "A lot
of excellent work has been done to demonstrate the value of training and the
payback. In relation to other areas, it is fairly mature and we naturally
wanted to include it in our own framework," she says.

This is a reference to Human Capital: External Reporting Framework, which
the CIPD published last month. Based on research published last November, it
proposes five core categories for measurement, including learning and
development, backed up by indicators such as spend on workplace learning and
competency levels. Baron is keen to stress that there is no single formula that
can apply in all circumstances, citing training as an illustration.

"Companies in highly specialised, fast-changing fields such as IT are
likely to invest heavily in off-the-job training," she says. "In
other sectors, the strategy might revolve around workplace learning, the
coaching and mentoring skills of managers, personal development plans and
promotion opportunities." Baron also points to the problem of multiple
interpretations. Coming up with measures is only the beginning and you need
considerable expertise to interpret them so as to give a true and balanced picture
of the organisation, she says.

One question raised by the Accounting for People Task Force is the
desirability of incorporating of reports on human capital management into the
Combined Code on Corporate Governance and/or Operating and Financial Reviews
(OFRs). There is no suggestion that such reports should be compulsory, however,
and it is hoped that as more businesses adopt the practice, measurement will
become increasingly sophisticated.

Murray approves of this evolutionary approach. "It shouldn’t happen
overnight. It should be driven by the market," she says.

Baron agrees. "I think there is going to be quite a lengthy period of
development as companies start reporting on their human capital and come to
realise the benefits," she says. The revolution may not be for tomorrow,
but one thing is sure – for the first time ever, HR and training are at the top
of the agenda. "It’s an exciting time," says Baron. "We now have
recognition that people create value but it’s up to us to grasp the opportunities,
to be at the forefront of providing, evaluating and interpreting the

Lawson is equally enthusiastic. "It may not be easy, but you’ve got to
be positive," he says. "If apartheid can end and the Berlin Wall can
come down, surely we can get a measurement system in place."

The task force brief

– Look at the performance measures
currently used to assess investment in human capital

– Consider best practice in human capital reporting, and the
performance measures that are most helpful in reports to stakeholders

– Establish and champion the business case for producing such

– Produce a final advisory report

B&Q reaps rewards of people

If proof were needed that measuring
human capital management brings rewards, look no further than B&Q. Since
2000, it has evaluated staff engagement using Q12 and correlated scores with
customer feedback and metrics such as staff turnover, shrinkage and
contribution to profit.

The results prove conclusively that rising engagement has a
direct effect on key business indicators. "It has given the board
confidence that investing in people has bottom line impact," says personnel
director Mike Cutt

"For the last two years it has agreed to a 60 per cent
increase in the training budget, which is enormous, especially for a big mature
business such as ours.

The human capital management project was not the only factor to
persuade them, but it certainly put them in a positive frame of mind."

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