The
Kingsmill report wasn’t worth the wait. It flunked the central question of how
to effectively measure people
At
Toyota in the US recently, managers were shocked to get hold of the latest
employee survey. This showed that staff felt performance ratings were
irrelevant to pay and promotion prospects, while despite all the company’s talk
about the importance of training and gaining experience in different bits of
the firm, doing so did not enhance careers. Indulge the bosses’ delusions was the
collective view.
In
response, the company felt it really had to prove to its staff that performance
and training mattered. So it went back over several years’ records and
established what had happened to people who were rated highly in appraisals,
those who undertook development, and those who gained experience on
assignments. Sure enough, they were better paid and advanced quicker than
others who did not. The company could put numbers on how much better they did.
The system was doing what it was supposed to.
This
story comes from Play to Your Strengths*, a scholarly new book by four
consultants at Mercer. It strikes me as a sensibly demystifying way of looking
at the mystifying subject of human capital. HR departments should borrow some
tricks from marketing, the authors suggest. As well as finding out preferences
by asking people, marketers examine spending habits. HR should do the same with
behaviour. Modelling the statistical patterns of how workers respond to the
rules and rewards of an organisation (the book calls it ‘internal labour market
analysis’), ‘the facts’ about the impact of HR become clear, and "the
say-do trap" can be avoided.
Take
exit interviews, for instance. Pay is often the most popular reason for leaving
because it is a socially acceptable motive, whereas telling the truth can burn
bridges. Yet a company really does need to know why people leave. The solution
is to track behaviour. People may leave from a particular grade at a particular
time, in flight from a particular manager. Model how employees move through an
organisation statistically, counsels Mercer. An objective answer will emerge,
and HR efforts can be directed accordingly.
Mercer
calls this "the new science of human capital measurement", which
makes it sound a little sinister, a little ‘Taylorist’ (see box). Yet while it
may be complicated, it also makes sense in a way that most things written about
human capital do not. Human capital, the book says, is "the stock of
accumulated knowledge, skills, experience, creativity, and other relevant
workforce attributes" – in other words, the full gamut of labour services
available to an organisation. ‘Human capital management’, meanwhile, is about
quantifying the value of such attributes and managing on the basis of that
knowledge. It is, therefore, subtly distinct from HR.
That
seems clear enough. So contrast it with the definition of human capital
management used in last week’s report from the Accounting for People taskforce
headed by Denise Kingsmill. Human capital management (HCM), it says, is "a
strategic approach to people management that focuses on the issues that are
critical to an organisation’s success".
It
is hard to imagine a worse definition. What issues? What does ‘a strategic
approach’ mean? Could you not use exactly the same words to describe human
resource management? Is HCM just a repulsive new buzzword for personnel, then?
If so, I’m sure we could live without it.
From
a close reading of the Kingsmill report and related website, it soon becomes
clear that contributors – those who don’t sound too mystified, that is – are
talking about wholly different things. Some use HCM as a new label for the same
old same old. Others see it (correctly, I would say) as the attempt to measure
the value of human assets and the effectiveness of HR interventions.
Cadbury
Schweppes, for instance, waxes in the report about its commitment to diversity,
learning and careers – what most of us would call bog-standard HR. But there is
nothing about linking these policies to performance. A more recognisably
HCM-inspired approach is demonstrated by the RAC motoring organisation. The
company has produced a "People P&L" (yuck), which quantifies the
cost of turnover, retention and absence and uses them as performance indicators
across business units.
In
other case studies, employee opinion surveys form the mainstay of attempts to
measure the effectiveness of people management. There is a long pedigree of
such surveys in HR, and no-one would deny their value. But do they really
measure the effectiveness of HR programmes? Or, rather, do they simply reflect
what workers think at any given moment – the ‘say-do trap’?
The
taskforce does not have a view. In fact, once the HR world stops being so
grateful that the Government is interested in their subject, I hope they come
to see that the Kingsmill taskforce does not have a view about very much at
all. To summarise: companies should be encouraged to report something
people-related. In a few years, it hopes a consensus will emerge about which
categories of information provide the most insight. For the moment, anything
goes.
The
taskforce has thus flunked the central issue that makes Mercer’s book so
timely: how do you distinguish between an effective way to measure the impact
of people management and an ineffective way. Meekly, the Kingsmill report says
that out of all the well-known approaches – the Scandia Navigator, balanced
scorecard, HR benchmarking, etc – "none is widely regarded as providing a
complete answer". Well, that was worth the wait.
So
here is another distinction: there are taskforces that wait for a consensus and
taskforces that try to build one.
‘Taylorism’
in a nutshell
Frederick
Taylor wrote The Principles of Scientific Management in 1911. These principles
became known as ‘Taylorism’:
–
Develop a ‘science’ for every job, including rules motion, standardised work
implements, and proper working conditions
–
Carefully select workers with the right abilities for the job
–
Carefully train these workers to do the job, and give them proper incentives to
co-operate with the job science
–
Support these workers by planning their work and by smoothing the way as they
go about their jobs
However,
in reality Taylorism changed the nature of the workplace forever, introducing
hierarchical leadership, split locations for office and manual work, the
division of labour, and changing the focus of business to products and outcomes rather than the
needs of the customer.
Perhaps
one of the most insidious effects of Taylorism has been ‘office envy’ – when it
comes to offices, size seems to matter.
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"The
principal object of management should be to secure maximum prosperity for the
employer, coupled with maximum prosperity for the employee," said Taylor.
Source:
Cornell University
