2011
New report on board of directors and HR
A new report by David Creelman and Andrew Lambert is the first that I have seen on boards of directors’ evolving role on the people side of the business.
It places “a spotlight on how boards are now addressing their responsibilities for oversight of human capital; how they themselves are changing their own behavior; and what part the senior ‘people professionals’ are now playing in facilitating boards in both of these dimensions.”
It’s an encouraging read – one that I commend to you.
2011
Human capital and Form 10-K
I have been appointed as the workgroup lead on a SHRM/ANSI taskforce that is charged with developing American National Standards for improving reporting about human capital on Form 10-K (the annual report that all publicly traded firms in the U.S. must file with the U.S. Securities and Exchange Commission).
This workgroup is a part of a larger effort that SHRM has launched to create standards for the HR profession. When the standard has been established, we intend to submit this document to the Financial Accounting Standards Board (FASB) for consideration.
This is, for me, a very exciting development since I have long advocated for improved reporting on human capital. It would have important implications for the HR profession and, perhaps more fundamentally, has the potential to change how people are managed and developed.
The group’s work will be guided by the following questions:
- What does the existing knowledge/research base tell us?
- What can we learn from other groups working on this?
- How do we make the standards stick by understanding the perspective of the parties that will be impacted?
- What specific human capital information should be included in Form 10-K?
If you have perspectives or advice that you would like to share on any of these questions, I’d be delighted to hear from you. Please feel free to post a response or to contact me directly.
2010
HC analytics – poll results
The results from our mini-poll are now in! (First, it should be noted that the poll was highly unscientific, open to anyone who chose to participate.) We received a total of 65 responses, predominantly from individuals in for-profit organizations of medium to large size.
Asked about organizational areas of focus where respondents thought that HC analytics could have a positive effect, three areas were each selected by over 85 percent of respondents: employee engagement/ commitment, employee retention, and leadership effectiveness. All other possible choices (including sales, quality, diversity, and safety) were each selected by fewer than half of respondents. When asked which of these areas represented the single highest current priority for improvement, 41 percent chose leadership effectiveness.
In almost half of all responding organizations (43 percent), the CEO makes decisions about spending on HC analytics. Interestingly, respondents reported budgets for HC analytics are generally quite tight. Many reported their budgets were zero, minimal or unknown. Among the respondents who reported budget levels, the average budget is $6.90 per organizational employee. Finally, many respondents (44 percent) indicated they’d look first to a firm with a specialty in analytics for outside assistance in this area.
So what do we take away from all this? First, it’s clear that most respondents are still thinking about HC analytics in “traditional” areas – leadership effectiveness, employee engagement/commitment, retention. Only a minority have begun to extend their thinking to incorporate HC analytics into assessing key organizational outcomes like sales and quality.
We were also intrigued by the low analytics budgets for most respondents. It appears that the dollars may not yet have caught up to the talk – people are more interested in HC analytics, but only a vanguard of organizations have truly committed monetary resources to following through on that interest. We’d expect that those on the cutting edge in this area will begin to develop a competitive advantage over their peers whose commitment is more lagging.
Full results from the mini-poll are available here.
2010
The New HR Analytics
Jac Fitz-enz deserves congratulations on the publication of his most recent book, The New HR Analytics. He notes in the preface that, “This book has been twenty-five years in the making,” and that “We are on the threshold of the most exciting and promising phase of the evolution of human resources and human capital management. We’ve gone from the horse and buggy to the automobile to the airplane. Now it’s time to mount the rocket and head for the stratosphere.”
I hope (and expect) that Jac is right. Business intelligence tools are ever so slowly making their way into the people side of the business—and it’s about time. Jac’s newest book helps move the ball forward, and for that, he has my thanks!
2010
What are the true costs of employee absence?
It is well known that unplanned employee absences cost employers money through lost productivity, among many other factors. What is less well known, and the subject of a recent Business Wire article, is exactly how much it costs. According to a survey done by Mercer (on behalf of Kronos Inc.), 8.7% of payroll is lost to these absences. To put this figure into perspective, that’s well over half the cost of the average payroll related health care expenditure. More specifically the net daily loss of productivity is 19% for unplanned absences (versus 13% for planned absences).
This analysis points to two important conclusions. First, is the importance of “human capital analytics”—using data to shed light on a real business problem. Second, is the importance of effectively addressing this cost/productivity problem through improved human capital management.
2010
HR told to prove its worth
With significant public sector budget cuts on the way in the United Kingdom (and elsewhere, of course), HR directors are assessing what they need to do to preserve their jobs.
According to senior HR leaders quoted in a new article in the UK’s HR Magazine, what HR personnel need to do is “give the business good, pragmatic, common-sense solutions…the future of HR is about realising how what you do can affect the organisation’s finished product.”
As we’ve mentioned once or twice previously, one of the most important things that HR professionals can do is focus on adding value to the organization by determining what people-related factors are the most important in improving organizational performance.
While McBassi provides such services to our clients, we also provide free documents on how to begin doing this yourself (go here and download “A Guide to Using Your Human Capital Data to Improve Business Results.”)
2010
Guide to people metrics
Looking for a user-friendly, insightful guide to possible people metrics for your business?
The government of Victoria (Australia) has come out with two new (free) documents that should be enormously helpful to many in the human capital field: A Guide to People Metrics and its companion, A Dictionary of People Metrics.
Both are well-worth checking out.
(Thanks to Les Pickett for calling those to our attention!)
2010
Human capital management predicts stock prices
In 2001 and 2003, under the auspices of our sister company (Bassi Investments, a registered investment advisory firm), we launched two different investment portfolios. The investment strategy for these portfolios rests on our research finding that firms making significant investments in formal learning and development for their employees subsequently outperform the market. In the table below, these are portfolios A and B.
In 2008, we launched four additional portfolios, based on broader concepts of human capital management, which we refer to as Portfolios C to F. We use a variety of selection criteria for these four newer portfolios, including evidence of being a “good employer” and an unusual degree of commitment to talent management systems.
The performance of these six portfolios, relative to the S&P 500, is summarized in Table 1. Overall, the average (weighted) performance of these portfolios relative to the S&P 500 is +4.7 percent per year. Additional information is available in our issue brief on this topic. It is important to note that with the exception of Portfolios A and B, the track record of these portfolios is relatively short. And, of course, past performance is never a guarantee of future returns.
Having said that, the results support the conclusion that human capital management is fast emerging as an essential core competence (possibly the essential core competence) for organizations. Interestingly, although the firms we hold in our portfolios are among the world’s leaders in human capital management, our analysis indicates that even these companies, on average, are still relatively unskilled at measuring and optimizing their investments in human capital. So there’s still room for improvement – and still time for other organizations to catch up.
NOTE: Reported portfolio performances do not include fees or expenses and are based on tracking statistics provided by account custodian. S&P 500 does not include dividends. Contact Bassi Investments for additional information.
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2010
Seven inexpensive ways to foster innovation
As the economy continues to show early signs of recovery, innovation has become the mantra of many CEOs. And rightfully so – it is abundantly clear that the future will not be a linear extrapolation of the past. A convergence of powerful forces has created a fundamental turning point in the economy. Smart innovation is the key to our future prosperity, both as individuals and as organizations.
But where does innovation come from? And how do you create the circumstances that foster it, increasing the odds it will occur? Innovation can’t be decreed. Although sometimes it happens by chance, more often it occurs because the conditions are right.
In our analysis of hundreds of organizations, and hundreds of millions of bits of data over the past two decades, we have identified seven simple, inexpensive actions that foster innovation (and drive business results as well):
- Seek and use input from employees, including when you’re making hiring decisions
- Improve communications to reduce unnecessary worry about job security
- Foster open, explicit, and frequent discussion about how to improve the value you create for your customers
- Creatively seek to make jobs fit employees’ needs when possible
- Focus on improving broken processes, especially when they can be addressed inexpensively
- Help employees get access to inexpensive online resources that will enable them to learn new skills
- Support low-tech methods (e.g., brown bag lunches – you buy the cookies!) for fostering the flow of information between departments
None of this is rocket science. While it doesn’t require much money, it does require focus and intentionality. This, in turn, requires that leaders muster a commitment to look beyond the urgent issue of the day (or the quarter) and focus on what’s important for the long run. Maybe that’s why these common sense approaches are so rare.
(This post was also sent to our email newsletter subscribers earlier this month. Click here if you’d like to subscribe.)
2010
The Achilles heel of the HR profession…
…is measurement.
There are a variety of reasons why this is so. HR folks are often not “numbers people.” Analytic skills are in short supply in most HR departments. Good data to evaluate HR programs and initiatives can be hard to come be, and the impacts are often ubiquitous and hard to pin down.
But perhaps the most fundamental problem is that all too often HR folks are doing measurement and evaluation for the wrong reason – they are doing it to “prove their worth” and/or to justify budgets. This motivation immediately undermines the credibility of the findings and implications – even before they are produced.
The right reason to undertake HR measurement/evaluation is to provide actionable insight for continuously improving organizational performance. I’ve spoken to many HR professionals who are moving in this direction.
It is impossible to overstate the significance of this shift in mindset. When they make it, HR professionals find that their world changes (for the better).