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Stephanie L. Rigsby
slr@jenkinsfenstermaker.com
Human Capital Management:
Your Plan for the Future
If you’re like most business and HR managers, you spend some of your time and energy on these issues:
- Whether or not you can afford to invest in training and development initiatives
- How to keep benefit costs, especially health insurance, from consuming more of your net income while keeping your employees at least satisfied with their benefits package
- What you can do to find, hire and keep A-level talent
Several surveys report these items are on the minds of business and HR managers across our region as well as at the national level. In the midst of the challenges of day-to-day operations management, the competitive environment and a sagging economic climate, many managers simply fall back on hope as their plan. However, recent research suggests that investing time and money on HR initiatives isn’t just a good thing to do. Organizations which target those investments financially outperform those that don’t.
Laurie Bassi and Daniel McMurrer have assessed organizational maturity in five core areas (leadership practices, workforce optimization, knowledge accessibility, learning capacity and employee engagement) and correlated that maturity to financial performance on publicly traded companies. Some examples of their research findings:
- Financial institutions with a low human capital management (HCM) maturity index lost 10% in average stock return, while those with a high HCM maturity index posted gains in excess of 10%.
- Organizations with a mature HCM index had significantly fewer lost workdays due to on the job accidents.
- Sales offices with a mature HCM index had elevated performance and productivity.
These correlations were later validated with private organizations and a school system, where the higher HCM score correlated with higher student achievement as measured by math scores.
How do these core areas translate into financial results?
- Ineffective leadership practices relate to motivation and retention.
- Poor workforce optimization leads to process inefficiencies and higher costs.
- Difficulties with knowledge accessibility affect getting work completed timely and effectively.
- Low learning capacity leaves staff poorly equipped to respond to constantly changing conditions.
- Weak employee engagement results in employees unlikely to contribute their best efforts, ultimately leading to problems in client satisfaction and loyalty.
Bassi feels that globalization, rapid technology advances, democratization, and the age structure of the work force have left “only one true path to profitability for firms operating in high-wage, developed nations: to base their competitive strategy on exceptional human capital management.”1 So, now that you know why it’s important to invest in HCM, how can you find the resources needed for this investment?
Assess Where You Are: It’s best to know where you are before you start on a journey of any kind, and taking your organization’s HCM to a new place is no different. In Bassi and McMurrer’s Harvard Business Review article, “Maximizing Your Return on People”, they provide a brief survey as a beginning exercise in assessing your organization or business unit’s HCM. This can give you a starting point for what you’re doing well and what needs some attention.
Potential Sources:
Recruiting/Hiring – Put on your creative thinking cap when you need to hire new employees. We have used non-traditional advertising, group interviews and behavioral interview questions very successfully in our last efforts to fill positions. You may need an outsider’s perspective (a consultant) to review your hiring needs and provide alternative ways to fill them. This one-time investment can pay HUGE dividends!
Training – Your tax dollars are hard at work here. Government resources are out there. Investigate some of these possibilities:
While these resources can help you invest in your staff, you may need to invest in training and development for your managers and supervisors. A friend of mine is fond of saying, “There are no outstanding programs; there are only outstanding people in charge of programs.” Your managers and supervisors provide the linkage between your organization’s leaders and the work force that serve your clients or make your products. If they aren’t on board with why HCM is important and/or don’t have the people skills to effectively cultivate the necessary relationships, you won’t get very far in your journey. Consider using upward reviews or 360 degree evaluations of your management personnel.
Benefits – Participate in various surveys to see how your benefits package compares to other organizations in your industry as well as within your geographical region. These give you a blueprint for where you might need to allocate your benefits spending in different ways. You can also develop a communication strategy to illuminate areas where you shine.
If you think your organization is too small to offer a broad array of benefits, you might want to investigate professional employer organizations. These companies provide co-employment for your current employees, which allow the offering of a multitude of benefits at larger group rates. You can look for a PEO company in your area at the National Association of Professional Employer Organizations’ web site, www.napeo.org.
It’s Your Move: I hope you’ll take some time to contemplate your organization’s HCM. If you do, I bet you’ll see the linkages between the five core areas and your financial performance. Once you do, it’s pretty easy to make a business case for investing time and money in what is truly your most important resource.
If you’d like to discuss any of the ideas here, or have any comments, please give me a call at 304.523.2100.
1Bassi, Laurie and McMurrer, Daniel. “Maximizing Your Return on People.” Harvard Business Review March 2007: 9 (of reprint).
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