Human capital metrics

Abstract

Evidence-based management can help managers and leaders do a better job of learning and practicing their profession, and make these difficult jobs a bit less taxing and more successful. There are no simple, easy answers, but there are answers: better ways of thinking about business knowledge and more fact-based ways of understanding management practices. Jeffrey Pfeiffer and Robert I. Sutton Introduction In the previous chapters we covered the critical components of human capital strategy. Culture, leadership, organisation, and talent must all work together to execute the strategy of the firm. To help ensure that these components are generating the right results and aligned on intent, it is important to develop human capital metrics. In the last decade, increasing efforts have been made to move towards an ‘evidence-based management’ approach. Borrowing from the field of medicine, the idea is that proven approaches or practices with known results are adopted by practitioners so that managers begin to take actions based on proven practices. While there are good ideas and theories in this area, actual metrics in the field of human capital are at a nascent stage as the quantification of ‘people practices’ has been an elusive area for many companies. While the benchmarking of the human resources function has been commonplace, this generally only deals with the efficiency of the processes and general headcount ratios rather than the actual impact on business results of human capital practices in the line organisation. New approaches to more strategic views of human capital measures have started to take shape and will provide managers with valuable insight on their human capital effectiveness. As this area evolves, many practitioners look forward to a time when the human capital metrics will sit alongside the financial performance metrics as key indicators of company performance.