Don't rely on myth and anecdote when measuring human capital

Apr 08 2005 by Nic Paton Print This Article

Employers need to measure properly how workers contribute to a business, not rely on myth or anecdote if managers want to make the right decisions in the future, a new guide has suggested.

Measuring the contribution employees make to a business significantly improves management decision-making, the guide by the Chartered Institute of Personnel and Development and Mercer Human Resource Consulting has argued.

When major business decisions fail to deliver the expected results, for example when making a take-over or restructuring a business, it is often because of poor people management.

This is not because directors and managers are blind to the importance of people factors, but because businesses find the value and contribution of their people hard to identify, measure and record.

Without this knowledge it is harder to make effective management decisions, it said.

The guide to human capital reporting, by the CIPD and Mercer Human Resource Consulting, is designed to provide practical support for organisations to help measure and increase the value of their human capital.

HR professionals need to work in partnership with other senior managers and line managers to build robust systems for internal reporting on human capital (a pre-requisite to external reporting), it argued.

Organisations such as Royal Bank of Scotland, Nationwide, Asda and the RAC are used as case studies of best practice.

Angela Baron, CIPD adviser on organisation and resourcing, said: “People can add real value to your organisation, but tapping this value requires measurement and management.

“Too many organisations rely on anecdote and mythology to develop and adjust their people management strategies.

“In a fast-paced, knowledge-driven economy this will not deliver success. Competitive advantage and the highest standards of service and performance will be achieved by those businesses that have a genuine understanding of their people, are able to tap into their collective assets and motivate them to apply their abilities in the interest of the business,” she added.

Jim Matthewman, guide author and Mercer partner, added: “Managers equipped with information that helps them to understand what motivates people to perform well will be able to manage their employees more effectively.

“The ability to communicate the contribution and value of people to key stakeholders is critical to understanding the true worth of an organisation.”