HR must drop the tea and sympathy if it wants credibility

Jul 05 2005 by Brian Amble Print This Article

Human Resources has for too long taken a backseat to other business-critical functions because it has no industry-standard method of demonstrating its return on investment.

But a new report from employment information provider, Croner, has called on HR to drop the "tea and sympathy image" and adopt a business-focused agenda that aligns employee and performance measurement with the strategic direction of the business to deliver tangible results, reliable metrics and a visible return on investment.

Research over the last five years commissioned by Investors in People UK (IIPUK) shows that organisational changes made by recognised employers are twice as profitable as changes made by other companies.

In the words of the first chairman of IIP: "Investment in people appreciates, whereas investment in capital depreciates."

At the heart of Human Capital Management is the need for organisations to align their own aspirations, beliefs and ambitions with those of their stakeholders.

The Croner report argues that Human Capital is a distinct and measurable business function, enabling organisations to take a strategic approach to employment policies.

Richard Donkin, author of the report, says: "Quite simply, Human Capital Management is about investing in people and the intrinsic value of employees.

"This is not about 'family friendly' HR policies. Even some of the UK's biggest companies are failing to make the connection between investing in a workforce and the end product in profits and sales. We are talking about the relationship between investment and profit, hence the term human capital."

"Too often employees have been described disingenuously as assets," Donkin continued.

"This can send the wrong signal to accountants whose balance sheet approach must register employees as costs. Employees are quite clearly costs but if they are viewed as capital that can appreciate with investment, rather than depreciate in value over time like many fixed assets, their value to an enterprise is difficult to dispute."

Donkin added that while the boardroom that remains a significant status objective, HR professionals often fail to establish a leadership role in business because they lack the tools and strategies to build one.

"Leadership has to be merited. It cannot be assumed as some God-given right", he said.