Sample Objectives
Quality people in all positions recognizing the great value in diversity. Acquiring the most qualified applicants for each department while appreciating the different skill sets, backgrounds, and perspectives that each employee brings to the table. Having qualified employees who recognize the advantages of diversity and can work as a unified team enables employees to draw upon one another’s strengths and solidify their skill sets to benefit the organization. Based on a 0–5 point scale, one example may include an average new hire quality rating of 3.75 based on prerecruiting requirements and an average employee performance rating of 3.5 based on position performance standards. Objectives may include completing an organization audit annually, establishing succession and development plans for all critical employees, and establishing and following development plans for 70 percent of all employees.
Highly rated HR performance. One of the great untapped roles of HR is to help the organization and subordinate units establish the mission and objectives. Human capital is essential to most, if not every, company function. Human Resources works to acquire, develop, and retain the human capital at the heart of business operations.
Competitive efficiency. Providing comfortable working conditions, attractive benefits such as a 401K with employer match and/or tuition reimbursement helps organizations remain competitively efficient compared to others of the same industry and size. Maintaining their recruiting cost ratio is also a marker of competitive efficiency. For example, sample objectives may include working to ensure that compensation for 75 percent of job groups is within 5 percent of associated benchmarks and that all HR costs are within 5 percent of associated benchmarks.
Why measure? Metrics help organizations to understand and identify whether human capital is meeting corporate objectives. Using the climber example, if they didn’t keep track of how much money they spent they wouldn’t understand how important to their overall budget it is that they pack enough supplies and not rely on more expensive supply stations. Whether working to create and evaluate value for acquisition, performance, assessment, development, retention, or change management areas of human capital management, it is important to understand how company resources are being allocated.
How to measure. The reason for working to implement a framework to measure human capital is to meet objectives based on the company mission. No matter which measures you choose, they are effective only if linked to company missions and objectives. Pete Ramstead, executive vice president of strategy and finance for Personnel Decisions International in Minneapolis, says “For example, [with] cost-to-hire and time-to-fill, without any way to measure how good the candidates are that you’re hiring, you understand only efficiency, not effectiveness.”
In 1997 Ramstead and John Boudreau, director of Cornell University’s Center for Advanced HR studies, created the Human Capital Bridge Framework, “which enables companies to translate what employees do into financial capital.” Ramstead and Boudreau suggest asking the following seven questions before designing or implementing a measurement system:
What to Measure? Determining which measures apply to your company can be challenging to say the least. Once you have a blueprint, choosing the types of measurement methods is much simpler. However, each department and situation warrants a different approach. Using the measures of new hire quality, hiring manager satisfaction, and others creates a base to build upon when working to establish a system to measure human capital.
Noted academic Richard Swanson from the University of Minnesota delivered a keynote session at the 2003 Human Capital Metrics Summit, titled “Ensuring Valuable Outcomes from Human Resource Investments.” Dr. Swanson’s presentation addressed the HR Performance Challenge, Thinking Tools, and a Fast Track to Assessing Performance. His Performance Diagnosis Matrix is a classic and invaluable to effectively understanding any organization.