Manage People as Assets, Not Costs

The best path to profitability in a global economy is not technology but effective management of an organization’s human resources, according to Laurie Bassi and Daniel McMurrer, authors of “Maximizing Your Return on People” in the March issue of the Harvard Business Review. The authors contend that investments in human capital management (HCM) can be directly linked to organizational performance, and they have developed a survey tool to measure an organization’s HCM effectiveness.

A set of rigorous surveys were designed to probe 23 practices that fall into a set of five core HCM drivers: leadership practices, employee engagement, knowledge accessibility, workforce optimization, and organizational learning capacity. If administered over time, the surveys can measure progress or regression in each practice and provide guidance for where an organization should focus improvement efforts. The authors report using the surveys with 42 organizations during the past five years, and discovered that the specific HCM practices that can have the greatest effect can both vary from organization to organization as well as change over time.

The authors used the survey tool to analyze HCM effectiveness in a diverse group of organizations, including a school district, a manufacturing company, and a dozen financial services organizations, in each case correlating scores to performance outcomes ranging from sales productivity and safety to student and stock performance.

Self assessment using the HCM survey tool requires three steps:

1. Employees and managers are surveyed to quantify HCM maturity across functions and job categories.

2. Variations in HCM scores are then linked to variations in performance indicators, both financial and non-financial.

3. The results from steps one and two are used to identify the HCM practices that drive the performance of the organization and those that represent organizational weaknesses. Organizations can use this information to focus further HCM initiatives.