‘Maximising your return on people’ by Laurie Bassi and Daniel McMurrer, Harvard Business Review, back issue, originally published March 2007

There is nothing of much interest to learning professionals in the latest HBR but the website is now re-offering back issues of key articles and this one stood out as of being of interest and relevance. Interestingly they are also recycling Kaplan and Norton’s original 1993 article on the Balanced Scorecard, which is strongly related to the key theme here – how do you measure the success of HR activities?

‘People are our biggest asset’ and ‘we need to measure our return on people’ have become the leading cliché and holy grail of management thinking in recent years. This article starts by restating the cliché but then goes some way towards the holy grail.

The authors – have you noticed how Harvard articles are hardly ever written by just one person? – have introduced their own ‘TLA’ to describe their work – HCM or Human Capital Management. I recall that similar concepts were being developed in the 1970s when I first entered management education and the objective was the same – to find a meaningful and quantitative way of measuring performance around management of people. Bassi and McMurrer claim to have found the answer via a framework for measurement involving five key categories that are determinants of organizational performance – Leadership Practices, Employee Engagement, Knowledge Accessibility, Workforce Optimisation and – thankfully included last but not least – Learning Capacity.

Within each of these categories there are between four and five sub-headings; for example for Learning Capacity these are Innovation, Training, Development, Value and Systems. The evaluation is carried out by a simple 1 to 5 scoring system related to a specific statement of success, eg for Training, ‘Training is practical and supports organisational goals’.

Though this is interesting and potentially useful, it is clear that it falls well short of the ultimate holy grail of measuring the return on people investment. The authors do however claim to have improved the HR performance of 42 organisations using this approach, though one assumes that this would be measured by their own indicators, an interestingly circular and self serving evaluation process. Their claim is that by monitoring period by period trends and by benchmarking against other similar businesses, this process fills the common void of quantitative accountability within the HR function. What is not mentioned is the potential cost of setting up and running the process.

Nevertheless, this is a useful article for the HR practitioner. If you are just interested the Executive Summary will do; if you are thinking a applying it, I suggest the full article.

PS
An interesting postscript. The article states that previous research could find only one traditional HR metric that predicted organisational performance – training expenditure per employee. It is surprising that this does not seem to feature in this latest research, perhaps because it is too simple?



To access this article go to http://hbr.harvardbusiness.org/2007/03/maximizing-your-return-on-people/ar/1