"Owning intellectual property is like owning land: You need to keep investing in it again and again to get a payoff; you can't simply sit back and collect rent."
- Ester Dyson
Human Capital "is the sum total of individual intelligence built on the acquisition of skills, training, and educational experience over a lifetime. It's the application of this human knowledge to the workplace that creates value," says Ed Gordon in a best practices article in Business: The Ultimate Resource
During the early 1990s U.S. business increased investment in human capital by increasing expenditure on training and development 37 percent to $62.5 billion. From 2000 as all capital investment declined, so did human capital investment (18 percent by 2005).
The consequences of this decline in attention to human capital are due to be magnified by the looming retirements of members of the baby-boomer generation. Beginning in 2008 demographic decline will slow U.S. workforce growth to near zero for the next 25 years. Unfortunately, there are also fewer people with the right skills to replace them.
Aligning Business Drivers
In the past too many organizations have wasted precious financial and human capital resources by improperly aligning their three primary business drivers: management systems, information technology (IT), and people performance development. Imperial's Human Capital Scoreboard (HCS) helps organizations gain a new understanding of the delicate synergies that exist among these three very different activities by raising the following issues:
- How good is your leadership and how well has it structured the organization?
- How well is IT supporting the organization?
- What "learnable aspects" of people performance development (skills, training, education) can be "dollarized" for measurement?
People Development - Management and Measurement
The Human Capital Scoreboard was first introduced by Ed Gordon in Skill Wars, Winning the Battle for Productivity and Profit (Butterworth - Heinemann, 2000)
The Human Capital ScoreboardTM (HCS) is a seven-piece tool kit (See Figure) of analysis, coaching, and software to help you import the "3P's" of performance, productivity, and profit. The HCS features:
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- Realigning management systems and technologies to maximize productivity (Productivity Management Process)
- Benchmarking the capabilities of your human capital against the competition (Management Performance Matrix)
- Establishing policy, practice, and profit performance standards (Knowledge Profit Model, Workforce Triad, Development Maps I and 11)
- Measuring human capital return-on-investment (ROI Nine-Step Worksheet Software)
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Benchmarking with the Managed Performance Matrix
"This is where the business case for the Sixth Discipline can be made," says Gordon. "Companies that empower their workers and invest in their education will create greater competitive advantage and sustain it longer that organizations that fail to invest in their long-term training needs at all levels of their business."
The Managed Performance MatrixTM provides a simplified overview of work force assessment and measurement. It benchmarks an organization's current human capital capabilities into four quadrants: Master, Apprentice, Novice, and Plugger.
Employees are assessed in the vital job areas of their personal performance, systems, and skill abilities. Based on this information, organizations can benchmark their own employees against their industry's knowledge standards.
By using the Managed Performance Matrix, senior managers can get an immediate snapshot of their present human-capital strengths and weaknesses. They can then monitor the ongoing improvement of their employees as more individuals move up the knowledge continuum moving from one matrix quadrant to another quadrant.
Knowledge and the ROI Worksheet
The Human Capital Equation (see Figure) is based on Benjamin Franklin's maxim that, "investing in knowledge always yields the best interest," the Knowledge Profit Model is a component of the Human Capital Scoreboard that gives managers a new sense of control by being able to understand people performance development like any other part of the business. First, you consider potential projects; second, the alternative ways that they can be delivered; third, the profit ratios for each alternative; and fourth, the choice is made based on the best return to the organization's bottom line.
HIGH-TECH WORKPLACE
Fewer complex machines doing more work
For the amount produced and level of quality |
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HIGHLY EDUCATED WORKERS
More Productive Workers
For the amount produced and level of quality
Lower fixed labor costs at comparable world productivity cost levels |
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Increased
People
Productivity |
+ |
Increased
Profit |
The ROI Nine-Step Worksheet is a file for Excel available free of charge that makes it easy to perform the ROI calculations once all the necessary data has been obtained. It allows companies to estimate accurately the monetary returns both before and after most skill, training, or education programs. The ROI software offers a far more credible and accurate measurement of training's effect on business productivity because its calculations are based on both the organization's operational data and currently accepted spreadsheet analysis standards. To see more information on the ROI Worksheet and to download it, click on ROI Worksheet
Imperial Consulting Corporation has developed a coaching program to help organizations successfully roll out the Scoreboard. As a first step an Executive Briefing on Imperial's Human Capital Scoreboard can be presented at your organization.
To find out more about these performance/productivity programs, click on Contact Us
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