Human Capital Metrics: Most users are missing the point

The vast majority of companies collect metrics related to their human capital, but less than half actively evaluate the impact of their human capital on business performance, according to a recent study conducted by ISR, a global employee research and consulting firm. The results suggest that many organizations measuring human capital are still not using their metrics to assist in senior management performance assessments or to improve business performance.

ISR, which polled 100 senior executives, managers, and HR professionals working in a variety of industries around the world, found the following evidence of a wide gap between the active measurement of human capital and the much less pervasive use of those metrics strategically:

ï 91 percent of those surveyed have some measures related to human capital, but only 46 percent assess the impact of human capital on business performance.

ï 77 percent of those surveyed conduct an employee opinion survey, but only 47 percent use those findings as part of their human capital key performance indicators or balanced business scorecard.

ï A modest 43 percent of the respondents use human capital measures within senior executive appraisals, and an even smaller percentage ñ 30 percent ñ include human capital measures as part of the senior executive bonus system.

ìOrganizations that are not connecting their human capital measurements with business performance are missing an opportunity to create a competitive advantage, commented Patrick Kulesa, ISRís Global Research Director. ìISRís research has shown, for example, that companies with more engaged employees perform better financially than those whose employees are less engaged. Going beyond mere measurement and using human capital metrics to target HR efforts strategically can indeed improve the bottom line.î

In other results, the study found that organizations are using a broad range of human capital measures, the top five being head count, employee survey indices (engagement, commitment, satisfaction), productivity, training hours, and recruitment/selection costs. The study also collected qualitative data on why some companies are not measuring their human capital and suggestions on how companies can improve in this area. If you would like to receive a copy of the executive summary, contact Jean Fulton at ISR: 312-645-4412; jean.fulton@isrinsight.com