Establishing and measuring people power

Australian Human Resources Magazine

A number of articles in Human Resources and other HR related magazines talk about the difficulty in measuring the ‘people contribution’ to the organisation. The model presented in the article by Dan Cook in Human Resources (Issue 102, 18 April 2006, p12), ‘Responding to the CEO: building a talent management agenda’, is a typical example where we build the model around traditional measures then try and find out how people contribute. The key is to integrate the people measures, firstly in what is needed to achieve and secondly by measuring the actual achievement.

The article referred to the “three key steps for HR”, however the “enterprise value map” did not include people in the first three value areas: revenue growth; operating margin; and asset efficiency. The only area where people management was captured was in the less defined “expectations” component of the value map.
Until we truly integrate the people assets/resources into the business management model it will be difficult for HR executives to be able to say they are earning their keep as a true contributor to the success of the organisations.

On page one of the same issue of Human Resources, the article on ‘HR admin to merge with F&A’ is great news, but hardly breaking news, as organisations have been separating the personnel administration function (include the personnel and payroll information systems) from the true HR management capabilities for many years. The redefining of the HR function is the first step if they are to move to being a true support function to the “core business” where there is a clear and definable link between what HR contributes and the success of the “core business”.

HR assets should have similar measures to some of those in the “value map”. For example, HR should be growing with the business, a job profiled today should have a higher competency profile than the same job profiled three or four years before. There are organisations that monitor this “people growth” using job design software systems that utilise outcome-based competencies.

The driving forces for development of individual competencies are: recruitment/promotion when competency gaps against the job requirements are identified (like commissioning a piece of equipment); and performance management cycles, where the degree of stretch in the contribution is identified. The performance management system is the driver for continuous improvement and therefore the competency development must keep up with this improvement (like condition and performance monitoring of a piece of equipment).

We agree with the content of the last paragraph in the article by Dan Cook: “For the HR and executives, viewing the workforce as a strategic asset, segmenting key roles and investing in customised talent strategies requires brave leadership across the entire organisation”. However, it just presents the issue and doesn’t address the solution. If we understand what capabilities are required to achieve the organisation’s strategic direction then determining the competencies required to deliver, this is no more difficult than establishing the right plant and equipment or the correct inventory levels or the required customer numbers or the level of finance. We use the term ‘competency’ frequently and often loosely, however the people capabilities required to deliver the outcomes can be expressed in outcome-based competencies giving the HR executive the necessary tools to quantitatively measure the people contribution.

Again, in the editor’s article in the previous edition of Human Resources (Issue 103, 2 May 2006, p3) “Lead versus lag indicators: Do analysts get it right?” the answer is simple. If the analysts are not using the right tools to measure the impact of the human resources it is highly unlikely that they will get it right. To get it right we must use the correct and modern tools and systems which allow us to, firstly design the job correctly and secondly, measure the individual contribution in an accurate way. Without doing this we will probably continue to know more about the capability of the office photocopier than we do about the capability we need in the people who use it. Let us start establishing and measuring the “people power” we need in our organisations upfront – not lagging behind looking for answers after the event.

Max Underhill, Director, Maxumise Consulting

30 May 2006