A typical executive team has a high degree of awareness and consensus around the financial strategy, as well as the priorities for operational process improvement. They typically have fewer consensuses around customer strategies but the worst grades are reserved for the understanding of strategies for developing human capital. There was little consensus, little creativity but fortunately, the situation has been undergoing a change for the past couple of years.
The greatest concern here is that, in the new economy, human capital is the foundation of value creation (Various studies show that up to 85% of the corporation’s value is based on intangible assets.) This presents an interesting dilemma: The asset that is most important is the least understood, least prone to measurement and hence, least prone to management. In an economy where value creation is dominated by human capital and other intangible assets, there can be no better starting point than with the measurement and quantification of human resource strategies.
As HR professionals respond to the challenge of being strategic partners, measuring HR’s performance and its contribution to the firm’s performance consistently emerged as a key theme. This comes as no surprise as the last decade has been highlighted by an ever-increasing appreciation for the value of intangible assets and the associated trends towards strategic performance measurement systems.
Investors now look beyond the financial numbers to determine the value of the firm. They have started to look at intangibles that predict future results. They don’t just want financial results today, but confidence in future results. Intangibles such as quality of leadership, speed of response, ability to innovate, organization’s culture, social capital, and intellectual capital have become an increasingly central part of a firm’s total shareholder value proposition. The drivers of new business will inevitably shift the focus to HR wherein HR practices of staffing, training, skills audit, ability and personality assessment, performance management systems, remuneration and incentives design are aligned around building organizational capability.
To integrate HR into business-performance measurement system, managers must identify the point of intersection between HR and the organization’s strategy implementation plan. These points which are the outcomes of the HR architecture that serve to execute the firm’s strategy are the strategic HR deliverables. These HR deliverables need to be measured and quantified to be able to deliver value to the customers and stakeholders.
The greatest concern here is that, in the new economy, human capital is the foundation of value creation (Various studies show that up to 85% of the corporation’s value is based on intangible assets.) This presents an interesting dilemma: The asset that is most important is the least understood, least prone to measurement and hence, least prone to management. In an economy where value creation is dominated by human capital and other intangible assets, there can be no better starting point than with the measurement and quantification of human resource strategies.
As HR professionals respond to the challenge of being strategic partners, measuring HR’s performance and its contribution to the firm’s performance consistently emerged as a key theme. This comes as no surprise as the last decade has been highlighted by an ever-increasing appreciation for the value of intangible assets and the associated trends towards strategic performance measurement systems.
Investors now look beyond the financial numbers to determine the value of the firm. They have started to look at intangibles that predict future results. They don’t just want financial results today, but confidence in future results. Intangibles such as quality of leadership, speed of response, ability to innovate, organization’s culture, social capital, and intellectual capital have become an increasingly central part of a firm’s total shareholder value proposition. The drivers of new business will inevitably shift the focus to HR wherein HR practices of staffing, training, skills audit, ability and personality assessment, performance management systems, remuneration and incentives design are aligned around building organizational capability.
To integrate HR into business-performance measurement system, managers must identify the point of intersection between HR and the organization’s strategy implementation plan. These points which are the outcomes of the HR architecture that serve to execute the firm’s strategy are the strategic HR deliverables. These HR deliverables need to be measured and quantified to be able to deliver value to the customers and stakeholders.
Contemplated & Written by: Smiti Saha, MHROD (Batch of 2008), Delhi School of Economics, Delhi UniversityAnirudh Kaushik, Faculty of
Management Studies (Batch of 2009), Delhi University
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