Most companies would never trust an IT or legal decision made without the consultation of an expert. So why do these same companies feel comfortable going it alone on human capital management?
As CEO of Creelman Research, David Creelman has contributed his extensive knowledge on human capital management to organizations, consultants and think tanks across the globe. Recently, he and I worked together on the Investor Metrics Taskforce for the Society of Human Resources Management (SHRM), helping to better illustrate human capital metrics for organizational stakeholders.
In my interview with David below, he shares more about how to overcome the human resources challenges facing organizations and what we really mean when we say human capital ROI:
1. What do you feel are the biggest changes impacting human capital management over the past five years?
David Creelman:The last five years has seen the unabated continuation of trends that began earlier. The importance of HR has gradually gained recognition and has now reached the point where some boards are paying attention. HR technology has become even more central to the role of HR. Finally, there is a slow professionalization of the function bringing more rigor to decision making.
2. In regards to the changes impacting human capital management, how well do you feel organizations are adapting?
DC: Most organizations are running quite a few years behind ‘best practice’. They may know they should integrate their systems, but have not got around to it yet. They may know the latest in learning theory, but still have old ineffective courses.
The biggest failing organizations have is that managers, in general, do not seem to recognize they need an expert HR business partner to help them with decisions around talent. They are willing to go it alone on talent decisions in a way that would seem reckless in IT or legal matters. We tend to blame HR for not being business savvy, but the blame lies equally with managers who don’t bother to talk to HR and, if HR is not savvy enough, don’t demand they get the HR business partners they need.
3. As economic factors continue to present challenges, all parts of an organization are being held responsible for ROI. How can organizations best illustrate the ROI of human capital?
DC:First, we need to be careful with the term ROI because if you studied finance it will lead you to think you need to use their pointless equation—forget the equation. What you need to do is prove that human capital investments make sense. That they are likely to produce something of value at an acceptable cost.
Numbers are involved, but it is perhaps 20% numbers, 40% logic and 40% emotion behind any decision. The other part of this is to always look for the value in what the business gets, not some HR point. HR projects should be justified in terms of better customer loyalty, fewer errors, winning ad campaigns, a productivity advantage. Just find out what your business leaders want and justify the return in how it affects that outcome.
4. What do you feel are the most common mistakes companies make when measuring or reporting on the value of human capital to investors or other stakeholders?
DC: Companies tend to report a fairly random array of feel-good information. They should instead ask what are the key ways human capital drives value creation in the organization and how can they demonstrate how strong they are in each area. Consistently focusing on the few things that matter most is what would help.
5. With investors asking more challenging questions related to human capital, how can the C-suite better work with their teams to prepare themselves for these questions?
DC: They should proactively take control of the conversation by preparing a human capital report for the board and sharing the most relevant parts with investors. This will lead to a clear minded story and a point of view on what matters.
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