Human Capital Metrics

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Overview

Human Capital Metrics brings mixes the complex “human element” and the incredible world of numbers and extracts a picture of an organization’s workforce by using pertinent data. This then enables strategic decision making in best interest of both the employer and the employee. There has been a steady evolution in the area of human capital metrics with the advancement of technology; the ideas and concepts of yesterday have become measurable and tangible, arming organizations with critical knowledge.

Why Human Capital Metrics

In today’s demanding times, organizations (and especially HR professionals) are under tremendous pressure to perform with constraints of a diverse and varying nature. Resources are precious and more needs to be made from every investment - be it in people, time or money. It is vital to arrive at exact focus areas in order to cut losses and maximize gains. Questions arise: how much, how to and where to invest? The answers could be in terms of incentives and rewards, imparting specific skill training, reassigning roles, or even in restructuring the organization. The amount information and data is vast and it must be filtered and evaluated with a degree of exactness to arrive at the desired result.

Traditional HR metrics do not suffice in such a competitive environment. They need to be more integrated and must be tied to the overall objectives of the organization. It is not enough to know just: cost of hire, head count, turnover rate and so on. Data and metrics need to provide actionable insights. Organizations now seek numbers and facts which can be translated into cutting edge plans. This is precisely what human capital metrics does - helps quantify what has been traditionally thought of as hard to measure.

All it requires is a fresh perspective, a blend of hard science and willingness to turn an old notion around on its head. The biggest challenge that lies in the field of human capital metrics is the magnitude of data floating around. The key to striking rich in this vast space is picking the right data, the stuff which really matters for the specific industry. As technology becomes more advanced, software solutions are able to sift through massive amounts of data selecting only what is relevant. For instance: human capital ROI, profit per employee, HR expense factor, human capital value add and turnover rate.

What Human Capital Metrics can do for the Organization

Organizations need to build an understanding on specific, critical, areas which can help during strategic decision making - investments in people systems and programs, employee behavior, customer response and the financial performance of the company. Insight derived through metrics in these key areas not only helps to outline productivity measures and define effective reward programs but also goes a long way in helping the organization cultivate and maintain its’ talent.

Pertinent human capital metrics are also vital in foreseeing a company’s growth path and therefore predicting its work force requirements in future. This enables the formulation of recruitment and training plans. Additionally, using human capital metrics, companies can effectively engage in talent management. A happy and satisfied employee spells improved performance and productivity which in turn, is vital for customer satisfaction.

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