HR Strategy Best Practice

Using Human Capital Management

to Discover & Invest in the Value &

Impact of People in Your Workplace

Lizabeth Kleintop, Ph.D.Associate Dean of Business and

Management Programs

Comenius Center for Continuing and Graduate Studies

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Fourthly, of the acquired and useful abilities of all the inhabitants or

members of the society. The acquisition of such talents, by the maintenance

of the acquirer during his education, study, or apprenticeship, always costs

a real expense, which is a capital fixed and realized, as it were, in his person.

Those talents, as they make a part of his fortune, so do they likewise that of

the society to which he belongs. The improved dexterity of a workman may

be considered in the same light as a machine or instrument of trade which

facilitates and abridges labor, and which, though it costs a certain expense,

repays that expense with a profit.

Adam Smith (1723-1790)

Smith, Adam: An Inquiry into the Nature And Causes of the Wealth of

Nations Book 2 – Of the Nature, Accumulation, and Employment of Stock;

Published 1776

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Top 30 Global Company Key Performance

Metric Comparison (1995-2005)

Higgins, J. (2011). Human capital financial statements. Marina Del Rey, CA: Human Capital Management Institute, p. 3.

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Roadmap

• Define human capital

management (HCM)

• HCM and current HR

practices

• HCM and metrics

• HCM & the financial

statements

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Elements of Intellectual Capital• Social capital

• Organizational capital

• Human capital

http://cdn.theatlantic.com/static/mt/assets/business/educationcollegewagesunemployment.png6

Human CapitalKnowledge, skills, and

abilities of people working in

an organization

– Intelligence

– Skills

– Expertise

Bring to bear using

– Education

– Change Skills

– Innovation

– Creativity

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Assumptions of Human Capital

1. People are assets to the organization

2. Investments by organizations in people

generates returns

• Human capital constitutes a key element of

the market value of a company

• People add value in organizations

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HC

M A

ND

HR

PR

AC

TIC

ES

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Key Questions Raised by HCM

• What are the key performance drivers that create value?

• What skills do we have?

• What skills do we need now and in the future to meet our strategic aims?

• How are we going to attract, develop and retain these skills?

• How can we develop a culture and environment in which organizational and individual learning takes place that meets both our needs and the needs of our employees?

• How can we provide for both the explicit and tacit knowledge created in our organization to be captured, recorded and used effectively?

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HCM and Talent Management

Business

Strategy

Human

Capital

Strategy

Business

Results

External Hires

Internal Mobility

Alig

nTraditional

ContingentM

ea

sure

Plan

Acquire

Engage

Deploy

DevelopLead

Retain

Evaluate

Forman, D. C. (2011). The global state of talent management. In L. A. Berger & D. R. Berger (Eds.), The talent management

handbook, 2nd ed. (pp. 529-531). New York, NY: McGraw Hill.

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HCM BEYOND HR

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Why measure HC?

• Human capital is a key component of market worth

• People add value and assessing this value is a basis for HR planning and monitoring

• Identifying metrics, collecting and analyzing data focus attention on what needs to be done to find, keep, develop, and make the best use of HC

• Measurements monitor progress in achieving HR goals

• “You cannot manage unless you measure.”

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Simple Illustration of Value Creation

Process Quality Process Cycle Time

On-time Delivery

Employee Skills

Customer Loyalty

Return on Capital EmployedFinancial

Customer

Internal/Business

Process

Learning and Growth

Kaplan, R. s. & Norton, D. P. (1996). The balance scorecard. Boston, MA: Harvard Business School Press, p. 31.14

HC Bridge to Showing Value

Toolsets

Effectiveness Dashboards, scorecards

Effectiveness Performance of outsource HR activities

Effectiveness Effects of HR programs on the workforce

Effectiveness Cost-benefit (utility) analysis

Efficiency Financial efficiency of HR operations

Efficiency Cost of providing HR services

Efficiency Benchmarking

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Human Capital Impact Statement Summary

Higgins, J. (2011). Human capital financial statements. Marina Del Rey, CA: Human Capital Management Institute, p. 8. 16

Total Workforce Productivity Impact Formula

and Components

Higgins, J. (2011). Human capital financial statements. Marina Del Rey, CA: Human Capital Management Institute, p. 9.

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Human Capital Asset Statement

Higgins, J. (2011). Human capital financial statements. Marina Del Rey, CA: Human Capital Management Institute, p. 11, 12.18

What does this tell you?

• Workforce value increases over time

• The workforce creates value far greater than it

creates cost

• Certain job roles create more organizational

value than others

• Training costs are more of an investment than

an expense

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What is your gain using HCM?

• Greater transparency

• A method for valuing knowledge capital

• Improved investment decisions

• A methodology for quantifying workforce

impact on financials

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Questions?

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Contact Me

Lizabeth Kleintop, Ph.D.Associate Dean of Business and

Management Programs

Comenius Center for Continuing and Graduate Studies

lkleintop@moravian.edu

t: 610 625-7704

f: 610-861-1466

1200 Main Street

Bethlehem, PA 18018-6650

http://comenius.moravian.edu

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