1.
HR Business Event – Copenhagen
11th June 2014
‘“Creating High Value HR: How the 21st
Century HR professional can add significant
value to any organization“
Paul Kearns
Chair
IHRM
www.hrmaturity.com

2.
The Value of Human Capital?

3.
• Why is Toyota’s market capitalization c.3 x the size of GM?
• Why can’t all banks produce value per head like Goldman Sachs?
• Why have Pharma firms largely failed to fix R&D pipelines?
• Why are BP & other oil majors still at risk of large scale disaster?
• How did mis-selling arise at Lloyd’s after PPI & 5 years post GFC?
• How does Costco stock consistently trade at a premium to Walmart?
• How can Ryanair make more profit and be a ‘nice’ company too?
• How is a 40 year old clothing firm more interested in saving the planet
making so much money?
Key Human Capital Questions need convincing answers

4.
“Some years ago a senior executive in charge of talent
management ….called me to request my help as she
set about, at the request of her CEO, to design a
program for the bank’s “high potential” people.
‘Why did she need a program?’ I asked. Was there
evidence that the bank was losing more talented
people than in the past, or more than its competitors -
in other words, was there any evidence of a problem?
That’s the state of play in human resources today -
mindless imitation of what others are doing, little to no
systematic evaluation of the effectiveness of
management practices and programs, infrequent data-
driven diagnoses of the problems HR is expected to
address - in short, little of the professionalism now
almost taken for granted in medicine, to take just one
example.” Foreword by Professor Jeffrey Pfeffer
Evidence-Based HR/Management

5.
HR’s value is determined by the level of organizational maturity

6.
VALUE
HUMANCAPITAL
WHOLESYSTEM
LEARNING
PEOPLERISK
INTEGRATION
IMPROVEMENT
TRUST
PERFORMANCE
COMMUNICATION
SOCIETAL VALUE
IHRM

7.
Stage 2
Good
Professional
Practice
Stage 3
Effective
Management
Stage 4
Human Capital
becomes integral
to business
operations
Stage 5
Transition:
operational
to strategic
focus
Stage 1
Personnel
Administration
Board & Executives resistant
to measuring human capital
value
Stage 6
Organisation
becomes a
whole system
Stage 0
No Conscious
People
Management
©Paul Kearns/IHRM
STRATEGICREACTIVE
HR Maturity Analysis
http://www.hrmaturity.com/a-simple-introduction-to-the-maturity-scale/

8.
No Conscious People
Management
Activity/Admin:
Process only
Basic Professional:
Process to system
Effective
Management:
Systems with teeth
Business integrated:
Early stages of system
integration
Transition from Ops. to
Strategic:
Towards whole system
Whole System
Organisation:
Seamless, unconscious
SCORE
CORE
QUESTION
Where is the organization in terms of:-
0 1 2 3 4 5 6
A Value motive - profit/societal No concept
Shareholder
value/Cost of service
Pure profit/service
user
Performance Employee shares Shared values Societal value 2
B
Human capital - organization's view of
human resource - people as cost vs. people
as value producing best return
No concept People = cost
People compliance
issues
Professional advice
informs ops
management
People management
integrated with
business plan
Focus shifting from
ops to future plans
People as valuable
capital
3
C
Whole system design - level of integration
between strategic plans and organization
design
No concept Silos - no integration
Professional advice
on more systematic
approach accepted
Organizational
weakness/failings
acknowledged
Matrix oriented
Moving towards
whole system design
thinking
Whole system
integration
2
D
Learning organisation - incorporating
knowledge management
No concept
Training courses
only
Training objectives
Professional advice
informs ops
management
Evaluation system
Momentum of
feedback loops
Org-wide learning
system/culture of
knowledge
5
E People Risk management No concept
Ensure activity
completed
Basic compliance
Professional advice
informs management
Business
performance
includes risk
assessment
Spotting future
trends in risk
behaviour
Whole system,
strategic risk
analysis
1
F Integration - business/people strategy No concept
No conscious
integration
Managers advised to
look outside own
needs
Understanding of
interdependencies
Interdependencies
managed
Moving towards
complete integration
Whole system
integration
3
G Improvement philosophy – quality system No concept
No philosophy -
some cost/time
awareness
Minimum quality
standards
Principle
established:
improvement equals
output/value
Managers'
performance gauged
by ops value
Gradual realisation
total quality
philosophy
True Kaizen 2
H Trust, Engagement & Cooperation No concept
Just get the work
done
Introduction of
concept that these
issues matter
Conscious attempt to
build
Connections made to
value
Mistrust, poor
cooperation and
disengagement
squeezed out
Level of trust built
over many years
3
I Performance system No concept
No system, just
activity data
Min. standards on
data gathering
process
Basic performance
measures managed
systematically
Management
understands link
betweeen
performance/value
Shift to value
management
exclusively
Performance = Value 1
J Communication - open & transparent No concept
Minimum level of
one way
communication
Advising that
feedback process is
necessary
Feedback system
Link between
communication and
performance
understood
Communication
becomes very
focused & fluid
All feel free to voice
views
6
Questions to ascertain levels of understanding about
each core dimension of business/HR strategy and
organisational maturity.
IHRM Standard - ARC©
Maturity - The 10 Pillars

9.
ARC - Pillars 1-5

10.
Ask questions
Do background research
Construct hypothesis
Test with experiment
Analyse results:
draw conclusion
Report results
Think!
Try again
Hypothesis is true
Hypothesis is false
or partially true
HR must adopt a
Scientific Method

11.
http://www.economist.com/news/business/21593468-size-not-everything-mass-market-carmakers-it-helps-kings-road
Market capitalization –
TOYOTA - $173 billion
GM - $53 billion

12.
“VW is targeting a margin
of more than 6 percent for
the mass-market car
brand… That compares
with auto division margins
of 8.8 percent at Toyota
and 9 percent at Hyundai
last year.
http://www.reuters.com/article/2014/04/25/us-vw-results-outlook-idUSBREA3O0X720140425

13.
So where is Human Capital Value today?
“Incorporating ESG and human
capital into company analysis and
valuation”
www.omratings.com
Stage 6 = AAA

14.
Stage 2
Good
Professional
Practice
Stage 3
Effective
Management
Stage 4
Human Capital
becomes integral
to business
operations
Stage 5
Transition:
operational
to strategic
focus
Stage 1
Personnel
Administration
Board & Executives
resistant/unaware of people &
human capital value up to this
point
Stage 6
Organisation
becomes a
whole system
Stage 0
No Conscious
People
Management
Maturity spectrum:
OMR ‘AAA’ Scales
LONG TERM - STABILITYSHORT TERM - UNSTABLE
A+to
AA-
AAA
BBBto
A
BBB-
BB+
BB
C
B
OMR
ARC