EmpIndex - Measuring the Value of Human Capital (20160407)

Mark Sweeny
Founder, Owner, Chief Executive
Certus Solutions
Measuring the True Value
of Human Capital
The Employee Index

So What Your About To See
Origins are from My Own Research 2009!
Private & Confidential 2007-2016 © Certus Solutions All Rights Reserved

The Challenges of a Small Medium Enterprise
Cloud Professional Services Business
 Survival - Cash is King!
 Balancing Growth v Sustainability
 Happy Customers! – Maintaining Reference-ability
 Delivery Capability in a Fast Changing Space
 “War On Talent”
 Employee Engagement & Retention

So How Do We Rise To
the Challenge?
We Focus On Our People
and For me …
HR is in the People Delivery Business
“Right People, Right Place,
Right Time, Right Cost”

Management Clichés & Jargon
People are our business
People are our greatest assets
Seize the day
Talent Management Human Capital
Paradigm shift Step Change
Excellence through people
Make A Difference

Do You Feel The Same Way?
A Quick Survey….Google Says…
 People are our greatest asset
 People are our most important asset
 People are our business
 People are our most valuable asset
1,590,000
2,980,000
97,600,000
229,000,000
2016 Hits
516,000
2,240,000
13,200,000
193,000,000
2009 Hits
Private & Confidential 2007-2016 © Certus Solutions. All Rights Reserved

The Challenge of HR Today
 For HR To Be Relevant Today
 Play it’s role in achieving sustainable competitive
advantage
 Show a return in delivering value to the
organisation
 HR Director Should Constantly Be Asking…
 How effective is my “People Proposition”?
 And “am I making a difference?”
“So What Do We Instinctively do? – We Try to Measure!”
But… What Are We Measuring?
When Are We Measuring it?
and how Are We Measuring it?

Traditional Measures of
HR Effectiveness are Flawed
Flaws in Traditional HR Measures
 Not linked to the overall business objectives
 Identified in isolation
 Focused heavily efficiency rather than effectiveness
 High degree of subjectivity
 Performance reviews are not ratified at corporate level
 Do not financially quantify the concept of “value”

Examples of Traditional Measures of
HR Effectiveness from 2009
n = 91 organisations; 506 measures
Source: IRS
Everyone has a different opinion?

Its all about People, it always has been…
 Professional Sport in America has been
measuring performance since its origins
 Performance measures contribute to
“MVP” – Most Valuable Player awards
 Determines a players value to the team
and influences contract negotiations
Applied Learning from Professional Sport – Before MoneyBall !!!!
So Why can’t we apply the same approach to
the Private or the Public Sector?

It’s a Question of Value & Contribution

Sir Alex Ferguson
Former Manchester United Manager
 Recruitment was centred around collecting and
working with talented youths
 Growing up and training together for years
created a loyal team that had an incredible
spirit, character and force
 Combined with older players created high
standards and maintained the clubs culture
 Always focused on the future - building a club and
not just a team- creating stability and consistency
 Also concentrated on the value each player
brought- only players with work ethic, energy,
perseverance, comradery, who were tactically
smart and a superb athlete were chosen for the
club

Bill Belicheck
Head Coach of the New England Patriots
 Culture beats Strategy - talent alone is not enough
 Created a sophisticated screening mechanism that targets a
players fit rather than talent alone
 Seeks like-minded players who share core values
 Team chemistry over individual talent
 Accountability
 Three Core Values:
 Passion - players have a love of the job and not just the
lifestyle (found via specific interview questions)
 Intelligence - players need to be intellectually curious,
committed and have a strong work ethic
 Value - each position is budgeted and does not change
regardless of factors such as talent. This means the
patriots are never controlled by the market or a player

Billy Beane
Executive Vice President of Baseball Operations
 Objective, advanced data to hire instead of the traditional
“statistics and gut instincts” approach
 Broke down success into a factors specific to each position
 Decisions were not emotionally made
 Being successful & having talented individuals can forge a
better culture
 Don’t disregard culture but don’t rely solely on it either
 Consider objective talent, performance measurements first
to widen the channel of prospective candidates and then
consider culture

Lies, Dam Lies and Statistics? - Possibly
Can you really measure Human Behaviour?
Can you really measure Culture?
Can you be consistent and fair?

Business Need Defined
What do we really mean by human capital?
… Its about “value” and “contribution” towards goals
… So how do we identify and quantify it in business?

So how can we measure Employee Value ?
-100 +1000
Employees can either create value …
So Where are Your People ?
First you have to define it…
… or destroy value

Employee Value Dynamics
Identifying Who Creates Value…
Employee Value linked directly…
to Organisational Objectives
Pressure on
Public
Finances
Government
Policy
Election
All Change?
Equal
Opportunity
Agenda
Trade Unions
Civil Service
Reform
European
Legislation
Global
Economy
Level of
Public Debt
UK
Legislation
Public Sector
Efficiency
Agenda
Pressure on
Public
Services
Public Value
Education
Health
Justice Security
Emergency
Services
Culture
Trade
Employee
Value
Employee
Value
-100
+100
0
ValueScale

Employee Value Dynamics
Fundamental Concepts of System Dynamics from MiT in 1950’s
Index
value increasing value reducing
+40.72
Stock or ReservoirFlow
We need to define what increases value and what reduces value

Lies, Dam Lies and Statistics? - Possibly
Creation of an “Employee Index”…
 A conceptual idea in Employee and Organisation value measurement
 provides alignment, clarity and focus in delivering a sustainable people proposition
 minimises subjectivity around human performance
 focuses upon measured contribution to determine value
 commercialises HR by financially quantifying the value of human capital
 Formula based upon weighted averages?

To Measure Contribution,,,,
You Need a Set of Value Factors that are Relevant to the Organisation
 Technical Skills
 Usually based upon Competency Levels
 Delivery
 Performance Results Related
 Behavioural & Soft Skills
 Most difficult to Measure due to Subjectivity
 Team Player – Interaction with Others?
 “Would I go for a drink with this person?”

Establishing “The Bridge”
Value Factors Outcome Determined by Weighting
%
Value
Score
(-100 to +100)
Weighted
Score
Attendance
Management
Average number of sick days per employee
per quarter
0.35 40 14.00
Financial Control Percentage budget variance relating to
employee costs per quarter
0.25 80 20.00
Personal Performance
Review
Score from performance appraisal per
annum
0.25 -20 -5.00
Conduct & Discipline % number of grievances raised that are
satisfactory resolved from staff per quarter
0.10 20 2.00
Training Delivery Average number of Training Days delivered
per employee per quarter
0.05 65 3.25
34.25
Example Scenario: Organisation metrics for determining the value contribution of an HR Business Partner in relation to a
departmental strategic objective and local objectives
Link
Link
Link
Link
Link
INDEX SCORE OF
DepartmentalStrategic
Objective

“Corporate Moneyball!” – Think Stockmarket
Linking to Financial Measures
Identifying Value and Quantifying Human Capital
0
10
20
30
40
50
60
70
80
90
100
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
EmpIndex
Employee 1
Employee 2
Employee 3
Employee 4
Employee 5
£££
0
10
20
30
40
50
60
70
80
90
100
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Org EmpIndex
HR Business Partner
Senior Management
Business Unit 1
Business Unit 2
Business Unit 3
£££

Delivering Insight
Identifying “Value of Connection” across an Organisation
67
664962
6132
55 68
45 45 79 63
62 61 6559
How Organisations truly work
67
664962
6132
55 68
45 45 79 63
62 61 6559
Traditional Organisational Chart
EmpIndex allows you to identify where the value exists across the entire Organisation

Is this the Next Step in the Journey?
A Talent Management Index – A System that…
 Allows an organisation to identify employee value (talent) across an organisation
 Demonstrates an employees contribution against organisational goals
 Delivers in-depth workforce analytics based upon value and contribution
 Facilitates objective comparison of individual employee’s contribution
 Ability to determine the performance gap between workforce and organisation
 Enables an Organisation to financially quantify its Human Capital

Is this the Next Step in the Journey?
But With All Concepts, there are Questions?
 Would you want to measure your people to this instinct?
 You need huge amounts of nearly REALTIME data to make this work?
 Doesn’t it just become another system that can be manipulated?
 Would it drive the right behaviour?
 Is this a Step to Far and to intrusive?

Key Take Aways – Regardless of Tech!
 Employee Measurement
Systems need to reflect both
Technical & Behavioural
Skills you value
 You need both elements to
build a “Winning” team
 You need to maintain
objectively and minimise
subjectivity! – but can you
really measure culture?

Mark Sweeny
Owner, Founder, Chief Executive
Mark.sweeny@certus-solutions.com
@CertusCEO
www.certus-solutions.com
Thank You For Listening
Questions?

EmpIndex - Measuring the Value of Human Capital (20160407)

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