HR professionals lack metrics skills

by 07 Aug 2007

THERE IS a major global shortage of HR professionals with the analytical skills and capabilities required to assist their organisations with HR metrics, according to a global human capital consulting firm.

As such, many companies employ or transfer analysts from finance or marketing into the HR function, as it is easier to train an analyst in HR than it is to train a HR professional in analytical skills.

“HR analytical skills are only a part of what is required,” said Peter Howes, CEO of Infohrm. Speaking at the recent Infohrm Asia-Pacific Conference on the Gold Coast, Howes said two other critical skills are the ability to interpret human capital data and then communicate the results.

Without high-level skills in these two areas, it was unlikely that any underlying analytical skills would result in an organisation making decisions based on data. Howes said the key limitation in such projects was the skills within companies required for such work. “If any of these skills are limited, the success of any project in assessing the contribution of human capital to the business will be limited.”

Howes expected to see a significant growth in companies undertaking work in HR metrics over the next few years, as companies strive to develop an evidence-based culture within the HR function.

Howes suspected that almost all companies intuitively realise the increasing importance of human capital on business performance, but have difficulty in knowing how to operationalise what this means or to measure its importance.

“From my experience most companies still rely on the mantra that people are a company’s most valuable resource without having the capability to quantify the extent to which people are important to business performance,” he said.

Human capital is already critical in business today but will become even more critical in the future, Howes said. This is most readily seen when looking at the percentage of market capitalisation associated with intangible assets across all companies listed on every stock exchange across the world.

“The average value on non-tangible assets is 84 per cent of the total market value, while the value of tangible or physical assets is only 16 per cent,” he said.

“When you look at companies like Google it is not surprising that intangible assets represent 95 per cent of the total value of the company. Clearly human capital is an important component of the value of business today.”

The key question is not whether human capital will become more important, but how companies are managed in a way that reflects the actual value of its human capital, Howes said.

“Most companies have no methodology or capability to quantify the impact of human capital on business performance. Building this capability to quantify the value add of human capital is more critical than simply waiting for human capital to become more important.”

At the Infohrm conference, Starbucks presented results on how human capital factors such as company engagement, workforce engagement, pay satisfaction, voluntary termination rates, workforce tenure and store manager stability impacted profit margins per store. There was a $210 million improvement in profit as a result of specific HR interventions that could be quantified, Howes said.

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