UDK 330

Экономические науки / 5. Управление трудовыми ресурсами

I.V. Onyusheva, PhD,

Professor of RAM, RANH,

International Leadership Institute, Turan University,

Almaty, Kazakhstan

Measuring Human Capital’s Contribution to Enterprise Goals: the Process Approach

Key Words: human capital, process management, measurement, ROI, enterprise contribution, process performance matrix, human capital performance matrix.

Problem statement. The key problem is how to reach enterprise goals through human capital management. In this sense the key problem is how to measure the economic value of employee performance and how to measure human’s capital contribution to enterprise goals. The research objective is to find criteria and approaches to measure human’s capital contribution to enterprise goals being in the working process that can help in managing human capital to increase organizational effectiveness and build sustainable competitive advantage for it.

Summary of the research findings. Human capital management is represented by six main management activities or functions. They are planning, acquiring, supporting, developing, retaining and evaluating of human capital. Measuring human capital is included in evaluating function and covered financial aspect as well. Measurement of the economic value of human capital is the ROI of human capital or return of it. To measure human’s capital contribution to enterprise goals it should be analyzed in detail the process management and anatomy of a process. It helps us to see the position of the person, the human capital within a process which is allegedly linked to the goals of the enterprise. Thus, the process approach is considered (1) requirements, (2) interference, (3) performers, (4) feedback, (5) consequences, inputs and outputs that have impact on contribution to enterprise goals.

Every function should have an ongoing set of operational metrics. Production, sales, and service units normally do. But when we move to staff groups, we often find a lack of metrics to tell us how efficient or effective the unit is. There is a solution to this deficiency. Just as there is an accounting system to tell us what is happening on the P&L, there is a basic methodology for process management. It is called the performance matrix.

The Figure 1 illustrates the performance matrix. It is the fundamental template to lay over any function or process. Down the left-hand column, you see cost, time, quantity, errors, and reaction. These are the five ways to evaluate things in organizations and in life.

- How much does it cost?

- How long does it take?

- How much was accomplished?

- How many errors or defects occurred in the process?

- How did someone react to it?

	QUALITY	INNOVATION	PRODUCTIVITY	SERVICE
COST	Warranty cost	R&D investment	Unit cost	Contact cost
TIME	Repair time	Time to market	On schedule	Response time
QUANTITY	Meets six sigma	Scalable	No. orders filled	Number served
QUALITY	Scrap rate	Best in market	Rework rate	First call solution
REACTION	On spec	Customer delight	No flaws	Problem solved

Figure 1 - Process performance matrix

Note: Based on [1-4].

The matrix gives us 4 basic criteria for judging intermediate value added: quality, innovation, productivity, and service or QUIPS. These are the essential elements of business. They are called dependent variables. At the same time they are objectives. They are steps along the way to competitive advantage and, eventually the profitability of the enterprise goal.

On the base of the process performance matrix and the human capital management functions it has been created human capital performance matrix illustrated in Figure 2.

	ACQUIRING	SUPPORTING	DEVELOPING	RETAINING
COST	Cost per hire	Cost per paycheck; Cost per employee assistance program case	Cost per trainee	Cost of turnover
TIME	Time to fill jobs	Time to respond; Time to fulfill request	Cost per trainee hour	Turnover by length of service
QUANTITY	Number hired	Number of claims processed	Number trained	Voluntary turnover rate
QUALITY	New hire rating	Process error rate	Skills attained	Readiness level
REACTION	Manager satisfaction	Employee satisfaction	Trainee responses	Turnover reasons

Figure 2 – Human capital performance matrix

Note: Based on [1-4].

The Figure 2 shows the components of the matrix when it is applied four core human resource functions: acquisition, support, development and retention.

Conclusion. The performance matrix is the basic assessment model that can be applied in any business operation. The human capital performance matrix is applicable to the administrative units of human resources, finance and accounting as well as information services. All indicators of the model are interdependent. The considered model within the process management approach can be successfully applied to draw a better ROI from their valuable human capital. Generally, the matrix can be used for both internal performance assessment and external market impact.

References:

1. Fitz-enz, J. (1990) Getting and Keeping Good Employees, pp.25-28.

2. Fitz-enz, J. (2004) How to Measure Human Resource Management, 4^th ed., New York: McGraw-Hill.

3. Phillips, J. (2007) Return of Investment, Houston: Gulf Publishing.

4. Fitz-enz, J. (2009) The ROI of Human Capital: Measuring the Economic value of Employee Performance, New York, Amacom Publishing.

5. Ashton, C. (2011) Strategic Performance Measurement, London: Business Intelligence, p.136