People and the bottom line

My FT column this week is highlighting a new report - People and the Bottom Line - that has been produced after more than a year of research. The Human Capital Standards Group, a group that I was instrumental in putting together and which met a number of times at the London offices of Investors in People, had some input in to the research, suggesting various areas that could be covered by human capital metrics.

The outcome of the research is interesting but I do think that employers should view the list of 12 metrics recommended in the report with some caution. The list reflects a series of measures that the researches are able to say with some confidence can make a difference to business performance.

This is not to say that there are not better measures available to companies. Some areas of measurement could not be tested because the surveyed companies were not undertaking such work. Other metrics were so ubiquitous that they could not be used to establish any potential performance advantage.

For this reason I believe some companies who may be approaching the use of HR metrics for the first time, should read this paper that I prepared some time ago but which has not been published hitherto outside the Human Capital Standards Group.

The suggested metrics in the paper owe their origins to various influences, including discussions among the group. The formulas for profit per employee and turnover per employee, for example, are measures used by Saratoga, part of PricewaterhouseCoopers.

Unlike the Gallup Q12 questionnaire , claimed by its originators to be protected by copyright, the engagement questions proposed here have not been subjected to rigorous testing. But there is no desire to impose copyright limitations. The rationale for this is spelled out in the paper.

I doubt very much that copyright could be attached to a single question since establishing the origins of that question would be extremely difficult. Besides, what is knowledge without questions? It may, on the other hand, be possible to pursue an action against anyone using a set a questions such as the Q12 without permission. Whether those who brought the action could make it stick is another matter. For this reason, however, I have avoided any organisation that seeks to secure ownership over their metrics.

The question asking how likely someone may be to recommend their employer to a potential recruit is one that was strongly advocated by Fred Reichheld and discussed within this column.

I think, incidentally, that proprietary thinking is misguided. Measurement should be boundaryless. It is too important to be in the perview of any particular organisation. Imagine if the French were to licence the use of the metric system, or if the British were to claim sovereignty over certain imperial measurements.

Measures find their own meaning through regular and widespread use. In that sense I would not wish to deter anyone from using the Gallup measures which I am sure are excellent. It is the proprietorial fences that some organisions try to draw around metrics that troubles me.

You will notice that quite a few measures in the paper are designed to establish people's attitudes or opinions. I believe that asking people to rate the quality of management (and leadership) in their organisation is an honest approach to measuring leadership and management effectiveness. Such an approach would build meaning if used consistently over time. Equally it would mean relatively little if the question were asked only once for the very reason that measurement must be related to something (as in the rule of thumb)to carry meaning.

You only know what cold is if you have experienced warmth. Equally what we might describe as "cold" in summer could pass for "mild" in winter. Context and comparison is vital for meaning in measurement.

As a rule I would say that no measure should be used alone, particularly when looking at people. As Gillian Stamp, director of the Bioss Foundation said in a presentation to the HR Society today, people are messy. I'm confident that human beings are far too complex animals to be perfectly measurable. That is as it ought to be. On the other hand, if measurement can be used as an aid to understanding, why should we avoid it?

It's difficult to make a case for sets of measures that are not widely used. If they have not been tested there can be no claim for their performance effectiveness. But the measures I have outlined in the paper represent the kind of focus I would adopt in my own business if I ran one.

I welcome the new report for taking us another step on the way to a better understanding of the principles of human capital discussed in this series of articles. But it is just one step and there is still a long way to go.