Wednesday, November 24, 2004

HC evaluation in management practices

I'd like to recommend an article by Juanita Elias and Harry Scarbrough in Human Resource Management Journal (2004, Vol. 14 Issue 4) that explores the development of systems of HC evaluation in management practices of 11 large UK firms. The authors start by providing an overview of the term HC in business literature, and state it is widely recognised that firms need to develop mechanisms to determine the value of their employee base.
An extensive HC literature has developed in which the authors propose elaborate systems for measuring a firm's human assets. The article does not seek to offer yet another HC model. Rather, its aim is to examine the management practices through which HC evaluation is undertaken. The findings of Elias and Scarbrough are highlighted as follows.
  1. The preference for internal over external (static accountancy-based) reporting.
  2. The diverse nature of HC evaluation systems that exist across UK business.
  3. Exploring the relationship between practices of evaluation and the role and position of the HR function within the firm.
  4. The implications of the HC perspective for practitioners is addressed, arguing that there is no single formula that can be applied to its evaluation.

The authors go on to suggest that the importance of the HC concept and its measurement may lie in its ability to re-frame perceptions of the relationship between the contribution of employees and the competitive performance of the business.

A cool realistic quote by a Head of Learning of a Telco, interviewed shortly after a meeting with City analysts, is the following:

"Judging from some of the market analysts' questions that I've heard this morning, this says to me that they are a long way off from showing any kind of interest in that kind of information [on HC]... There were six or seven priorities that the CEO listed in terms of focus for our three-year strategy. One of them was motivating people. But there wasn't a single question on motivating people. All the questions were about what are the financial returns on this and that and the other, what is your market performance in this area of the business, when will you get this product to the market. Not a single question on motivating people as a priority. So my judgement from that would suggest that market analysts are still some way off the concept of HC being measured".