Session Plan 14 March 2013 The aim of the session is to : Introduce human capital management Our objectives are that we Must consider Human capital measurement and Human capital reporting Should examine examples of human capital reporting and then Could consider practical implications of human capital management Focus on general discussion of key themes brought out in the class – slides are for reference and pretty comprehensive – I may split the session into two depending on how we progress and allow plenty of time for independent research. This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

HUMAN CAPTIAL MANAGEMENT The provision of guidance on effective people management by the systematic analysis, measurement and evaluation of how people policies and practices create value This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

HUMAN CAPITAL MANAGEMENT AIMS Obtain, analyse and report on data that inform the direction of HR strategies and processes Use measurements to prove that superior HRM strategies and processes deliver superior results Reinforce the belief that HRM strategies and processes create value through people This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

HCM AS A BRIDGE BETWEEN HRM AND BUSINESS STRATEGY This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

THE ELEMENTS OF HUMAN CAPITAL Intellectual capital Social capital Organizational capital This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

THE SIGNIFICANCE OF HUMAN CAPITAL It is the knowledge, skills and abilities of individuals that create value, which is why the focus has to be on means of attracting, retaining, developing and maintaining the human capital they represent, thus producing: A human capital pool that cannot be imitated or substituted by rivals Human capital advantage that results from employing people with competitively valuable knowledge and skills Competitive advantage This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

THE PROCESS OF HUMAN CAPITAL MANAGEMENT Reporting measurements Drawing conclusions about the significance of the measurements Guide to future action Measurements This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

HUMAN CAPITAL MANAGEMENT QUESTIONS What skills do we need? What skills have we got? What are the key performance drivers that create value? How can we capture, record and use the knowledge we create? How are we going to get, develop and keep these skills? How can we develop a learning culture? This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

HUMAN CAPITAL MEASUREMENT The process of finding links, correlations and causation between different sets of HR data This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

APPROACHES TO MEASUREMENT Analyse sources of value Analyse relationships between people management practices and outcomes and organizational effectiveness Measure impact of people management practices on performance, not just the efficiency of the HR function Keep measurements simple Only measure activities if doing so contributes to decision making Analyse trends not just actuals Focus on easily available quantified data Remember, measurement is a means to an end, not an end in itself This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

MEASUREMENT ELEMENTS Basic workforce data – demographic, race, age, working arrangement, absence and sickness, turnover and pay People development and performance data – learning and development programmes, performance/potential assessments, skills and qualifications Perceptual data – attitude/opinion surveys, focus groups, exit interviews Performance data – financial, operational and customer This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

NON-FINANCIAL VARIABLES Quality of corporate strategy Execution of corporate strategy Management credibility Innovation Research leadership Ability to attract and retain talented people Market share Alignment of compensation with shareholders’ interests Quality of major business processes This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

WATSON WYATT HUMAN CAPITAL INDEX Four major categories of HR practice that could be linked to an increase in shareholder value creation: Impact on market value Total rewards and accountability 16.5% Collegial, flexible workforce 9.0% Recruiting and retention excellence 7.9% Communication integrity 7.1% This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

THE SEARS ROEBUCK MODEL EMPLOYEE- CUSTOMER–PROFIT CHAIN A compelling place to work A compelling place to shop A compelling place to invest Attitude about the job Serving helpfulness Customer recommendations Return on assets Operating margin Revenue growth Employee behaviour Customer impression Attitude about the company Employee retention Merchandise value Customer retention This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

THE BALANCED SCORECARD Innovation and learning Financial perspective Customer perspective How do customers see us? Innovation and learning (people) perspective Can we continue to improve and add value? Financial perspective How do we appear to our shareholders? Internal perspective What must we excel at? This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

HR SCORECARD HR competencies administrative experience employee advocacy strategy execution change agency HR practices: communication work design selection development measurement rewards HR deliverables: workforce mindset technical knowledge workforce behaviour Strategic focus: operational excellence product leadership customer intimacy HR systems: alignment integration differentiation Source: R W Beatty, M A Huselid and C E Schneier, ‘Scoring on the business scorecard’, Organizational Dynamics, 2003 This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

HUMAN CAPITAL REPORTING Strategy Acquisition Development Leadership This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

HUMAN CAPITAL REPORTING FRAMEWORK Human capital strategy Acquisition and retention Learning and development Management and leadership Human capital management Human capital performance This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

HUMAN CAPITAL REPORTS 1. Set out quantitative and qualitative information 2. Set out measures of employee satisfaction and engagement 3. Analyse benchmark data 4. Identify key performance drivers and indicate how HCM is creating added value in these areas 5. Review how well HR strategy and practice are contributing to achieving business goals 6. Set out returns on investment in people management programmes 7 Draw conclusions on implications for HR strategy and practice This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

EXAMPLES OF HUMAN CAPITAL REPORTING This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

STANDARD CHARTERED BANK: MANAGING HUMAN CAPITAL ROADMAP How am I recognized and rewarded? How do we attract and retain the best talent? DRIVING BUSINESS PERFORMANCE How am I doing? How are we expected to do things here? How do I develop my strengths? This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

NATIONWIDE ‘GENOME’ CAPITAL INVESTMENT MODEL Quantify impact of employee commitment on customer satisfaction and business performance Use existing data, eg employee opinion surveys, customer satisfaction indices, business performance statistics and employee metrics Prove statistically that the more committed the employee, the happier the customer Predict that increasing employee satisfaction with basic pay would produce a rise in customer satisfaction of 0.5% and an increase in personal loan sales of 2.3% This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

NATIONWIDE: ‘DASHBOARD’ FOR AREA MANAGERS ON KEY DRIVERS Key drivers of committed employees Outcomes Pay Length of service Coaching Resource management Values Retention Customer commitment 1 2 3 4 5 This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

PRACTICAL IMPLICATIONS OF HCM High-performance working Talent management Human resource development Performance management Reward management Knowledge management This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

KNOWLEDGE MANAGEMENT Intranet Customers Networks Communities of interest Data warehouse Processes Performance drivers This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

HUMAN CAPITAL MANAGEMENT: BASIC CONSIDERATIONS You cannot manage unless you measure But the measures must be meaningful And they must lead to action This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

THE SEVEN ‘MUST’ ASK QUESTIONS: CENTRICA What is the strategic agenda? What are the key people issues driving the strategic agenda? For each people issue, what would be the successful outcome? What would ‘good’ look like? What information do we need to show that we achieved ‘good’ ? Where will the data come from? How will this information be analysed/presented? Who is going to drive this? This resource is part of a range offered free to academics and/or students using Armstrong’s Handbook of Human Resource Management Practice, 11th edition, as part of their course. For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.

Further Research in this area Zenith is an interesting case study (on Learnet) To test your knowledge and understanding try the task included in the study