Maximizing Your Return on People

New tools can show which investments in employees are driving company performance now and which you should emphasize to advance your strategic goals.

For many companies, people are the only source of long-term competitive advantage. Companies that fail to invest in employees jeopardize their own success and even survival.

Organizations’ strengths and weaknesses in human capital management (HCM) can be assessed by monitoring the performance of HCM practices that fall within five broad HCM driver categories. In general, improvements or declines in organizational performance can be tied directly to improvements or declines in HCM practices.

Most traditional HR performances metrics-such as employee turnover rates, average time to fill open positions, and total hours of training provided-don’t predict organizational performance.







The power of HCM improvements to drive performance can be seen in a diverse array of organizations from large manufacturers, public schools, and financial services firms. In each industry, HCM maturity scores are directly linked to a range of performance improvements.

The above shows a comparison between the average three-year compound annual growth rate income for the 50% of sales office in the major business unit that boasted the largest maturity-score improvements with the income growth rate for the 50% of offices that had the smallest. In four out of the five categories, the growth rate for the higher-scoring offices ranged between about 60% and 130% about the growth rate for the offices with smaller improvements (or declines) in HCM maturity.

Assessing Yourself

Just as Six Sigma techniques involve continuous refinement of processes base on feedback, the HCM evaluation approach is used iteratively: An initial assessment indicates the HCM changes that should positively affect performance; performance responds to the changes; HCM practices are reevaluated, leading to further rounds of suggested changes; and so on. Note that as organizations and their environments evolve, the key HCM factors that drive performance may shift. Thus, it’s important to regularly measure and adjust HCM practices and correlate them to organizational outcomes.

By using rigorously designed surveys to score an organization on the range of Human-Capital Management practices across the five major categories, it’s possible to benchmark an organizations HCM capabilities, identify HCM strengths and weakness, and link improvements or backsliding in specific HCM practices with improvements or shortcomings in organizational performance.

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