Investing in People: Financial Impact of
Human Resource Initiatives
nd
Wayne F. Cascio, John W. Boudreau 2 edition 2010
1
,CHAPTER 1 MAKING HR STRATEGIC
Data and analysis are important to investing in people, but they are really just means to an end. The
ultimate purpose of an investment framework is to improve decision about those investments.
Decisions about talent, human capital, and organizational effectiveness are increasingly central to the
strategic success of virtually all organizations. invest in people and see them as assets to be
developed, not simply as costs to be cut.
However limited measures or faulty logic (e.g. how measure return on investments of retain talent?).
measures have immense potential to improve the decision of HR and non-HR leaders.
This book is based on a fundamental principle: HR measurement adds value by improving vital
decisions about talent and how it is organized.
HR measurements must do more than evaluate the performance of HR programs and practices, or
prove that HR can be made tangible. Rather, it requires that Hr measure reinforce and teach the logic
frameworks that support sound strategic decisions about talent.
Each chapter provides a logical framework and key variables that affect cost and value, as well as
specific measurement techniques and examples.
CH.2. engagements influences sales? More engagement so more sales?
CH.3. cover absent employees or reduce absence rate what is the most benefit?
CH.4. how to distribute the layoffs? Costs or benefits of employee turnover?
CH.5. offering cheaper health benefits – costs ?
CH.6. high employee satisfaction lead to higher financial returns
CH.7. work and life fit organizational productivity?
CH.8. costs per hire
CH.9. value of good versus great performance; or minimum standard enough?
CH.10. payoff to improved selection?
CH.11. outsourcing or not?
relationship between decisions about HR programs and the ultimate costs or benefits of those
decisions. (HR measurement; decision science),
However, there are areas where the practice of decisions lags behind state-of-the-art-knowledge.
How a decision science influences HR measurement
When HR measures are carefully aligned with powerfull, logical frameworks. Human capital
measurement systems not only track the effectiveness of Hr policies and practices, but they actually
teach the logical connections, because organization leaders use the measurement systems to make
decisions (e.g. economic value added, and net present value). combine both number and logic to
make decisions about financial resources.
Human capital measurement systems can enhance how well users understand the logic that
connects organization success to decisions. Frameworks show how resources affect strategic success.
Evidence based HR management: creating measurement systems that encourage and teach manager
how to think more critically and logically about their decision, and to make decisions that are
informed and consistent with leading research.
Decision frameworks: provides the logical connections between decision about a resource (e.g.
financial capital or talent) and the strategic success of the organization.
Finance is a decision science for the resource of money, marketing for resource of customers and
talentship for resource of talent.
Efficiency: relationship between what is spent and the programs and practices that are produced
Effectiveness: relationship between the programs or practices and their effects on target audience
Impact: relationship between the effects of the practice on the target audience and the ultimate
success of the organization.
HR management is heavily dominated by efficiency measures.
2
, Paradox: increasing sophistication in technology, data availability, and the capacity to report and
disseminate HR information, BUT investments in Hr data systems, scorecards and integrated
enterprise resource systems fail to create the strategic insights needed to drive org. effectiveness.
many organizations are ‘hitting a wall’ in HR measurement (effectiveness and impact are often
unmeasured). HR measures only rarely drive true strategic change.
To have impact HR measures must create a true strategic difference in the organization. There is a
large gap between the expectations of measurement systems and their true effects (e.g. to prove a
cause-effect connection between HR programs and organizational outcomes).
We must embed HR measures within a complete framework for creating organizational change
through enhanced decisions. LAMP framework to move HR measurement beyond the wall.
Four critical components of a measurement system that drives strategic change and organizational
effectiveness. Measures represent only one component. All together needed for true purpose of HR
measurement. Paradox: genuine insights about HR often exist in the areas where there are no
standard accounting measures. HR measurement systems are only as valuable as the decision they
improve and the organizational effectiveness to which they contribute. HR measurement systems
create value as a catalyst for strategic change.
Logic: the ‘story’ behind the connections between the numbers and the effects and outcomes. Logic
to help to organize the measurements and show how they inform better decisions. Missing or faulty
logic is often the reason well-meaning HR professionals generate measurement systems that are
technically sound but make little sense to those who must use them. Use logic to enhance decisions.
Measures: greatest attention in HR, e.g. to enhancing quality of HR measures, based on timeliness,
completeness, reliability and consistency (e.g. employee turnover and its costs). Needs measures to
estimate this, but you need context and strategic objectives. Logic must support good measurement.
However, need to make the measures precise and valid to what matters.
Analytics: a logic with good measures can flounder if the analysis is incorrect. For example a
correlation does not prove that the first one causes the other one, but are related to each other.
Analytics transforms HR logic and measures into rigorous relevant insights; often links logical
framework to the science related to talent and organization.
Process: measurement affects decisions and behaviors and those occur within complex social
structures, knowledge frameworks and organizational cultural norms. Effective measurement
systems must fit within change-management process that reflects principles of learning and
knowledge transfer. Return on investment as potent tool in financial decisions (e.g. investment in
hiring managers and its performance).
CONCLUSION
Frameworks to help guide HR measurement activities toward greater strategic impact. LAMP: logical
system for understanding how measurements drive decisions, organization effectiveness, and
strategic success & also provides diagnostic framework to examine existing measurement systems
for their potential to create these results.
3
Human Resource Initiatives
nd
Wayne F. Cascio, John W. Boudreau 2 edition 2010
1
,CHAPTER 1 MAKING HR STRATEGIC
Data and analysis are important to investing in people, but they are really just means to an end. The
ultimate purpose of an investment framework is to improve decision about those investments.
Decisions about talent, human capital, and organizational effectiveness are increasingly central to the
strategic success of virtually all organizations. invest in people and see them as assets to be
developed, not simply as costs to be cut.
However limited measures or faulty logic (e.g. how measure return on investments of retain talent?).
measures have immense potential to improve the decision of HR and non-HR leaders.
This book is based on a fundamental principle: HR measurement adds value by improving vital
decisions about talent and how it is organized.
HR measurements must do more than evaluate the performance of HR programs and practices, or
prove that HR can be made tangible. Rather, it requires that Hr measure reinforce and teach the logic
frameworks that support sound strategic decisions about talent.
Each chapter provides a logical framework and key variables that affect cost and value, as well as
specific measurement techniques and examples.
CH.2. engagements influences sales? More engagement so more sales?
CH.3. cover absent employees or reduce absence rate what is the most benefit?
CH.4. how to distribute the layoffs? Costs or benefits of employee turnover?
CH.5. offering cheaper health benefits – costs ?
CH.6. high employee satisfaction lead to higher financial returns
CH.7. work and life fit organizational productivity?
CH.8. costs per hire
CH.9. value of good versus great performance; or minimum standard enough?
CH.10. payoff to improved selection?
CH.11. outsourcing or not?
relationship between decisions about HR programs and the ultimate costs or benefits of those
decisions. (HR measurement; decision science),
However, there are areas where the practice of decisions lags behind state-of-the-art-knowledge.
How a decision science influences HR measurement
When HR measures are carefully aligned with powerfull, logical frameworks. Human capital
measurement systems not only track the effectiveness of Hr policies and practices, but they actually
teach the logical connections, because organization leaders use the measurement systems to make
decisions (e.g. economic value added, and net present value). combine both number and logic to
make decisions about financial resources.
Human capital measurement systems can enhance how well users understand the logic that
connects organization success to decisions. Frameworks show how resources affect strategic success.
Evidence based HR management: creating measurement systems that encourage and teach manager
how to think more critically and logically about their decision, and to make decisions that are
informed and consistent with leading research.
Decision frameworks: provides the logical connections between decision about a resource (e.g.
financial capital or talent) and the strategic success of the organization.
Finance is a decision science for the resource of money, marketing for resource of customers and
talentship for resource of talent.
Efficiency: relationship between what is spent and the programs and practices that are produced
Effectiveness: relationship between the programs or practices and their effects on target audience
Impact: relationship between the effects of the practice on the target audience and the ultimate
success of the organization.
HR management is heavily dominated by efficiency measures.
2
, Paradox: increasing sophistication in technology, data availability, and the capacity to report and
disseminate HR information, BUT investments in Hr data systems, scorecards and integrated
enterprise resource systems fail to create the strategic insights needed to drive org. effectiveness.
many organizations are ‘hitting a wall’ in HR measurement (effectiveness and impact are often
unmeasured). HR measures only rarely drive true strategic change.
To have impact HR measures must create a true strategic difference in the organization. There is a
large gap between the expectations of measurement systems and their true effects (e.g. to prove a
cause-effect connection between HR programs and organizational outcomes).
We must embed HR measures within a complete framework for creating organizational change
through enhanced decisions. LAMP framework to move HR measurement beyond the wall.
Four critical components of a measurement system that drives strategic change and organizational
effectiveness. Measures represent only one component. All together needed for true purpose of HR
measurement. Paradox: genuine insights about HR often exist in the areas where there are no
standard accounting measures. HR measurement systems are only as valuable as the decision they
improve and the organizational effectiveness to which they contribute. HR measurement systems
create value as a catalyst for strategic change.
Logic: the ‘story’ behind the connections between the numbers and the effects and outcomes. Logic
to help to organize the measurements and show how they inform better decisions. Missing or faulty
logic is often the reason well-meaning HR professionals generate measurement systems that are
technically sound but make little sense to those who must use them. Use logic to enhance decisions.
Measures: greatest attention in HR, e.g. to enhancing quality of HR measures, based on timeliness,
completeness, reliability and consistency (e.g. employee turnover and its costs). Needs measures to
estimate this, but you need context and strategic objectives. Logic must support good measurement.
However, need to make the measures precise and valid to what matters.
Analytics: a logic with good measures can flounder if the analysis is incorrect. For example a
correlation does not prove that the first one causes the other one, but are related to each other.
Analytics transforms HR logic and measures into rigorous relevant insights; often links logical
framework to the science related to talent and organization.
Process: measurement affects decisions and behaviors and those occur within complex social
structures, knowledge frameworks and organizational cultural norms. Effective measurement
systems must fit within change-management process that reflects principles of learning and
knowledge transfer. Return on investment as potent tool in financial decisions (e.g. investment in
hiring managers and its performance).
CONCLUSION
Frameworks to help guide HR measurement activities toward greater strategic impact. LAMP: logical
system for understanding how measurements drive decisions, organization effectiveness, and
strategic success & also provides diagnostic framework to examine existing measurement systems
for their potential to create these results.
3
