Human Capital Management 2011 © HireSmart All Rights Reserved.

Human Capital Human Capital Management Management

2011 © HireSmart

All Rights Reserved.

Introduction to Introduction to Human Capital ManagementHuman Capital Management

• The only vital value any enterprise has is the experience, skills, innovativeness and insights of its people.

• The success of any company will depend on its ability to understand how human capital links to its performance and its wealth.

• The most competitive companies will have the best strategies and methods for attracting, hiring, managing, developing and retaining top performing talent.

• Managers need training on how to apply human capital management (HCM) principles and methods to business strategy and performance. 

• Today, we are going to learn about several new management tools and how others are using them to reach their business goals.

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Major Contributions toMajor Contributions toHuman Capital ManagementHuman Capital Management

• 1986 – The Know-How Company – Karl Erik Sveiby

• 1997 – The New Wealth of Organizations – Thomas Stewart

• 2000 – The ROI of Human Capital – JacFitz-Enz

• 2001 – The Human Value of the Enterprise – Andrew Mayo

• 2002 – Corporate Longitude – Leif Edvinsson

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The History ofThe History ofHuman Capital ManagementHuman Capital Management

1986- Sveiby publishes "The Know-How Company" on managing intangible assets 1987- Amidon publishes “Managing the Knowledge Asset into the Twenty-First Century” 1988- Sveiby publishes "The New Annual Report" introducing "knowledge capital" 1989- Sveiby publishes "The Invisible Balance Sheet" 1989- Handy publishes “The Age of Paradox”1990- Sveiby publishes "Knowledge Management" 1991- Stewart publishes first "Brainpower" article in Fortune 1991- Skandia appoints Leif Edvinsson as the world’s first Director of Intellectual Capital 1992- Stewart publishes second "Brainpower" article in Fortune 1993- St. Onge establishes concept of Customer Capital 1994- Stewart authors "Intellectual Capital" cover article in Fortune 1994- Mill Valley Group decides to host a gathering of IC managers 1996- SEC symposium on measuring intellectual / intangible assets 1996- Sullivan and Parr book, "Licensing Strategies", published 1996- Lev founds Intangibles Research at New York University 1997- Sveiby publishes "The New Organizational Wealth" 1997- Edvinsson and Malone publish a book, "Intellectual Capital” 1997- Stewart book, "Intellectual Capital“ is published 1997- Hoover Institution conference on measuring intellectual capital 1998- Sullivan book, "Profiting from Intellectual Capital", published

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Principles of Human Principles of Human Capital ManagementCapital Management

• Building a powerful human capital strategy requires solid facts, measures, and processes for discerning where the firm will get the most leverage from its people.

• Recent technological advances have been the catalysts for the emergence of new approaches to human capital management.

• Business models and human capital strategies must match. 

• Taking advantage of the observations and records of actual events maintained in your company’s HR information systems helps you discern how your business model and human capital strategies have been working for or against each other.

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Principles of Human Principles of Human Capital ManagementCapital Management

• There’s a floor to cost reduction but no ceiling to value creation. 

• Find the key points of leverage for increased profits.• View your human capital as a value-producing asset

instead of a cost to be minimized, reduced, or reined in. 

• New management tools now exists to help you analyze how key outcomes such as productivity are affected over time by human capital attributes and practices. These tools help you predict the return on your human capital investments.

• Identifying and focusing on what’s important will drive value.

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Changing in HR ParadigmChanging in HR Paradigm

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Recruitment

Coaching & Mentoring

Human Asset Profiles

Career Development Plans

Core Values

Core Competencies

PerformanceImprovement

SelectionHuman Capital Strategy

Performance Management

Revenue Per Employee Cost Per

Employee

Profit Per Employee

Activities of Human Activities of Human Capital ManagementCapital Management

The quality and performance of our people is what sets us apart in an intensely competitive

market!

• Recruiting and hiring the best available talent• Developing and motivating people to reach their fullest

potential• Retaining talent (and the investments made in them) • Minimizing risk and cost on the human side of the

business• Designing talent management information systems• Implementing performance based compensation

systems• Developing your Employer of Choice Brand• Designing coaching and mentoring programs • Applying performance management technologies

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Finance Driven Finance Driven Business ModelBusiness Model

Money Drives Value - Budget Driven!

• Focus on tangible assets• Valuation of physical and financial assets• Use decision criteria for physical capital investments • Manage costs • Focus on the past (cost measurement)• People are treated as expenses and salary costs• Focus on present cash flow• Focus on fixed budgets and periods • Focus on short-term profitability

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Human Capital Driven Human Capital Driven Business ModelBusiness Model

People Drive Value - Event Driven! • Focus on tangible and intangible assets• Valuation of physical, financial, human and

structural assets• Use decision criteria for knowledge and human

capital investments • Process and customer cost focus • Focus on the future (value creation measurement)• People are treated as expenses and investments• Focus on present cash flow and future revenue

streams• Focus on dynamic budgets and revenue streams• Focus on short-term and long-term profitability,

added-value and sustainability

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HCM Glossary HCM Glossary

Human Capital Strategy

A business strategy that links the competencies, motivations and satisfactions of its employees directly with drivers of value for customers, which in turn drives profitability for the enterprise. Human Capital decisions are guided by data-driven, results-oriented planning and accountability systems. The keys to a successful HCM strategy are process efficiencies, effective use of information technology and business metrics.

Talent Management

Identifying mission-critical values, competencies and talents needed in the current and future workforce. Clarifying the methods that will be used to recruit, hire, develop, manage and retain a high performing workforce.

Performance Culture

A diverse, results-oriented, high performance workforce, with a performance monitoring system that effectively differentiates between high and low performance and links individual / team / departmental performance to organizational goals and strategic objectives. Compensation is directly linked to performance.

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HCM GlossaryHCM Glossary

Human Capital

The sum of a company's employees including their skills, competencies, talents, creativity and know-how.  Within each employee is the knowledge the company seeks to utilize. 

Intellectual Capital

The sum of a company's ideas, inventions, technologies, knowledge, computer programs, patents, trademarks, designs, methods, systems, processes and publications. When codified, defined, written or committed to media form, the company's intellectual assets can be moved, leased, or sold. When these intellectual assets (IA) are legally protected we call them intellectual property (IP).

Structural Capital

The sum of a company's tangible assets including financial assets, buildings, machinery and equipment, manufacturing facilities, distribution channels and sales outlets. 

Customer Capital

The sum of a company's customers including their names, contracts, contact databases, loyalty, satisfaction, references, testimonials and future revenues. 

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