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The Economics of People and Profits Laurie Bassi December 9, 2008

The Economics of People and Profits Laurie Bassi December 9, 2008. The Economics of People and Profits A “skill-biased” economic (re)evolution is underway. Twin forces: globalization & technology. Organizations that manage them well. Highly Skilled People. Superior HCM = Sustainable

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The Economics of People and Profits Laurie Bassi December 9, 2008

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  1. The Economics of People and Profits Laurie Bassi December 9, 2008

  2. The Economics of People and ProfitsA “skill-biased” economic (re)evolution is underway Twin forces: globalization & technology Organizations that manage them well Highly Skilled People Superior HCM = Sustainable Competitive Advantage

  3. In the Long Run… Globalization has left only one sustainable path to profitability for firms operating in high-wage nations… ...basing their competitive advantage on exceptional human capital management (HCM).

  4. In the Short Run… • The turmoil in markets dictates that we focus on that which we can control • This suggests a heightened focus on the management of people • Fortunately, this focus also yields a long-run competitive advantage

  5. The HCM Drivers of Business Results • Leadership Practices • Employee Engagement • Access to Knowledge • Optimization of Employees • Capacity to Learn

  6. Our Research-Based Measurement System

  7. The Evidence—Investing in Developing People Pays Off

  8. Evidence Across Multiple Firms – HCM & Retention of Key Employees in Law Firm (n=69) 11/2/2014 8

  9. Evidence Across Multiple Firms – HCM & Process Safety in Chemical Plants (n=45)

  10. Evidence within a School District – Student Achievement in South Carolina From Bassi & McMurrer, “Maximizing Your Return on People,” Harvard Business Review, March 2007, pg. 122.

  11. Evidence Within a Single Firm – HCM &Sales Performance

  12. Implications Focusing on HCM will help you: • Guide your organization through these turbulent times • Position you for long-run growth This is too important to be delegated to the HR department

  13. Implications • Running the people side of your business by gut and intuition is dangerous — AND unnecessary • Hence, a decision science around HCM is beginning to emerge • Human capital analytics is an important missing capability within most firms

  14. Getting Started • Use the assessment tool in our HBR article to get a quick sense of where your organization stands on HCM • Start to connect the dots—what data can be used to link the “people side” of your business to your organization’s performance? • Develop a data-driven HCM strategy that will drive business results in both the short & long run

  15. A “How-To” Example • Use an old tool—the employee survey—in a new way • Apply “human capital analytics” to develop business intelligence and fact-based HCM strategies

  16. Evidence-Based HCM: Step 1 Quantify HCM Maturity and variations in it across functions, business units, regions and job categories. How? By re-purposing traditional employee satisfaction surveys to measure the broader concept of HCM. Why? To document organizational strengths and weaknesses 1. Quantify HCM Maturity

  17. Scorecard: Sample Summary Table 11/2/2014

  18. Evidence-Based HCM: Step 2 Link Variations in HCM Maturity to to variations in key business metrics (sales, employee commitment, safety, customer satisfaction) How? Using appropriate statistical techniques, which vary and depend on the number of units available for analysis Why? To determine which HCM factors are the most critical drivers of business results for your organization at this point in its evolution 1. Quantify HCM Maturity 2. Link variations in HCM maturity

  19. Pinpointing Improvement Critical Factors Major Regions Branches (c) 2008, McBassi & Company

  20. Evidence-Based HCM: Step 3 Combine the findings from steps #1 & #2 How? Systematically analyze which areas of HCM weakness are negatively impacting your business results, and which HCM strengths are so critical that you need to become even better at them Why? To develop a fact-based, prioritized business case for driving business results through strategic HCM focus and investment 1. Quantify HCM Maturity 2. Link variations in HCM maturity 3. Combine findings

  21. Evidence-Based HCM: Step 4 Repeat Steps #1 - #3 How? By making “human capital auditing” an integral part of how business is done Why? To continuously improve your HCM strategy as you evolve, and document the impact of your past initiatives 1. Quantify HCM Maturity • Results: • Improved • Performance • Financial • Sales • Safety • Customer • satisfaction • etc. 2. Link variations in HCM maturity 3. Combine findings 4. Repeat

  22. Wrapping up • Exceptional human capital management is the only remaining source of sustainable competitive advantage • Running the people side of your business by gut and intuition is dangerous • A decision science around HCM is beginning to emerge • A rigorous focus on HCM will help your organization to manage through this crisis and to survive and prosper beyond it

  23. Resources • Self-assessment guide to “Maximizing Your Return on People” (published in Harvard Business Review) • White papers and “how to” guides on our web site (http://www.mcbassi.com)

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