Businesses become more and more data driven. Unfortunately, not many HR professionals try to measure impact of their activities. For those, who plan to do so, here is a simple formula:
Human Capital Leverage = 1p/+ 25% / +65%
Let’s dig a bit deeper.
Researchers from Stanford, London School of Economics and McKinsey analysed more than 4,000 manufacturing companies in Europe, the US and Asia and identified 18 management practices that distinguish high-performance practices.
They discovered that the easiest way to dramatically improve performance is to adopt best management practices, not to attract more funding and or hire more employees.
Here is a quote worth pondering:
“One-point shift in management practice has the same effect on productivity as a 25% increase in the labour force or 65% increase in the investment capital”.
These figures are truly amazing, and the most amazing thing is that it gives a new angle to all the HR activities. HR professionals have a lot on their plate and Organisational Development and building managerial competencies is among them.
So, HR function is responsible for Learning & Development (L&D) and L&D has a positive impact on the bottom line of organisation.
One more thing.
If HR activities have a positive impact on the bottom line and improve performance, why HR function is still considered as a “support function”? Perhaps, the main reason is that while everybody understands that L&D might have some positive impact, this impact can’t be proved with the same credibility and precision other functions, like Marketing and Sales can provide.
We are on the mission to change this.
Technology nowadays allows to measure the competencies development as well as other aspects of Human Capital Leverage, which is a powerful tools HR professionals control.
HR professionals who can use the technology to measure the right thing – development in competencies and performance improvement linked to this development, could really provide and prove the impact of their activities.
This and similar research, provides a basis for the digital transformation of L&D function making learning measurable.