INSIGHT 4:
DETERMINE THE RETURN ON INVESTMENT
OF HUMAN CAPITAL
HR has struggled with the notion of return on investment
(ROI) of human capital for many years. In my second book, High
Performance HR (Wiley, 2000), I argue that HR needs to become
effective at calculating the ROI in human capital. Since then,
other theorists have written about that expectation as well. I also
reinforced this idea in my seventh book, Leadership-Driven HR
(Wiley, 2013), as a core organizational capability.
This capability is more easily said than done. In my executive
development classes on Strategic HR, I often ask what the math-ematical
formula for ROI is and most participants do not know
the answer. I then tell them that ROI, is a literal description of
the formula of “return divided by investment” or R/I. I then ask
which part of the formula is easier for HR to calculate, and they
all answer the investment denominator. The numerator, represent-ing
the economic return on HR work, is hard to calculate because
there are so many factors that can contribute to return, so it is dif-ficult
for HR to take credit for it.
The recommendation for HR is that they can learn from mar-keting
how to claim partial credit. Just as marketing claims partial
credit for building a brand that delivers a return on intangible
assets, HR can also claim partial credit for the return associated
with building an employment brand. HR can extend this argu-ment
to all of its programs. For example, HR should claim a
percentage of the return if engagement survey results improve, if
an effective total reward system realigns behaviours, if a leadership
development program contributes to improved organizational per-formance,
if the culture aligns better with strategy and if change is
implemented effectively.
The outcome of this ROI of human capital approach should be
an internal repositioning of HR as an investment rather than as a
cost in the same way that marketing is perceived as an investment
rather than a cost.
INSIGHT 5:
TAKE OWNERSHIP OF
INTERNAL COMMUNICATIONS
Edmund Jerome McCarthy proposed the concept of the four Ps
Marketing Mix in his classic book, Basic Marketing: A Managerial
Approach. The four high-level categories known as the “Four Ps
of Marketing” are price, product, promotion and place. Although
the Four Ps have evolved significantly over the years, one key fea-ture
that is instructive for HR is that marketing owns promotion.
Marketing is accountable for developing the communication strat-egies
and programs to highlight to the customer the key product
features and benefits for the right price and distributed to the cus-tomer
at the right place.
Unfortunately, in many organizations, HR has little to no
control over internal promotions, often referred to as internal
communications. In many organizations, internal communica-tions
are viewed as add-ons to external communications and often
report into a communications unit that frequently places priority
on external over internal communications. The result is HR may
have great programs and processes, but they lack “voice” – the abil-ity
to communicate with employees directly and inspire them to
take action. This approach is a missed opportunity for the organi-zation
and puts HR programs and processes at risk of not being
heard, understood and implemented.
Some HR leaders report that they have advanced this issue by
having dedicated communication partners for internal communi-cations
just as there are dedicated business partners for HR from
finance and information technology. However, that only improves
HR’s ability to communicate its programs and processes – it
doesn’t give HR the opportunity to be the trusted organizational
voice to employees.
Now imagine an organization where HR has the accountabil-ity
for internal promotion just as marketing has accountability
for external promotion. HR would be accountable for developing
the organization’s communication strategies and programs for all
hr practice
HR can use marketing’s
customer analytics
to define what the
internal priorities should
be that will deliver
maximum value to the
external customer
rawpixel / 123RF
30 ❚ CONFERENCE ISSUE 2019 ❚ HR PROFESSIONAL
/Marketing_mix
/Marketing_mix
/Marketing_mix
/profile_rawpixel