Human capital theory in HRM

HR in Transition – The Building Blocks of a New HR Business Model  May 23, 2012 – 08:06 am
quadrant is extended

Imagine you are the Chief Human Resources Officer (CHRO) of a large company going through a business model transformation. As CHRO, you have supported this transformational process by adapting your sourcing, performance, talent and remuneration strategies. In your HR report to the CEO, you proudly affirm that employee commitment, absenteeism, and turnover are far better than industry standards, and that the staffing plan has been met despite the shortages in the labor market. Your training manager delivered on the training plan within a challenging budget and the performance cycle was experienced as excellent by more than 90 % of the managers.

Nevertheless the CEO is unsatisfied. The Human Economic Value Added (HEVA), which is a measure of the true economic value of managerial actions (see calculation at the end of this article) and the Human Capital Return on Investment (HCROI), which looks at the ROI in terms of profits for monies spent on employee pay and benefits (see calculation at the end of this article) dropped with more than 3 %.

Worse yet, the scenario replays itself the following year: the HR team delivered on all items in the HR business plan - demonstrating an ability to attract, retain and productively manage a shrinking pool of talented, motivated people - but still the HEVA and HCROI further dropped.

Source: Hrmblogs

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