Principles in selecting human capital measurements and metrics

Abstract

Orientation: Physical and natural resources have been surpassed by human capital as aresource of wealth creation. As a result, senior management relies increasingly on appropriatepeople information to drive strategic change. Yet, measurement within the human resourcefunction predominantly informs decisions in support of efficiency and effectiveness. Consequently, dissimilar understanding of measurement expectations between these partieslargely continues.Research purpose: The study explored principles in selecting human capital measurements,drawing on the views and recommendations of human resource management professionals,all experts in human capital measurement.Motivation for the study: The motivation was to advance the understanding of selectingappropriate and strategic valid measurements, in order for human resource practitioners tocontribute to creating value and driving strategic change.Research design, approach and method: A qualitative approach, with purposively selectedcases from a selected panel of human capital measurement experts, generated a datasetthrough unstructured interviews, which were analysed thematically.Main findings: Nineteen themes were found. They represent a process that considers thecentrality of the business strategy and a systemic integration across multiple value chains inthe organisation through business partnering, in order to select measurements and generatemanagement level-appropriate information.Practical/managerial implications: Measurement practitioners, in partnership withmanagement from other functions, should integrate the business strategy across multiplevalue chains in order to select measurements. Analytics becomes critical in discoveringrelationships and formulating hypotheses to understand value creation. Higher educationinstitutions should produce graduates able to deal with systems thinking and to operatewithin complexity.Contribution: This study identified principles to select measurements and metrics. Noticeableis the move away from the interrelated scorecard perspectives to a systemic view of theorganisation in order to understand value creation. In addition, the findings may help toposition the human resource management function as a strategic asset.