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Abstract
To drive value and optimize company performance, human capital-the collective knowledge, skills and abilities of people that contribute to organizational success-is an asset to be leveraged. Based on corporate culture, organizational values and strategic business goals and objectives, human capital measures indicate the health of the organization. The effective use of key performance indicators (KPIs) that measure human capital outcomes, such as talent management, employee engagement and high performance, illustrates the firm's business, financial and strategic goals, promotes partnership with senior management for organizational success and demonstrates HR value to the C-suite.
Introduction
"In order to fully value human capital, we must go beyond the view of human effort as purely individual. We, humans, affect each other profoundly, and it is the way we affect each other that determines our value to our organizations. And, it is the way that strategic human resource professionals bring this understanding to the fore of their organizations that determines HR's value at the senior management table."1
In 1995, the seminal study by management guru Mark Huselid linked high-performance work practices with company performance and revealed that workforce practices had an economic effect on employee outcomes such as turnover and productivity, as well as on short- and long-term measures of corporate financial performance.2 This study marked a new era of measuring the influence of HR to promote effective organizational performance, sustainability and financial success.
As HR positions itself as a strategic business partner, one of the most effective ways to do so is to support the strategic business goals through key performance indicators. Key performance indicators (also known as KPIs) are defined as quantifiable, specific measures of an organization's performance in certain areas of its business. The purpose of KPIs is to provide the company with quantifiable measurements of what is determined to be important to the organization's critical success factors and long-term business goals. Once uncovered and properly analyzed, KPIs can be used to understand and improve organizational performance and overall success.3
Why Measure Human Capital?
The primary motivation to measure human capital is to improve the bottom line. To design better KPIs, it is essential for HR to understand what is important to the business and what key business measures exist. In addition, the drive to...