I think the best alternative to measuring HR in financial terms is to link HR activities and Human Capital outcomes of these activities to financial results through an HR scorecard or strategy map.
Note this is different to trying to put a financial measure on HR – it’s just about understanding from a strategic perspective what impacts HR is likely to have, and using this as a management tool to get better at making this sort of prediction about organisational performance.
I write about this perspective in the current issue of Strategic HR Review: “Using a human capital scorecard as a framework for analytical discovery” and strongly recommend reading this if you’re one of those 35% of HR professionals who think that HR’s greatest challenge is measuring everything in financial terms.
The article includes this quote from Jac Fitz-Enz in a recent conversation with David Creelman which I think explains the point quite well:
“When we talk about predictive analytics everyone thinks you need to be doing statistics, but that is not necessarily the case. There are two steps. First you need a logical framework or mental model, to think through what your problem is and identify the key variables. Then you may need statistics or metrics to help determine the best decision; but people forget the first part and fixate on the metrics.”
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