More than ever before, HR practitioners must empirically demonstrate a clear link between their practices and firm performance. In, Investing in People: Financial Impact of Human Resource Initiatives, Wayne F. Cascio and John W. Boudreau show exactly how to choose, implement, and use metrics to improve decision-making, optimize organizational effectiveness, and maximize the value of HR investments. They provide powerful techniques for looking inside the HR "black box," implementing human capital metrics that track the effectiveness of talent policies and practices, demonstrating the logical connections to financial and line-of-business, and using HR metrics to drive more effective decision-making. Using their powerful "LAMP" methodology (Logic, Analytics, Measures, and Process), the authors demonstrate how to measure and analyze the value of every area of HR that impacts strategic value. Among the areas covered in depth are:
· Leadership Development
· Health and Wellness
· Employee Engagement
Readers will master crucial foundational principles such as risk, return, and economies of scale and use them to evaluate investments objectively in everything from work/life programs to training. Also included are powerful ways to integrate HR with enterprise strategy and budgeting and for gaining commitment from business leaders outside HR.
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About the Author
Wayne Cascio holds the Robert H. Reynolds Chair in Global Leadership at the University of Colorado Denver. He has authored more than 150 journal articles and book chapters and 24 books. In 1999 he received the Distinguished Career award from the HR Division of the Academy of Management. He received an honorary doctorate from the University of Geneva (Switzerland) in 2004, and in 2008 he was named by the Journal of Management as one of the most influential scholars in management in the past 25 years. In 2010 he received the Michael R. Losey Human Resources Research Award from the Society for Human Resource Management. His work is cited regularly in the business press. Dr. Cascio is a Fellow of the National Academy of Human Resources, the Academy of Management, and the American Psychological Association. Currently he serves as a senior editor of the Journal of World Business .
John Boudreau is Research Director at the Center for Effective Organizations and Professor of Management and Organization in the Marshall School of Business at the University of Southern California. He is recognized worldwide for breakthrough research on the bridge between superior human capital, talent, and sustainable competitive advantage. He is a strategy, human resource management, and talent advisor and educator in organizations ranging from early-stage companies, to government agencies and Fortune 100 organizations, to large multinational companies. Dr. Boudreau has published more than 60 books and articles, and his work has been featured in Harvard Business Review , The Wall Street Journal , and Business Week . He has won scholarly awards from the Academy of Management. Dr. Boudreau is a fellow of the National Academy of Human Resources and was formerly a professor at Cornell University.
Read an Excerpt
The demand for accountability among all business functions has never been greater. A key responsibility of human resource (HR) leaders and consultants is to articulate the logical connections between progressive HR practices and firm performance, and they need to demonstrate those connections with data. This book provides logic and technology to look inside the "black box" between HR practices and financial/business performance.
We argue that investing in talent should be as systematic as investing in any other vital resource, based on logical frameworks and focused on optimization rather than simply cost reduction or mimicking best practices. This argues against the common "peanutbutter" approach to talent investments that spreads the same investments (for example, in training or staffing programs) over the entire organization, in an effort to be fair by being equal. Such approaches engender justifiable skepticism from leaders and employees who are asked to invest in programs or activities because HRor even the CEOsays that "everyone must do it." That approach is in stark contrast to other resources, such as customers and technology, where investments are targeted where they have the greatest effect. Why not make greater talent investments where they matter most and smaller investments where they do not make a significant strategic difference? This "decision-science" approach provides the foundation for the techniques we present here. We emphasize that ultimately measurement is valuable when it improves important decisions about talent. That requires not simply more or better measures, but an integrated approach that combines those measures with logic, analytics, and knowledge processes (what we call the LAMP framework). Each chapter begins with a logic diagram that shows the links between particular HR programs, employee behaviors, and operational and financial outcomes. Each chapter includes a discussion about process, describing opportunities and effective ways to communicate results to decision makers.
We draw extensively on our decades of experience assisting senior-level decision makers to better understand and measure the impact of talent decisions, and also on our scholarly research on the connections between talent and organizational outcomes. We have been fortunate to work with both practicing leaders and academic researchers. This combination is essential for talent measurement and decisions that achieve both practical relevance and logical rigor.
Investing in People draws upon research in psychology, economics, accounting, and finance to provide tools that leaders inside and outside the HR profession can use together to describe the financial results of their investments in people. We focus on HR investments with a rich history of data-based research, including staffing, training, workplace health, employee attitudes, and employee turnover, which also represent some of the most important strategic HR functions.
This book provides specific formulas and calculations that you can use to evaluate the impact of your own talent decisions. To make the formulas easier to use, we developed software to accompany the chapters on the following topics: absenteeism, turnover, health and welfare, attitudes and engagement, work-life issues, external employee sourcing, the economic value of job performance, payoffs from selection, and payoffs from training and development.
The Society for Human Resource Management (SHRM) provided generous support for the development of the software, and you can access this software at the SHRM website (http://www.shrm.org), regardless of whether you are a SHRM member or not. The software performs the calculations of measures, so that readers can focus on the logic, analytics, and processes necessary to improve strategic decisions about talent.
Business leaders, inside and outside of the HR profession, need more rigorous, logical, and principles-based frameworks to understand the connections between human capital and organizational success. We hope that this book serves as a "go-to" resource for those frameworks.
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Table of Contents
About the Authors xv
Chapter 1: Making HR Measurement Strategic 1
Chapter 2: Analytical Foundations of HR Measurement 19
Chapter 3: The Hidden Costs of Absenteeism 51
Chapter 4: The High Cost of Employee Separations 79
Chapter 5: Employee Health, Wellness, and Welfare 115
Chapter 6: Employee Attitudes and Engagement 143
Chapter 7: Financial Effects of Work-Life Programs 169
Chapter 8: Staffing Utility: The Concept and Its Measurement 195
Chapter 9: The Economic Value of Job Performance 223
Chapter 10: The Payoff from Enhanced Selection 255
Chapter 11: Costs and Benefits of HR Development Programs 283
Chapter 12: Talent-Investment Analysis: Catalyst for Change 309
Appendix A: The Taylor-Russell Tables 325
Appendix B: The Naylor-Shine Table for Determining the Increase in Mean Criterion Score Obtained by Using a Selection Device 337