How Accenture approached HCM

Peter Cheese, global managing partner of human performance at consultancy Accenture, looks at the work his company has carried out to prove that workforce performance investment delivers returns.

Accenture recently conducted a major study called The High Performance Workforce1. The findings, based on a cross-industry survey of 200 executives worldwide, made interesting - and in some cases, alarming - reading.

We found that 57 per cent of participating companies rarely or never measure how their training initiatives affect factors such as employee turnover. The same percentage rarely or never measures the impact of their HR initiatives on employee satisfaction. And about 70 per cent rarely or never measure the impact of HR or training initiatives on innovation in their business.

Such findings underline the extent to which investments in people performance are being made in the dark. Even in today's connected, information-rich companies, evidence about the relationship between human capital investments and the business' financial performance remains largely anecdotal. As competition intensifies and stakeholders' vigilance increases, this approach is not only inefficient, but increasingly unsustainable.

Finding tools for the job

What companies need are robust diagnostic tools to show the real return on investment (ROI) from human capital development initiatives, and to provide practical guidance over which investments will yield the greatest return. A team of researchers led by the Accenture Institute for High Performance Business has been tackling this issue - and has already made significant progress.

The project has been a two-stage effort. In the first stage, the team developed and field-tested what Accenture calls the Human Capital Development Framework. This enables an organisation to diagnose its strengths and weaknesses in key human capital practices, prioritise investments to bolster the strengths and address the weaknesses, and to track the results. The framework does this by combining best practices in the fields of human resource development, learning and knowledge management, with state-of-the-art measurement techniques to identify specific needs and target interventions.

The second stage, based on initial work with companies, is now underway, and aims to establish the empirical link between human capital investments and shareholder value. Though results from the second stage are preliminary, they are nonetheless encouraging about the validity of the Accenture's Human Capital Development Framework, both as a diagnostic tool and as a predictive model.

Making the case for measurement

Before starting the project, the case has to be made for why such measurements are important. So Accenture's team began by studying existing experience and research to identify five guiding principles governing the relationship between an organisation's human capital assets and its financial performance. These are:

1. Staff who value their work and working environment respond with a level of effort and contribution that enables an organisation to create higher levels of shareholder return. Positive individual attitudes and supportive organisational culture make a real difference to financial performance.

2. Investments in processes such as learning and training must be thoughtfully deployed and targeted to have a positive effect on employees' sense of engagement. Increased spending will not help if the investment does not reach the right places.

3. Organisations whose HR and human capital development practices are valued by staff and aligned with business strategy achieve superior results under measures such as productivity, innovation and customer satisfaction. However, improvements tend to occur incrementally, indirectly and over time, rather than being direct and instantaneous.

4. Organisations invest in human capital development to enhance their capabilities in key areas - for example, their ability to change in response to shifts in critical markets, or take full advantage of new technologies, by flexing, expanding, contracting and accelerating as necessary. These capabilities are rarely measured or managed directly.

5. Organisations that achieve superior performance - both capital efficiency and growth - in productivity, innovation and customer satisfaction, are rewarded in the marketplace through higher ratings from investors and analysts.

Armed with these general principles, the team then set out to develop a conceptual framework and methodology to allow an organisation to evaluate the effectiveness of its current human capital initiatives, establish metrics for spending and return on investment, and then design and deliver human capital programmes that realise a better financial return.

Keeping score

The result is the Accenture Human Capital Development Framework - an analytical measurement and planning tool that enables an organisation to identify and measure the human capital factors that directly or indirectly affect organisational performance.

It does all this by using four distinct levels of measurement to reach an assessment of an organisation's human capital practices and investments, and determine the resulting benefits. These four levels are: