Measuring the value of human capital investments: the SAP case

Abstract

PurposeOver the past three years Accenture developed and applied a new measurement tool that assesses the maturity of an organization's human capital development processes, benchmarks the processes' performance against other organizations, and determines the relationship of each process to bottom line business results. It is designed to help executives make significantly more informed choices about their investments in human capital. This article aims to look at this tool.Design/methodology/approachThe tool, known as the human capital development framework, now has been tested in more than 60 organizations. This case describes how one organization used it to help turn around a struggling division.FindingsResults of the initial implementations of the framework suggest that financial performance improves as a company improves its scoring in those critical human capital processes with strong relationships to financial success. As an organization moves from one benchmarking quartile to the next in these processes within the framework scoring, its capital efficiency – or the ratio of total annual sales to the capital invested in the operations of the business by shareholders and creditors – improves from 10 to 15 percent.Practical implicationsThe framework outlined in this article provides a tool that enables company leaders to make clear‐eyed assessments of the payoff from human capital investments. It helps organizations diagnose their strengths and weaknesses in key human capital practices, to set investment priorities and track performance, and to establish an empirical link between human capital investments, business practices, and overall business performance.Originality/valueThose organizations in the study with more mature human capital processes have better financial performance than those organizations with less mature processes. Specifically, those organizations that focus on processes devoted to three key areas – creating a people strategy aligned with the business strategy, providing supportive work environments, and developing employees by giving them ample opportunities to learn and grow – achieve far greater economic success than those that do not.

Human Capital Investment: Practices and Measurement In Slovak Enterprises

“…It will help enterprises get an overview about the value of human capital and potential opportunities for further investment and its return. Cantrell et al [11] pointed out that societies with advanced processes of human capital have better financial performance than those with less developed processes. Advanced processes do not have to influence financial performance immediately; at first they influence the abilities of human capital such as engagement and efficiency of employees which affect the key factors of performance [11].…”

“…According to [10], in the know-how economy we should use and analyze data on human capital more extensively. However, the reality in companies is different, as proved by the results of the survey carried out by Accenture [11] which showed that many companies do not even attempt to measure their investment in human capital. Despite the fact that the topic of human capital is very important and widely discussed in Slovakia authors [12] [13] and others deal with this issue mostly in terms of company's performance taking into account intellectual capital or innovations.…”

Strengthening the Intellectual Potential of the Workable Population as a Direction of Increased Employment

“…Following the result, you should calculate the maximum or minimum costs spent on stimulating the work of employees, which the company is willing to spend. [5][6][7][8] To test the incentive system, you need to start with a minimum and keep track of how large or, conversely, the impact of the new incentive system is useless.…”

Investments in Human Capital: Elements of Investments, Their Valuation, and the Related Financial Performance Ratios

“…The issues of measuring the value of investments in human capital are, for example, investigated by Cantrell, Benton, Laudal, and Thomas (2008), based on the case of a well-known American corporation. The gap between the economic benefits of company-sponsored education and training and the accounting and disclosure treatment of these costs is investigated by Frederickson, Webster, and Williamson (2010).…”