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Human Capital ManagementHuman Capital Management

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Introduction toIntroduction toHuman Capital ManagementHuman Capital Management

The only vital value any enterprise has is theexperience, skills, innovativeness and insights of itspeople. The success of any company will depend onits ability to understand how human capital links toits performance and its wealth.

The most competitive companies will have the beststrategies and methods for attracting, hiring,managing, developing and retaining top performingtalent.

Managers need training on how to apply humancapital management (HCM) principles and methodsto business strategy and performance.

Today, we are going to learn about several new

management tools and how others are using themto reach their business goals.

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Major Contributions toMajor Contributions to

Human Capital ManagementHuman Capital Management 1986 The Know-How Company Karl Erik Sveiby

1997 The New Wealth of Organizations Thomas Stewart

2000 The ROI of Human Capital JacFitz-Enz

2001 The Human Value of the Enterprise Andrew Mayo

2002 Corporate Longitude Leif Edvinsson

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Principles of HumanPrinciples of Human

Capital ManagementCapital Management Theres a floor to cost reduction but no ceiling to value

creation.

Find the key points of leverage for increased profits.

View your human capital as a value-producing asset instead

of a cost to be minimized, reduced, or reined in. New management tools now exists to help you analyze how

key outcomes such as productivity are affected over time byhuman capital attributes and practices. These tools helpyou predict the return on your human capital investments.

Identifying and focusing on whats important will drivevalue.

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A business strategy that links thecompetencies, motivations andsatisfactions of its employees directly withdrivers of value for customers, which inturn drives profitability for the enterprise.Human Capital decisions are guided bydata-driven, results-oriented planning andaccountability systems. The keys to asuccessful HCM strategy are process

efficiencies, effective use of informationtechnology and business metrics

Human Capital Strategy

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Recruitment

Coaching &

Mentoring

HumanAsset Profiles

CareerDevelopment Plans

CoreValues

CoreCompetencies

PerformanceImprovement

SelectionHumanCapitalStrategy

PerformanceManagement

Revenue

PerEmployee

Cost PerEmployee

Profit PerEmployee

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Activities of HumanActivities of HumanCapital ManagementCapital Management

The quality and performance of our people is what sets us apart inan intensely competitive market!

Recruiting and hiring the best available talent Developing and motivating people to reach their

fullest potential Retaining talent (and the investments made in them) Minimizing risk and cost on the human side of the

business Designing talent management information systems I

mplementing performance based compensationsystems Developing your Employer of Choice Brand Designing coaching and mentoring programs Applying performance management technologies

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Finance DrivenFinance DrivenBusiness ModelBusiness Model

Money Drives Value - Budget Driven!

Focus on tangible assets

Valuation of physical and financial assets Use decision criteria for physical capital investments

Manage costs

Focus on the past (cost measurement)

People are treated as expenses and salary costs

Focus on present cash flow Focus on fixed budgets and periods

Focus on short-term profitability

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Human Capital DrivenHuman Capital DrivenBusiness ModelBusiness Model

People Drive Value - Event Driven!

Focus on tangible and intangible assets Valuation of physical, financial, human and structural assets

Use decision criteria for knowledge and human capitalinvestments Process and customer cost focus Focus on the future (value creation measurement) People are treated as expenses and investments Focus on present cash flow and future revenue streams Focus on dynamic budgets and revenue streams Focus on short-term and long-term profitability, added-

value and sustainability

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Talent Management

Identifying mission-critical values,competencies and talents needed in the current andfuture workforce. Clarifying the methods that willbe used to recruit, hire, develop, manage and retain

a high performing workforce.Performance Culture

A diverse, results-oriented, high performanceworkforce, with a performance monitoring system

that effectively differentiates between high and lowperformance and links individual / team /departmental performance to organizational goalsand strategic objectives. Compensation is directlylinked to performance.

HCM GlossaryHCM Glossary

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HCM GlossaryHCM GlossaryHuman Capital

The sum of a company's employees includingtheir skills, competencies, talents, creativity andknow-how. Within each employee is theknowledge the company seeks to utilize.

Intellectual Capital

The sum of a company's ideas, inventions,technologies, knowledge, computer programs,patents, trademarks, designs, methods, systems,processes and publications. When codified,defined, written or committed to media form, thecompany's intellectual assets can be moved,leased, or sold. When these intellectual assets (IA)are legally protected we call them intellectual

property (IP

).

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Structural Capital

The sum of a company's tangible assetsincluding financial assets, buildings,machinery and equipment, manufacturingfacilities, distribution channels and salesoutlets.

Customer CapitalThe sum of a company's customers

including their names, contracts, contact

databases, loyalty, satisfaction, references,testimonials and future revenues.

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End of Unit 1

Thank you