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Linda Bilmes is a former assistant secretary of the US Department
of Commerce. She takes up a teaching post at Harvard University's
John F. Kennedy School of Government in January.
The "people scorecard" aims to measure how well companies
manage employees It uses a set of criteria that can be tracked and
quantified. This helps overcome the problem of companies neglecting
human capital because it is difficult to measure and the benefits
of people strategy take time to emerge. However, there is growing
evidence to link company performance and people management.
An analysis of 200 companies in the US and Germany showed that
those that scored highest had a higher total shareholder return
than lower-scoring companies.
Further, scores varied wildly.
Third, people-factor benefits take time to emerge. Over four years
and longer, a pattern becomes clear, with those companies scoring
highest on the scorecard enjoying strong performance versus their
competitors. But people-factor companies sometimes forego short-term
profits in pursuit of longer-term success. Fourth, companies with
high HR scores but low scores for "intrapreneurship" do
not have superior stock performance. So, HR should reinforce and
foster entrepreneurial opportunity.
A company that does well on all parts of the scorecard seems to
translate that into better performance through a more contented
and loyal workforce. Features that most increased job satisfaction
were: allowing people to influence decisions that affect their work
life; training; and performance-linked pay.
Similar factors increased employee loyalty. Employees who agreed
with the statement "My company makes it easy for me to put
my ideas into practice and to get credit for it" were twice
as satisfied, and twice as loyal to their companies, as those who
disagreed.
However, a huge gap exists between what companies thought they
provided and what workers believed they received. For example, 71
per cent of respondents listed "I am able to influence decisions
that affect me" as "very important" - but only 34
per cent of employees agreed that they could do it.
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Eight steps
Superior stock market performance and the powerful effect on
employee morale together create a powerful case for the scorecard.
Moreover, the fact that so many workers feel they do not receive
people-factor benefits reveals the size of the opportunity. Companies
can begin to create an emphasis on people by following eight basic
steps:
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Top-level commitment.
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Workforce development planning.
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Develop versatility.
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Training.
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Retain good workers.
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Structure work so that people enjoy it and to foster intrapreneurship.
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Reward success.
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Communicate the people factor.
In the current economic climate, managers preoccupied with short-term
returns from cost-cutting often run against the grain of the people
factor. Companies with the foresight to see beyond immediate difficulties
will emerge from the downturn with renewed strength.
This article is drawn from the author's book The People Factor,
which will be published by FT Prentice Hall in 2002.
This summary is part of a longer article which can be ordered
through back issues of the series (£3 each UK and Ireland;
£4 each continental Europe; £5 each rest of world)
from Remember When by telephoning +44 (0)20 8763 6363, faxing
+44 (0)20 8668 0380 or emailing ft@remember-when.co.uk.
The book of Mastering People Management will be published in June
2002 by FT Prentice Hall. Other Mastering books can be ordered
at +44 (0)1279 623928 or by visiting www.business-minds.com.
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