Return on People Investment- Key to Organizational Health
Date: Monday , October 01, 2012
HP (NYSE: HPQ) is a technology company founded in 1939 and is headquartered in Palo Alto, California. The company provides infrastructure and business offerings spanning from handheld devices to supercomputer installations. HP India Sales operates as a subsidiary of HP. where Sailesh Menezes heads HR for HP India Sales Pvt Ltd and is responsible for people strategy, engagement & development, employee relations and talent management for the India business.
The concept of "Return on Investment (ROI)" has always been considered a financial metric; a metric that measures the solidity of an organizations investment philosophy, be it business or capital. It is rarely heard off for an organization to continue to invest in so called dead investments or those without measurable returns. Then, why do we still have a different approach when it comes to investing in our people? Is it because every people rupee or dollar is more often considered an expense, rather than an investment?
The value a share holder places on an organization is based on a number of different factors including revenue and profit. But that premium is not just restricted to financial parameters alone, rather to certain intangible factors related to the future potential of an organization and chief among them is the quality of business leadership and the perceived return on people investment.
We are in an era characterized by scarcity of resources and an abundance of knowledge. Measuring and analyzing a return on people investment can improve an organizations performance, identify optimal areas for investment and drive organizational effectiveness. However, before we begin to do so, we would first need to re-position our people investment strategy.
Organizations have for long, encouraged a socialistic ethos in the allocation of scarce resources to its employees. This widely practiced method is because of its ease and ones inert desire to please all. However, for any organization that harbors an intent of driving industry leading growth, one would need to create strongly differentiated people programs that will help allocate precious people dollars to employees with the highest ROI. So, how does one measure a return on investment made in each employee?
First and foremost, we should learn to recognize that every investment we make in our people has a dollar or rupee cost to it that goes far beyond just compensation. Precious monetary resources are also used in driving excellence and in supporting an employee’s career aspirations. These are funds that could very well have been used in product development, R&D or new business generation. Hence, if we have chosen to invest this in our people, there should be a measurable return.
Like any type of financial investment, investments in People can also be measured and at a broad level through:
Alignment to organization vision - business strategy, people, customers and brand.
Alignment to organization culture - belief & advocacy of organization ethos.
Alignment to organization goals - current performance and future potential.
Some of these are simple and straight forward to measure like in the case of performance, while others would need a stronger understanding to ascertain a holistic perspective on each employee and to quantify employee effectiveness.
For effective measurement, a combination of tools and metrics would need to be used including high-potential assessment tools, performance and productivity ratios and a 360 degree feedback analysis, but the end result is worth the effort involved.
The return on people investment is one of the most important effectiveness metric available and probably the most important key to any business. By measuring this, one can design effective key talent programs that will help allocate maximum investments to employees with the greatest ROI. This not only maximizes returns, but also ensures that the organization retains talent who are key to its future. On a broader level, changes in annual return on people investment and financials will reflect the true direction and health of any organization. |