This is the third article in a series around HR Capital metrics and is a the result of some interesting HR Soap Opera worthy antics that led to some in the HR community to stop an effort to define HR Capital metrics for investors. If you want to catch up to speed – here is the link to the intro article.
This article is going to focus on numbers that HR should be putting in front of executives and investors that really do matter to the business models of most companies. Think of it this way, if you are doing something great from a HR perspective that is making your human capital (your company’s assets) better in some way – then don’t you think your investors care? Don’t think of this from a risk perspective (e.g. you could lose investment) but think of it from a positive perspective – it could make your CFO and Company better due to the ability to have a great Human Capital strategy. Because here is the newsflash – the analyst and investor community are already doing it – they are just guessing. One of previous articles explain how most of a company’s stock price has nothing to do with book value – it has to do with what the people are doing.
Talent Attraction: Does your company have access to talent as you need it!
Do you have a good new hire strategy that is resulting in faster time to fill? Are you faster than competitors? Imagine this during a earnings call…
If you are an R&D Company:
“One of the strategic initiatives that company XYZ has is making sure our competitive advantage is maintained by continuing to attract and recruit world class engineers. As a result, we have continued our college recruiting and researching funding intiatives, and as a result, our time to fill on key new engineer positions is less than 45 days. As we continue to open up new areas of R&D, this ability is key to our success.”
If you are a global Company:
“Company XYZ is very excited about opening up sales in the new Middle East market. Project sales are XYZ Million based on projections, and one reason that we think that is a reasonable expectation, is that the HR department spent six months making sure we have an employer brand and talent acquisition process that works effectively in the Middle East. We do not want to have short term sales gains, and then not be able to support those sales from a hiring perspective in the region. Our current numbers are showing we getting high enough candidate flow that our time to fill in the Middle East is 90 days, and this is more than sufficient to support our growth projections.
If you have a great employer brand, great sourcing, great technology, great college recruiting, great alumni relations – basically anything in play that is giving your company faster access to talent – then you should be getting this to alert your investors as to why you are a better investment than your competitors.
Productive Talent: Once you have the talent – what happens?
From an investor perspective – what makes your utilization of human capital better? Are they more efficient and/or productive than other potential investments. Again, imagine some of these earning calls:
If you are a retailer or large basic manual skill operation
” One of our strategic efforts was to make our employees as effective and productive as possible, as soon as possible. Based on our internal analysis, we have been able to reduce the time from 2 weeks to 2 days- to make the employee 100% productive. This was the result of more efficient preboarding, onboarding and training delivery for new hires. Based on the projected seasonal hiring plans this season – this will save us ten days of payroll for individual which will bring XYZ to the bottom line this season.
If you are a business services or consulting shop:
” Given the caliber of individuals that Company XYZ attracts, our corresponding salary cost is also high. As a result, a crucial operating metric for us is time to revenue generation for the employee. Given the breadth of our company, this ramp up period for employees to learn what we do, how we do, and how to bring that to the customer can be daunting. However, based on a new mentoring program that we launch, our time to revenue generation for employees has gone from 90 days to 60 days. Given the base numbers of this strategic initiative – we expect to see 50 Million in one time sales due to the time shifting of the sales, and 20 million to the bottom line in expense reduction due to Salary coverage.
Lastly: Are you controlling your Human Capital Risks:
Candidly, I think this is an area where a great CHRO and CFO partnership could become very dangerous to competitors! If you are a risk (e.g. flight risk, turnover, medical expenses, etc.) that you have done something amazing with – and you know your competitors are dealing with the same risk – then broadcast what you are doing! Watch their earnings calls become fun. The key is – remember the analysts work by sectors – so if they are on your calls – then they will be on you competitor calls. Here are some examples:
Retirement Risk for Engineers:
“In the Oil and Gas Industry, the average age of engineer is 55, and at our company we are close to this average. While the material impacts won’t be felt for 3 to 5 years of this retirement curve, we do believe that unless our company takes serious action – that this could become a material issue. As a result, we have put together a comprehensive team to identify the risk areas, and develop specific approaches to make sure the next generation of engineers are prepared to take the healm. While we will continue to watch this, we are please to announce that our next generation of engineers are 90% as successful in finding new exploration areas.”
Conclusion: But shouldn’t we be humble and/or are we giving away our secrets and/or competitive advantages?
First of all, the CHRO is the most ignored position in the earnings releases, and SEC documents. Consider the following:
CFO – tons of financials
CIO – IT Capital spend, Capital projects, ERP projects
Procurement/logistics – Total on hand, warehouse square footage, number of inventory turns!
Real Estate – Long term leases, lease backs, tax savings
HR – Medical, pension, and Headcount
Think of it this way – if you in HR are excited about an area that you are doing – then it is likely your POTENTIAL investors would too.
How would you like to eventually to see the following in an analyst report- “Company XYZ has implemented a number of very Signifigant Human Capital projects and as a result, we are raising their target price by $2 and moving them from a Hold to a Buy.”