30 May. 2013 | Comments (0) Share Follow @Conferenceboard
In the New York Times bestseller, Made to Stick, authors Chip and Dan Heath recall the story of the 1992 presidential election when James Carville struggled to keep the Clinton campaign focused on a few key principles. To do such, Carville wrote three phrases on a whiteboard for all the campaign workers to see. One of the phrases on the impromptu list was: “It’s the economy, stupid.” This message would become the core of Clinton’s successful campaign.
The Heath brothers included this story in their book to emphasize the importance of finding the core of an idea to satisfy the first Made to Stick test – Simplicity.
As I observed in the blog, Human Capital Analytics: A State of Chaos, human capital analytics (HCA) is in its infancy, struggling to coalesce around an approach that gains widespread support in the employer community. Numerous constituencies in the HR world have developed sets of HR metrics, approaches, and continuums – only adding to the chaos. Due to the level of complexity of most approaches and lack of a cohesive order, the promise of HCA has, consequently, yet to be fulfilled, or “Made to Stick.”
In that blog, I also suggested it is possible to have a sense of order in HCA that is both cohesive and comprehensive. In subsequent blogs, I’ve indicated that this can be achieved by:
- Treating the financial capital spent on human capital as an investment, rather than an expense;
- Isolating the investment in human capital, as described in Human Capital Investment: Driver of Enterprise Value; and
- Measuring the ROI of the investment, as described in Human Capital ROI – The Holy Grail or Human Capital ROI: Measuring Value-Added Formulas.
Returning to the wise counsel of the Heath brothers, if HR wants HCA to take hold and stick in their organization, it must focus on the core of the idea – return on the human capital investment. From there, we can build-out a cohesive context for HR metrics.
So, the human capital analytics corollary to Carville’s phrase, “It’s the economy, stupid,” is: “It’s the human capital ROI, stupid.” This is the metric that is the core of the human capital analytics idea: It is simple to comprehend, and it is responsive to both the CEO’s and the board’s needs.
Turning to Revenue
As we observed in an earlier blog, Human Capital Analytics: Foundational Concepts, companies invest in human capital to drive both revenue and profits. My next blog will focus on approaches to measure the revenue driven by human capital.
View our complete listing of HC Analytics blogs.