Employees are the foundation of an organization. The core of all employee-related matters is the human resource department which conducts activities such as recruiting, onboarding, explaining HR policies and improving career development that leaves a huge impact on a company’s success.
HR management software has an influence on almost every part of an organization’s financial performance both directly as well as indirectly which can leave a profitable effect. But this can be difficult to prove, as employee power is a case that is seldom measured.
Now things have started changing and HR departments which are skillful at conducting employee analytics are increasing profits as well as their own reputation. They are doing so by explaining and calculating the impact of the employee on financial performance.
Here is how you can calculate the human capital which most people see as an insubstantial asset.
Calculating the Power of People
It is a given fact that employees are an inherently measurable asset. Not all factors of human capital can be calculated or measured. But today, technology is offering numerous models to recognize sources of generating value in employees.
Though not all aspects of the human capital can be measured, time and technology are providing sophisticated models that can identify sources of value generation in the workforce.
For measurements to be effective in terms of assessing the value of people, it must be forward. Financial forecasting in any business considers the likely future commercial impact of strategic decisions.
Ability to demonstrate the business impact for operations like recruitment drives, redundancy programs, or learning and development campaigns, can be extremely valuable for the HR department.
But the measurements should be in accordance with your organization. You must identify the information about the people with the best ability for tackling your biggest business hurdles. You must also work out how to extract this data from your systems.
Stronger Connection between Finance Team and HR
In order to make HR measurement a great success, there must be a close relationship and connection between the finance department and HR. It is only then; one can completely access the effect of human capital on profits. So, it is better to provide your finance department access to human resource management systems.
Also, you can appoint a finance analyst to work with the HR team who can oversee the human capital data and will likely turn out to be an influential figure for both the teams.
After analyzing the relevant data, the HR department must proactively hand over these measurements to the senior executives and explain the implications of the data and how it will be useful in case of key HR strategies and programs.
The Bottom Line
Few organizations are measuring human capital wisely and clearly whereas some do not do it at all. In today’s economy, organizations require the complete picture of how financial success and profitability is impacted by human capital and to do so, they need to link measurement programs to business goals, implement ideal analytical systems and processes, and function along with the finance department to ensure a streamlined approach.