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Collapse Mark as Unread RE: M1_A2_Discussion Dr. KEMP Email this Author 9/12/2016 6:46:02 PM
Tracey, your paper suggests that HR can come from very informal and trial and error backgrounds as well as begin to develop into an organization and function that when tied together is greater than the sum of its parts. How does the article below show you how this can happen? Well written. Dr. K.
SHRM
WHITE
PAPER
APPROACHING A METRIC OF HUMAN CAPITAL SYNERGY
By Dr. Janice Presser
February 2006
In order to fully value human capital, we must go beyond the view of human effort as purely individual. We, humans, affect each other profoundly, and it is the way we affect each other that determines our value to our organizations. And, it is the way that strategic human resource professionals bring this understanding to the fore of their organizations that determines HR’s value at the senior management table.
Traditional assessment metrics have been focused on the individual’s personal qualities, generally characterized as “strengths” and “weaknesses.” It has been a relatively simple matter to apply these measures, calculate variation and then rank employees in terms of whatever is perceived as the most desirable strength. However simple this may be to calculate, it is also, unfortunately, dependent on an overly simplistic view of human productivity.
As human resource professionals, who are also behavioral scientists, we are looking at an entirely different metric, what we call a metric of human capital synergy, which we will define as measurement of the effect that happens when we put the right people together.
Synergy is most simply understood as the effect we see when the whole of something is more than the sum of its parts. We know that phenomenon of synergy occasionally happens with people. When it does, the curious among us are eager to know how and why it happened so we can replicate it at will. It is easy to assume that the reason for this is a team of superstars, so we valiantly try to recruit a competitor’s best people to put with our own best, often overlooking the bad examples of superstar teams. Consider all-star sports events: rarely does one see magic in their plays. With each team member playing the identical role on his or her home team, there is much jockeying for position and no guarantee of success. Then what is the metric of human capital synergy?
To understand how we can measure human capital, it is first necessary to understand the nature of measurement. Measurement is simply a matter of making a comparison between some characteristic that you want to quantify and a standard. Many characteristics that we want to measure are physical, such as length or weight or speed. But what if you want to measure something more complicated, such as color? It is fairly easy to put color into broad categories. Anyone with normal color vision, for example, will have no difficulty classifying a red block, a green block and a purple block. But what do you do when it becomes a question of a reddish purple or a bluish purple? How blue does it have to be before it stops being purple and is considered blue? Even more importantly, when your spouse sends you to the store to buy three gallons of “nice blue paint” for the dining room, how do you decide what is “nice”?
Measurement of color illustrates the fact that measurement is not always a simple, quantitative method, a direct count of how many units of the standard are in the object to be measured. Instead, some attributes lend themselves better to what is called qualitative measurement. There is nothing wrong with using qualitative measures, and in fact, there are some extremely sophisticated techniques that have been developed for performing mathematical analyses of qualitative measurements. Clearly, a qualitative measurement is required when it comes to measuring people in terms of their internal characteristics that, when combined together, contribute to the wealth of an organization.
Consider the many breeds of dogs. When people think of a generic dog, they tend to think in terms of the one they know, generally a popular kind like a German shepherd or collie. A breed that is unusual in appearance, such as a dachshund or a bichon frise, is often seen, especially by people who are not familiar with the breed, as somehow less “doggy.” “Dogginess” is a good example of a qualitative measurement. It is not solely a matter of opinion but of our agreement on how close one example comes to the standard. This agreement may vary strongly between cultures, and this enhances the value of the qualitative measurement. Since there is no absolute standard of “dogginess,” there is room to adjust to the norms of any group. So it is with human capital because, as human resource professionals know well, personal characteristics that are valued highly by one organization can be deemed commonplace, or even undesirable, in another.
To qualitatively determine the value of human capital, it is necessary to consider both what the employee can produce in terms of sustainable wealth and the costs associated with that employee. Some of these factors are easily quantifiable, such as salary, taxes, benefits, office space, equipment and supplies. Other factors are not as easily quantified, such as fit. For example, suppose we add a new employee to an assembly line, paying her four times what the rest get because of her superior credentials and excellent skills. Then we learn that she is so bored that her productivity is a mere 20% of her colleagues. Clearly, this makes no economic sense. But suppose we take that same employee and send her up to the computer room to program the accounts receivable where she brings the system up to date, causing a dramatic rise in collections. Now it makes economic sense. The challenge is that part of the employee’s value is not only his or her fit with work performed, but also the alignment of the employee’s behavior and style with the rest of the organization.
All of these factors, including the employee’s knowledge, experience, personal characteristics and style, go into determining the capital value of that employee. Employee’s knowledge and experience are fairly easily determined, and their value is well established by the marketplace. That does not determine what the capital value is though, nor does it allow measurement of the rest of what will determine the capital value. That is the metric of synergy.
Metric of synergy takes into account the employee’s style and manner of approaching the job and encompasses such components as his or her general qualities, communication, teamwork, motivation, initiative, analytical style, adaptability, self-confidence, special strengths and potential. Knowledge and skills are required to do a job, but the metric of synergy is what determines if the job will be done well and in such a way as not to cost more than it is worth in added problems to management. Metric of synergy is based not only on the intrapersonal resources but also on the interpersonal resources of the work team. It is here that we can determine the value of human capital and, once we understand it, nurture its growth.
A high level of intrapersonal resources is not difficult to spot once you have been able to observe someone over a period of time. You have undoubtedly, at some point, encountered a relatively young man or woman who has a certain presence that gives you an impression of someone much more developed and mature. There is poise and confidence, and they demonstrate by their work that this is more than mere appearance. They are simply very good at what they do, they can work well with others, they give the impression of a deep and satisfying confidence that is beyond their years. There is a quiet sense of capability that is carried out effectively. Naturally, we also see the opposite—the employee who constantly disappoints us with immature, ineffective, even unethical behaviors. These are frustrating to deal with—while we may be able to tolerate this behavior from a tired toddler, it becomes a source of constant irritation when it is part of our daily experience with a cranky, disgruntled, childish employee.
Interpersonal resource level is difficult to observe unless you have a very long time to watch. It is present in creative teams that soar—the kind that solve thorny social problems or invent new, life-altering products. You may have experienced it yourself when you worked with someone who you simply meshed well with. This was someone who was able to “fill in” and demonstrate his or her strengths where you were weak and who allowed and encouraged you to fill in with your own strengths. This meshing is a large part of what is described as team fit. In contrast, in a team of people who have a lot of intrapersonal resources and capability, but who do not allow themselves to fill in for each other, there is probably too much overlap of strengths and weaknesses, which creates the undesirable combination of too many people doing the same thing and too many things left undone. Teams like this are often marked by constant clash. Alone, each individual may be an excellent employee who does a fine job, but together they do not work well. This lowers the metric of synergy as well as return on investment.
There are three dimensions of the metric of human capital synergy. First, and most important, is the person’s predominant, overarching style or approach—what we call the individual’s role. Second, there is the question of flexibility. Can your human capital do what is required or demanded in a relaxed and effective manner, even under stress? Are they too rigid and fixed on “one and only” way of approaching a work situation, regardless of the demands of the project? Are they so burdened with internal conflict that they seem to behave randomly most of the time? Third is the level of endorsement, or how empowered someone is by circumstances. Endorsement can be imposed externally, by necessity, to meet the demands of the organization. It can be internally driven, subjectively experienced as the “real me”—or it can feel like a mission.
These factors drive the qualitative measure of human capital and its growth and development. As with financial instruments, if you make a good investment, the stock is likely to grow in value as the company grows in value. It is not necessary to invest more in the same stock. So how can you apply the metric of synergy to achieve the same with human capital?
We want a higher level of intrapersonal and interpersonal resources to be more effective in solving the ongoing flow of problems that are the lifeblood of any organization. In the past, the focus has been on having one person, with more or less assistance from others, work out a solution. Occasionally, the assignment is turned over to a committee where lots of people can fumble around and try to work out a solution, more or less at random. Yet with a work team, which differs from a committee in the same way an ad hoc group of players differs from a sports team, we have the charge to put together a high metric of synergy grouping, carefully sculpting it to ensure that all major roles are covered and that team members are capable of playing in the same league. We know that the addition of a star player can do a lot to motivate and improve the playing of the whole team. But suppose you added a top professional baseball pitcher to a fifth grade school team. What effect would this have on the rest of the players? Most likely, after the initial excitement wore off, there would be a tendency among other players to slack off since they would assume that the burden was taken by the professional and there was little need to try. This would be an excellent example, albeit unrealistic, of a bad fit.
Keep in mind that on a sports team everyone does not do the same job. Rather, there are specific areas of responsibility and duties that each player performs, and he or she does it in a manner that supports others. There is usually some overlap so that each player can get help if needed, but each has a specific area of responsibility and, on an effective team, trusts the rest to handle their areas. When they are all playing in the same league, there is shared work ethic, values and corporate culture to provide a medium for the enhanced communication that makes the high functioning team a virtual creativity factory.
This suggests, quite correctly, that fit is the key to increasing human capital. However, fit is a very complex issue. It is not enough to simply randomly add an employee with a high level of resources—internal and external, intrapersonal and interpersonal—to an existing group. What is needed is not only an employee with the correct, needed role for that particular team, but also one who can help each teammate enhance his or her resources.
Imagine a powerful bulldozer parked on a construction site. Its potential power is enormous, yet it just sits there and does nothing. The driver gets in and gets ready to begin to move earth, and it still sits there doing nothing. Then the key is inserted in the ignition, the driver turns it on, and the machine roars to life. Regardless of the potential of the machine, it could not move until that one tiny piece was added. At the end of the day, the driver turns off the machine, gets into an SUV and inserts the same key. Nothing measurable happens. There is no value. The metric of synergy remains at baseline.
Getting the bulldozer or the SUV to roar into action is not a matter of just any key but of the correct one. So it is with achieving human capital gains. It requires, first of all, a team of employees with intrapersonal and interpersonal resources—good potential, just like an undervalued stock. Then it requires the right mix of roles to give employees the fit that is essential to enhance growth potential and a high level of endorsement by themselves and senior management. And then, just as with a stock, you step back and let them go. You put the right people together and watch the magic happen. This is the new charge of the strategic HR professional.
Dr. Janice Presser is the chief executive officer of The Gabriel Institute, a professional services company that provides clients with a role-based assessment tool that is used for pre-employment screening, enhancing performance and preventing workplace conflict. She serves on SHRM’s Human Capital/HR Metrics Special Expertise Panel and welcomes contact from SHRM members at [email protected].
