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The next frontier for EPM

24th February 2009 > ITWeb

 

Human capital must be made part of the enterprise performance management suite.

 

Every organisation in the world depends on three pillars for its success: process, technology and people.

It is pretty much common cause that most organisations have their process and technology taped. The work done by Big 5 and other consultancies over the last two decades has seen to that.

In particular, the consultancies have applied the precepts and principles of business process management and enterprise architecture to make sense of their processes and technology, respectively.

Which brings us to the third pillar of organisations: people. Two axioms suggest themselves: People are the lifeblood of any business; and people are the greatest cost centre of any organisation.

 

Human capital


It was the father of capitalism, Adam Smith, who first coined the term "human capital”. He identified four types of capital that comprised a company's fixed assets: 1) useful machines, instruments of the trade; 2) buildings as the means of procuring revenue; 3) improvements of land; and 4) human capital.

Ironically, most companies implementing an enterprise performance management (EPM) suite will focus on the first three, while ignoring the final one. Yet human capital has much that needs to be managed and measured, and if it is not made part of the EPM suite, it will undermine the overall value delivery.

People provide the business with some of its leading, rather than lagging indicators. As happy customers are a consequence, in part, of happy employees, employees are a critical leading indicator to the performance of any company.

In making human capital part of the overall EPM process, a company should look to answer questions such as these:


  • Is there a detailed, rigorous process and structure for human capital? It should include an organisational chart, job descriptions, selection process, regular performance appraisals and comprehensive evaluation, training schedules and reward and recognition.
  • How many employees do a company have, by position? Are they ideally deployed, and are there critical positions vacant?
  • Are employees productive in their specific positions? If not, why not, and what can be done to amend the situation?
  • Are employees focused on critical metrics such as quality and delivery on time?
  • Are the employees happy, and can the company judge what constitutes happiness? To quantify this, it's ideal to conduct regular employee satisfaction surveys – at least twice a year.
  • Are customers happy with the company's employees?
  • Employees expect feedback – in all likelihood it was promised to them. Is this being delivered in line with this expectation?
  • Are employees being properly trained? Is their training in line with SAQA requirements? Is the company claiming back the input costs? (Tip: Companies are almost certainly losing many thousands, if not millions a year, through not claiming against the training levy.)
  • Does every employee have a growth path? Has this been identified, or are there square pegs in round holes?
  • Are the selection, identification and recruitment processes scientific? Are they traceable, answerable and auditable?
  • What progress is being made towards BEE targets, across the multiple pillars of the Codes of Good Practice? What is BEE returning to the business, if anything?
  • Given that people are the greatest cost input, does the company know its staff attrition rates? Does it know why employees left? Is there a pattern, and given the cost of people, can the company identify a commonality in why people left, and could it have persuaded them to stay?
  • Are staff members easily able, and with some degree of automation, to report via the Balanced Scorecard?
  • Can productivity be measured, such as sales and profit per employee, gross margin per employee and margin per hour worked? Each of these provides a good metric for an organisation's productivity.

 


Chances are the company is like most others, and it will not be able to answer these questions in the affirmative. If this is the case, a business would be well advised to consider implementing the human capital-centric components of an EPM suite.

It will close the loop that links the process, technology and people, and ensure human capital benefits from the integrated, single-version-of-the-truth management process that is EPM.