In an article in Harvard Business Review (March 2004) titled “How’s your Return on People?”, Laurie Bassi and Daniel McMurrer report their research showing that publicly traded companies that spend about twice the norm on employee training and education, outperformed the S&P during the years 1997 to 2001, and then again in the period from 2001 to 2003. They wrote that their study is in line with…
…a growing body of empirical research showing that organizations that make extraordinary investments in people often enjoy extraordinary performance on a variety of indicators, including shareholder return.
Bassi and McMurrer published another article ("Maximizing Your Return on People") in HBR in March 2007 summarizing their studies of human performance factors that predict organizational performance. They wrote:
When we researched the key HCM [Human Capital Management] drivers of organizational performance, we found that most traditional HR metrics—such as employee turnover rate, average time to fill open positions, and total hours of training provided—don’t predict organizational performance.
According to their studies, key HCM practices that do predict organizational performance include among others: managers eliminate barriers, provide feedback, and inspire confidence; work is well organized and taps employees’ skills; job-related information and training are readily available; high performance is expected and rewarded; employees have formal career development plans; and leaders demonstrate that learning is valued.
Through these two articles, Bassi and McMurrer have made an important contribution to improving performance of people and organizations by offering valuable tools for measuring HCM. However, missing is an explanation of how and why these indicators make a difference in each organization. I think we have to look to stories for an understanding of the link between HCM and increasing or decreasing performance. We need to create narratives around the actual events that link a specific management practice to high performance and then to improved strategic outcomes in an organization. We know there is a link; now we need to explain that link.