The measurement of the impact of Human Resources (HR) has historically been the bone of contention among the company's own specialists and managers, without agreeing, or having a criterion acceptable to all, that it is a managerial function main, capable of having quantifiable and measurable objectives and that it is possible to measure its impact objectively either at the global level of the organization or its parts, remains an objective to be pursued.
Among those who have not known or know how to do it and those who do not want to, the idea remains that it is a function that only accepts a qualitative evaluation in terms of behavior, or at most in statistical terms.
It is practically a principle of business management, especially when it comes to strategic management, that what is not diagnosed is not controlled, since the diagnosis is a new and main function of the strategic approach. And, what is not controlled is not measured either, and if it is not measured and not controlled, it is difficult to plan on objective bases, that is, decisions are also difficult, especially if it is about strategic decisions.
So that we have several problems in one, from the questioning and inadequacies in relation to the stage of development in which HR is, as a function and as an organizational area in companies; especially those that are going through and developing the stage of implementation of the Business Improvement process, that is, a process that must necessarily set qualitatively higher objectives in relation to HR as a management function.
The Institute for Labor Studies and Research (IEIT) has been carrying out a research project for two years, the main objective of which has been to investigate and characterize the level of integration of Human Resources, as well as its impact on the management of the company, and In general, there is a low or no level of integration, which places this area and the activities it develops closer to the traditional function and practices than to the new ones that need to be implemented and developed.
No es extraño oír o leer, incluso entre nuestros especialistas, que estas prácticas, tecnologías y enfoques gerenciales vienen del “primer mundo”, es decir, de los “países capitalistas desarrollados”, desde donde supuestamente “es más fácil abogar por la realización mas plena del hombre, cuando se tienen satisfechas todas las necesidades básicas”. Tal parecería que el desafío es entonces nuestro solamente; el desafío de utilizar los enfoques de desarrollo pleno del hombre sin tener satisfechas todas las necesidades básicas, dando por sentado que las sociedades capitalistas desarrolladas satisfacen todas las necesidades básicas y que también pueden lograr la realización plena del hombre. De esta manera, en la práctica se sigue haciendo lo mismo, y lo que es peor, se debilita la conciencia y la actitud de lucha necesaria para realizar las transformaciones imprescindibles.
Before talking about measuring the impact of HR on the entity's results, it is essential to make a theoretical-conceptual reflection, which is sometimes rejected or divorced from practice.
Human Resources, Labor and Capital
The scarcity of Marxist analysis and the application of dialectical and historical materialism to life and current practices, including the company and the capitalist mode of production, becomes proverbial; and above all, the concepts that concern us in this work, such as Human Resources or “people's resources”, or the so-called Human Capital.
It is absolutely insufficient to advocate, speak, define or evaluate Human Capital or Human Resources for the training and financial valuation of what it can produce or what is reverted to in the value of the company, which led to business terms and functions in the company, is often quickly and easily summarized as the selection, training and evaluation of people, functions that supposedly make it possible to raise “real capacities”, or “knowledge, abilities and skills”.
It is a simplistic analysis, which begins with wanting to equate the HR function with Human Capital, and which aims to simplify both in certain technical elements related to the training and elevation of individual competencies, eliminating or ignoring the value of the elements of social orientation of the individual, such as their values and motivations, interests and needs. In this way, both concepts are limited, without considering the group, collective and organizational capacities as part of Human Capital or Intellectual Capital, which require a certain social organization.
It is not possible to abstract from the social relationship, either outside or within the entity, and consider that the productive capacity of the workforce is caused only by training, that is, training. The socialization of knowledge, which "should be" a characteristic of the current revolution in Informatics and Communications, which, applied in the company, would effectively lead to new styles and methods of management, with the consequent non-anarchist questioning of the single square that presides over all organization, larger or smaller, more vertical or more horizontal, with more or less structural divisions, but they always all start from the first and only square at that level. Marx spoke of this or rather intuited all the possibilities, when he called "transmission of skills and knowledge from one worker to another."
The development of the productive force, the use of material and financial resources, efficiency, effectiveness, profitability, are also determined by the social organization of the production process, scientific progress and its practical application through current knowledge management.
All this, in no way can be simplified at the level of individual abilities and skills and competences, and identify this as Human Capital, as if the organizational elements that require group and collective capacities were divine elements not related to a qualitatively different treatment of HR as a management function, or defined as “people's resources”.
The configuration of factors inherent to people since the evolutionary level of "homo sapiens" was reached, such as knowledge, information, communication, technology, innovation, requires a new configuration and greater integration. The integration of HR or people's resources, requires integration of Human Capital, Structural Capital and Relational Capital, or in other terms, of capacities, knowledge, experiences, values, needs, motivations, with group capacities, cultural values organizational skills, capacity for change and organizational learning, and institutional relationships.
The previous concepts, without their own critical analysis, often lead to interpretations far removed from our ideology and our reality. It leads in practice to establish through sophisticated technology a minimum necessary training to carry out new practices with high performances, based on narrow skill profiles, which of course does not help the integral development of people, nor the development of real and potential capacities and new knowledge that allow workers greater creativity and innovation, consequently new wealth, and above all greater participation of workers in the direction and management of processes and entities, which would be the greatest wealth of all.
Already in the 60s there was a reaction and a controversy among a group of academics and philosophers about the "Homogeneity of Capital", or as the Cambridge Controversy is known, which sought to differentiate from previous economic and organizational models and theories, Labor and Capital, as inputs equally to the production process and which were acquired, of course, as merchandise.
So that the Homogeneity of Capital was replaced by the "Heterogeneity of Capital", trying to elevate the human work. But, in practice over the years and under new forms, currently, human work is reduced to the condition of accumulative capital, which is why there is so much emphasis on training and today on knowledge management, as a direct factor linked intangible assets.
This path led in later years to the Human Capital Theory, which considers work as a form of capital; consequently, Human Capital is considered as a form of Capital. It must be remembered and kept in mind that for Marxists, Capital is a social relation of production, in which work is the source and value of wealth. Work is a social process that takes place between man and nature, in the course of which it regulates, controls and acts as a mediator, thereby not only transforming nature, but modifying itself with new experiences, knowledge, skills, values.
Whatever the social forms of production, workers and the means of production are always its factors, is said in Capital, and the way in which they are combined is what distinguishes the different economic times. Marx's combination is not a simple relationship of factors, but the interrelation of those factors.
If resource is any element or factor that gives value to the company or entity, the human resource, without distinguishing people from other resources, or even considering it as a determining factor, is not differentiated or separated from any other merchandise in companies of market. So human resource is not referred, nor should it be, to the person. The worker is separated from the means of production, detached from all property except that of his labor power, instituted in capital until he himself becomes an element of capital, and Marx fuses them in a concept "separation between the worker and the working conditions".
If manufacturing radicalizes to the extreme the unity of the labor force and the labor environment, and the effective use of the means required a set of physical and intellectual qualities, the development of the machine tool makes it independent of the labor force. In other words, the means of work and the worker acquire different forms of evolution, which makes possible a different one, the unity of the means of work and the object of work. Marx says that the development of the machine tool allows the constitution of a "material skeleton independent of the workers themselves." If before the Industrial Revolution the technique was the indissoluble set of a medium and a worker, then it will be that of an object and the instruments of work, with which technology appears, or the application of knowledge to techniques.This transformation of one structure into another, or the change in the forms of the labor process that characterizes the productive forces, Marx explains as "two forms of material existence" of the labor process, that of the "unity of the labor environment and of the work force ”and that of the“ unity of the work environment and the work object ”.
Knowledge, which also leads to current levels of information and communication, also transforms the work process. The intellectual work that produces the knowledge that is applied in the work process, whose workers are not necessarily present, enables and leads to what Marx calls “socialized work”.
Today, as then, talking about the mode of production and productive forces without relating it to consumption and distribution would be like seeing one side of the coin. “Productive consumption and individual consumption of work are thus perfectly different. In the first, they act as the driving force of capital and belong to the capitalist, in the second they belong to himself and fulfill vital functions outside the production process. The result of one is the life of capital, the result of the other is the life of the worker himself ”, says Marx.
And he points out that: "In fact the worker is a possession of the capitalist class, before being sold to an individual capitalist." The appearances that make capital see how the worker advances, especially in terms of the work process, are just that, appearances.
Finally, what we are interested in remembering is the philosophy that prevailed and the policies derived in relation to the treatment of people in the work process. From the traditional conception that indicates that people dislike work, and consequently are incapable of directing themselves, with policies that are based on strict control over predetermined simple tasks, passing through school and the time of human relations that recognizes people and policies are developed that allow participation that increases worker satisfaction, until the most recent time of the school of human resources, which supposes people capable of directing themselves and as a misused resource, it needs policies that create a climate of active participation, almost a century has passed.This last approach requires addressing not only the so-called Human Capital but also Structural Capital and Relational Capital.
But, the "personal growth of the workers" as some authors call it, or rather the development of the workers, and which is supposed to be one of the main objectives of any administration, has historically not been on a par with the "growth of the organization".
Also in our society there have been imbalances, or lack of integral combination. The extraordinary educational leap and the training and preparation of workers has not always had an equal or greater impact on the economic-productive and financial effectiveness of the organization; and vice versa, the growth of the organization at the expense of "hard" technology has not achieved integration with "soft" technology, thus showing contradictions between individual knowledge and capabilities, or so-called Human Capital, and group and collective capabilities. characteristic of Structural Capital and Relational Capital. We would even say that it affects both behavior both internally or within organizations and outside and between organizations,therefore it affects the Social Capital or the relations between the institutions. Thus, the need to integrate everything related to people is revealed.
Perhaps this is an explanation and cause that the implementation of New Organizational and Management Forms, the advancement of the new style and HR management approaches has not really progressed much.
From theory to practice or the assessment of the impact of Human Resources management
To talk about quantitative indices and indicators, or the economic and financial evaluation of HR, it is enough to consult the scarce and valuable bibliography to realize the many and diverse problems that we face, only to decide and define what we want to measure and how to do it. But what is often not entirely clear is whether, when advocating for financial measurement and assessment of impact, qualitative individual, group, and organizational behavioral assessment is left aside or not. It goes without saying that both must go hand in hand, if we do not want to simplify things again.
In order not to enclose ourselves in narrow frameworks, first of all it is necessary to start from the consideration or principle that HR continues to be and is first a management function with a social and behavioral dimension, with financial impact. We are not referring to the economic evaluation of employment, that is, to the effectiveness of employment, but there is no doubt that an effective job involves the effectiveness of the HR management function.
Therefore, the elements that reflect the impact at a global level must be properly combined since HR is a present function and with an impact on each and every one of the activities and processes carried out in the entity, with specific elements that reflect certain important processes, and that together make it possible to assess the management carried out. In other words, we consider it necessary to reflect and measure the impact of HR taking into account Technology, Processes and People, factors that determine the company-system today.
Among the pioneers in the field of HR impact measurement are, among others, Jac Fitz-enzy, Wayne F. Cascio and Jack I. Phillips are required reading, to gain knowledge that make new developments possible, and which we have certainly used as a bibliography for this work.
In the last decade there have been important efforts to change the traditional vision of the HR function in the world and among us, in such a way that from a second activity and area treated as service or support, it is now considered as a total management function, connected to the vision and mission and the overall results of the entity. The aggravating factor is that the lack of financial measurement and valuation is not done in qualitative terms of conduct either, or when it is done it is as information and not as an analysis of the results of two different periods to find feasible solutions. The myth that the HR function has been measured in terms of behavior is no less than the myth that it cannot be measured in financial terms.
Then, the HR mission to promote productivity through the personal development of workers, to work the strategic approach to achieve the strategic objectives of the entity, becomes an intention without clear and precise orientation.
First of all, it is more than desirable, essential, that the specialized personnel of the HR area, when not all the specialists in the different organizational areas, since we are still far from the necessary transfunctionality and transdisciplinarity that can make it possible, should know the structure, technology, production or service processes, relationships with customers and suppliers, so that they can carry out their mission efficiently, effectively and effectively.
They must know the costs incurred in their operations in the entity's processes, among others:
- operating costs (incurred directly by the area to carry out the processes) time costs (time spent preparing and carrying out the processes) fixed and variable costs (relative to area workers) opportunity costs (the that could have been achieved by making better use of resources, personnel costs or called Human Capital (according to Cascio, FW: wages, salary and benefits of workers excluding long-term benefits, cost of justified or unjustified absenteeism, and cost of rotation from termination of employment until replacement and end of apprenticeship)
It is not usual practice among us to carry the operating costs of the area, which are hidden in those of the administration, and it is necessary to decentralize it; and the other costs the HR area. H H. she must master them as well as the economic-financial area.
The above costs include the first four direct costs of the personnel of the area, which expresses the effectiveness of the structure, and serves to evaluate the management within the area and budget for operations. The last one refers to all workers, and also expresses HR management at the level of the entire organization, since with better management these costs can be reduced, especially those of absenteeism and turnover. It also makes it possible to search for the area's personal payroll / total personal payroll relationship.
However, it is important not to get lost in a sea of indicators, similar to the statistics that are kept and that serve to exercise those who compile it to "report up" in time and space and in quantities that do not allow indications or superior orientations effective. They should be metrics that reflect the highest percent of the HR function in value added.
First of all we are going to refer to a concept used in the indices such as the ETC (Full Time Equivalent or FTE its acronym in English) that due to the profusion in many countries of the phenomenon of part-time work or less than the full time of the day work, seeks the equivalence of the payroll to full-time workers. Thus, ten part-time workers equals five FTE workers. Obviously the effectiveness of the occupation is sought, and there is no doubt that it constitutes an important index.
In our case, it could be the Average Number of Workers, as a sum of the number of workers for each day of the month divided by calendar days, from the Register of Workers. But it happens that the Registry includes all workers who attend or not, and regardless of whether or not they work for a certain reason (from the lack of materials or raw materials, or other interruptions, commission of services, vacations, licenses, state obligations, established rest regime, training courses, contracted or in provision of services, which are authorized or not to appear).
The method or Average of Workers certainly considers fluctuations over the course of the period, but does not provide exact information about the effectiveness of the actual occupation level, or the number of actually assisted workers working. And since it is about looking for an indicator that tries to combine the real occupation level with the use of the working time fund, we propose Men - Days Worked (HDT) or Effective Workers (TE), indicators widely used in previous decades in our organizations not only as statistics but in the analysis of the organization.
All the authors agree on the organizational effectiveness indicators such as Revenue or Sales Factor, Expense Factor and Profit Factor as global indicators that ultimately reflect both the structure, the processes and the people, by dividing these by the total workforce.
The Total Sales (or Total Income) / TE ratio compared to Total Sales (or Total Income / Average of workers would give us not only how the workforce is used, but how it is stopped being used; what is the income, expense or the proportional utility in the case of expenses and utility, which the entity obtains or disburses for each worker working and for each worker on the payroll.
After these global indicators there would be other important specific aspects to assess, such as the effectiveness of the Structure and Management of the HR area itself; the training function and an indicator proposed by Fitz-enzy called Added Value of Human Capital (Income- (Expenses-Salaries, Salaries and Benefits) / ETC)
A necessary clarification, and that is that the structure of the area continues to be important when the organizational approach is concerned; When it comes to a strategic approach, with a much higher level of integration between the functions, in any case indices such as investment and costs and expenses are still identified by HR.
Among a large group of indicators to measure the effectiveness of HR structure consider two that can have a major impact on our environment, and would be the Factor RH Investment to calculate the average investment per worker, and Factor HR expenses, that is, the share of area operating expenses in the entity's operating expenses.
As training indicators, in addition to the statistics of trained workers per period over total workers, or the internal-external training ratio, it is essential to know the Training Cost Factor, how much of the total HR operating expenses is allocated; and the Training Investment Factor or how much is invested in training, that is, training cost among workers.
In summary they would be:
Indicator Definition Formula
Income Factor Income or Sales Income / TE (Income / PT)
Average per Worker Sales / TE (Sales / PT)
Expense Factor Average Expenses by Expenses / TE (Expenses / PT)
Employee
Profit Factor Average Profit by Profit / TE (Profit / PT)
Employee
Investment Factor
in HR HR expenses by
employee of the entity HR / TE Expenses (HR / PT Expenses)
Expense factor
HR Participation of
HR operating expenses
In the Entity's Expenses HR Operating Expenses /
Total operating expenses
Cost Factor Average Training Costs Training Cost / TE
Training (Cost of Training / PT)
(Cost ratio
Training) Cost of training with respect to
to operating expenses Training Cost /
operating costs
Investment Factor
Training Training Investment
per capita Cost of Training / TE
(Cost of Training / PT)
Value added
of Human Capital Productivity per worker Income- (Expenses-Salaries) / TE
Income- (Expenses-Salaries) / PT
If it were true that the place and role of Human Resources, or the HR area, speaking in functional terms of the organization, were to take on real importance, the decisive importance it should have, based on measurement and assessment and the demonstration of its impact on the results of the organization, then these indicators or others should facilitate the change. But, as the saying goes "a swallow does not make a summer." Neither does the fact that we dedicate efforts and design a strategy mean that it will be carried out automatically, if in any case we do not work day by day. And the HR function is a daily task for each and every worker, for which they must prepare.
We initially talked about the importance of the social dimension or HR orientation in terms of behavior. This may not be and may not be desirable to put into formulas, but it is still necessary to evaluate permanently and systematically. Perhaps only when you have a clear vision of motivational aspects and job satisfaction; of the communication that is established at different levels and between them, from the individual through the group to the organization; of the organization of primary groups due to the importance of interpersonal relationships and cooperation; and leadership and active and effective participation of workers in the life and decisions of the organization, make real sense the measurement and evaluation of the financial impact, and talk about Human Capital.
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