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Human and Organizational Development Making the right investments in people By James M. Benton, Susan Cantrell and Meredith A. Vey Implementations of the Accenture Human Capital Development Framework have identified the areas of human capital investment most likely to produce the greatest financial return.
Imagine owning a car and been a hunch is now a fact: Organiza-
confidently extolling the virtues of tions that put people first finish first.
gasoline—but without the benefit of
a gas gauge, a means of determining One important focus of Accenture’s
fuel efficiency or any way to tell continuing research into the charac-
a bad engine from a good one. teristics of high-performance busi-
ness has been the mastery of key
Curiously, corporate management business functions or competencies,
often takes a similar view of its including human and organizational
employees: Although executives reg- development. (For related articles, see
ularly affirm the importance of their Outlook, June 2004.) This research
people to overall business success, indicates that companies that master
few companies have in place any human performance processes and
systematic way to measure their total programs get maximum performance
investment in human capital assets, from their employees.
the return on that investment and
which areas of that investment are Best practices
most likely to produce an increase Although companies can spend any-
in overall business performance. where from 25 percent to 45 percent
of their revenue on human capital,
To be sure, measuring the effective- most executives feel that they have
ness of human performance is a no definitive way to justify their
more complex proposition than tak- belief that better human capital man-
ing your car to a mechanic. But if agement pays off in better business
human capital management is not performance. As a result, executives
automobile repair, neither is it are unable to clearly prioritize these
magic or art. Last year, to help bring investments based on the business
needed rigor to the management of value they’re likely to yield. Even
organizations’ people assets, Accen- more frustrating, few executives have
ture introduced its Human Capital the knowledge they need to develop
Development Framework. The frame- insights into how different kinds of
work is a diagnostic approach to human capital management actions
assessing human capital capabilities and programs affect overall work-
and the processes that drive them, force and business performance.
ultimately linking human capital
assets and approaches to overall The Accenture Human Capital
business performance (see “How to Development Framework uses best
boost your workforce performance practices and Accenture’s experience
ROI,” Outlook, May 2003). in the fields of human resource
development, learning and knowl-
Based on analysis of the initial imple- edge management, and workforce
mentations of the framework with productivity, and then combines
a group of 19 organizations around that information with state-of-the-
the world, Accenture can now defin- art measurement techniques. The
itively identify a set of particular framework is unique in that it helps
human capital processes where organizations do more than look
investments have been shown to at spending levels to get a sense
help businesses achieve high perfor- of the effectiveness of their human
mance—both in terms of superior capital development efforts.
workforce performance and in terms
of bottom-line business results. In The framework draws on informa-
other words, what had previously tion from surveys and interviews,
66 www.accenture.com/Outlookas well as on hard human resources
and financial data, to enable a more
key human capital capabilities and
drivers of financial success like inno-
Organizations with
rigorous and reliable assessment vation and customer satisfaction. more mature or
of the true effectiveness of each
human capital process and capabil- Results from our analyses were effective human
ity. With the framework, an organi- conclusive and provocative.
zation can better assess its core We have found that: capital processes
human capital capabilities, such as
leadership, workforce performance 1. There is a strong and powerful have better financial
and talent management; identify the link between the maturity of
human capital processes that will an organization’s human capital
performance than
likely improve those capabilities; and processes and its overall financial
then prescribe the specific process performance.
organizations with
adjustments that will improve the less mature processes.
capabilities and, as a result, overall 2. Companies can, in fact, focus their
business performance. human capital investments in sev-
eral key areas that are more likely
Conclusive and provocative than others to produce better finan-
The Accenture Institute for High cial performance. Specifically, our
Performance Business, in partnership findings affirmed the importance of
with SAP as well as with our Human
Performance service line, implemented • Human capital strategy: processes
the framework in 19 organizations that align people initiatives with
around the world, representing a vari- overall business strategy.
ety of industries. Implementations
involved collecting data on all four • Work environment: processes
areas of the framework: human capi- that provide employees with
tal processes, human capital capabili- supportive and positive work
ties, key performance drivers and environments.
business results.
• Employee development:
Business results were analyzed by processes that expand and
looking at an organization’s two-year enrich employee capabilities.
average capital efficiency relative
to an industry peer group. Analysis 3. These human capital processes
was based on an examination of drive important business capabili-
actual HR and financial data, face- ties like leadership, workforce
to-face interviews with more than 75 performance and employee
business and human resources exec- engagement; these capabilities,
utives, and online survey responses in turn, have a significant impact
from more than 3,300 employees on key drivers of organizational
and 100-plus HR personnel. performance such as innovation.
Analysis of these initial implementa- Making a difference
tions had two objectives. The first was Our research and these implementa-
to assess the framework’s reliability as tions of the framework strongly
a measurement technique. The second suggest that human capital manage-
was to demonstrate empirically that ment practices really can make
investments in human capital assets a difference to the bottom line. But
and processes affect a company’s what distinguishes high performers
growth potential and its value to with respect to the way they manage
shareholders through their impact on and develop people? We set out to
Outlook 2004, Number 3 67The Accenture Human Capital Development Framework
The Accenture Human Capital Development Framework is an analytical measurement and planning tool that enables an
organization to identify and measure the human capital factors that affect organizational performance. As shown in the
figure below, the framework uses four distinct levels of measurement to assess an organization's human capital practices
and determine the benefits it receives from investments in people.
Tier 1
Business results
Revenue ROIC or Total return to Future value
growth ROE (FS only) shareholders Illustrative business measures
Tier 2
Key performance drivers
Productivity Quality Innovation Customers
Tier 3
Human capital capabilities
Leadership Workforce Employee Workforce Ability to Talent Human capital
capabilities performance engagement adaptability change management efficiency
Tier 4
Human capital processes
Competency Career development Performance Succession planning Recruiting Workforce planning Workplace design
management appraisal
Rewards and Employee relations Human capital Learning management Knowledge management Change management Human capital
recognition strategy infrastructure
SOURCE: ACCENTURE ANALYSIS
The resulting scorecard from the measurements can be used in three distinct ways: as a diagnostic assessment that
highlights areas for performance improvement and/or value creation; as part of a recurring measurement activity–
for example, one aligned with an organization's core planning processes; and as part of a large-scale organizational
transformation, in which the goal is to reshape traditional HR functions to bring them in line with a new business strategy.
The scorecard has such a wide variety of uses because, unlike other diagnostics that focus solely on human resource
practices, it is linked to overall corporate performance and is also forward-looking; that is, it is concerned with value
creation, not just with cost control.answer these questions by measuring
the maturity of human capital
What are the particular human capital
processes, the particular programs
Successful companies
processes in those organizations and investments, that deliver on hard design human capital
implementing the framework. measures like revenue, margins and
shareholder value? strategies to ensure
Processes were carefully chosen based
on previous research and thinking The Accenture Human Capital that the right people
concerning the people programs Development Framework gives
and practices that most likely affect these executives clear data to guide capabilities are in
workforce performance and business their spending. Investments in
results. They included not only core some human capital processes will
place to effectively
human resources processes such as generate better returns than others.
recruiting, career development and Specifically, our analysis concluded
execute the business
competency management, but broader that those organizations that focus strategy.
human capital processes as well, such on processes devoted to the follow-
as workplace design, learning and ing three key areas will most likely
training, and knowledge management. achieve far greater economic success
We explicitly assessed the maturity of than those that do not.
each process: the use of best practices
in each process area, how well the Human capital strategy:
process supports employees, and, bor- Gaining a seat at the table
rowing from measurement techniques Our analysis demonstrates that suc-
used in quality improvement and soft- cessful companies design human capi-
ware engineering, the reliability and tal strategies to ensure that the right
repeatability of the process. people capabilities are in place to
effectively execute the business strat-
We found that effective human capital egy. Top performers from these initial
management practices do matter. framework implementations had very
Those organizations with more mature different human capital strategies;
or effective human capital processes what they had in common was a
have better financial performance mature strategy process for formulat-
than organizations with less mature ing and aligning human capital initia-
processes (see figure, page 71). Indeed, tives with business strategy. These
more than half of the 13 human capi- organizations make clear priorities
tal processes we measured have a and track their people programs based
statistically significant relationship on the business value they create.
with a company’s overall financial
performance, as well as with key Take the experience of a well-known
human capital capabilities like leader- cell phone manufacturer we’ll call
ship and employee engagement. This CellTech. In the mid-1990s, CellTech
sends a powerful signal to anyone was at the top of its game. But later
who has ever doubted the business in the decade, new players flooded
value of investing in people. the market, and analog cell phones
slipped along the product lifecycle
Return on investment curve toward commoditization.
However, in today’s business environ- CellTech sought to stem its shrink-
ment, where every investment must ing margins by developing the next
be justified in terms of the expected wave of industry innovation: digital
return, human resources, training and cell phones.
other human capital executives have
often been hampered. Which invest- Although CellTech had a new business
ments in people are most important? strategy, it lagged in devising a new
Outlook 2004, Number 3 69SAP and the Human Capital Development Framework: "Insight we can act on"
Analysis of the initial implementations of the Accenture For example, SAP America’s policy of what president and CEO
Human Capital Development Framework (see story) was Bill McDermott calls “overcommunicating” with employees
cosponsored by Accenture alliance partner SAP. SAP also seems to be working, as evidenced by the fact that the
implemented the framework at its SAP America business unit employee-relations process earned a high maturity score.
to help assess the human capital dimensions of some of its
most important strategic challenges and to prioritize the Other results revealed areas for possible additional invest-
problem areas that need more focus. ments. For some years, SAP has had what could be called an
“intuitive culture.” Because the company is known for innova-
One of SAP’s long-standing competitive advantages has been tion and responsiveness, it has resisted some longer-term
the ability to use its innovative products to develop strong, processes such as workforce and succession planning, a situa-
lasting and trusted customer relationships. Further deepening tion that was highlighted by the framework implementation.
these relationships will be vital as SAP continues to acceler-
ate its strategic move away from selling individual bundles Executives now have the data they need to move forward
of products and solutions to selling total customer solutions. more effectively; the company’s aggressive growth plans for
the next few years will need to be accompanied by increased
Since a strategic move toward solution selling requires a attention to a number of HR strategy and planning processes.
thorough knowledge of the customer’s needs and a superior To support the move to solution selling, for example, SAP will
understanding of the required value proposition, it has a pro- need to implement new skills development programs that
found impact on what is expected from the workforce. SAP enable employees to understand more fully the business
America senior executives believed implementing the Human challenges of its customers and prospects.
Capital Development Framework would help identify and pri-
oritize the human capital investments that would be most According to Terry Laudal, SAP America’s senior vice presi-
critical to continuing the company’s growth momentum in dent, human resources, “The true value of the framework is
the software marketplace. in integrating business results and our core HR processes
into a common framework that can be applied and measured.
By applying the framework, SAP sought more rigor in guiding its Results are valuable because they give us insights that we
human capital investments. Executives were looking for answers can act on. They are also valuable because they help frame
to a number of important questions: Are our HR practices our HR investments in business language.”
enabling the organization’s mission? Are employees appropri-
ately motivated? Are our executives focusing on the right peo- Laudal plans to use the Accenture framework in the com-
ple programs—those most likely to yield maximum value? pany’s leadership development program. He also plans to
communicate the initial results of the implementation to the
Results of the framework implementation at SAP America HR leadership team, both in the United States and globally.
were highly instructive. Some of the company’s recent human SAP America plans to continue using the framework to see
capital initiatives were reflected in higher human capital how new initiatives have improved the effectiveness of the
process maturity scores, a measure of the effectiveness of company’s human capital processes and capabilities in support
those processes. of stronger business results.people strategy to support it. The satisfied and engaged. These organi- to support core HR processes consis-
company neither acquired nor devel- zations effectively address employee tently and effectively across the
oped the skills in its workforce that grievances or concerns, inform business is an essential capability,
would enable it to create and produce employees about business issues yet for many organizations, it is still
the new technology in time. Because affecting them and establish pro- something of an aspiration. Besides
CellTech had never developed the grams to reduce the impact on morale the basics of being able to pay peo-
human capital strategy process that when the company undergoes a ple reliably, accurately and on time,
would have enabled it to anticipate major organizational change. During robust human capital infrastructure
a new workforce need based on a the recent economic downturn, these processes also provide business and
changing business strategy, it was companies resisted the temptation human resources managers with reli-
unable to execute its plan in a timely to cut costs by scaling back employee able data and information regarding
way. It lost significant market share health and well-being programs and their costs and their people.
and millions in potential revenues. flexible work arrangements. Our
analysis indicates that the organiza- Although we found it rather surpris-
Positive work environments: tions that did not sacrifice such pro- ing that such basic processes differ-
Supporting employees grams outperformed those that did. entiate high performers from the
Based on these initial implementations pack, we heard time and again from
of the framework, we can also say In addition, we have seen a statisti- the executives we interviewed just
that high-performance organizations cally significant relationship between how important it is to perform these
have an effective employee relations human capital infrastructure processes fundamental processes well. Not
process specifically devoted to ensur- and financial results. Having the only do they help create a more
ing that employees are informed, infrastructure and systems in place supportive work environment, but
Why effective practices matter
There is a direct correlation between the maturity, or effectiveness, of human capital
processes and financial performance.
3.4 ■ Organizations that scored
Human capital strategy in the top quartile of
1.8 financial results
3.4 ■ Organizations that scored
Employee relations in the bottom quartile of
2.2 financial results
3.6
Human capital infrastructure
1.7
3.6
Career development
1.5
Succession planning/ 3.5
leadership development 1.7
3.3
Learning management 1.8
3.6
Knowledge management
2.2
1 Immature 2 Moderately mature 3 Mature 4 Highly mature 5
Process maturity score
(score based on relative performance to peers in the benchmarking database)
SOURCE: ACCENTURE ANALYSIS
Outlook 2004, Number 3 71these processes, above all others, that we continuously deepen their
Companies that enable human resources personnel skills or develop some of the skills
actively develop their to gain credibility and trust from and behaviors that might be lacking.
both employees and senior leaders. Our competitive strategy is based on
employees and delivering a leading-edge skill set to
Application of the Human Capital clients in our local market; a crucial
provide them with Development Framework at Briggs part of executing this strategy is hav-
& Stratton Corporation, a global ing strong processes such as knowl-
opportunities to learn manufacturer of engines and other edge management and learning.”
power products, was particularly
and grow achieve helpful to the company’s HR execu- What does this firm do differently
tives. Results highlighted two areas— from other companies we looked at?
superior economic employee relations and human capital First, a larger proportion of its
success. infrastructure—where executives now employees believe they are getting
believe investments will have maxi- the training they need to excel at
mum impact. Getting the infrastruc- their jobs and prepare for future
ture in place and ensuring HR has ones. Employees are also given more
a strong customer service orientation opportunities to formulate career
are critical as HR becomes a strategic plans and goals than their counter-
partner to the business. parts at other organizations. Employ-
ees meet with their supervisor or
Briggs & Stratton also used the career counselor at least twice a year
framework as a communications and to discuss specific career development
strategic planning tool. According plans; employees in most of the
to Joe Da Via, assistant vice presi- organizations in our study do so less
dent, employee and retiree econom- than once a year. Third, the firm has
ics, “We used the results from the established communities of practice—
framework implementation as the groups of employees with common
cornerstone of our annual three-day interests who get together to share
HR meeting. It helped us think more knowledge, solve problems and infor-
strategically, which has been one mally collaborate across functional
of our major goals in HR.” boundaries. The company even
rewards employees for participating.
Employee development:
The skills to succeed Eskom, a vertically integrated South
Companies that actively develop African utility, is using results from
their employees and provide them the framework implementation to
with opportunities to learn and grow assist in overall planning for possi-
also achieve superior economic suc- ble government restructuring of the
cess. Our analysis revealed that career electricity supply industry. As Eskom
development, succession planning, evolves from its current environ-
learning management and knowl- ment of a vertically integrated util-
edge management processes are ity to one that will be characterized
all strongly associated with better by competition and expansion, it
financial performance. will require new skill sets consisting
of project management, engineering
The chief operating officer of an Aus- and technical skills. Although some
tralian professional services firm with of the skill sets will be acquired
very strong financial performance externally, Eskom also plans on pri-
put it this way: “Of course, we need marily developing the skills of its
to hire the right people. But once we existing workforce. This strategy
have them, it is extremely important will require robust learning manage-
72 www.accenture.com/Outlookment and knowledge management performance primarily through the in the development of the Human
processes to succeed. continuous introduction of innova- Capital Development Framework.
tive products and services.
Pursuing high performance james.m.benton@accenture.com
Results from initial implementations 3. Justifying people investments.
of the Accenture Human Capital The findings from these initial imple- Susan Cantrell is a research fellow and
Development Framework suggest mentations, used in conjunction with senior manager at the Accenture
a number of ways it can be used the framework’s externally validated Institute for High Performance Business
in the pursuit of high performance. assessment of the strengths and in Wellesley, Massachusetts, where she
weaknesses of an organization’s specializes in knowledge worker produc-
1. Targeting high-impact areas human capital processes, can support tivity, business innovation and human
where human capital processes and and justify investments in people performance. Ms. Cantrell, along with
capabilities are currently weakest. programs. The framework can also institute colleagues, members of the
The framework can be used to identify be used on an ongoing basis to track Accenture Human Performance service
areas that are most strongly linked to the impact and improvement from line and a team from SAP helped
positive financial results as well as investments in human capital, and develop the Accenture Human Capital
currently in a state of least maturity or to continuously refine those invest- Development Framework; she has
effectiveness. These areas are likely to ments for maximum effect. recently been implementing it at client
yield the greatest return on investment. organizations. Her work has been fea-
Corporate executives deeply knowl- tured in numerous business publications,
Relatively mature processes linked to edgeable in human performance issues including Sloan Management Review,
financial performance may produce are often frustrated by the inability to Industry Standard, Across the Board and
incremental financial benefits based be sufficiently quantitative about the Strategy and Leadership.
on a small set of highly targeted value of their disciplines. Today, advo-
improvements in the processes. cates of people programs no longer susan.cantrell@accenture.com
Improvements in less mature processes need to base their budgeting requests
that are not linked to the economic on faith or exhortation. They can Meredith A. Vey is a research fellow and
success of a company should take build a business case that empirically industrial/organizational psychologist
secondary priority; these processes justifies human capital investments to with the Accenture Institute for High
may produce improvements in impor- all relevant stakeholders. They can Performance Business. Her research on
tant human capital capabilities like also identify the particular processes emotional expression at work, organiza-
employee engagement or workforce and programs that matter most to the tional citizenship and work motivation
adaptability, but they are less likely to bottom line, enabling them to chart has been featured at conferences and in
produce immediate financial benefits. their own unique course toward high publications such as Human Performance
performance. ■ and Emotions in Organizations. Dr. Vey
2. Targeting areas of competitive worked with a multidisciplinary team of
advantage. colleagues from the Accenture Institute
Results from the application of the
About the authors for High Performance Business, the
framework may also be used to iden- James M. Benton is a New York-based Accenture Human Performance service
tify those processes that, if improved, associate partner in the Accenture line and SAP to develop the Accenture
will also likely result in an improve- Human Performance service line as well Human Capital Development Framework.
ment in the key value propositions as an industrial/organizational psychol-
on which an organization competes. ogist. Working extensively in the areas meredith.a.vey@accenture.com
Not all companies generate high per- of human resources and human capital
formance the same way. Depending strategy, performance management and
on their unique industry and mar- human capital measurement, he has Robert J. Thomas, associate partner
ketplace demands, some achieve it consulted on organizational/HR strategy and executive director of the Accenture
primarily through superior customer and development issues for a broad Institute for High Performance
service and satisfaction; others focus range of public- and private-sector Business, and Linda Kerzel, a Boston-
on attracting and retaining customers clients. Dr. Benton, a featured speaker at based senior manager in the Accenture
based on high-quality products and a number of conferences including SAP- Human Performance service line, also
services. Still others achieve high PHIRE and SAP Insider, was instrumental contributed to this article.
Outlook 2004, Number 3 73You can also read
