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Human capital management and engagement – a clear link?

February 14, 2011

Recently the CIPD publicised research into human capital management – ‘View from the city: How can human capital reporting inform investment decisions?’ in which it was stated that ‘there is clear recognition among investors and analysts that the performance of a company depends on the quality of its people and its people management’. Perhaps not a great surprise; regardless of the CIPD research this makes intuitive sense, especially when we look at the engagement literature, we find that the more engaged the workforce, the better managed they are the more benefit is seen to the bottom line and this is what is a key factor in attracting investors.

The report also states that analysts are ‘interested in the performance of assets and with the growing acceptance of business leaders that people are assets whose knowledge, creativity and capability to innovate and renew itself is greater than any other’ and most crucially they also recognise that they ‘need to get better at understanding how these assets perform against business-relevant measures’. One of the key recommendations in the report was to ‘draw on the MacLeod Review of employee engagement to support the proposition that employee engagement drives financial performance’. And there we have it, recognition that employee engagement needs to be brought up the agenda – not only is employee engagement research important for the way forward for the organisation as a whole but also for investors to be able to make an informed decision about the profitability of company assets and further investment. In fact, a suggestion is being made that the Government is committed to reinstating a financial review ensuring that company reports show corporate accountability and transparency, which may mean more of a requirement in the future to show ‘people metrics’ including engagement data.

However, according to the research there was ‘little interest in engagement data other than from the SRI analysts’. Hmmm, why, given it has been proven time and time again that it is so important to the overall performance of an organisation? Well, it appears that we are back to the old chestnut, which was reviewed in Rule 1: The Rules of Engagement Series, how to define employee engagement. It appears that ‘the lack of consistency in measuring engagement and even in defining it makes it difficult to use for comparison purposes’. So, the way forward for engagement is clear – it needs to be more clearly defined, a definition that everyone can utilise, providing a clear pathway for measurement where organisational comparisons can be made for investors to see their return and analyse the risk.

At Employee Feedback, we utilise a widely heralded definition of engagement already, one deeply based in employee engagement literature (specifically, Kahn, 1990) and utilise this across organisations providing clear benchmarking capability across the companies we work with. However, we are keeping one eye open waiting for an overall definition to emerge from the ether that is adopted by all, which hopefully will not be too far in the future as time has truly come to all sing to the same hymn sheet.

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