Human Capital: Value Creation and Risk

AAAAA+AA- AAA+AA-BBB+

An introduction to Organization Maturity

Stuart WoollardCEO OMR Group & Council member, Maturity Institute

How much does human

capital matter?

Understanding how human capital drives value & risk:

The paradox is that by not pursuing

profitability to the exclusion of all

else, the Great Engine companies

in their Golden Age would achieve

enormous increases in

value...whereas, by single-mindedly

pursuing profit...these same

companies and their successors

actually created less genuine,

lasting wealth; indeed, they would

often destroy it.

(The Puritan Gift, Kenneth & William Hopper)

Value motive – short, long term;

narrow or broad based?

“

”

Profit is critical for a

healthy organisation but

[societal] value is much

broader, cleaner and

sustainable

Adding Value: quantification

6

€+ =

Increased Output (O)

Reduced Cost (C)

Increased Revenue (R)

Increased Quality (Q)Value of business now

Value of Business in

1, 2, 5, 10 years

ADDED VALUE

€€

The Measurement Challenge: how people link to value & risk

• Maturity assesses the extent to which an organization is

designed around the goal of maximizing its value, while

controlling risk, with respect to all its human capital.

• Value relates to the organization itself (i.e. productivity,

quality, revenue, cost) and value generated by the

organization in a societal context (e.g. economic, well-

being, environmental).

• Human capital relates to an organization’s people and all

people connected with the development, production and

supply of an organization’s goods and services.

Maturity, Value & Risk

Measuring or rating maturity:

9

“Art is about learning to see and to observe. And the sciences are about seeing and observing.” –Ed Catmull, Pixar

Value Motive

Whole system

Learning Organization

Improvement philosophy

People riskHuman capital ethos

Trust Engagement Cooperation

Performance system

Communication

Business/people strategy

The Ten ‘Pillars’

OMR

Stage 2

Good

Professional

Practice

Stage 3

Effective

Management

Stage 4

Human Capital

becomes integral

to business

operations

Stage 5

Transition:

operational

to strategic

focus

Stage 1

Personnel

Administration

Board & Executives

resistant/unaware of people &

human capital value up to this

point

Stage 6

Organisation

becomes a

whole system

Stage 0

No Conscious

People

Management

Maturity spectrum:OMR ‘AAA’ Scale

©Paul Kearns/OMR 2013

LONG TERM - STABILITY

SHORT TERM –

UNSTABLE

A+

to

AA

-

AA

A

BB

B to

ABB

B-

BB

+

BB

C B

How maturity affects HR value & risk influence

Becoming mature: getting beyond “best practice”

HR (GM) functions

HR’s Performance/value

2 3 4 5 6 7 8 9 101 2 3 4 5 6 7 8 9 10

Including

Mature

(Value

oriented)

firms

changes the

scale

“Best

practice”

scale

Maturity predicts value creation & destruction

Value vs supply chain orientation

Embedded societal value &

responsibility

Truly inclusive workplaces

Best/sustainable resource use

Learning, knowledge &

innovation

High trust, cooperation &

informed decision making

Maturity drives higher value, lower risk & ‘good’ outcomes

“social, economic, environmental, and ethical

factors directly affect business strategy—for

example, how companies attract and retain

employees, how they manage the risks and create

opportunities from climate change, a company’s

culture, corporate-governance standards,

stakeholder-engagement strategies, philanthropy,

reputation, and brand management.” – David

Blood 2007

Maturity in practice: value outcomes

Early indicators:

Exec expectations of human capital & value now aligned

Organization now adopting a new language around HCM

10 Pillars embedded into assessment of planned HC activities

Maturity is new framework for decision making

Senior execs now lead on HC initiatives

HR team now business focused rather than "best practice”

Thank you

www.hrmaturity.comStuart.woollard@omratings.com

+44 [0] 7940585661