The cultural immune system and Human Capital

We already know these things:

  • If you don’t have a trusting relationship with your manager, you already know that you withhold – something.  What and when is maybe unpredictable, as yet unknown.  Whether it is an explicit withdrawal or a passive withdrawal – it will happen.
  • If your extra effort isn’t valued; if you feel you don’t count; when you have a headache and have worked long hours, or a family crisis crops up, or a family party and  you have limited leave you may decide to phone in sick.
  • When we work with a manager who accepts us just as we are, who is open to reciprocal influencing, and who involves us in key decisions that impact us..  This manager is more likely to bring out more in us than one who is closed to our influence, who tells us what is going to happen to us and who assumes superiority in some way.
  • When a new system is introduced that we protest isn’t going to work because… when we aren’t listened to, we sit back and wait, because we know, but we aren’t heard.

What else do we already know?

Here’s something to start with.  Some hard data.

The Work Foundation published a paper in February 2014  “to highlight and discuss the inherent tension between so called “constrained’ work characterised by the adoption of Taylorist management principles and constrained’ operating models and high quality work and cultures of employee engagement.”

Here’s some of the data from the report:

  • Engaged employees report fewer days of sickness absence (2.69 days compared with 6.19 days)
  • Disengaged employees are 4 times more likely to leave an organisation than an average employee
  • At the macro-economic level, the UK benefits from reduced absenteeism costs are estimated at £13.4 billion per year (CBI/AXA, 2007)
  • One study they referred to found that 66 per cent of ‘engaged’ employees felt that their work brought out their most creative ideas compared to just 3 per cent of ‘disengaged’ employees (Krueger and Killham, 2007)
  • With high staff replacement costs, replacing employees who leave has been estimated to cost 150 per cent of the employees salary (Rayton, Dodge and D’Analeze, 2012)

Working on the assertion then that replacement costs are 150%, you lose one person who doesn’t feel valued, who let’s say has a cost of £35K including associated NI costs etc your range of costs could be £52k, or more conservatively £30k.

Taking the absence data – engaged 2.69 vs disengaged 6.10 days.  The financial measures for this can be taken as a cost of the overall salary bill.  Anything over 2.69 could be seen as wasted money.

So we have concrete correlations between organisational behaviour and costs.  We haven’t even looked at customer service data.

If we look at creativity – 66% of people feeling creative compared to 3% – now here’s where we start to get more challenging in terms of “metrics”.   That 63% of people who are creative are very likely to be more resourceful in solving problems themselves, more confident to deal with conflict, more inclined to suggest improvements – more everything.

We already know all this right?

The Work Foundation assert that the Economic downturn has led to (amongst other things)

  • Increased focus on short-term investment and results
  • Financial constraints within organisations
  • Increased levels of fear and anxiety across the UK

There is plenty of research to support the assertion that focussing on short-term results, for sustained periods, has a negative impact on an organisation’s adaptability.

Finance and HR – a beautiful partnership?

The CIPD are partnering with CIMA to forge closer links between HR and Finance.

Our collaboration with CIMA will help us build hard metrics for what is often seen as the “soft” contribution people and culture make to organisational value.  By working together on this and other critical challenges we intend to build stronger connections between the HR and finance functions “

I fear that there is a risk that this will lead down the path of only believing in data/reporting on data that can be quantified in conventional methods.

With that fear, I am also curious about this partnership because – don’t we already know all this stuff?

I wonder why we call behaviour and relational aspects of our work “soft”.  It feels like a discount for that most complex of matters – humanity.   Is it because really,  when it comes to it, all we value is money?

When we view our decisions through a financial lens, we miss the multiple perspectives that qualitative data offers.

My experience is that finance is often the decider in organisations.   Managers struggle to get resources, but financial leadership exerts control and says no.  Often.   Or offers less.  It can be a tiresome negotiation of procurement, bargaining and ultimate disempowerment.  It’s not all like that – I wrote previously about an inspIring FD who told me – “you do what you need, spend what you need, and I’ll make sure it balances.” This wasn’t a carte blanche for out of control spending but it respected my leadership position.  I work with organisations where leaders take this empowerment; it doesn’t seem that is the norm.

The cultural immune system

We have hard data already.  We know what absence costs, we know what stress costs, we know what recruitment costs, we know what productivity costs, we know what errors costs us. I wonder how much we understand how much financial control costs us – do we ever ask that question?

I am curious what CIMA and CIPD will come up with to quantify, to metricise, to assetise the potential that exists with 63% more employees who are able to offer their creativity.

I suggest it would be more effective to take what we already know in terms of statistics, and educate out of the comfort zone into expertise in qualitative data collection and synthesis.  Educate about organisation behaviour and performance.  OD actually.

We have the data – it’s there; we ignore it because we look at cost more than value, we still reward the shout rather than the whisper, we keep on doing what we always do in other ways.

The CIPD are doing great work right now in so many spheres but potentially this takes us down the path where we ignore what we already know, because of what we already know.


5 thoughts on “The cultural immune system and Human Capital

  1. I have a bit of a thing about the notion we need hard metrics to somehow prove the value of people stuff.
    I don’t want to have to prove the value; it should be self evident. If I have to prove it, something is wrong somewhere.

  2. I agree that it is already evident, what appears to be lacking is the ability to articulate, connect, interpret. It feels like partnering with the CIMA to produce a set of metrics is regressive and reinforcing the mindset. Thanks for the comment.

  3. Meg, thanks for your considered thoughts on this. We share your concerns about business being led too often by financial decisions. That, in a nutshell, is what the Valuing your Talent programme of work is looking to address. We think one way of giving HR a more credible voice and greater influence in the boardroom is to help them make better use of the data available to them. But, we’re not suggesting that this means reducing everything HR does to numbers and financial reporting. Instead, we suggest that a blend of quantitative data and qualitative narrative is needed to give businesses the full picture on which to base decisions. One without the other will not give the full picture. This is why the framework we’re proposing highlights fourdifferent lenses through which various metrics should be viewed – only one of them is financial – the others being sustainable business performance, risk understanding and external environment. In short, far from playing into the hands of the accountants, we think HR and finance need to work in collaboration.

    At the CIPD we’re currently running the Valuing your Talent Challenge at with the RSA. We’ve proposed a first version for a framework to measure human capital and have opened it up to discussion and development by “the crowd”, because we know how much innovative thinking goes on out there and we want to capture it and facilitate it in to something potentially groundbreaking. I’d love to hear more of your thoughts on what we’re working on via the challenge site.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s