The most important driver of value

We had a client in the high-tech industry (4,000 employees) where we interviewed all of the top executives and senior leaders to determine what the most important drivers of value in the company were. We talked to the CEO, COO, EVP Sales, VP HR, and even the Chairman of the Board. We expected the consensus would be somewhere in profitable (sustainable) revenue growth, maximizing operating margins, or at least customer satisfaction. It turned out that the #1 driver of value was “Employee Skills.” Employees with advanced degrees, professional certifications, industry experience, etc., were THE key driver of value in the company: they made customers happy, they developed superior products, and they captured revenue.

Yet the company did not have one single measure around employee skills. They didn’t capture that information, they didn’t share it, report on it, or even plan for it in the budget.

This gap was enlightening for them. In order for them to put their money where their mouths were (in other words “people are our most important asset -- now lets utilize that asset”), they had to build Employee Skills measures into their models, plans & forecasts, and management reporting and analysis processes and systems.

This wasn’t HR-centric involvement in the strategic planning process – I think every function, including Marketing, Sales, Development, and Operations, has a stake in “people as assets,” or at least in measuring and improving employee skills…to drive customer & stakeholder value.

And for more on HR Key Performance Indicators, see this entry.

Comments

[Michael Friedenberg]

I think this absolutely makes sense. You typically hear that a company’s biggest assets are its employees. The question is how do you quantify it and relate it back to revenue or overall company performance? If you’re an ISV or you provide consulting services, it’s easy. But how do you quantify those softer skills such as customer support or marketing? Will an advanced degree necessarily help with the bottom line?

[Ron Dimon]

There are operational metrics that help quantify softer skills, the trick is discovering, agreeing, and communicating on the interrelationships among them. For example, in Customer Support for an ISV, the metric could be turn-around-time (call open to call resolution). And if you compare that to # of hours of training received by the CSR, you may find a cause-and-effect ratio: the more hours spent on training, the faster the turn-around-time. The faster the turn-around-time, the fewer CSRs needed (or more calls get handled) - which will have an impact on Margin (and Customer Sat).
Documenting those "value-driver" relationships, and connecting them to company goals, should be the first step in any measurement, reporting, or planning initiative.