The state of human capital in the UK part 2

Recent posts on Systematic HR,  on Quantifying Talent, and on Sean Rehder’s Talent Ecology blog, have inspired a return to my human capital series. Both comments were prompted by the recent uncovering of $325 billion of assets appearing on the US government’s books as a result of new accounting rules for property. How would it be, they wondered, if there was some agreed way of measuring and reporting on human talent?

I thought I’d expand on that theme, with reference to what’s happening currently in the UK.

Sean’s point is that it should be possible to rate professional peers against their peers:

within industries themselves (rather than from company to company), we could get to a point where we could define successes or be able to identify where a professional is “above par, at par, or below par” amongst their professional peers

Systematic HR looks at it organisationally – what if we could aggregate individual competencies to see how well an organisation met its competency goals? He points out that this is a much better measure of organisational position than the usual basic HR metrics:

Rather than simple headcounts, this gives a more meaningful roadmap

In this, of course, he’s echoing the differentiations between measures of skills made by others, such as Professor William Scott-Jackson measures of human capital.

I agree with Systematic HR that you can only measure any gap in organisational competency by aggregating differences in individual competencies, and that the place to collect that individual data is during performance reviews. But here are some questions:

1. How do you compare the competencies of all people in an organisation? Is it even possible?
2. What do you need to do it all? 
3. Who cares about this outside HR?

Here are my answers:

1. The best way to compare different sets of competencies is relatively. For example, you could say that ‘Company A is 12% short of its required competency levels to deliver planned growth/output in 2007, against a 5% shortfall for Company B’. For me, this makes more sense than saying ‘Company A needs a skills score of 500, but has 440, whereas B has 180 against a desired level of 200.’ What matters is whether they can do the job they set out to do (defined by the required skills levels they set themselves). Further, if you are comparing skills across the departments of a company, I can’t see how it is possible to compare levels for (eg) project management skills vs. those for selling or management in absolute terms. It is, however, possible to aggregate the relative ratings of different departments, weighted by (eg) the number of employees in each department. Using relative measures really highlights one key thing: you don’t get more expert by throwing more bodies at a job, not if they are short of what the job needs. You get more expert by increasing your expertise, either through development or recruiting the right people.

2) To report on aggregated skills levels you need several things. Two of the most important are industry standard skills frameworks, and internal procedures for ensuring accurate data. An industry standard skills framework is a matrix that lists the skills of a particular discipline (e.g. IT, management) along with a grading of skills (the grading allows different levels to be required for different roles). This framework has to be an industry standard, otherwise the skills data collected is meaningless for inter-company comparisons. When I say ‘internal procedures for ensuring accurate data’, I mean that whoever is confirming the skills of the individuals concerned (usually their manager) has to work with other managers to ensure that they are assessing individuals in the same way, and with the same interpretation of the skills standards. It also requires an escalation process for appeals if individuals feel wrongly assessed. (In my experience such processes are seldom used, but their presence makes accurate assessment far more likely.)

I would also say that to get the most out of this whole process, you need a methodology and some software that can help you collect, aggregate, and report on your skills data. Disclaimer: okay, so I’m the director of a company producing software for skills and capability management (InfoBasis), but I can’t imagine anyone disagreeing with that statement. 

3) Who cares? Not enough people. ‘I can compare my organisational capability against that of others? So what?’ I can hear the CFO saying. ‘I can already do that by looking at last quarter’s results. Now get out of my office while I perfect my putting.’

I know that you can pick holes in this line of reasoning, but it’s a common response. So here’s my answer: getting to the point of aggregating such data has to come slowly, and – initially – it will almost certainly be a by-product of other activity, which has been signed off, because it is useful in its own right. What could that activity be? Well, here are some types of activity that are currently underway in the UK:

• UK Sector Skills Councils – collecting basic skills data (see posting) to reduce employers’ transactional costs. This is very much level 1 human capital measurement at present, but could be developed into a tool for collecting and then aggregating more sophisticated data
• Users of the IT professional skills framework SFIA will likely begin sharing and comparing aggregated skills data this year – initially, simply to compare the make up of job descriptions  
• Some professional bodies/institutes are already collecting skills information on their members at an individual level, but also linked to their employers. They see the benefit to the organisations disseminating the aggregated information.

Once the infrastructure is in place for skills data to be collected, the first step has been taken. After that, (provided you are using an industry standard skills framework), it is a matter of finding a way to begin the aggregation and comparison of the skills data. Will that start with inter-organisational comparisons? It’s unlikely. I believe it will begin between different sections of one department of a large organisation. 

The next post in this series will include specific examples of companies at work with human capital measurement and reporting. In the meantime, here’s a article on using a skills framework that I wrote some time ago.