Benefits October 25, 2004

Study: HR Professionals Need to Hone HR Capital Stats

October 25, 2004 (PLANSPONSOR.com) - Employees won't truly be regarded as a corporate asset alongside other assets until their value can be precisely measured with the same confidence, researchers say in a new worldwide study.
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Recent regulations such as Sarbanes-Oxley in the US and similar efforts in France, the UK and elsewhere, mean “the drive towards meaningful human capital measurement is gaining pace,” the researchers wrote in the PricewaterhouseCoopers/Saratoga study, Key Trends in Human Capital: A Global Perspective. The corporate accounting changes “all provide strong indications that human capital reporting and measurement will be a standard requirement within years,” the study said. “HR practitioners must ensure that they are ready to respond with systems and thinking in place.”

If a company’s workforce is to be held to the same financial metrics as other forms of corporate capital, the PwC/Saratoga researchers assert:

  • Companies will have to have “a strong internal (HR) guardian” to make sure that human capital’s cost “never exceeds its value and that the margin is the best in the business.”
  • Because the economically advantageous use of human capital will increasingly become a key part of a company’s general competitive advantage, companies will have to make sure that they’re getting “high engagement, low cost, and competitive return” from workers. Pressures to continue offshoring will intensify.
  • To make the numbers the best they can be, “requires a very disciplined control over the hours of work, the cost of those hours and the numbers of people employed to produce the outputs.”

Meanwhile, data collected by the survey of 10,000 companies in the US and Europe show that the US invested $80,963 in 2003, up from $71,012 in 2001 in compensation and benefits per employee, while Europe invested $43,719 in 2003, up from $40,897 in 2001.

European companies get back $2.01 for every dollar invested in employee compensation (up from $1.62 in 2001). US companies get $1.48 for every dollar invested in employee compensation (up from $1.31 in 2001). European companies invest nearly 36% more per employee ($867.00) in employee training than in the US. ($559), the survey found.

Cost per hire in the United States is $2,928 compared to $2,460 in Europe. Each HR employee supports 90 employees, both in the US and Europe.

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