Recruiting, Retention, and Returns

Everyone believes good HR policies affect the bottom line. Southwest Airlines, GTE, and A.C. Nielsen can quantify it.

In response, Nielsen did something radical: It gave its employees a vote on part of the management team’s bonus. Twenty-five percent of managers’ bonuses are now based on the results of a survey of employee attitudes. Employee satisfaction has improved, hitting 63 percent in 1999. The company’s goal is 70 percent, says Althea DeBrule, senior vice president of global human resources at Nielsen. “We want employees to tell us what we can do better,” she says. “Once they tell us, we figure out if we accomplished what they told us to do” — and reward managers accordingly.

Because Nielsen’s employees are happier, turnover dropped to 10.5 percent in 1999, a 50 percent decline. And, says Chrenc, the company’s operating margins rose from 2 percent in 1996 to 8 percent in 1999. Employee satisfaction “does improve the bottom line. When you hire good people, train them well, and recognize them, that translates clearly to the clients.” Nielsen’s customer-satisfaction level last year in its North American unit was 72 percent, exactly the same as its employee-satisfaction level.

A Talent Inventory

In terms of shareholder value, just pleasing employees is not enough: Companies must nurture the best. A common method for identifying the most talented employees within a company is competency measurement.

The technique is not new. A recent Corporate Leadership Council study indicated that 77 percent of the Fortune 500 use some kind of competency-based system to evaluate employees. Competency measurement is a key building block for human capital management, says White of Human Capital Technology. A company should “inventory its desired set of competencies in light of its business strategy,” he says, and then promote to match its ideal.

The idea is embraced at Nielsen, which tracks its high- potential employees, some 200 people out of a pool of 21,000. “We review their talent profiles, look at when they are scheduled to go on another assignment, and [then] track and measure how well they’re doing,” says DeBrule, adding that achievements are matched against company leadership standards and the specific competencies of the job.

Telecom giant GTE, in Irving, Texas, is assessing the skills and leadership potential of all its 120,000 employees. The results: specific metrics on several subsets of employees, including high-potential women and minorities, and the overall high-potential population.

GTE uses a ratio to compare how the placement of its best people into new assignments compares with that for the general employee population, explains Garrett Walker, human resources director. “The high-potential employees should be moving twice as often as the general population,” he says.

This ratio is just 1 of 113 metrics GTE uses to measure human capital management. Others include employee attitudes; perceptions of HR service; cycle time to fill positions; cycle time to start; various training measures; HR cost measures, including head count of HR staff; turnover by unit; and churn. The result is a quarterly balanced scorecard that measures human capital management effectiveness and ties it to business results.

Too much of a good thing? On the contrary, says Walker: “Our executives have been extremely positive. They would like to have even more information.” He adds that the scorecard, which was launched in the first quarter of last year, has ushered in a major cultural change in the HR department. “Early on, there was some fear of being measured on this,” Walker says. “But now, we are compensated on the results of this scorecard, and that keeps our eye on the ball.”

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