copyright © 2001 by accenture, iicr and saratoga institute these slides must be accompanied by a...

Copyright © 2001 by Accenture, IICR and Saratoga Institute

These slides must be accompanied by a PDF document (HCStudy.pdf) entitled:

“Human Capital ROI: Written Report”

Human Capital Study:Slides

Dr. Nick BontisMcMaster University

[email protected]


List of Participating Organizations1.0

ABN AMRO North America Inc. Allstate Insurance CompanyAMP Australia AMP UK Andersen Consulting Aon AXA Client Solutions Blue Cross Blue Shield of Florida Blue Cross Blue Shield of Illinois / Texas Blue Cross Blue Shield of North Carolina CNA Commercial Insurance EquitaxFarmers Insurance Group

Hartford Financial ServicesHewitt Associates, LLCIntermountain Health Care International Monetary Fund Merrill LynchNational City Corp. Northwestern Mutual LifePenn National InsurancePNC BankSavings Bank of UticaUnited Health Group Zurich U.S.


Quantitative Metric Model2.0

Human CapitalEffectiveness

Human CapitalValuation

Human CapitalDepletion

Human CapitalInvestment

+

+

_


Descriptive Statistics for HCV Sample - Means

Full-time regular employees 13,149 Part-time regular employees 676

Regular employees 13,795 Contingent employees 1,820

Total headcount 16,353 Total Full-time equivalents 21,006

Headcount: Executive 3.2% Headcount: Supervisor 12.7%

Headcount: Professional 41.7% Headcount: Administrative 42.3%

Average age: Executive 48 years Average age: Supervisor 42 years

Average age: Professional 38 years Average age: Administrative 38 years

Tenure: Executive 15 years Tenure: Supervisor: 11 years

Tenure: Professional 8 years Tenure: Administrative 7 years

Total compensation cost $ 998,173,818 Average year of incorporation 1902

Total workforce trained 12,823 Total training cost $ 45,582,889

Revenues $ 8,534,652,304 Operating expenses $ 7,510,438,534

Net profit after tax $ 659,560,770 Return on assets 4.86%

2.1


HC Effectiveness - Revenue Factor2.2.1

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Revenue Factor $602,039 $226,411 $528,648 $478,446 $399,369 $315,368 $357,567

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -

PCP Non-Bank Financials

All Industries

Saratoga Institute HRFR 1998 Sample


HC Effectiveness - Expense Factor2.2.2

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

Expense Factor $526,417 $178,582 $413,398 $450,073 $375,260 $252,057 $282,500

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Effectiveness - Income Factor2.2.3

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Income Factor $36,514 $42,037 $64,612 $18,107 $61,373 $78,379 $64,112

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Effectiveness - Human Capital ROI2.2.4

0.00

0.50

1.00

1.50

2.00

2.50

3.00

HC ROI 2.70 2.14 1.77 1.50 2.07 2.00 2.15

HCV Sample Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Valuation - Compensation Revenue Factor2.3.1

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Comp Rev Fac 13.3% 15.8% 8.1% 14.8% 9.8% 15.5% 22.8%

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Valuation - Compensation Expense Factor2.3.2

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Comp Exp Fac 15.2% 20.0% 9.5% 12.2% 12.0% 21.8% 27.0%

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Valuation - Compensation Factor2.3.3

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Comp Fac $54,024 $32,509 $41,046 $37,588 $40,900 $46,531 $44,445

HCV Sample Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Valuation - Executive Compensation2.3.4

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

Exec Comp $290,082 $93,353 $192,192 $153,703 $150,013 $166,139 $217,299

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Valuation - Supervisory Compensation2.3.5

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

Super Comp $71,271 $57,241 $72,296 $68,914 $73,653 $70,259 $74,035

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Investment - Development Rate2.4.1

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Develop Rate 82.2% 56.9% 74.2% 87.9% 61.1% 59.1% 66.3%

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Investment - Training Investment2.4.2

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Train Invest $1,693 $317 $874 $459 $456 $636 $617

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Investment - Training Cost Factor2.4.3

$0

$500

$1,000

$1,500

$2,000

$2,500

Train Cost $2,083 $740 $767 $966 $1,352 $1,036 $1,019

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Depletion - Voluntary Turnover2.5.1

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Voluntary 13.1% 18.8% 12.6% 12.6% 11.9% 18.6% 14.7%

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Depletion - Involuntary Turnover2.5.2

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Involuntary 4.2% 5.5% 5.1% 5.4% 3.0% 4.4% 4.9%

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



HC Depletion - Total Separation Rate2.5.3

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Total Depletion 17.1% 23.4% 19.0% 18.3% 13.9% 23.4% 19.1%

HCV Sample

Banks Insurance -

All Insurance -

H&L Insurance -


All Industries



Significant Pearson Correlations2.6

1st measure and 2nd measure Pearson

Human Capital Effectiveness

Revenue Factor Average tenure at company of Supervisors 0.696**

Revenue Factor Average tenure at company of Administrative 0.670**

Expense Factor Average tenure at company of Executives 0.632**

Expense Factor Average tenure at company of Supervisors 0.624**

Expense Factor Average tenure at company of Administrative 0.647**

Income Factor Average tenure at company of Supervisors 0.640**

Human Capital Valuation

Compensation Factor Headcount percentage breakdown of Executives 0.686**

Human Capital Investment

Training cost per trained employee Average age of Executives - 0.847**

Training cost per trained employee Average age of Professionals - 0.942**

Training cost per trained employee Average tenure of Professionals - 0.895**

Human Capital Depletion

Voluntary turnover Average tenure at company of Administrative - 0.705**


Areas of Concern3.1

2

5

5

6

7

9

10

11

12

13

17

23

29

30

31

0 5 10 15 20 25 30 35

Relational Capital

Structural Capital

Know ledge Generation

Education

Value Alignment

Motivation

Know ledge Sharing

Human Capital

Know ledge Integration

Employee Satisfaction

Employee Commitment

Process Execution

Retention of Key People

Business Performance

Management Leadership


Perceptual Means: Lowest and Highest 103.2

LOWEST 10

P77 Information systems include employee knowledge. 3.24P39 Our systems (e.g., files and databases) contain knowledge that is easily accessible. 3.47P61 Our "time to market" for new products and services is better than our competitors. 3.49P42 Our organization has methods for capturing and retaining the knowledge of its workforce. 3.51P40 We have a system for continually refreshing our knowledge base. 3.52P58 Our organization exploits new business opportunities quickly. 3.57P76 Our organization has effective mechanisms for capturing individual employee knowledge an

packaging so that it can be shared with others. 3.64P44 Our organization captures and utilizes information from suppliers. 3.68P75 Employees systematically document and pass on their knowledge. 3.68P46 Our organization captures and utilizes information from trade associations. 3.71

HIGHEST 10

P36 Our employees generally have the intelligence and aptitude to succeed. 5.53P47 We nourish our corporate relationship with the community. 5.44P7 Employees commit to their assigned tasks to completion. 5.43P33 Competitors target our key personnel for recruitment. 5.41P80 Our company's reputation in the marketplace is favorable. 5.40P38 Our systems (e.g., files and databases) contain useful knowledge. 5.24P32 Recruits perceive that our employees are well respected within the industry. 5.19P35 Employees have the necessary knowledge, skills, and competencies to succeed. 5.12P81 We provide adequate value to our shareholders. 5.03P11 Employees are highly qualified for their positions. 5.03

NOTE: Items based on Likert-type scales from 1 (strongly disagree) to 7 (strongly agree).


Sample Item Statistics - Satisfaction, Commitment and Education3.3.1

EMPLOYEE SATISFACTION (Alpha = 0.8509)P1 Employees are satisfied working here. 4.83 1.03 0.840 0.719 0.806P2 The workplace environment/climate would be described as satisfactory. 4.88 1.13 0.806 0.671 0.818P3 Employees are generally satisfied with their roles and responsibilities. 4.77 1.02 0.890 0.798 0.785P4 Employees are satisfied with working conditions. 4.99 1.07 0.707 0.565 0.846P5 Employees are satisfied with their opportunities for advancement. 4.36 1.02 0.716 0.571 0.843

EMPLOYEE COMMITMENT (Alpha = 0.8916)P6 Employees demonstrate commitment to the organization through high

performance. 4.93 1.29 0.856 0.612 0.862P7 Employees commit to their assigned tasks to completion. 5.43 1.12 0.815 0.613 0.877P8 Employees are dedicated to achieving the overall strategy. 4.88 1.21 0.876 0.679 0.856P9 Employees feel a sense of belonging to the organization. 4.71 1.40 0.807 0.606 0.878P10 Employees would say they feel a sense of ownership regarding

organization success/results. 4.42 1.28 0.828 0.638 0.867

EDUCATION (Alpha = 0.8641)P11 Employees are highly qualified for their positions. 5.03 1.08 0.683 0.534 0.869P12 The general level of education in the organization is relatively high when

compared to the industry. 4.81 1.06 0.776 0.649 0.846P13 Employees receive the appropriate training for their jobs. 4.37 1.16 0.873 0.781 0.813P14 Training and development is available to anyone who needs it. 4.43 1.38 0.866 0.772 0.813P15 The company has established the mindset and systems necessary to

support employees' continuing education needs. 4.23 1.40 0.826 0.714 0.830

Mean Std. Loading Item to Alpha if Dev. Construct deleted


Correlation Matrix of Constructs - Part 13.4.1

1 2 3 4 5 6 7

1 Employee Satisfaction 1.000 0.725 0.447 0.781 0.714 0.571 0.585 2 Employee Commitment 0.725 1.000 0.500 0.771 0.628 0.724 0.696 3 Education 0.447 0.500 1.000 0.459 0.600 0.507 0.691 4 Employee Motivation 0.781 0.771 0.459 1.000 0.649 0.673 0.734 5 Value Alignment 0.714 0.628 0.600 0.649 1.000 0.715 0.565 6 Retention of Key People 0.571 0.724 0.507 0.673 0.715 1.000 0.650 7 Human Capital 0.585 0.696 0.691 0.734 0.565 0.650 1.000 8 Structural Capital 0.419 0.357 0.317 0.420 0.429 0.339 0.335 9 Relational Capital 0.381 0.270 0.184 0.388 0.423 0.413 0.27510 Management Leadership 0.599 0.553 0.502 0.678 0.771 0.722 0.52611 Process Execution 0.535 0.436 0.339 0.481 0.428 0.382 0.42112 Knowledge Generation 0.500 0.515 0.358 0.548 0.615 0.515 0.51513 Knowledge Sharing 0.663 0.635 0.474 0.727 0.712 0.670 0.61514 Knowledge Integration 0.438 0.424 0.524 0.464 0.547 0.583 0.60915 Business Performance 0.394 0.560 0.307 0.566 0.379 0.401 0.501

NOTE: > 0.307 correlation is significant at the 0.01 level (2 tailed)> 0.270 correlation is significant at the 0.05 level (2 tailed)


Correlation Matrix of Constructs - Part 23.4.2

8 9 10 11 12 13 14

1 Employee Satisfaction 0.419 0.381 0.599 0.535 0.500 0.663 0.438 2 Employee Commitment 0.357 0.270 0.553 0.436 0.515 0.635 0.424 3 Education 0.317 0.184 0.502 0.339 0.358 0.474 0.524 4 Employee Motivation 0.420 0.388 0.678 0.481 0.548 0.727 0.464 5 Value Alignment 0.429 0.423 0.771 0.428 0.615 0.712 0.547 6 Retention of Key People 0.339 0.413 0.722 0.382 0.515 0.670 0.583 7 Human Capital 0.335 0.275 0.526 0.421 0.515 0.615 0.609 8 Structural Capital 1.000 0.288 0.526 0.574 0.625 0.470 0.356 9 Relational Capital 0.288 1.000 0.374 0.318 0.379 0.356 0.48310 Management Leadership 0.526 0.374 1.000 0.399 0.615 0.709 0.51511 Process Execution 0.574 0.318 0.399 1.000 0.704 0.506 0.45012 Knowledge Generation 0.625 0.379 0.615 0.704 1.000 0.609 0.48613 Knowledge Sharing 0.470 0.356 0.709 0.506 0.609 1.000 0.59014 Knowledge Integration 0.356 0.483 0.515 0.450 0.486 0.590 1.00015 Business Performance 0.483 0.321 0.396 0.523 0.536 0.497 0.290

NOTE: > 0.307 correlation is significant at the 0.01 level (2 tailed)> 0.270 correlation is significant at the 0.05 level (2 tailed)


HC Conceptual Model4.0

ManagerialLeadership

ValueAlignment

Retention of Key People

Human CapitalDepletion

BusinessPerformance

EmployeeSatisfaction

EmployeeCommitment

EmployeeMotivation

EducationHumanCapital

RelationalCapital

Human CapitalEffectiveness

StructuralCapital

ProcessExecution

KnowledgeIntegration

KnowledgeGeneration

KnowledgeSharing

0.751

0.506

0.475

0.530 0.326 0.360

0.358

0.734

0.456 0.429

0.430

0.285 - 0.233

- 0.372

- 0.337

0.327

0.439

0.543

0.491

0.3940.262

0.307

0.442

R2 = 28.5%

R2 = 28.5%

R2 = 68.2%

R2 = 44.1%

copyright © 2001 by accenture, iicr and saratoga institute these slides must be accompanied by a...

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