60 • 100 GREAT BUSINESS IDEAS
Recent research suggests that the average company spends
40 percent of its revenues on people-related expenses (human
capital costs), and 92 percent of fi nancial directors think human
capital has a “huge” impact on customer satisfaction and profi tability.
However, only 16 percent of companies have any real idea of the
return on human capital investments. The solution is to measure
the direct return on your investments in people.
The idea
Given the sums invested in human capital activities—notably
training and development—and the clear link between investment
in employees and effectiveness, the need for systems to measure
performance is vital. According to General Electric’s former CEO,
Jack Welch: “The three most important things you need to measure
in a business are customer satisfaction, employee satisfaction
and cash fl ow.” Although Welch later changed the last item to
shareholder value, the importance of the other two—and their
connection—remains strong.
Executives typically encounter one or more problems with
performance measurement.
- Too many measures obscure the most signifi cant issues and
divert attention from other issues.