AssessmentWorld Pty Ltd Catalogue 2023

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The Intra-systemic Human Capital Measurement Model

AssessmentWorld Pty Ltd suggests an alternative approach to human capital measurement and reporting (read the full article at:  https://bit.ly/3d50691 ).  This approach is built on a philosophy of measuring for the sake of managing, versus measuring for the sake of reporting.  This means that the focus of the measurements is to internally improve on the employment of human capital over time, and to track and measure said.  This approach differs fundamentally from one where measuring is done against the myriad of metrics that exist, with the view to comply with external indicators, standards and disclosures.  Human capital measurement is a highly fragmented area of management practice, and we posit that the current reporting in integrated statements, reflects the same condition.

AssessmentWorld Pty Ltd also of the view that efforts to standardise HC measurement, for the sake of ‘coherent’ reporting and comparability, will be an exercise in futility, as, for one, organisations differ substantially in the way they operate in a specific time span.  A quantitative example would be the differences between organisations on a metric such as labour costs as a percentage of revenue (LCPR).  Company A might reflect a LCPR of 50%, and an EBITA of 12%, versus Company B, reflecting a LCPR of 20%, and an EBITA of 3%.  Clearly the LCPR metric in this example could be interpreted incorrectly, if simply read on its own.

A qualitative measurement example would be the differences between companies on a metric such as a Staff Satisfaction Index (SSI), using a Likert scale.  Company A might score a Sten 8 on an SSI instrument, indicating a high SSI, versus Company B, scoring a 6, i.e. average SSI.  Deeper understanding of the workings of the two companies during the reporting period, reveals that Company B changed executive leadership, and was driving an aggressive growth strategy, demanding greater levels of input and quality from employees.  The mere Sten score on the SSI does not explain the more complex and stressful interactions in Company B during that period, versus Company A, which, during the same period, was experiencing exponential market growth, offering its employees expansive bonuses.

AssessmentWorld Pty Ltd suggests an Intra-systemic HC Measurement Model for the use of HC measurements in organisations:

• HC measurement and management should be based on ethical principles, such as fairness, honesty, loyalty, care, accountability, and responsibility.  

• Based on ethics and organisational justice, managers should execute HC measurement and management, discretionary, whilst ensuring system integrity.  

• Discretionary system integrity, now enables managers to create privacy, dignity, safety and protection, both physically and psychologically for the organisation’s human capital. It also enables management to self-direct human capital autonomously and strategically, and to self-correct, where indicated by measures.  

• It then follows that managers have the autonomy to measure, analyse, improve and manage human capital from a quality management perspective, i.e. deriving the highest levels of returns on human capital, be it quantitatively or qualitatively measured.

• Measurement, analysis, improvement and management of human capital, as described above, is a continuous process, therefore, when integrated reporting for stakeholders is done, it should report on this process via uncomplicated, concise and informative narratives.  These narratives should be integrative in nature, without unrelated, complicated quantifications and data representations.  In short, the ‘story’ of how human capital was deployed in a particular year, should be presented.  

The implementation of the Intra-systemic HC Measurement Model creates various implications for organisational managers in order to give effect to its principles and execution:

• Management in this context refers to all line managers in the organisation, and not just HR management.  The latter has to indeed take the lead here, as human capital measurement-management is their specialist area.  All organisational managers, however, have to be trained and skilled in these areas, as they mostly engage with employees during performance within the operations of the organisation.  

• Determination has to be made regarding what is material and important for the organisation to measure in terms of its human capital efficiencies.  A combination of quantitative and qualitative measures may be decided upon.  

• Managers also need to be clear as to how, and with what they want to measure.  This would include, how often these measures need to be applied, and would depend on organisational specific needs.  Instruments, such as, accounting, production and HR data, surveys, and performance appraisal outcomes are some of the measures which can be used.

• A vital component of model execution, is the decision/s as to how to translate the measures into human capital efficiency improvements.  Management by objectives (MBO) comes to mind here, with clearly defined key performance areas and indicators, linked to clear time lines.

• Change management is a competency that needs to be employed, to ensure buy-in, motivation and engagement.  Employees who are made to feel important as human capital, and not mere labour, will be less resistant and more inclined to partake in improvements, such as upskilling, adapt to new work flows, and the like.

• General managerial actions, such as controlling, monitoring, and remediation, should be applied.  Managerial agility would lead to timely identification of deviations, and implementation of corrective actions.

• Continuous measurements of improvements should be documented and communicated internally, as this leads to further re-enforcement of efficiency changes implemented.

• At the end of a financial year, organisations will then possess of rich sets of data to narrate to external stakeholders in an integrated manner, using a mix of quantitative and qualitative data.  The organisation now tells its human capital measurement and management story, which is unique to its identity and circumstances. 

Within the Intra-systemic HC Measurement Model approach, standard developers and regulators need to take note of the following implications:

• The idea of developing and prescribing a plethora of standards and regulations, purely for the sake of reporting, will be counter-productive.  Measuring for the sake of managing is rather the philosophy to be introduced here.

• Specific standards and regulations should be non-negotiable and enforceable, such as, physical and psychological health and safety, rights of employees, workplace ethics, including non-discriminatory management, and the like. 

• Most standards should, however, be voluntary, enabling organisations to move freely, and narrate their unique human capital efficiency improvement ‘story’ on their own terms, utilising these voluntary standards as guidance and framework.  

• A mix of quantitative and qualitative standards and regulations should be developed and made available, in order to assist organisations to choose those who most aptly apply to them and their specific circumstance at a specific time.  This will afford organisations the capability to develop integrated narratives regarding their human capital within a broad, mostly voluntary framework of standards.  The approach should also allow all stakeholders to make an informed assessment as to the truthfulness and trustworthiness of said narratives, as well as enable comparability within and across industries, and over various time frames.

The Measurement of Human Capital

The full article can be read at:  https://ssrn.com/abstract=4049062

The term human capital refers to the economic value of an employee’s experience and skills. Human capital includes assets like education, training, intelligence, skills, health, and others that employers value, such as, loyalty and punctuality. As such, it is an intangible asset or quality that is not listed on a company's balance sheet/statement of comprehensive financial position, yet has a profound and direct impact on its financial bottom line.  Human capital is perceived to increase productivity and thus profitability. The more a company invests in its employees, the higher the levels of its productivity and success become.

The psychological-behavioural value drivers of human capital reside in the following factors:

*Psychological wellness/being  

*Psychosocial health and safety 

*Employee engagement/Job satisfaction, including training and learning opportunities/Job performance

*Organisational Culture 

Employing any form of capital holds inherent risks for business managerial-leaders.  Human capital is no exception.  This asset is in the final analysis made from flesh and blood, tends to become emotionally upset, becomes fatigued, falls ill, disengages, experiences personal problems, is often subjective, loses interest and motivation.   Risks, and their effects cost the organisation money, whether in direct economic costs and/or indirect opportunity costs.  

The risk of e.g. absenteeism, as a result of factors, such as, psychological un-wellness, un-safeness, job dissatisfaction, disengagement, lowered job performance and toxic culture, is one of the major factors for business managerial-leaders to take into account, when employing human capital. 

AssessmentWorld Pty Ltd offers quantitative organisational surveys, enabling management to calculate human capital risks and their real cost effects.  The results of these surveys, over time, also enables management to implement interventions, measure, track, and report on their effects.  These statistics and their graphic displays can further be utilised in organisations' annual integrated reporting documents.

Psychological Health and Safety Index (PHSI-S)

The Psychological Health and Safety Index (PHSI-S) measures a person's perception of his/her psychological health and safety as it pertains to six dimensions:

The National Standard of Canada for Psychological Health and Safety in the Workplace (CAN/CSA-Z1003-13/BNQ 9700-803/2018) defines psychological health as 'a state of complete physical, social, and mental well-being, and not merely the absence of disease or infirmity; a state of well-being in which the individual realizes his or her own abilities, can cope with the normal stresses of life, can work productively and fruitfully, and is able to make a contribution to his or her community'

The same standard defines psychological safety as 'the absence of harm and/or threat of harm to mental well-being that a worker might experience' and states that a psychologically healthy and safe workplace is 'a workplace that promotes workers' psychological well-being and actively works to prevent harm to worker psychological health including in negligent, reckless, or intentional ways'

The Psychological Health and Safety Index (PHSI-S) is a reflection of an organisation's employees' experience and perception of the six psychological health and safety dimensions in the workplace.

PSYCHOLOGICAL HAZARDS-SAFETY

This dimension refers to work-related hazards of a psychological and psychosocial nature, and the severity of injury and ill-health that can be caused by these hazards, inclusive of psychological injury, such as depression, suicidal ideation, psychosomatic and physical health reactions (hypertension, migraines). Hazards of a psychological and psychosocial nature include aspects of work organization, social factors at work, work environment, equipment and hazardous tasks (ISO 45001). 

PSYCHOLOGICAL HEALTH

This dimension refers to psychological health, which is defined as 'a state of well-being in which an individual realises his/her own potential, can cope with the normal stresses of life, can work productively and fruitfully, and is able to make a contribution to her/his community' (World Health Organisation).  Psychological/mental health is also often expressed as the absence of psychological symptomology, such as, depression, low self-esteem, anxiety, and others.  Employees suffering from psychological ill-health, are often present at work, yet do not fully contribute to productivity as they are often 'mentally absent', e.g. experience low concentration levels and lack of confidence to execute tasks.  Psychological ill-health can be caused by workplace psychological hazards and/or originate from situations outside the workplace, including but not limited to, relationship strife, financial difficulties, and societal disturbances.     

PHYSICAL HEALTH

The causes of physical health problems may be physiological, biological and genetical.  Physical health problems could also be caused by psycho-social causes, such as stress and fear.  The adverse effects of physical health on the psychological wellness of an employee are well documented in research literature, and include lowered concentration levels, presenteeism, self-depreciation, and the like.  These, in turn, affect psychological safety directly, and could lead to increased work-related accidents, interpersonal conflict, and decreased productivity.

STRESS-BURNOUT-FATIGUE

Psychological stress is defined as 'a particular relationship between the person and the environment that is appraised by the person as taxing or exceeding his or her resources and endangering his or her well-being'.  

Burnout is a psychological syndrome of emotional exhaustion, depersonalisation (mental distance), and reduced personal/professional accomplishments, in which the person has no positive feelings, sympathy, or respect for their job. Burnout occurs as a result of prolonged response to chronic stressors in the workplace. It has a wide range of psychological, physical, and behavioural problems which will not only have a negative impact on an individual's work-life but also their personal life.

Fatigue is a state of unrelenting exhaustion, lasts longer than mere acute tiredness, is more profound and isn't relieved by rest. It's a nearly constant state of weariness that develops over time and reduces a person's energy, motivation and concentration. Fatigue at this level impacts a person's emotional and psychological well-being.  Occupational fatigue can be caused by chronic stress states, physical over exertion, ill health, lifestyle choices, such as alcoholism, obesity, and the like.  These causes could also be situated outside of work parameters, yet cause fatigue in the employee, for example, interrupted sleeping habits, relational difficulties, and financial distress.

WORK-LIFE-BALANCE

Work-life-balance refers to a state of equilibrium between the demands that are placed on an individual from a work perspective and a personal life perspective. Individuals who report low levels of work-life-balance (i.e. have conflict between their work demands and personal life demands) are up to 12 times more prone to experience burnout and two to three times more likely to experience depression, compared to those individuals with better work-life balance.  (World Health Organization: WHO Healthy Workplace Framework and Model).

COPING CAPABILITY

 

Coping capability refers to various personal abilities and perceptions which will allow the person to either cope with difficult situations and to manage them effectively and efficiently, or not.  Some people use humour, have confidence to assert themselves positively during conflict, exhibit resilience when workload increases, show 'bounce back ability' if adversity happens, have strong interpersonal support systems, apply high levels of EQ, don't get upset easily, understand others, etc.  These behaviours, and many more, assist employees to cope with life and work.  The opposite is also true.

PSYCHOLOGICAL HEALTH AND SAFETY INDEX (PHSI)

The PHSI is the composite of the equally weighted six psychological health and safety factors measured in this survey.  This composite should be interpreted together with the individual factors assessed.  For example, the PHSI might present favourable, yet one or two of the individual factors, such as, stress-fatigue-burnout, might present less favourable.  Managers should then focus on the less optimal factor, do further root cause analysis, and implement improvement practices. 

Absenteeism-Presenteeism Risk Indicator (APRI)

The Absenteeism-Presenteeism Risk Indicator is determined by calculating the inverse of the PHSI.  It indicates the risk that employees, due to adverse psychological health and safety factors prevalent in the organisation, will either excessively be absent and/or behave with presenteeism, that is attend work whilst unwell, hence not contributing productively and cost optimally to the tasks they are assigned.  The APRI needs to be factored into the calculation of the cost of absenteeism-presenteeism in an organisation.

Psychological Hazards-Safety Risk Indicator

The Psychological Hazards-Safety Risk Indicator is the risk associated with high levels of psychological hazards and mentally unsafe working environments.  These hazards and environments could include excessive workload, unsafe physical work conditions, autocratic management practices, toxic cultural environment, workplace bullying, job insecurity, various types of harassment, physical and interpersonal violence, unfair remuneration practices, and the like.  

Psychological Health Risk Indicator

The Psychological Health Risk Indicator is the risk that psychological ill-health, such as depression among employees can affect productivity, and increase absenteeism, presenteeism, and employee turnover and replacement.  The cost of this risk factor is mostly 'invisible' and not calculated/taken into consideration when determining possible absenteeism-presenteeism and employee turnover and replacement costs and trends.  

Physical Health Risk Indicator

The Physical Health Risk Indicator refers to the absence of health, such as, chronic and recurring minor physical illness.  This risk factor has a direct impact on employee costs, such as, temporary staff appointments.  It also has indirect/opportunity costs implications, including extra workload burden on team members and supervisors, which may cause errors in work, and re-working.  This may, in turn, generate other direct costs, such as overtime.  Organisations should include this riks factor when calculating direct employee costs, as well as absenteeism-presenteeism costs.    

Stress-Burnout-Fatigue Risk Indicator

The Stress-Burnout-Fatigue Risk Indicator measures the risk associated with employees' unproductive management of stress, leading to fatigue and burnout.  This risk factor also directly feeds into the absenteeism-presenteeism risk factor, and should therefore be take into account when calculating these costs.  

Work-Life-Balance Risk Indicator

The Work-Life-Balance Risk Indicator is the risk associated with work-life imbalance, and has a direct impact on employee functioning.  Individuals who report low levels of work-life-balance (i.e. have conflict between their work demands and personal life demands) are up to 12 times more prone to experience burnout and two to three times more likely to experience depression, compared to those individuals with better work-life balance.   

Coping Capability Risk Indicator

The Coping Capability Risk Indicator is the risk associated with employees' inability to cope with e.g. work-related pressures; life problems; personal adversities.  In many cases, employees utilise unproductive coping mechanisms, such as, excessive alcohol usage, violence, avoidance, and disengagement from work.  These all eventually add to employee costs, whether direct or indirect.  This risk factor has a direct bearing on absenteeism-presenteeism, employee turnover and replacement costs.  

 

Management Competency Observational Index (M-COI

The Management Competency Observational Index (M-COI) measures current management potential as pertaining to TWELVE management competency areas:

 

 

Self-management refers to the candidates competency set enabling him/her to manage self in areas such as EQ, Values, Professionalism, Stress, Wellness, Development, and Work-Life balance.

Leadership is the ability to influence others towards goal achievement.  In the modern era various leadership constructs and approaches exist, such as, servant, authentic, and neuro leadership.  All of them still fit with the two broad leadership approaches, namely transactional and transformational.  The modern-day leader should be able to competently manoeuvre amongst situations, by selecting and applying the most productive leadership approach at that time - contingency leadership.  John Maxwell famously said that everything rises and falls with leadership.  Leadership competency is in high demand as effective leaders achieve higher engagement of the human capital component in the organisation via motivation, fairness, clarity of vision, and the like.

Operational management competencies refer to the classic management functions, such as, planning, organising, controlling, project management, and budgeting.  These competencies allow the person to effectively manage the resources of the organisation in an efficient manner, thereby increasing the return on assets and capital invested. for the shareholders and/or owners.  

Knowledge refers to the candidate's knowledge of job-related technical content & and organisational matters, e.g. strategies, culture and politics.  People with high levels of knowledge usually provide higher return on human, intellectual and knowledge capital for the organisation, as their knowledge levels allow them to operate highly efficiently. 

Thinking & problem solving refer to a very specific competency set which includes the ability to diagnose problems and get to their root causes, by applying both analytical as well as creative thinking modalities.  It also suggests competent utilisation of of team processes, as well as the abilities to formulate recommendations, calculate cost-benefit, implement and measure the effectiveness of implementation. 

Decision-making competencies include elements such as understanding one's range of authority, circle of influence, EQ, resilience, logical-rational thinking, risk analysis, and monitoring and evaluation.  Highly competent managers utilise a clear methodology to reach and execute decisions.  They also possess the necessary assertiveness and resilience to 'push through' in the face of resistance.  Their high EQ competencies allow them to work with a team, as well as to change direction, if the situation so demands/indicates. 

Communication is the information 'blood flow' of the organisation.  Managers who communicate clearly, craft their messages for their audience, listen effectively, and feed back to the team continuously, make for highly competent managers in this area.

Organisations are social environments and people are its human capital.  Managers who manage their teams of people with high levels of interpersonal competencies, such as diversity management, conflict handling, motivation, care, and the like, are usually very successful.  These organisations are inevitably characterised by engaged and productive employees, and very low levels of disciplinary issues and staff turnover. 

Steve Jobs (late CEO of Apple) maintained that teams of people make an organisation work, not committees and/or heavily layered bureaucracies.  He is of course on point here, as the synergies created by highly efficient teams of people, unlock vast potential for the organisation - think about all the innovations at companies such as Google, Amazon, and many others.  Competent team focussed managers know how to construct, enable, develop and resource their teams.  These managers are also very good at coaching and facilitating cooperation among team members.  They also do not shy away from managing team conflicts effectively, nor to reward great performances. 

Human capital refers to the skills, knowledge, and experience possessed by employees, viewed in terms of their value to an organisation.  In the modern day, managers should view their employees as valuable units of human capital, i.e. an investment on which the organisation can make a return,  versus employees simply being viewed as a cost to company.  The human capital approach leads to the application of management competencies, such as, scientific recruitment practice, learning & development, talent pipe line and talent management.  The most recent development in the field of people metrics, also becomes part of the competent human capital manager. 

Managers who possess high levels of total quality management (TQM) competencies, add continuous value to the organisation's quality and profitability margins.  Via their operational management competencies, they focus on continuous improvement, lean management, reduction of waste, and strive for zero defect products and services.  In their quest for extreme high levels of quality, they employ evidence based/empirical problem solving and decision-making principles, and measure people, processes and products continuously, in order to create optimal organisational functioning and outputs. 

The modern-day organisation finds itself operating in an increasingly VUCA environment - Volatile, Uncertain, Chaotic and Ambiguous.  Change is therefore the only constant!  It is also one of the management competency areas which is scarce in supply.  Managers who have mastered the art and science of change management, understand and apply competencies, such as, change planning, team involvement, using change champions/agents, communicate effectively, create a sense of urgency, celebrate the wins, consolidate the changes, and effectively deal with resistances.