The 7 Skills of Valuation

These skills should give talent managers the intelligence needed to create competitive advantage in the marketplace.

Finding value in our work requires building skills in measurement and analysis. But there is much more to it than counting things. The objective of measurement programs is to yield actionable data. 

This type of data, blended with analytic skills, generates knowledge, insights and, hopefully, intelligence. Intelligence is what management needs to make better investment decisions and create competitive advantage. The following are the seven skills that are useful and necessary for performance evaluation.

1. Widen your view. There is more to human capital analysis than labor demand and supply. Start by considering your organization’s strategic capacity to deal with technology, global competition, economic fluctuations and other market macro forces. Are your vision, brand and culture strong enough to address these seminal issues? These are the basic criteria for investment allocations. You may have to help executive leadership in this area.

2. Link people to results. Identify and describe in detail your organization’s critical positions. These are the jobs that have the greatest positive effect and potentially the greatest drag on performance. Then trace the linkages from employee performance in those jobs to customer reaction and competitive advantage. This is the path to profitability for commercial firms and constituent service for nonprofit organizations. Breaks in that chain diminish your ability to fulfill your firm’s vision and purpose.

3. Plan to win. The acceptance of a “win some, lose some” philosophy is a path to mediocrity. Would you ever enter an important athletic contest with anything other than a total dedication to winning? If you did, you might as well stay home. Likewise, do you plan to be No. 1 in human capital management? If not, you give your competition the advantage in recruiting, managing, engaging and retaining the best talent. No one remembers or admires who finished second.

4. Optimize efficiency. Fine-tune your game. Audit your HR process sources, methods and results. Are they good enough to make you No. 1 in your market? Are you the best at sourcing talent, capturing, managing, incenting, developing, engaging and retaining it? If not, where are the most obvious and important shortcomings? What will it take to fix them as quickly as possible? Can you afford not to?

5. Integrate delivery. Level the silos. The chain is only as strong as the weakest link. Excellent recruitment without engagement and retention is a futile waste of resources. The best HR processes seamlessly connect every step. When you achieve this, you provide the best service to your internal employee customers. This leads to competitive products and services for your external customers. Bring your functional leaders together to build a unified, continuous process carrying your human capital from recruitment to retirement.

6. Focus on the future. Shift your attention to strategic leading indicators. This will bring to light the intangible factors that determine competitive advantage. Although you need to monitor past costs, delivery times and service quality, none of those by themselves will win market share tomorrow. As an example, the Consumer Confidence Index is a predictor of near-term future buying decisions. Internally, data on retention can be a predictor of near-term employee performance. In a sense, the rate of turnover doesn’t matter; the point is who is leaving, why and how do we contain it?

7. Predict investment return on investments. Manage tomorrow today. Design and deliver services based on their future effects for your employee, your human capital and on future market outcomes. Does your firm need to increase revenue, accelerate delivery, cut costs or improve service? Those corporate goals are human capital performance targets as well. Where should you invest to obtain the greatest return, the most important outcomes? Going back to operating efficiency, where should you invest your limited capital to achieve the greatest gain in performance? Improving less relevant services is wasteful. Put your money on the organization’s key goals.

I don’t have to remind you that managing people isn’t easy. People are highly variable and independent. Yet this doesn’t mean that we can’t help them improve their performance. If we couldn’t, there would be no reason for the human resources function to exist.

My experience since my first HR job in 1969 has proven to me that sound management principles supported by valid, relevant and reliable data gives us a base on which to make effective investment decisions that help drive our organization’s goals.

This article originally appeared in Chief Learning Officer's sister publication, Talent Management.