From Mercer Management Journal 16
CASE STUDY: FIRST TENNESSEE NATIONAL
Tapping the Hidden Value of People
It pays to learn exactly where and how to invest in human capital
By Tom Love and Haig Nalbantian
This large financial services institution knew that its workforce made all the difference to its customer-focused business strategy. But until the firm dug deep into its employee data, it couldn’t be sure that its human capital practices were really advancing that strategy.
f you’ve heard it once, you’ve heard it a thousand times: that old line about the company’s best assets walking out the door every night. The headlines tell a different story. The frequency and depth of layoffs today suggest that many managers still view human capital primarily as a variable cost rather than a value-producing asset.
Managers manage what they can measure––and they find it hard to measure people. While they can calculate payroll expenses, they typically don’t have the tools to determine causal relationships: why valued employees really leave, what happens when new staff are promoted rapidly, how training influences productivity. And when economic pressures dictate that labor costs should be adjusted to business realities, many managers don’t know when they are discarding valuable knowledge assets rather than simply cutting costs. Absent the facts, managers are hard-pressed to apply systems thinking to the management of human capital. They’ve had to make such decisions piecemeal, with little sense of their broader impact and the economic tradeoffs involved. There is some early evidence of a shift in this view. A recent survey conducted by Mercer Human Resource Consulting and CFO Research Services revealed that 43% of CFOs see human capital more as a source of value, with 32% saying it is equal parts cost and value. Only 25% see it more as an operating cost (Exhibit 1). On balance, more CFOs indicate that they view HR as a strategic partner rather than a cost...