Evaluating the Impact of Human Resources

Human resources (HR) management constitutes a blend of human-capital practices, some of which are required for corporate maintenance, but others of which create value for a company. The task that faces HR managers who seek to establish the financial impact of their departments is to be able to show which practices are the ones that create value. One wide-ranging study has shown a clear relationship between specific human-capital-management practices and increased shareholder value. However, apparently not all HR practices boost value—even though it seems they should. Although additional research will be needed to establish which practices boost the bottom line (and which are merely maintenance activities), the data indicate what HR managers have long suspected. That is, HR-management practices are not a necessary evil that creates a drag on corporate profits, as some executives seem to believe. Rather, solid human-capital management does improve corporate profits and creates shareholder value.