Dr. Nick Bontis - SuccessFactors

Intellectual Capital ROI
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576 Years of Research
Dr. Laurie Bassi
Dr. Peter Cappelli
CEO of McBassi &
Company and
Chair of Bassi
Investment Inc.
Dr. David Sirota
Professor of
Management at
the Wharton
School of UPENN
Dr. Jac Fitz-enz
Founder of the
Sirota Survey
Intelligence
Dr. Charles Grantham
Co-founder of the
Work Design
Collaborative
Doug Klein
CEO of Workforce
Intelligence Inc.
Leader of Greer &
Associates, Inc.
Nov Omana
Board member and
Former Chairman
of IHRIM
Dr. Kirk Hallowell
Senior Consultant for
Personal Decisions
International
President of MICA
Consulting
Partners
Bob Paladino
Founder and
Managing Partner
of Paladino &
Associates
Josh Bersin
President and
founder of Bersin
& Associates
Co-founder of the
Work Design
Collaborative
Jason Corsello
Dr. Jesse Harriot
Vice President of
the Center of
Excellence at
Knowledge Infusion
Karen Beaman
Ken Greer
Catharine Larkin
Sirota's President
of Consulting
Dr. Jim Ware
Vice President
of Research for
Monster Worldwide
Dr. R.J. Heckman
VP and general
manager of PDI's
Leadership
Assessment Products
Co-founder and
Editor-in-Chief of
the IHRIM Journal
Lexy Martin
Lead author and
manager of the
CedarCrestone
HCM Survey
Dr. Kim Ruyle
Vice President of
Product for
Lominger
International
Tom Olivo
President of Success
Profiles Inc.
Dr. Nick Bontis
Director of the
Institute for
Intellectual
Capital Research
Rob Bernshteyn
VP of Global Marketing
and Management of
SuccessFactors
successfactors.com/research/thought-leaders
Dr. Nick Bontis
¾Nick has been immersed in the field since 1991
- cover story in Fortune magazine, titled
"Brainpower”
¾His ground-breaking doctoral dissertation went
on to become the #1 selling thesis in Canada.
¾Dr. Bontis is the Director of the Institute for
Intellectual Capital Research
¾Tom Stewart, current Editor of the Harvard
Business Review, recognizes him as a "pioneer
and one of the world's real intellectual capital
experts".
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10
Causal Model: Insurance Sector
0.506
Managerial
Leadership
Retention of
Key People
0.442
R2 = 68.2%
0.530
Training &
Development
0.475
0.326
0.360
Relational
Capital
Human Capital
Effectiveness
0.307
0.358
R2 = 28.5%
- 0.337
Structural
Capital
0.751
Employee
Satisfaction
Human
Capital
0.734
0.456
0.491
0.543
Employee
Commitment
Knowledge
Generation
0.327
Business
Performance
R2 = 44.1%
0.439
0.429
Process
Execution
Employee
Motivation
0.430
Value
Alignment
Knowledge
Integration
- 0.372
0.394
0.262
Knowledge
Sharing
0.285
Human Capital
Depletion
- 0.233
R2 = 28.5%
List of Participating Organizations
ABN AMRO North America Inc.
Allstate Insurance Company
AMP Australia
AMP UK
Andersen Consulting
Aon
AXA Client Solutions
Blue Cross Blue Shield of Florida
Blue Cross Blue Shield of Illinois / Texas
Blue Cross Blue Shield of North Carolina
CNA Commercial Insurance
Equitax
Farmers Insurance Group
Hartford Financial Services
Hewitt Associates, LLC
Intermountain Health Care
International Monetary Fund
Merrill Lynch
National City Corp.
Northwestern Mutual Life
Penn National Insurance
PNC Bank
Savings Bank of Utica
United Health Group
Zurich U.S.
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Quantitative Metric Model
Human Capital
Depletion
_
Human Capital
Valuation
Human Capital
Investment
+
+
Human Capital
Effectiveness
HC Effectiveness - Revenue Factor
13
HC Effectiveness - Income Factor
14
HC Valuation - Compensation Factor
15
HC Valuation - Executive Compensation
16
HC Valuation - Supervisory Compensation
17
HC Investment - Development Rate
18
HC Investment - Training Cost Factor
19
HC Depletion - Voluntary Turnover
20
HC Depletion - Total Separation Rate
21
Areas of Concern
22
Perceptual Means: Lowest and Highest 10
NOTE: Items based on Likert-type scales from 1 (strongly disagree) to 7 (strongly agree).
LOWEST 10
P77
P39
P61
P42
P40
P58
P76
P44
P75
P46
Information systems include employee knowledge.
Our systems (e.g., files and databases) contain knowledge that is easily accessible.
Our "time to market" for new products and services is better than our competitors.
Our organization has methods for capturing and retaining the knowledge of its workforce.
We have a system for continually refreshing our knowledge base.
Our organization exploits new business opportunities quickly.
Our organization has effective mechanisms for capturing individual employee knowledge an
packaging so that it can be shared with others.
Our organization captures and utilizes information from suppliers.
Employees systematically document and pass on their knowledge.
Our organization captures and utilizes information from trade associations.
3.24
3.47
3.49
3.51
3.52
3.57
3.64
3.68
3.68
3.71
HIGHEST 10
P36
P47
P7
P33
P80
P38
P32
P35
P81
P11
Our employees generally have the intelligence and aptitude to succeed.
We nourish our corporate relationship with the community.
Employees commit to their assigned tasks to completion.
Competitors target our key personnel for recruitment.
Our company's reputation in the marketplace is favorable.
Our systems (e.g., files and databases) contain useful knowledge.
Recruits perceive that our employees are well respected within the industry.
Employees have the necessary knowledge, skills, and competencies to succeed.
We provide adequate value to our shareholders.
Employees are highly qualified for their positions.
5.53
5.44
5.43
5.41
5.40
5.24
5.19
5.12
5.03
5.03
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Correlation vs. Path Analysis
Correlation between Age and Risk of Heart Attack
+ 0.36 (p < 0.01)
Correlation between Obesity and Risk of Heart Attack
+ 0.32 (p < 0.01)
Age
+ 0.36
Heart
Attack
Obesity
+ 0.32
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Correlation vs. Path Analysis
Path between Age and Obesity
+ 0.26 (p < 0.01)
Path between Obesity and Risk of Heart Attack
+ 0.43 (p < 0.01)
Age
+ 0.26
Obesity
Heart
Attack
+ 0.43
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Parsimony vs. Predictive Power
Fitness
Diet
+ 0.13
Genetic
+ 0.19
Age
+ 0.29
+ 0.23
+ 0.26
+ 0.20
Obesity
Heart
Attack
+ 0.43
+ 0.29
Implication 1
Senior management mentorship and alignment
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0.506
Managerial
Leadership
Retention of
Key People
0.442
R2 = 68.2%
0.530
Training &
Development
0.475
0.326
0.360
Relational
Capital
Human Capital
Effectiveness
0.307
0.358
R2 = 28.5%
- 0.337
Structural
Capital
0.751
Employee
Satisfaction
Human
Capital
0.734
0.456
0.491
0.543
Employee
Commitment
Knowledge
Generation
0.327
Business
Performance
R2 = 44.1%
0.439
0.429
Process
Execution
Employee
Motivation
0.430
Value
Alignment
Knowledge
Integration
- 0.372
0.394
0.262
Knowledge
Sharing
0.285
Human Capital
Depletion
- 0.233
R2 = 28.5%
Implication 2
Human and structural capital coordination
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0.506
Managerial
Leadership
Retention of
Key People
0.442
R2 = 68.2%
0.530
Training &
Development
0.475
0.326
0.360
Relational
Capital
Human Capital
Effectiveness
0.307
0.358
R2 = 28.5%
- 0.337
Structural
Capital
0.751
Employee
Satisfaction
Human
Capital
0.734
0.456
0.491
0.543
Employee
Commitment
Knowledge
Generation
0.327
Business
Performance
R2 = 44.1%
0.439
0.429
Process
Execution
Employee
Motivation
0.430
Value
Alignment
Knowledge
Integration
- 0.372
0.394
0.262
Knowledge
Sharing
0.285
Human Capital
Depletion
- 0.233
R2 = 28.5%
Implication 3
Employee commitment is critical for performance
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0.506
Managerial
Leadership
Retention of
Key People
0.442
R2 = 68.2%
0.530
Training &
Development
0.475
0.326
0.360
Relational
Capital
Human Capital
Effectiveness
0.307
0.358
R2 = 28.5%
- 0.337
Structural
Capital
0.751
Employee
Satisfaction
Human
Capital
0.734
0.456
0.491
0.543
Employee
Commitment
Knowledge
Generation
0.327
Business
Performance
R2 = 44.1%
0.439
0.429
Process
Execution
Employee
Motivation
0.430
Value
Alignment
Knowledge
Integration
- 0.372
0.394
0.262
Knowledge
Sharing
0.285
Human Capital
Depletion
- 0.233
R2 = 28.5%
Implication 4
Generation, integration and sharing are distinct
30
0.506
Managerial
Leadership
Retention of
Key People
0.442
R2 = 68.2%
0.530
Training &
Development
0.475
0.326
0.360
Relational
Capital
Human Capital
Effectiveness
0.307
0.358
R2 = 28.5%
- 0.337
Structural
Capital
0.751
Employee
Satisfaction
Human
Capital
0.734
0.456
0.491
0.543
Employee
Commitment
Knowledge
Generation
0.327
Business
Performance
R2 = 44.1%
0.439
0.429
Process
Execution
Employee
Motivation
0.430
Value
Alignment
Knowledge
Integration
- 0.372
0.394
0.262
Knowledge
Sharing
0.285
Human Capital
Depletion
- 0.233
R2 = 28.5%
Implication 5
Turnover effect and performance feedback loop
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0.506
Managerial
Leadership
Retention of
Key People
0.442
R2 = 68.2%
0.530
Training &
Development
0.475
0.326
0.360
Relational
Capital
Human Capital
Effectiveness
0.307
0.358
R2 = 28.5%
- 0.337
Structural
Capital
0.751
Employee
Satisfaction
Human
Capital
0.734
0.456
0.491
0.543
Employee
Commitment
Knowledge
Generation
0.327
Business
Performance
R2 = 44.1%
0.439
0.429
Process
Execution
Employee
Motivation
0.430
Value
Alignment
Knowledge
Integration
- 0.372
0.394
0.262
Knowledge
Sharing
0.285
Human Capital
Depletion
- 0.233
R2 = 28.5%
Causal Model – Health Canada
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Causal Model: Organization A
Pay
Satisfaction
Training &
Development
0.355
Employee
Capabilities
0.394
0.247
Supervisor
Satisfaction
R2 = 37.5%
0.324
0.210
Job
Insecurity
- 0.073
Job
Satisfaction
R2 = 56.4%
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Causal Model – Organization B
Leadership
0.747
Customer
Service
Feedback
0.201
0.129
0.159
R2 = 28.1%
0.381
0.125
0.310
Climate
0.309
Job
Satisfaction
0.244
Human
Capital
0.083
0.247
0.395
0.075
0.246
Performance
Compensation
0.026
R2 = 15.6%
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Causal Model – Organization C
0.734
Executive
Behaviours
0.832
Value
Alignment
-0.003
0.269
Manager
Behaviours
0.434
Motivation
Training &
Development
0.315
0.329
Reward &
Recognition
0.229
0.461
0.267
0.060
0.509
0.751
0.327
Commitment
Satisfaction
Human
Capital
0.460
R2 = 80.3%
0.246
R2 = 72.1%
0.163
0.425
0.037
Climate
0.079
Business
Performance
0.116
0.456
0.448
0.063
0.507
Career
Opportunity
0.642
0.117
Work / Life
Balance
Relational
Capital
0.209
0.146
0.201
0.024
Compensation
0.013
-0.012
0.093
Physical
Environment
0.021
0.512
Structural
Capital
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The Power of Longitudinality
0.530 (t = 0.75)
Training &
Development
0.245
(t = 0.01)
0.358
(t = 0.15)
0.326 (t = 0.23)
Human
Capital
Structural
Capital
0.360 (t = 0.45)
Relational
Capital
0.307 (t = 1.25)
0.307 (t = 0.28)
Employee
Satisfaction
Human Capital
Effectiveness
37
Max / Min Calculus
Relational
Capital
Employee
Satisfaction
0.60
0.55
0.50
0.318
0.374
0.554
Beta
0.45
0.40
0.407
0.445
0.274
0.35
0.30
0.25
0.20
0.15
0.10
Revenue per
Employee
Jan 04
Jan 05
Jan 06
Optimal Temporal Impact
y = 0.062x2 – 0.366x + 0.858
yÄ0
Human
Capital
y = – 0.1045x2 + 0.4845x – 0.106
yÄ
0 = 2 * 0.062x – 0.366
0 = – 2 * 0.1045x + 0.4845
0 = 0.124x – 0.366
0 = – 0.209x + 0.4845
X = 2.928
X = 2.318
Dec. 23, 2005
April 26, 2005
Next Steps
• QUICK WIN: develop a causal map for your organization
derived on already existing survey and human capital data
(e.g., Hewitt, annual employee survey)
• Larger sample across many more firms / industry groups /
nations (for bench-marking).
• Longitudinal nature of impacts (i.e., time lag effects of
constructs)
• Alternative financial capital measures
• In-depth intra-unit analysis (i.e., sub-units, branches,
locations, subsidiaries, geographical offices)
• Intermediating effects (i.e., fear, trust, empowerment,
health, work-life balance, compensation alignment)
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Thank You
Dr. Nick Bontis,
Ph.D.
Associate Professor of Strategic Management
DeGroote School of Business
McMaster University
Tel: (905) 525-9140 x23918
Fax: (905) 304-7734
Director, Institute for Intellectual Capital Research Inc.
CKO (Chief Knowledge Officer), www.Knexa.com
Associate Editor, Journal of Intellectual Capital
[email protected]
www.NickBontis.com
Full Article: Bontis, Nick and Jac Fitz-enz. (2002). "Intellectual Capital ROI: A causal map of human capital antecedents and consequents",
Journal of Intellectual Capital, Vol. 3, No. 3, pp. 223-247. Available for download at: http://www.NickBontis.com/Research.htm