using npv, irr and payback framework to determine financial impact of human capital investments

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1 Using NPV, IRR and Payback Frameworks to Determine Financial Impact of Human Capital Investments 06-07 Jan 2014, Marriott Karachi 09-10 Jan 2014, Marriott Islamabad we Assist companies in evaluating the Efficiency, Effectiveness and Outcome of HR practices; and also facilitate in measurable benchmarking and action planning in Human Capital Management to Improve workforce productivity for visible impact on organization bottom line

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HR people requesting funds form senior management encounter much tougher roadblocks than their peers in manufacturing, operations and marketing. Those other disciplines have a long tradition of quantifying the potential costs and benefits of their proposed programs and presenting these estimates in language that all can understand-money. Since Human Capital investments are always in financial terms, the business leaders expect HR to demonstrate payback also in financial terms. Unless HR does not learn the language of business, its success remains at stake.

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Page 1: Using NPV, IRR and Payback Framework to Determine Financial Impact of Human Capital Investments

1

Using NPV, IRR and Payback Frameworks to Determine

Financial Impact of Human Capital Investments

06-07 Jan 2014, Marriott Karachi

09-10 Jan 2014, Marriott Islamabad

we Assist companies in evaluating the Efficiency, Effectiveness

and Outcome of HR practices; and also facilitate in measurable benchmarking and action

planning in Human Capital Management to Improve workforce productivity for visible impact on

organization bottom line

Page 2: Using NPV, IRR and Payback Framework to Determine Financial Impact of Human Capital Investments

Situation A

Organizations normally use logical frameworks including Net Present Value, Internal Rate of Return and Payback

framework to determine financial impact of

investment in plant, inventory, building, raw

material or any other service support structure.

Situation B

When it comes to evaluating the economic viability of human capital investment

decisions, traditionally organizations do not use

same logic, which is used for other capital investment and

most of human capital investment decisions are based on emotions, and subjective gut Like "Best

practice, matching market or mimicking competitor.”

Page 3: Using NPV, IRR and Payback Framework to Determine Financial Impact of Human Capital Investments

Intangibles does not mean immeasurable.

A true business case is 75% data and 25% emotions.

HR has difficulty in making line believe that HR had direct

influence on business performance and therefore

Business Leaders do not find the HR investment case very

persuasive

Page 4: Using NPV, IRR and Payback Framework to Determine Financial Impact of Human Capital Investments

CEOs and CFOs all measure results in financial terms.

When human capital investments are in

hard financial term; consequently the employer expects accountability and

quantifiable framework to measure the

outcome in hard financial terms.

HR’s traditional model of using

subjective opinions, emotions and gut

feelings for workforce decision making is woefully inadequate. A key

responsibility of HR is to articulate the logical connections

between progressive HR practices and

firm performance, and demonstrate those connections

with data and ratios.

Analytics quantify HR department's

contribution to the overall bottom line in financial terms,

through solid, factual, and

verifiable data and justify toughest

managerial decisions with easy-to-use mathematical

formulas.

Page 5: Using NPV, IRR and Payback Framework to Determine Financial Impact of Human Capital Investments

Global research on 400 companies indicates that

companies use NPV, IRR and Payback to

determine impact of human capital

investment have productivity rate

double than industry average

Page 6: Using NPV, IRR and Payback Framework to Determine Financial Impact of Human Capital Investments

Developing a logical business case to management for

approving or evaluating a specific

project

Goals, opportunities, action plans, anticipated

financial results, and inherent risks

A roadmap for funds utilization and its return on

the firm’s investment

Page 7: Using NPV, IRR and Payback Framework to Determine Financial Impact of Human Capital Investments

Board HR Members

HR Heads

CFOs, Auditors and Actuaries

Cost

Rs 40,000 per person

Click Here to Register

Voice: 051-8437201

Cell: +92 342 5579160