Value and Impact of People Practice and How it can be measured

Whether you are handling your CIPD level 3, 5, or 7, you will definitely come across a question that requires you to make an argument on the value that people practice create in the organisation. In level 3 (3CO02), you are expected to explain the benefits or positive impacts of people’s practice creating value. In level 5 (5CO02), you are to look into the positive and negative impact of people practices creating value in an organisation and how to measure these impacts. In level seven, this concept has been spread across the 7CO02 unit, with the learner expected to address it bit by bit in numerous questions. However, the bottom line as a learning outcome at all levels, the CIPD expects that the learner completes having understood that people practice is outcome-driven (as observed in the CIPD professional map) and, therefore, people professionals must create value. Quoting directly from the CIPD People Practice factsheet, “As people professionals, we need to be experts in our knowledge of people, of work, and of change. An important part of this is having a core knowledge of a range of people practices and understanding how different practices impact each other and work together in an integrated way” (CIPD|People Practice, 2024). These values influence the organisation in many ways; although they can sometimes lead to negative outcomes, the aim is for their overall impact to be positive, hence the need to understand how they are measured. This article aims to touch on three areas: value, impact, and measurement.

How people practices creates value for organisations

Before we take a deep dive into how people’s practices create value for organisations, it would be important to understand what people’s practices are and basically to take a sneak peek into who people professionals are. If you are on your second unit, which is CO02 for most CIPD learners but not necessarily, you have already come across these terms severally, and probably you understand them by now, but a quick reminder never hurt anyone. According to the CIPD, people practices entail all the strategies and processes that are applied throughout the entire employee lifecycle (CIPD|People Practice, 2024). These include activities such as recruitment, performance management, learning needs assessment, people analytics, creation of talent pools, discipline and grievance handling, and policy development, among many more. Hence using the term people practice we can define people professionals as individuals who, through people’s practices, unlock the value of human factors within an organisation and enable sustainable business outcomes, thus enabling both organisations and their people to thrive.

Now that we understand who people professionals and people practices are, we can understand the organisational value created by people practices.

People practice Creating value through workforce planning

People practices creating value through workforce planning

Workforce planning

Workforce planning serves as the backbone of recruitment and selection, as well as training and development, playing a critical role in aligning talent management with organisational strategy. In recruitment and selection, workforce planning ensures that hiring efforts are proactive rather than reactive. By forecasting future needs, it identifies skills gaps and predicts staffing shortages, allowing organisations to acquire the right talent strategically. This approach enhances the quality of hires, reduces turnover, and ensures that recruitment aligns with long-term business goals. Recruitment can become disjointed without workforce planning, leading to misaligned hires and resource inefficiencies.

Similarly, in training and development, workforce planning is essential for aligning employee growth with organisational objectives. It identifies the skills required for future success, enabling targeted training programs that address fundamental gaps. Succession planning also ensures that leadership development is prioritized, preparing high-potential employees for key roles. Workforce planning promotes proactive skill development, ensuring employees remain adaptable to industry changes and emerging technologies. Additionally, it optimizes resources by focusing development efforts where they provide the highest return, enhancing both individual performance and organisational competitiveness.

Effective workforce planning creates significant value for the organisation, its employees, and its stakeholders. For the organisation, it ensures a well-prepared and agile workforce capable of meeting strategic goals and adapting to change, driving long-term success and stability. It offers clear growth opportunities and development pathways for employees, increasing engagement and job satisfaction. For stakeholders, it translates into improved organisational performance, efficient use of resources, and a stronger, more competitive market position, fostering trust and investment in the organisation’s future.

People practice Creating Value through Human Capital Management

People practices Creating Value through Human Capital Management

As the business world evolves, numerous organisations continue to understand the critical role of the people within the organisation. This has led to employees being identified as the most valuable asset within an organisation. Through people management/ human capital management, people professionals can ensure that an investment in people will eventually deliver value for an organisation in the long run. According to Heery and Noon, human capital management entails more than just managing people within an organisation; it ensures that as an organisational asset, people can contribute to the organisation’s success. Human capital management regards individuals as assets and emphasizes the implementation of a holistic and comprehensive methodology for people management, which is the responsibility of all organisational stakeholders and not just people specialists (Peters, 2024). By adopting a strategic approach to human capital, organisations align their people practices with overall business goals, enhancing both individual and organisational performance. This approach fosters continuous development, ensuring employees are equipped with the skills needed to drive innovation and competitive advantage. Furthermore, it engages all organisational stakeholders in the process, ensuring that human capital management contributes to a cohesive and productive work environment. Ultimately, this strategic human capital management creates substantial value by improving operational efficiency, fostering employee engagement, and enhancing organisational resilience, benefiting the organisation and its broader stakeholder community.

People practice Creating value on business performance

People practices Creating value on business performance

For close to 3 decades now, the CIPD has conducted comprehensive research on the influence of people management techniques on organisational performance. Evidence underscores the importance of ‘fit’ the compatibility of HR initiatives with business strategies to attain optimal impact. As Rebecca Peters mentioned on the Strategic Human Resource Management factsheet, standalone HR policies do not independently lead to enhanced business performance (Peters, 2024). Highly competent individuals provide substantial value, but their potential is completely actualized only within a supportive, value-oriented workplace that cultivates positive connections with management. Such environments foster ‘discretionary behavior,’ wherein employees exceed the minimum standards and devote additional effort.

People practices are pivotal in enhancing business performance through several critical mechanisms. Firstly, aligning HR strategies with organisational goals ensures that human resources directly contribute to achieving business objectives. This strategic fit drives coherence and focus across the organisation, leading to improved performance. Additionally, effective people practices boost employee engagement, motivation, and commitment, resulting in higher productivity and quality of work. Engaged employees are more likely to exceed basic job requirements, positively impacting business outcomes.

Investing in talent management and development is another key factor. By enhancing employees’ skills, organisations ensure they are well-equipped to meet evolving challenges, fostering innovation and adaptability. A positive work environment, characterized by supportive relationships and recognition, further enhances job satisfaction and reduces turnover, leading to a stable and effective workforce. Moreover, people practices that promote diversity and inclusion bring varied perspectives, fostering creativity and better decision-making. Lower absenteeism and turnover rates are achieved through effective retention strategies, and hiring and training costs are minimized, ensuring consistent performance. Engaged employees also deliver superior customer service, boosting satisfaction and loyalty. Ultimately, data-driven insights from people practices enable informed decision-making, aligning HR efforts with business performance goals and driving overall organisational success.

People practice Creating value through people analytics

People practices Creating value through people analytics.Concept of KPI.

People practices create substantial value through people analytics by leveraging data to address business challenges and enhance human resource management. People analytics, also known as HR analytics or workforce analytics, provides critical insights into various aspects of HR practices, helping organisations make informed decisions (Peters, 2024). By utilizing key performance indicators (KPIs), people analytics measures strategic HR practices’ impact on the HR function and the broader organisation.

This data-driven approach enables HR to align its strategies with organisational goals, refining recruitment processes to attract and select candidates who fit the company’s needs. It also supports the development of personalized training programs by identifying skill gaps, thereby enhancing employee productivity and growth. Additionally, people analytics improves employee engagement and retention by identifying factors that affect job satisfaction, allowing for targeted initiatives to reduce turnover. Strategic workforce planning benefits from analytics by accurately forecasting staffing needs and potential skill shortages. Effective performance management is achieved by setting clear, data-based metrics and ensuring fair and objective evaluations. Ultimately, the quality of strategic HRM hinges on the capability of people analytics. It drives better decision-making, optimizes HR practices, and fosters a data-driven culture, leading to improved business performance and sustained organisational success.

According to the 2017 CIPD report on “creating and capturing value at work”, when the word value comes to mind, many think about worth. However, like many other articles, the report argues that value does not necessarily equate to an economic worth CIPD, 2017. Therefore, while people’s practices create value within an organisation, this value does not necessarily have to have a monetary value. Additionally, this value is created across many different sectors and often depends on the organisational efforts of workers, managers, and entrepreneurs.

Impact of people practices in an organisation

People practices can positively and negatively impact an organisation, influencing various aspects of business performance, culture, and employee engagement. Depending on how strategically they are designed and executed, they have the potential to either enhance or undermine organisational success.

Positive Impacts: of people practices in an organisation

When well-designed and strategically aligned, people practices can drive significant value. Effective recruitment and selection processes ensure that the organisation attracts talent that fits its culture and objectives, leading to improved performance and innovation. Training and development programs enhance employees’ skills, keeping the workforce adaptable and capable of meeting evolving business demands. Furthermore, robust performance management systems can increase motivation and productivity by providing clear expectations and feedback. Additionally, practices that promote employee engagement and well-being create a positive work environment, leading to higher retention rates, better job satisfaction, and reduced turnover costs.

Negative Impacts: of people practices in an organisation

However, poorly implemented people practices can have detrimental effects. Misaligned recruitment strategies may lead to hiring the wrong talent, which results in higher turnover, lower productivity, and wasted resources. Inadequate training programs can leave employees underprepared, limiting innovation and reducing competitiveness. Moreover, if performance management is perceived as unfair or overly punitive, it can demoralize employees and increase dissatisfaction. Similarly, poorly managed people practices may foster a toxic workplace culture, causing disengagement, burnout, and absenteeism. This can ultimately hurt both employee well-being and organisational performance.

How To Measure the Impacts and value of people practices

In the current world of work, Organisations need to possess the ability to leverage the abundance of data they possess on their people, the instruments at their disposal to utilize that information, and the development of logical frameworks to consider whether or not investments in people practices support value generation (Burke, 2017). They must comprehend the connection between investments in people and value and be able to monitor and assess whether these investments are currently yielding value and are projected to yield value in the future. This can only be accomplished in two ways. First, they must ascertain whether these investments are cultivating the necessary human skills for the organisation or, in other words, whether the organisation is creating human capital that will ensure its sustainability in the future. Secondly, they must illustrate how human investments yield value through more tangible financial metrics or the more significant intangible forms of value as contemporary perspectives on value definition evolve. The following methodologies can be employed to assess the value of people practices, enabling informed decisions regarding their worth and sustainability within the business. These are essential for assessing effectiveness and facilitating informed judgments regarding continuous improvement:

• Employee Engagement Surveys: These will give insights into how employees are engaged and satisfied with work and the organisation. High engagement would indicate that people’s practices are in the right place. Regularly conducting these helps trace changes over time and points out what needs improvement.

• Turnover and Retention Rates: Both rates set a baseline measuring the effectiveness of people’s practice in holding onto talent. If people management strategies have been effective, turnover rates could be expected to fall. Understanding why people leave can then provide further insights, enabling accommodation into the retention strategy to enhance it.

• Performance Metrics: Evaluate employee performance by KPI and appraisal to measure the impact of people’s practices on individual/organisational performance. Better performance metrics reflect more effective training, development, and motivation strategies.

• Talent Development Metrics: The progress of the talent development initiatives will be charted by considering the employees who have been promoted, participating in training programs, and acquiring new skills. This provides insights into the effectiveness of such programs and informs on whether or not the organisation is launching effective people off its talent pipeline.

• Employee Well-being Indicators: Things to monitor that would give indications of employee well-being include such aspects as absenteeism, stress levels, and health-related matters. Good people practice ensures a healthier and more efficient workforce.

• Diversity and Inclusion Metrics: The impact of the inclusion and diversity initiatives can be measured through an evaluation of demographic representation in this organisation and relevant experiences. Such metrics include diversity in new staff hired, staff promotion, and satisfaction from various groups of employees.

• Financial Performance: A last ground on which the effects of practices can be expected is that of the organisation’s financial performance. Measurements of revenue per employee, profit margins, or ROI in HR initiatives can give a definitive view concerning the value created by people’s practice. (Rees & French, 2023)

Lesson Review:

In a nutshell, the practice of people is crucial to the success of organisations in terms of efficient contribution from their staff. It adds value to organisations through improved employee engagement and a robust and positive work culture; it promotes continuous development. This has impacts on performance, talent management, and organisational culture. This can be measured by using a mix of engagement surveys, retention rates, performance metrics, and financial indicators. By constantly monitoring and optimizing people’s practices, an organisation can facilitate the proper enablement of people to achieve strategic goals.