HCM in Non-Profit Organizations

Listen to an interview of Dr. Laurie Bassi by Erik Berggren, Director of SuccessFactors Research.
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Is Human Capital Management only beneficial to ‘for-profit’ organizations? Dr. Laurie Bassi, our SF Research partner and thought-leader, set out to answer this question by studying the effect of Human Capital Management in public middle-schools. As a result, she has found empirical evidence which confirms that not only does better HCM drive better results in non-profit organizations, but it is actually the most important driver for results in comparison to other commonly assumed variables.

Human Capital Management has proven its merits many times in the realm of “for profit” institutions. Businesses and firms have witnessed a boost in productivity, retention, customer satisfaction, and ultimately revenues and profits by increasing their employee’s engagement through implementing “strategic HR” solutions. In the non-profit field, however, strategic HR has been neglected and its results have seldom been studied. At least that was the case before Dr. Laurie Bassi, CEO of McBassi & Company Inc, led a research into this uncharted domain.

Dr. Bassi, an expert HCM auditor, wanted to discover whether Human Capital Management can enhance the performance of non-profit institutions. She embarked on a study, surveying 30 middle schools in Beaufort County School District, to investigate this relationship. Choosing public middle schools was a good decision since their “product,” student achievement, can be easily measured by their test scores.

Dr. Bassi began by surveying employees in each school on a set of 5 HCM metrics though the online distribution of Human Capital Capability Scorecards. She then grouped the schools into five sets (6 schools each) and measured the mean score of the students on the standard PACT Math test. The results can be seen in Exhibit-1. Dr. Bassi found that the students of schools that scored higher on HCM metrics had higher test results.

Dr. Bassi then proceeded to investigate the relationship between academic achievement and other variables. In particular, she examined the relationship between students’ socio-economic status and their subsequent performance. Therefore, she categorized the 30 schools into 5 sets again, this time using a socio-economic metric (number of students eligible for free or reduced lunch) to test the correlation between socio-economic status and academic achievement. She found (Exhibit-2), again, that the students’ performance would increase as their socio-economic status was rising. However, this factor contributed less to the test scores of the students.

The results of her research were groundbreaking. Not only did she find a relationship between HCM and student’s academic achievement, but she also found evidence that the school’s HCM is more than twice as important in explaining student’s achievement than is children’s socio-economic status—a result that is quite contrary to the common belief. This notion has very important implications. Schools can do very little about the Socio-Economic conditions of their students; on the other hand however, the Human Capital Management of the school is entirely in the control of the school’s decision makers. Decision makers, therefore, should focus their resources on enhancing their human capital management practices if they want to get the most significant results.

For more details on how McBassi & Co determines the HCCS score please visit their website http://www.mcbassi.com/ or Dr. Bassi’s recent HBR article Maximizing Your Return on People.