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Managing human capital: the APS Human Capital Framework

Securing human capital by engaging new employees or developing existing employees generates capability. The challenge for agencies is to turn this capability, or labour potential, into productive labour by motivating employees to apply their knowledge, skills and abilities toward agency goals.13 Management literature, particularly on employee motivation, suggests this is not simple. Rather, effectively managing human capital requires managers and leaders to be actively involved in motivating employees and shaping the workplace to give employees the best opportunity to contribute their individual human capital to meet organisational goals.14

While understanding what elements of the workplace might affect, and be influenced to support employees is complex, the Framework was developed to assist agencies with this. It conceptualises human capital as:

  • capability—meaning what knowledge, skills, and abilities employees have
  • capacity—meaning how well these are applied.

The Framework separates the workplace into four distinct elements—leadership, design, culture and conditions—each of which affects workforce capability and capacity (Figure 10.2).

Figure 10.2. The APS Human Capital Planning Framework

Source: The Commission

The Framework enables agencies to consider the aspects of their workplace that influence human capital, and identify where they can invest to improve their management of human capital. A critical part of this is the agency's ability to understand and monitor human capital and evaluate the impact of workplace strategies and initiatives designed to influence the management of such.

Importantly, as shown in Figure 10.2, human capital is underpinned by people strategies. For example, recruitment and diversity strategies, approaches to innovation, risk and change management strategies play a key role in the ongoing development and maintenance of effective human capital. Risk management in the APS context is discussed in detail in Chapter 3. Change is discussed in Chapter 6, innovation in Chapter 7 and leadership and organisational culture in Chapter 5. Diversity information is included at Appendix 5.

While there has been some work on developing measures of the human capital of nations15, there has been less on developing organisational measures of human capital.

Measuring APS human capital

Measures of human capital can be both descriptive and diagnostic.16 Stakeholders, such as government and citizens, are typically interested in descriptive measures, such those measuring confidence (that the public sector is meeting expectations), benchmarking (that the public sector is performing to a standard similar to other jurisdictions, in the absence of absolute measures of performance) and compliance (that the public sector is meeting its legislative obligation).

APS agencies, including groups such as the Secretaries Board and agency executives, are also interested in diagnostic measures, such as those measuring comparative performance (comparing agency performance against other agencies) and performance improvement (how organisational performance changes over time).

Both descriptive and diagnostic measures can be satisfied using the same metrics, however, comparators and the level at which analysis occurs may change.

The APS has access to a broad range of data that can be used to develop measures of human capital:

  • administrative data—provides summary employment data for human capital in the APS, for example, numbers of employees, their experience, education qualifications and diversity levels
  • organisational data—provides an understanding of the actions taken by agencies to manage their human capital, for example, whether they use particular initiatives and how effective they believe they are
  • employee attitude and opinion data—provides an understanding of the aspects of human capital that can offer indicators of where investment might provide the best returns, including employee engagement, intention to leave, readiness for change and opinion towards specific aspects of the workplace (for example, leader behaviour, workplace culture and workplace conditions).

Aggregating this information into a form that the APS can use to measure human capital requires:

  • identifying an appropriate data source
  • determining what elements of the data source to include in the measure
  • developing a methodology for calculating the measure or index
  • identifying the benchmarks against which to compare.

Developing a human capital index

Consistent with the discussion in this chapter, this year the Commission explored options for developing a measure to help agencies evaluate their human capital. This section outlines using the Framework to compare and report on data and benchmarks. It outlines the initial development of an index that could be used to measure and evaluate APS human capital (this work will be further developed throughout 2015).

The human capital index described in this section uses attitude and opinion data from the employee census. Features of the employee census that make it suitable as a data source for developing an APS human capital index are that:

  • the survey content is comprehensive with more than 250 separate survey questions including national and international benchmark items
  • all items in the census are mapped against the Framework
  • the census is administered annually allowing for comparisons over time.

Twenty-nine questions from the employee census have international benchmarks that are mapped against the Framework:

  • 11 addressing APS capability and capacity
  • 7 addressing aspects of workplace leadership
  • 6 focusing on workplace culture
  • 4 addressing workplace conditions
  • 1 focusing on workplace design.

In developing the human capital index, scores on each of these elements (capability and capacity, workplace leadership, culture, conditions, and workplace design) were first aggregated into a 0 to 100 point index. These indices reflect different aspects of each element of the Framework and combine a range of quite discrete measures into a single, consolidated score. These scores were then calculated across the APS for 2013 and 2014. They were also calculated for three other benchmarks: public sector agencies in the United Kingdom (UK); public sector agencies worldwide; and private sector organisations worldwide.17

The results (Figure 10.3) demonstrate the improvement achieved across the Framework's leadership and workplace design elements between 2013 and 2014. Scores for leadership increased by three points and scores for workplace design increased by two points. Scores for capacity and capability remained stable for the APS between 2013 and 2014, while scores for workplace culture and conditions declined slightly, by two points and one point respectively.

In comparison to the UK and worldwide benchmarks, the APS scored:

  • higher on aggregate measures of workplace culture and conditions
  • lower on workplace capability and capacity
  • marginally lower on workplace design
  • comparable on leadership, owed to improvements in the APS in 2014.

Figure 10.3. Human capital index, 2013 and 2014

Source: Employee census, ORC International

The next section examines in more detail the aggregate measures reported above. It reports results for the individual items included in the overall score for each workplace measure—leadership, design, culture, conditions, and capacity and capability.

Workplace leadership

This element of the Framework—workplace leadership—refers to the behaviour of individual leaders and managers at all levels in an agency. Although research tends to focus on senior executive behaviours, leadership occurs at all levels and has a direct impact on the workforce. Immediate supervisor behaviour is a major determinate of a number of employee outcomes (such as intention to leave). Leadership in the APS is dealt with more comprehensively in Chapter 5.

When benchmarked against other public and private sector organisations APS employees are particularly positive about the feedback provided by their immediate supervisors. Although improved from 2013 and higher than other benchmarks, less than 70% of APS employees agreed that their immediate supervisor provided them with regular and constructive feedback and only 44% agreed their most recent formal performance review helped to improve their performance. Performance management in the APS is discussed in detail in Chapter 9.

APS results are significantly below other benchmarks for senior leader communication. Improvements in APS results for 2014 compared to 2013, places the APS in a similar position as other public sector organisations on how well change is managed, although the visibility of senior leaders is marginally lower. APS results for 2014 are marginally below other public sector benchmarks on employee perceptions of the quality of senior leaders.

Figure 10.4. Workplace leadership comparisons, 2013 and 2014

Source: Employee census, ORC International

Workplace design

This element of the Framework—workplace design—refers to the impact that the complexity of the workplace (its organisation for example) and actual work performed by employees has on human capital. It includes whether the workplace is more or less hierarchical, whether the day-to-day work of employees is well defined or less clear, and whether employees have a clear understanding of their role. Unfortunately, only one question relevant to this element of human capital is available for the benchmarks used and it measures employee perceptions of role clarity.

When benchmarked against other public and private sector organisations, results demonstrate that clarity about duties and responsibilities has improved since 2013 (82% of APS employees agreed with this statement in 2014 compared to 80% in 2013), although the APS lags behind all others on this measure (84% UK public sector; 84% worldwide public sector; 89% worldwide private sector).

Workplace culture

This element of the Framework—workplace culture (discussed in detail in Chapter 5)—closely relates to the values of an agency and is often reflected in its language, forms and traditions. It has been shown to influence levels of morale and productivity, commitment to the workplace and innovation in the workplace.

Examining workplace culture shows that APS employee perceptions are generally positive and, in some cases, higher than other public sector organisations. Results for 2013 and 2014 shown in Figure 10.5 demonstrate that when benchmarked against other public and private sector organisations, APS employees are more likely to agree their senior leaders act in accordance with the organisation's, values and that employees in their agency work well with those from diverse backgrounds. APS employees are also more likely to agree their workplace is committed to workplace safety than other public sector employees.

Figure 10.5. Workplace culture comparisons, 2013 and 2014

Source: Employee census, ORC International

Workplace conditions

This element of the Framework—workplace conditions—includes financial and non-financial remuneration, as well as other workplace conditions including opportunities for career progression and how an agency deals with underperformance.

Examining workplace conditions for 2013 and 2014 shows that when benchmarked against other public and private sector organisations the APS performs very well on non-financial and monetary remuneration. However, it scores lower on opportunities for career progression and management of underperformance (performance management is a focus in the APS and is addressed in Chapter 9). These findings are in Figure 10.6.

Figure 10.6. Workplace conditions comparisons, 2013 and 2014

Source: Employee census, ORC International

Workforce capability and capacity

This element of the Framework—workforce capability and capacity—is central to any index of human capital. It provides the most direct measure of human capital and reflects the two key components of the people or workforce component of human capital planning—what the workforce can do (workforce capability) and how much the workforce can do (workforce capacity). While administrative data can provide some measure of capability or labour potential of the workforce, attitude and opinion data can provide an indicator of the likelihood of transforming this potential into productive capacity, the real challenge of managing human capital.

In examining workforce capacity and capability for 2013 and 2014, individual survey questions were separated into those:

  • included in the APS Employee Engagement Model (Figure 10.7)
  • that address issues such as enjoyment of work, pride in their agency and whether employees would recommend their agency as a good place to work (Figure 10.8).

When benchmarked against other public and private sector organisations the APS lags behind other public sector organisations in most areas. For example, how valued employees feel for their contribution, the opportunity their job provides to utilise their skills and that their work gives them a feeling of accomplishment.

Figure 10.7. Employee engagement question comparisons, 2013 and 2014

Source: Employee census, ORC International

As Figure 10.8 shows, when benchmarked against other public sector organisations APS employees are more likely to be proud to work in their agency, to recommend their agency as a good place to work and to feel a strong personal attachment to their agency. However, the APS lags behind other public and private sector agencies in inspiring employees to do the best in their jobs.

Figure 10.8. Capability and capacity comparisons, 2013 and 2014

Source: Employee census, ORC International

Employee retention

A critical aspect of human capital that can be measured through an employee survey is employee intention to leave.18 While the employee census includes a question related to this, data for the benchmarks used in this chapter are not available. Data from the United States (US) and UK public service employee attitude and opinion surveys, however, show that in:

  • 2013, 68% of US public servants indicated they did not plan to leave their agency for at least 12 months19
  • 2013, 78% of UK civil servants indicated they planned to stay with their agency for at least 12 months20
  • 2013, 81% of APS employees indicated they planned to stay working for their agency for at least the next 12 months
  • 2014, 75% of APS employees indicated they planned to stay working for their agency for at least the next 12 months.

Limitations

The management of human capital in the APS has not been looked at holistically to date—this chapter provides an example of how this can be achieved using existing APS data and the Framework.

The human capital index demonstrated in this chapter can measure differences across time and across comparison groups. However, it has a number of limitations due primarily to the desire to make external comparisons. The set of questions available in the employee census is far more comprehensive than the set of questions used in the example provided in this chapter. While it would lack direct external comparability, an index based on an analysis of the entire employee census question set would provide a much stronger diagnostic tool for the APS. Additionally, there are other data sources available to the APS that can also provide relevant metrics that could meaningfully contribute to understanding how well the APS manages its human capital, including administrative data and programme evaluation data from the implementation of human capital strategies across the service.


Footnotes

13 Boxall, P 2011, ‘Human capital, HR strategy, and organizational effectiveness’ in A Burton-Jones & J-C Spender (eds), The Oxford Handbook of Human Capital, Oxford University Press, Oxford, United Kingdom.

14 Workplace is used throughout this chapter for the discussion of measuring and evaluating human capital. It is used generically to represent an employee's working environment and, as such, encompasses local workgroups and areas, as well as broader organisational context.

15 Stroombergen, A, Rose, D, & Nana, G 2002, Review of the Statistical Measurement of Human Capital, Statistics New Zealand, Wellington, New Zealand, viewed 9 October 2014, http://www.stats.govt.nz/~/media/Statistics/browse-categories/edu-and-train/tert-edu/review-stat-method-human-capital/human-capital.pdf.

16 Mayo, A 2008, So what's the Difference between Human Capital and Human Resources?, Presentation to CIPD West London Branch, 15 January, Chartered Institute of Personnel and Development, London, viewed 9 October 2014, http://www.cipd.co.uk/NR/rdonlyres/F19BF029-4D5A-4F42-8A3C-ADDF061DD570/0/HumanCapitalslides.ppt.

17 These benchmarks are drawn from ORC International's Perspectives database and include data from June 2012 to June 2014. The UK Public Sector benchmark comprises 210 organisations and 450,462 employees across the UK. The Worldwide Public Sector benchmark comprises 254 organisations and 711,169 employees globally (this benchmark excludes data from APS agencies). The Worldwide Private Sector benchmark comprises 253 organisations and 2,068,279 employees globally.

18 Commission research shows a moderate correlation (r = 0.4) between individual employee intention to leave (aggregated at the agency level) and subsequent agency exit rates (ongoing employees).

19 United States Office of Personnel Management 2013, 2013 Federal Employee Viewpoint Survey, OPM.gov, Washington, District of Columbia, viewed 9 October 2014, http://www.fedview.opm.gov/2013.

20 United Kingdom Civil Service 2013, Civil Service People Survey 2013: Civil Service benchmark scores, GOV.UK, London, viewed 9 October 2014.