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Learning and Applying Financial Metrics to Evaluate Human Capital Investments: The case of Return on Investment

Dadd, Deneise Anson Donna (2016). Learning and Applying Financial Metrics to Evaluate Human Capital Investments: The case of Return on Investment. PhD thesis The Open University.

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Abstract

Return on Investment (ROI) is one of several financial metrics increasingly advocated and used to evaluate expenditures on human capital initiatives. This thesis explored empirically the discrepancy between growing interest in, and uptake of, ROI for human capital investments on the one hand; and evidence to date that implementation is problematic and actual usage limited, on the other.

From within a constructivist/interpretivist paradigm, ten attempts to apply ROI were identified and reconstructed using the qualitative techniques of observations, interviews and document analyses. These attempts were drawn from three different contexts - corporate, health service and international development. Concepts from seminal theories on learning and skills acquisition, knowledge, practice, context and their relationship with each other, as well as the introduction of new technical approaches, were selected to provide a framework to guide the enquiries and interpretation of data.

The study found the term ROI was used as a bridging metric and understood in three ways - metaphorically, as an aspiration of value; literally, as a metric; and procedurally, as a method for planning and evaluating human capital investments. The metaphorical use of ROI was widespread as a way of expressing a common goal when dealing with key stakeholders. However, the metric was rarely utilised to measure human capital investments because applying it was difficult and time consuming; particularly linking the investment and service system performance through people performance. Methodically, ROI seemed to function as an aspirational map for planning and evaluating human capital investments. Learning and applying the method, even partially, was valued and tended to lead to changed behaviour and organisational culture.

Significant variations between the three contexts were noted, and it is argued that the contingencies affecting the uptake and appropriateness of ROI in different settings would likely affect the appropriateness of other financial metrics for evaluating human capital investments.

Item Type: Thesis (PhD)
Copyright Holders: 2014 The Author
Keywords: human capital; rate of return; personnel management; performance measurement; value investing; productivity accounting
Academic Unit/School: Faculty of Business and Law (FBL)
Faculty of Business and Law (FBL) > Business
Item ID: 60528
Depositing User: Ann McAloon
Date Deposited: 23 Apr 2019 13:10
Last Modified: 06 Oct 2019 22:09
URI: http://oro.open.ac.uk/id/eprint/60528
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