We talk a lot about ROI on data warehouse, business intelligence, etc. I wonder what measures to use to calculate ROI on hiring an analyst/data mining expert, i.e., ROI on human resource rather than systems?


Mike Jennings' Answer: There is a growing focus in HR that utilizes data mining to measure the corporate value received through human capital investments. The idea is that the same cost/benefit analysis applied to most capital budgeting can also be used for human capital investments. Capital budgeting for physical assets requires we provide a complete understanding of the timing, magnitude and risk associated with any investment. The challenge with human capital investment, as with any investment, is finding the right balance between optimal investment and impact on corporate results. Part of this challenge is to define a set of attributes for human capital investment and returns that allows for practical testing against measures of business success. Human capital metrics may include rewards, benefits, training, leadership style, decision processes and other measures to corporate HR policies. Using data mining these metrics can provide insight into how these factors drive human capital investment. Human capital metrics can then be tested against business success metrics such as revenue growth, profitability, shareholder value.

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