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Management buy-in is crucial to the success of measuring employees' contribution to a business, new research has revealed.

A study by the Institute for Employment Studies has found organisations that have commitment from senior executives to monitoring employee engagement will reap rewards in improving staff morale.

The report said HR plays a vital role in measuring an organisation's people and skills, and linking that back to the performance of the organisation.

Dilys Robinson, principal research fellow for the institute, said: "Measuring the value people bring to a business can be tricky, but is vital to monitoring the health of your organisation. HR plays a crucial role in making the links between things such as employee engagement, turnover and vacancy rates, and customer satisfaction, and measuring their impact."

The Human Capital Measurement study also showed that the term 'human capital measurement' was rarely used in practice within UK organisations. More common terms were 'workforce data' or 'key people indicators', although the report warned there was no 'one size fits all' approach.

The research was based on workshops involving 14 of the UK's top private and public sector organisations, including the Royal Bank of Scotland, the BBC and the NHS, and took place between February 2007 and March 2008.

Ms Robinson said: "Although it may seem daunting, with the right planning and working closely with management, people metrics can do a lot to monitor business health."