APEX-Human Capital Index is an analytical tool that measures the value of human capital or talent pool in order to help service sector organizations analyse their talent capabilities and various other critical and at times hidden aspects of human capital. The objective of APEX-Human Capital Index is to provide a measurable and financially reliable tool for the interpretation of investments in Human Capital to returns on a consistent basis.

1. Whitepaper
APEX-Human Capital Index
Human
Aventus Partners

2. APEX-Human Capital Index Whitepaper
Valuation of Human Capital is a big challenge for any organization. As organizations
focus more on leveraging their human capital, there is a need of a standard valuation
tool for Human Capital. Human Capital as an asset class has the maximum impact on the
value creating ability of an organization especially those rendering services. As popularly
acknowledged it can also exit from the organization any time at its own will.
At Aventus Partners, we have developed a human capital rating tool - the “APEX-Human
Capital Index”.
The objective of APEX-Human Capital Index is to provide a measurable and financially
reliable tool for the interpretation of investments in Human Capital to returns on a
consistent basis.
The Index consists of a set of human capital ratios and financial ratios. Human capital
parameters play a vital role in the composition of APEX-HC Index and make up for 2/3rd
of the total point weightage. The APEX-Human Capital Index is measured for 300 scale
points in rating pattern from AAA to D where AAA is the highest rating while D is the
lowest rating. There are 7 key parameters that collectively make the index namely –
 Work environment,
 Organization pyramid dimensions,
 Skill induction and development,
 Remuneration,
 Retention,
 Human Capital contribution to business and
 Financial performance.
The Index is available on www.apexhc.com .
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3. APEX-Human Capital Index Whitepaper
Contents
Background ................................................................................................................................................... 4
APEX-The Aventus Partners Human Capital Index........................................................................................ 4
Objective ....................................................................................................................................................... 5
Methodology.................................................................................................................................................5
Annexure –I (Sample Report)........................................................................................................................7
Year – 2006, Rating – BBB.........................................................................................................................7
Year – 2007, Rating – A ............................................................................................................................. 8
Year – 2008, Rating – A ............................................................................................................................. 8
Year – 2009, Rating – A ............................................................................................................................. 8
Year – 2010, Rating – BBB.........................................................................................................................9
Year – 2011, Rating – BBB.........................................................................................................................9
Annexure –II................................................................................................................................................ 10
Annexure –III...............................................................................................................................................10
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4. APEX-Human Capital Index Whitepaper
Background
Organizations frequently state that employees are their most valuable asset, and yet do not measure
and record its value in their annual statements (annually/quarterly statements of financial position) and
provide little or no information on this “most valuable asset” to investors or the public.
Regulatory authorities require extensive disclosure regarding all major assets including financial assets,
physical assets, and technological/intellectual property such as patents. However, they do not require
detailed disclosures of what, for most organizations, is their largest annual operating expense: the
workforce. This draws a line between the commonly reported asset classes and human capital and
creates the need for a method to measure the worth of organization based on its human capital value.
Most organizations focus purely on ROI on capital deployed and do not measure human capital return
on investment (HCROI), although investment in human capital is a significant portion of their
investments .
APEX-The Aventus Partners Human Capital Index
APEX-HC is an analytical tool that measures the value of human capital or talent pool in order to help
service sector organizations analyse their talent capabilities and various other critical and at times
hidden aspects of human capital. The tool can be effectively leveraged by the following groups of
professionals:
 Business Leaders in the services domain to understand the performance of their Human Capital
from the business indicators
 HR Professionals to understand which areas of the Human Resources function need to be
augmented/redesigned/better utilized
 Banks and Financial Institutions, so as to understand how Human Capital contributes to the
financial performance of Services organizations and thereby arrive at more robust lending
mechanism norms for these organisations/sectors
 Private Equity players, to arrive at an optimum price discovery mechanism on their investment
strategies in the services domain
 High Net Worth and Retail investors, to discover a new asset class with potential for
performance and discover new strategies of investment
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5. APEX-Human Capital Index Whitepaper
Objective
The objective of APEX-Human Capital Index is to provide a measurable and financially reliable tool for
the interpretation of investments in Human Capital to returns on a consistent basis.
Methodology
APEX-The Aventus Partners Human Capital Index consists of a set of human capital ratios and financial
ratios.Human capital parameters play a vital role in the composition of APEX-HC Index and make up for
2/3rd of the total point weightage. Human capital ratios are clubbed under 6 key parameters while
financial ratios are clubbed under one parameter.
Data is collected from audited financial statements such as the balance sheet, the profit and loss
account, the cash flow statement and their schedules. Some human capital related data is also collected
from director’s reports’, management analysis section of annual reports’ and some from annexures.
Data collection is followed by calculation of the ratios by putting the collected data under scrutiny.
Calculated ratio values that are derived are arranged on a customized ratio scale for all the selected
years and then added to get the index rating point for a single year.The range of a scale is based on the
importance of ratio to index, which is why rating points on the scale varies from ratio to ratio. Range of a
scale varies from negative points to positive points, for instance if the scale is 9 for a ratio then the ratio
will be measured on the scale of -9 to +9 points based on the value of the ratio. If the value of a ratio is
negative, the rating will be measured on negative side and if ratio value is positive, rating will be on
positive. The sum of all the ratios scale is 300 points.To assign a ratio value on a scale we take maximum
and minimum value of ratio from given data and assign the maximum value to the highest end of a scale
and assign negative values to the negative end of the scale. We also calculate the value of each key
parameter based on the sum of all the ratios which falls under a particular key parameter and then
assign a rank to it.
The APEX-Human Capital Index is measured for 300 scale points in rating pattern from AAA to D where
AAA is the highest rating while D is the lowest rating1. There are 7 key parameters that collectively make
the index namely - Work environment, Organization pyramid dimensions, Skill induction and
development, Remuneration, Retention, Human Capital contribution to business and financial
performance. These 7 key parameters are measured on weighted rating system which varies from “Very
Good” to “Very Low” based on the score of each parameter2. These 7 key parameters and the final index
ranking make the output part of the index3. To measure an organizations’ human capital value, we
1
Criteria of rating is given in Annexure-II
2
Ranking criteria is given in Annexure-III
3
Sample Output of index is in Annexure-I
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6. APEX-Human Capital Index Whitepaper
require two or more years’ sequential data for that specific organization. In order carry out the
organization’s valuation we compare the rating of two companies for the same year and going deeper in
the valuation process we compare key parameters rankings. Both comparisons give us a clear picture of
company’s position in market in terms of human capital as well as effect of each key parameter on
market position.
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7. APEX-Human Capital Index Whitepaper
Annexure –I (Sample Report)
Company X Rating
300
270
240
210
180
150
120
2006 2007 2008 2009 2010 2011
Rating Points
Company X Rating report – Last six year rating of company X ranges from BBB – A
Year – 2006, Rating – BBB
Company X made adequately high investment in Human capital which led to the adequately high level of
returns. There is a lot of space for improvement of human resource policies and procedure and
investment in human capital to move up to Rating AAA.
Key components and their assessment –
1. Work Environment – Very Good
2. Organization Pyramid Dimensions – Average
3. Skill Induction and Development – Very Low
4. Remuneration – Very Good
5. Retention – Average
6. Contribution to Business – Very Good
7. Financial Performance – Very Good
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8. APEX-Human Capital Index Whitepaper
Year – 2007, Rating – A
Company X made significant investment in Human capital which led to a high level of returns. There is
room for improvement of human resource policies and procedure and investment in human capital. The
quality of investment made in human capital is good.
Key components and their assessment –
1. Work Environment – Good
2. Organization Pyramid Dimensions – Good
3. Skill Induction and Development – Low
4. Remuneration – Very Good
5. Retention – Good
6. Contribution to Business – Very Good
7. Financial Performance – Good
Year – 2008, Rating – A
Company X made a high investment in Human capital which led to a high level of returns. There is a
space for improvement of human resource policies and procedure and investment in human capital. The
quality of investment made in human capital is good.
Key components and their assessment –
1. Work Environment – Good
2. Organization Pyramid Dimensions – Good
3. Skill Induction and Development – Good
4. Remuneration – Very Good
5. Retention – Average
6. Contribution to Business – Very Good
7. Financial Performance – Good
Year – 2009, Rating – A
Company X made a high investment in Human capital which led to a high level of returns. There is a
space for improvement of human resource policies and procedure and investment in human capital. The
quality of investment made in human capital is good.
Key components and their assessment –
1. Work Environment – Good
2. Organization Pyramid Dimensions – Very Good
3. Skill Induction and Development – Good
4. Remuneration – Good
5. Retention – Average
6. Contribution to Business – Very Good
7. Financial Performance – Good
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9. APEX-Human Capital Index Whitepaper
Year – 2010, Rating – BBB
Company X made adequately high investment in Human capital which led to the adequately high level of
returns. There is a lot of space for improvement of human resource policies and procedure and
investment in human capital to move up to Rating AAA.
Key components and their assessment –
1. Work Environment – Good
2. Organization Pyramid Dimensions – Average
3. Skill Induction and Development – Very Good
4. Remuneration – Good
5. Retention – Average
6. Contribution to Business – Very Good
7. Financial Performance – Good
Year – 2011, Rating – BBB
Company X made adequately high investment in Human capital which led to the adequately high level of
returns. There is a lot of space for improvement of human resource policies and procedure and
investment in human capital to move up to Rating AAA.
Key components and their assessment –
1. Work Environment – Average
2. Organization Pyramid Dimensions – Low
3. Skill Induction and Development – Very Good
4. Remuneration – Good
5. Retention – Low
6. Contribution to Business – Very Good
7. Financial Performance – Good
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10. APEX-Human Capital Index Whitepaper
Annexure –II
APEX-Human Capital Index rating criteria –
Rating Criteria (Maximum 300 points)
AAA ≥271
AA ≥241
A ≥211
BBB ≥181
BB ≥151
B ≥121
CCC ≥91
CC ≥61
C ≥31
D <31
Annexure –III
Key Parameter ranking criteria –
Rank Criteria
Very Good ≥81%
Good ≥61%
Average ≥41%
Low ≥21%
Very Low <21%
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11. APEX-Human Capital Index Whitepaper

Aventus Human Capital Partners LLP
40/48, Ground Floor, Pocket 40,
EPDP Road, CR Park, New Delhi-110019
Phone +91 11 40561242-45
Fax +91 11 40561241
www.aventus.in
Delhi I Bangalore I Kochi
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Partners and its clients as well. While every effort is made to achieve accuracy in the information contained in this document
Aventus Partners is not legally responsible for any content of this document or any consequent actions. We advise that all persons
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© 2012, Aventus Partners
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