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The ROI of Human Capital: Measuring the Economic Value of Employee Performance |  |
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The ROI of Human Capital: Measuring the Economic Value of Employee Performance | |
The lifeblood of any business enterprise is its people. Yet it wasn’t until the publication of the groundbreaking book The ROI of Human Capital that there was a reliable way to quantify the contributions of people to corporate profit. Completely updated with new metrics, the book shows executives and HR professionals how to gauge human costs and productivity at three critical levels:
organizational (contributions to corporate goals) • functional (impact on process improvement) • human resources management (value added by five basic HR department activities)
The second edition contains new material on topics including corporate outsourcing, developments in behavioral science, and advances in trending and forecasting that have dramatically changed the way organizations measure the bottom line effect of employee performance. Utterly up-to-date, this is the go-to resource for organizations performing the essential task of measuring the value of their people.
The mission of quantifying the value each employee brings to your organization is a crucial task, and not one to be taken lightly. But how do you accurately determine the contributions of your people and use that knowledge to improve your company’s overall performance?
Now in a brand new edition, The ROI of Human Capital provides you with a complete, reliable method for measuring the contributions of your people to corporate profit. Fully updated with new metrics, this long trusted resource offers a rare blend of management expertise and quantitative measurements, showing you how to gauge human costs and productivity at three critical levels:
1. Organizational. Macro-level data is the launching site of any ROI assessment system. Examples and proven formulas illustrate how to combine quantitative and perceptual measures into a corporate human capital scorecard. The book introduces you to the five key indexes of change: cost, time, quantity, quality, and human reactions.
2. Functional. This is the process arena, which typically sprawls across business units and is therefore difficult to manage and measure. A detailed five-point approach shows how to “tame” processes and add value to them, specifically in terms of service, quality, and productivity.
3. Human Capital Management. You’ll discover how to build a performance matrix that enhances the fundamental HR activities—planning, acquiring, supporting, developing, and retaining—by connecting them to the five indexes of change.
Written by Jac Fitz-enz, the man widely regarded as the inventor of human performance benchmarking, The ROI of Human Capital, which won the Society for Human Resource Management Book of the Year Award in 2001, brilliantly shows how to integrate these levels into a single, end to end system of human capital valuation reporting. It also helps you weigh the potential effects of such practices as HR restructuring, outsourcing, using contingent workers, and merging with or acquiring another company. And, not least, you will learn to create futures scorecards that can improve your ability to see over the horizon and far beyond your competition. Throughout, Fitz-enz enlivens his wealth of hard data with useful examples and a conversational, easy-to-read style.
The second edition contains new material on topics including corporate outsourcing, developments in behavioral science, and advances in trending and predicting that have dramatically changed the way organizations measure the bottom-line effect of employee performance. Utterly up-to-date, this is the go to resource for organizations performing the essential task of measuring the value of their people.
Jac Fitz-enz, Ph.D., is the acknowledged father of human capital strategy and measurement. He began his breakthrough research in these areas in the 1970s and has since trained more than 85,000 managers in 45 countries. From 1980 to 2002 Dr. Fitz-enz was founder and chairman of Saratoga Institute, renowned for its benchmark data on effective HR practices. Currently, he is the founder and CEO of Human Capital Source, developers of Predictive Management—HCM:21®. His other books include The 8 Practices of Exceptional Companies; How to Measure Human Resource Management; Benchmarking Staff Performance; A New Vision for Human Resources (coauthored with Jack Phillips); and Human Value Management, honored as Book of the Year in 1991 by the Society for Human Resource Management. Dr. Fitz-enz lives in San Jose, California.
Jac Fitz-enz (San Jose, CA) has been called “the father of human performance benchmarking.” He is founder of the Saratoga Institute, known worldwide for its pioneering research and reports on performance measurement and improvement, and of the consulting firm Human Capital Source.
“In fact, this is a scholarly tome well worth reading by more than just the HR crowd… Solid business wisdom that allows for humanity and humor.”
--Booklist
“Essential reading for professionals, this book culminates years of quantitative and qualitative research, providing a breakthrough methodology for measuring the bottom-line impact of employee performance… This well-written and authoritative guide is highly recommended for university and professional collections.”
--Choice
"The ROI of Human Capital is an ambitious venture into the world of employee performance measurement and improvement in economic value terms… a roadmap for fundamental examination, assessment and strengthening of multi-faceted human performance.”
--Canadian HR Reporter
“Fitz-enz brilliantly summarizes the key points of the basic measurement system. These brief comments can only begin to suggest the scope and depth of his eloquent and compelling analysis of an immensely complicated subject.”
--American Chamber of Commerce Executives
“An important new business book… The ROI of Human Capital will serve as an excellent reference and guidebook for HR professionals and business leaders, especially CEOs and CFOs, who need to understand how HR contributes to their bottom line. I can serve as a roadmap for HR professionals who want to plan their organizational strategy in a way that will be embraced by the executive team. This work will be invaluable as a framework for executive dialog on HR issues.”
--HR Magazine
The ROI of Human Capital has long been the most trusted book available on measuring the value of one’s employees. Drawing on years of research by the prestigious Saratoga Institute, this up-to-date second edition provides all-new metrics along with a thorough methodology for quantifying the contribution of human capital to corporate profit. This is the one guide you need to determine how to invest most effectively in your organization’s most valuable resource: its people.
Praise for the First Edition of The ROI of Human Capital:
“Well worth reading by more than the HR crowd. Solid business wisdom that allows for humanity and humor.” — Booklist
“Essential reading for professionals, this book culminates years of quantitative and qualitative research, providing a breakthrough methodology for measuring the bottom-line impact of employee performance. . . . This well-written and authoritative guide is highly recommended for university and professional collections.”
— Choice
“The ROI of Human Capital is an ambitious venture into the world of employee performance measurement and improvement in economic value terms . . . a roadmap for fundamental examination, assessment and strengthening of multi-faceted human performance.” — Canadian HR Reporter
“Fitz-enz brilliantly summarizes the key points of the basic measurement system. These brief comments can only begin to suggest the scope and depth of his eloquent and compelling analysis of an immensely complicated subject.”
— American Chamber of Commerce Executives
“An important new business book . . . The ROI of Human Capital will serve as an excellent reference and guidebook for HR professionals and business leaders, especially CEOs and CFOs, who need to understand how HR contributes to their bottom line. It can serve as a roadmap for HR professionals who want to plan their organizational strategy in a way that will be embraced by the executive team. This work will be invaluable as a framework for executive dialog on HR issues.”
— HR Magazine
CONTENTS
PREFACE TO THE SECOND EDITION
PREFACE TO THE FIRST EDITION
CHAPTER 1: Human
Leverage
CHAPTER 2: How
to Measure Human Capital’s Contribution to Enterprise Goals
CHAPTER 3: How
to Measure Human Capital’s Impact on Processes
CHAPTER 4: How
to Measure Human Resources’ Value Added
CHAPTER 5: End-to-End
Human Capital Value Reports
CHAPTER 6: Human
Capital Analytics: The Leading Edge of Measurement
CHAPTER 7: Predictive
Analytics: Leading Indicators and Intangible Metrics
CHAPTER 8: How
to Measure and Value Improvement Initiatives Results
CHAPTER 9: Outsourcing:
A New Operating Model?
CHAPTER 10: How
to Change the Game
CHAPTER 11: Eleven
Principles, Seven Skills, and Five Metrics
INDEX
~
CHAPTER 1: Human Leverage
‘‘We can have facts without thinking but we cannot have
thinking without facts.’’
—JOHN DEWEY
The Shift
No longer is management of the human resources department
a human resources issue. When personnel and training
came into being during the 1930s, it was in response to
the growing strength of organized labor. The main contribution
of personnel and industrial relations was to deal with
that incursion. After World War II, as corporations expanded,
there was a need for someone to handle the administrative
issues around employees. Personnel got the job. By
the late 1960s, it was becoming clear that there were more
complex challenges, so personnel changed its name to
human resources. Today, the game is human capital management.
Conceptually, this is recognition that people are
the bedrock of the organization as we stumble into the Intelligence
Age. The fundamental question has become, how do
we improve the return on our investment in human capital?
We find ourselves in a world where yesterday is a distant
memory and tomorrow is an uncertain dream. The only reality
is now. Yet, by taking the long view of any issue, we
