The ROI of Human Capital: Measuring the Economic Value of Employee Performance

by Jac Fitz-Enz

Book Overview

The lifeblood of any business enterprise is its people. Dr. Jac Fitz-enz helps professionals quantify that statement by critically gauging their true human costs and their employees' productivity.The... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0814413323
• ISBN13: 9780814413326
• Release Date: January 2009
• Publisher: AMACOM/American Management Association
• Length: 312 Pages
• Weight: 1.45 lbs.
• Dimensions: 1.3" x 6.3" x 9.1"
• Age Range: 18 years and up
• Grade Range: Postsecondary and higher

Customer Reviews

Highly Recommended!

Jac Fitz-enz presents a breakthrough approach to measuring your return on investment (ROI) in human capital. This book could have been dull, dry and dusty in someone else's hands, but instead is absorbing and a pleasure to read. Using studies done by the Saratoga Institute - his own facility - and drawing upon the work of other researchers as well, the author places this new methodology in the context of today's business challenges, including e-commerce. He pinpoints satisfaction as the baseline value employees pursue, and shows how you will profit by working toward employee fulfillment. We from getAbstract highly recommend this book to those in human resources, and to managers, executives and entrepreneurs who run their own businesses.

The Human Dimension of ROI

Perhaps you have already read The 8 Practices of Exceptional Companies. Fitz-enz adds substantially to his international renown with this more recent book in which he suggests all manner of ways to measure the economic value of human capital. In the Preface, he suggests that (in business terms) human capital be described as a combination of factors such as these:* The traits one brings to the job: intelligence, energy, a generally positive attitude, reliability, commitment* One's ability to learn: aptitude, imagination, creativity, and what is often called street smarts", savvy (for how to get things done)* One's motivation to share information and knowledge: team spirit and goal orientationAs Fitz-enz then explains, Chapter 1 takes the first steps toward a methodology for measuring the return on investment (ROI) of human capital. Chapter 2 launches the process of finding the ROI of human capital from an unusual "starting point": rather than begin with process improvement at the lower organizational levels, focus at the highest possible levels on "the goals of the enterprise." Chapter 3 is the "bridge" between the enterprise and the human capital management levels. Chapter 4 brings us to "the drivers of all enterprise success": people." Chapter 5 integrates the three levels (enterprise, process or function, and people), combining them "in one end-to-end system of human capital valuation reporting." Chapter 6 moves to the next level: trending and predicting. Chapter 7 dissects five of the most common human resources and human capital initiatives, demonstrating HOW to find economic value in the workings of each. Chapter 8 reports on two of the longest-term, largest-scale studies of human capital management. Chapter 9 explains what is required for an organization to take a quantum leap" over its competition. Chapter 10 provides a "compilation" of eleven "guiding principles" which serve as "The Foundation Stones of the Human Capital Measurement Pathway." And then in the final chapter, Fitz-enz brilliantly sums up the basic measurement system. Note in particular Figure 11-1 ("Composite human capital scoreboard") which provides an excellent model to guide and inform the efforts of any organization, regardless of its size or nature. With very few exceptions, an organization's greatest assets do indeed "walk out the door" at the end of each business day. For those who are eager to measure human capital more accurately, who then wish to create for their organization a much greater return on investments in its human resources, this is an absolutely indispensable resource to help achieve those objectives.

If we don't know how to measure, we can't manage.

"In the closing years of the twentieth century, management has come to accept that people, not cash, buildings, or equipment, are the critical differentiators of a business enterprise. As we move into the new millennium and find ourselves in a knowledge economy, it is undeniable that people are the profit lever. All assets of an organization, other than people, are inert. They are passive resources that require human application to generate value. The key to sustaining a profitable company or a healty economy is the productivity of the workforce, our human capital...Drucker claims that the greatest challenge for organizations today and for the next decade at least is to respond to the shift from an industrial to a knowledge economy...This shift toward knowledge as the differentiator affects all aspects of organizational management, including operating efficiency, marketing, organizational structure, and human capital investment...Since employee costs today can exceed 40 percent of corporate expense, measuring of the ROI in human capital is essential. Management needs a system of metrics that describe and predict the cost and productivity curves of its workforce" (pp.1-3). Within this general framework, Jac Fitz-Enz argues that without measurement we cannot:* communicate specific performance expectations.* know what is going on inside the organization.* identify performance gaps that should be analyzed and eliminated.* provide feedback comparing performance to a standard or a benchmark.* recognize performance that should be rewarded.* support decisions regarding resource allocation, projections, and schedules.In short, he argues that "if we don't know how to measure our primary value-producing assets, we can't manage it".On the other hand, in Chapter 1, he displays many of the management panaceas that have hit the market in the past fifty years as follows:** 2000 ? ? ? ? ?-Intellectual Capital-Learning Organization-Rightsizing-Balanced Scorecard-EVA** 1990 -TQM-Reenginering-7 Habits-Delayering-Downsizing-Customer Service-Benchmarking-Kaizen-Empowerment-Continuous Improvement** 1980 -Corporate Culture-Change Management-MBWA -Intrapreneuring-Relationship Marketing-Excellence** 1970 -Quality Circles-Diversification-One Minute Managing- Work Simplification-Needs Hieracchy-Statistical Process Control- Organizational Renewal-Value Chain-Portfolio Management** 1960 -Managerial Grid-Matrix-Hygienes and Motivators-Theory Z-Theory X & Y-Plan-Organize-Direct-Control-Human Relations** 1950 -Management by Objectives-Management Science-Decision TreeI highly recommend this 'must' reading study to all executives and HR practitioners.

Professional reviews ROI of Human Capital

This review was written and published by Barbara Jacobs forBOOKLIST, a national book review service.... Wall Street has long shunned the notionthat employee satisfaction or dissatisfaction impacts the corporation's bottom line. Esteemed consultant and prolific author (The 8 Practices of Exceptional Companies, 1997) Fitz-enz balances the scorecard with his metrical and sometimes lyrical evaluation of employees---aka "human capital"---which he calls ROI. In fact, this is a scholarly tome well worth reading by more than the HR crowd; in it, he sets forth guidelines to measure the effect of human performance as well as improvement initiatives such as restructuring and outsourcing. Some are mathematical formulas, which, after a careful drilling down through, are less intimidating. Others reflect a wise and commonsensical review of other management gurus' findings, a recap and then a reapproach. One example of why benchmarking fails is that the initiative is defined in too broad a scope---or, in the author's words, "don't take on world hunger." Solid business wisdom that allows for humanity and humor. ---Barbara Jacobs

Worth every penny

This book is a must reading for all human resource professionals and a must in all libraries. I found this book very interesting and being a human resource professional myself, this told me methods and introduced me to many tools in which the human resource can be quantified and accountability can be broughtinto this department, especially HR department. Wonderful book and it makes Human capital accounting sounds practical, feasible and logical. Worth every penny