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

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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 ...

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

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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.

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Editorial Reviews

From the Publisher
“If you want to create a greater return on your investments in your human capital, this book is an important read for the Human Resource professional.” — absorbing and a pleasure to read.
HR Magazine
…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.
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Product Details

  • ISBN-13: 9780814413326
  • Publisher: AMACOM
  • Publication date: 2/23/2009
  • Edition description: Second Edition
  • Edition number: 2
  • Pages: 336
  • Sales rank: 713,630
  • Product dimensions: 5.90 (w) x 9.00 (h) x 1.30 (d)

Meet the Author

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.

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Read an Excerpt

CHAPTER 1: Human Leverage

‘‘We can have facts without thinking but we cannot have thinking without facts.’’


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 a 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 better understand not only where we have come from and where we are now but perhaps where we might be headed.

Consider how a technology such as telecommunications has evolved. It started as a box on the wall with a crank and a gizmo to talk into. Some people believed that it was a fad and that they didn’t need one. Today, it is a gizmo stuck in your ear or a pad hung somewhere on your body and don’t try to tell your teenagers that they don’t need one.

So what does this have to do with managing organizations and especially with understanding how people—that is, human capital—need to be addressed within our organizations?

Here is where it goes three-dimensional. The issue is not only the structure of organizations and the people within them. Now the external entity, the customer, has entered the organization in a new and as yet not clearly understood way. Whether we recognize the fact or not, the customer is as much a part of our companies as are our physical and human assets. The three types of capital—

structural, human, and relational—are rapidly merging into just structural and human with what was the external relations (the customer) now imbedded in everything we do internally.

Let me try to explain it by paralleling it with the evolution of electronic technology. Computers became a reality with the production of ENIAC, which was the first truly workable a large-scale computer. By large, I mean room size.

ENIAC was born in 1945 as a mass of vacuum tubes that truly took up the space of a room. Twenty years later, IBM

came out with the System/360 that brought computing into the business world in a somewhat user-friendly way. Two decades later, minicomputers were common and the micro-computer appeared. The first portable computer weighed more than 20 pounds. Today, laptops weigh less than 5

pounds. BlackBerrys and similar devices weigh only 5

ounces and provide more computing power than ENIAC. So

what? Stay with me, there is an end and a point to this journey.

As the computer and lately the telephone evolved and merged capabilities, the critical challenges also advanced from hardware to software to services. The product capability has grown to the point where the customer and the product are virtually inseparable. Today’s telephone/computer is no longer in a room, on our desk, or in a purse or briefcase.

It is attached to our ear. Already that gizmo is taking simple switching voice commands. Tomorrow it will do our computing verbally as we walk, drive, or sit on our patio. Arguments over any topic from who won the Stanley Cup in 1948

to where was da Vinci when he painted the Mona Lisa to what was Tonto’s pet’s name will be settled without lifting a finger.

Ten years ago, I told people at PeopleSoft that they needed to move toward services as the next natural evolutionary step. They told me to get lost. Lou Gerstner saw the future and had the power to shift IBM toward service. In

2007, over 60 percent of IBM revenues came from services.

The reason that the customer is now part of our organization is that we no longer sell a product or provide a service.

We design, sell, and service a customer experience. We are stuck in the customer’s ear, literally and figuratively. No

matter what our product, because of the customer’s emerging capabilities and the expectations that are coming with them, we are selling experiences.

Steve Berkowitz, former CEO of and later senior vice president of Microsoft’s online business group, hit it squarely in words that are paraphrased here:

We have to deliver the basics but that isn’t going to get us to the top. Customers go where their emotions take them. We

have to give the customer the richest experience they want

NOW. In order to do that, I say we have to live 24/7 with the customer.

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Table of Contents










How to Measure Human Capital’s Contribution to Enterprise Goals


How to Measure Human Capital’s Impact on Processes


How to Measure Human Resources’ Value Added



Human Capital Value Reports



Capital Analytics: The Leading Edge of Measurement



Analytics: Leading Indicators and Intangible Metrics


How to Measure and Value Improvement Initiatives Results



A New Operating Model?


How to Change the Game



Principles, Seven Skills, and Five Metrics



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Customer Reviews

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Sort by: Showing 1 Customer Reviews
  • Anonymous

    Posted June 14, 2004

    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 highly recommend this book to those in human resources, and to managers, executives and entrepreneurs who run their own businesses.

    1 out of 1 people found this review helpful.

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