The ROI of Human Capital: Measuring
the Economic Value of Employee
Performance by Dr. Jac Fitz-enz
Highly Recommended!
We all know that people--not cash, buildings, or equipment--are the
lifeblood of any business enterprise. Yet, astonishingly, there has never
been a reliable way to quantify the contribution of human capital to
corporate profit...until now. In THE ROI OF HUMAN CAPITAL, Jac Fitz-
enz draws on years of quantitative and qualitative research by his
prestigious Saratoga Institute to provide a breakthrough methodology for
measuring the bottom-line effect of employee performance. A prolific
author, whose previous work includes Human Value Management, named
Book of the Year by the Society for Human Resource Management, Fitz-
enz has also been called the father of human performance benchmarking.
This new book offers a rare blend of management expertise and
quantitative metrics, showing 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). With todays employee costs often
exceeding 40 percent of corporate expense, measuring the value of this
human capital is essential. Here, at last, is a resource that reveals how to
do it and that helps managers determine how to invest most effectively in
human productive potential.
Personal Review: The ROI of Human Capital: Measuring the
Economic Value of Employee Performance by Dr. Jac Fitz-enz
"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.

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