HR Manager’s bookshelf<br> HR as a value-added proposition: Measuring and auditing HR management

In this column, we review two recent books that can help readers examine and enhance their HR practices, measures and results.

The ROI of Human Capital is an ambitious venture into the world of employee performance measurement and improvement in economic value terms. It offers conceptual models, research findings and a host of measures for HR practices and HR management outcomes in the organization.

Auditing your Human Resources Department provides a framework for assessing current HR practices as a building block for setting priorities and improvement targets.

Both books give HR practitioners a lot of food for thought, as well as extensive material for use in consulting and involving organizational leaders and HR’s clients in developing a more accountable, business-oriented and effective HR function.

The ROI of Human Capital
By Jac Fitz-enz, 298 pages (2000), Amacom. Available from McGraw Hill Ryerson, 1-800-565-5758,

HR professionals, performance consultants and senior managers will find this new book presents a systematic approach to understanding and measuring human capital at the enterprise level, within business processes and across human resource management functions and practices.

“The great irony is that the only economic component that can add value in and by itself is the one that is the most difficult to evaluate. This is the human component — clearly the most vexatious of assets to manage.”

Fitz-enz is founder and chair of the Saratoga Institute in Vancouver and draws upon extensive research to expand and build on his earlier book, How to Measure Human Resources Management (2nd ed., McGraw Hill, 1995).

The book begins by linking four elements of intellectual capital:

•intellectual property;

•process and culture;

•relationships; and

•human capital.

Fitz-enz shows how these elements contribute to functional-level results (service, quality, productivity) and enterprise-level economic and market goals.

A comprehensive set of measures is presented and illustrated throughout the book, including corporate-level measures (a corporate HR scorecard), functional and HR practices, and outcomes measures.

A few examples will illustrate the range:

•cost of hiring, training and turnover;

•benefits and compensation costs;

•employee commitment and satisfaction;

•corporate climate measures; and

•human capital cost, ROI and value added.

In parallel, business process anatomy is outlined, including value analysis and metrics for processes in marketing, customer service, IS, finance, purchasing and other areas.

It’s all tied together in “end-to-end human capital pathways,” which demonstrate the links between human capital management, functional processes and overall organizational goals including shorter time to market, increased customer satisfaction and becoming an employer of choice.

Later chapters in the book address specific issues:

•Trends, forecasts and predictions, including a Saratoga Institute human capital financial index with numerous measures covering organizational effectiveness, HR structure, compensation, benefits, staffing, training and development and separation.

•Valuing leading initiatives including HR restructuring, outsourcing, contingent workforce management, mergers and acquisitions and benchmarking.

•Reports on major studies of human capital management by Gallup and Saratoga.

•“Quantum leap: a strategy for inventing your future,” a chapter which helps readers create a context for going beyond incremental change to build scenarios (probable, hopeful, unthinkable), taking into account demographics, the economy, technology, customers and governmental factors.

Throughout the book, Fitz-enz recognizes the central importance of values and fulfillment in work as the real drivers of productivity and performance.

The ROI of Human Capital is not a quick read or compendium of gimmicks. Rather, it’s a roadmap for fundamental examination, assessment and strengthening of multi-faceted human performance.

Auditing your Human Resources Department
By John H. McConnell, 383 pages in ring-binder format (2001), Amacom. Available from McGraw Hill Ryerson, 1-800-565-5758,

This step-by-step guide has been updated from earlier editions with the involvement of an advisory board — 20 senior HR practitioners and consultants from the United States and Europe, representing various sectors and organization sizes.

The process to audit your HR function is laid out in four phases:

•Information gathering: working through 16 subject matter categories by answering a series of detailed questions about your HR practices and positioning.

•Evaluation: applying numerical ratings to the answers developed in part one. The mindset is one of general auditing to identify areas for further investigation and consideration, rather than an exhaustive study of every possible situation specific to each individual organization.

•Analysis: interpretation of scores using weightings and ratings provided by the advisory board. The outcome is identification of strengths and areas for improvement.

•Action planning: completion of a concise template summarizing improvement objectives, requirements, planned actions, responsibility and time frames.

Categories covered in the audit are:

•department mission;

•how the department is organized and its relationships within HR and with the rest of the organization;

•staffing, selection, training and retention of the HR team;

•labour relations;

•recruitment and selection;

•education, training and development;

•employee relations (policies, procedures, conditions of employment);



•HR planning;

•organization development;

•diversity and equal employment opportunity;

•safety and environment;

•security (protection of employees, assets, information, facilities);

•equipment and facilities available to HR to fulfill its role; and

•documentation and information systems.

The audit questions and focus range from the nuts and bolts to broader business support and direction. While the book (and accompanying CD-ROM) could be used by an individual or small group to take a systematic look at the HR function, it has even greater value as the basis for larger group discussion across HR and representative stakeholders who make use of HR’s services.

This audit process could be an excellent beginning to building HR’s quality, consistency, business focus and value in the organization.

Ray Brillinger is a senior consultant with the IBM Consulting Group. He provides change management, business transformation and organization effectiveness services to client organizations. He can be reached at (905) 316-4646 or [email protected].

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