The ROI of human capital

Abstract

Chapter One: Human Capital—the Profit Lever of a Knowledge Economy In the current knowledge economy, people, not money, facilities, or equipment, are the critical differentiators of a business enterprise. People are the profit levers; all other assets are passive resources that require human application to generate value. Thus, the key to sustaining a profitable company or a healthy economy is the productivity of the workforce. Given this reality, there is no chance of competing effectively, without hard data on human capital activity and productivity. Management needs a system of metrics that describes and predicts the cost and productivity curves of its workforce, and it needs qualitative measures that focus on value and human reactions. Whereas, quantitative measures describe what happened in terms of cost, capacity, and time, qualitative measures tell why it happened. Together, they offer insights into causes and effects, and they allow management to: • communicate specific performance expectations; • know what is going on inside the organization; Jac Fitz-enz

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