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INTERVIEW: Dr. Jac Fitz-enz on Human Capital Metrics

HR metrics, human capital metrics, human capital, Dr. Jac Fitz-enz, ROI of Human Capital

I’m a self-professed math geek. Which is why I’m very excited to share with you today’s interview. But before we start, I want to share how I learned about Dr. Jac Fitz-enz. I’ve told this story before but I’m going to tell it again.

In my very first human resources manager role, I attended a weekly department head meeting. My boss would have all of us go around the table, talk about the projects we were working on, and discuss any resources (i.e. budget and staff) we needed to achieve our goals.

The operations director would talk about their projects and the resources they needed – and they would get them. Then the marketing director would do the same. And the controller would too. All of them would get the resources they requested. When it came time for me to talk about projects and needs, sometimes I would get what I wanted and sometimes I didn’t. Frankly, it was frustrating. I was determined to find out what they were doing that I wasn’t.

Then I realized that, when my colleagues talked about projects and resources, they talked in terms of return-on-investment (ROI) and the bottom-line. I talked about what made the employees feel good. That’s not to say employee satisfaction isn’t important. But I found that, when I turned employee satisfaction into a number…I got what I wanted too.

I learned how to turn stories into numbers by reading a book – “How to Measure Human Resource Management” by Dr. Jac Fitz-enz. In addition, two of his books, “Human Value Management” and “The ROI of Human Capital” won the Book of the Year Award by the Society for Human Resources Management (SHRM). I had the opportunity to chat with Dr. Jac about his career and how human capital impacts today’s human resources departments. I’m thrilled to share his thoughts with you.

In 1977, you founded the Saratoga Institute (SI), which is well-known for its work in human capital metrics. What prompted you to start the Institute?

jac fitz-enz, metrics, HR metrics, Saratoga Institute, human capital, human capital metrics, SHRM[Fitz-enz] I first became involved with HR, then called personnel and training, in 1969. I found a function that was regarded as a cost center that created no value. Having come from the sales and marketing side I couldn’t accept that a company would support a nonvalue generating unit. So, I started working on a way to measure and evaluate in objective terms the work of HR. It took until 1977 to work out and test the system. Then I was ready to take it public through SI.

The initial response was quite negative. It took about 10 years before the function began to accept it. HR people were not business oriented and were afraid that revealing the results of their work would make things worse for them. Only by showing them how to evaluate improvements in staffing, compensation, development, and retention in terms of cost reduction, process times, quantity produced, quality of the outcomes and reactions of the company’s management and employees did they begin to come around.

Lots of talk today about predictive analytics. In fact, you co-authored a book titled “Predictive Analytics for Human Resources” with John Mattox. Is there a place in HR for both metrics and analytics? If so, how should HR professionals approach it?

[Fitz-enz] HR is a business function just like sales, operations, IT, etc. Therefore, it should be managed like a business and its performance measured accordingly. There are three levels of analytics:

  1. Descriptive. Measurement is descriptive. It tells WHAT HAPPENED in a past period; month, quarter, year, etc. This is what accounting reports—the past.
  1. Predictive. By referring to the past (descriptive metrics) and studying the future we can determine WHAT TO DO to produce more positive results in the future; i.e.; prediction.
  1. Prescriptive. Finally, prescription is a plan of how to carry out the prediction leading to the desired result. It’s like a doctor’s prescription that tells us to take a certain number of pills over a certain time period to overcome the illness (the prediction). It is the HOW to do it.

HR professionals are busy today. If they only had time to focus on a handful of metrics, which ones should they consider?

[Fitz-enz]Attraction and retention of qualified talent seems to be the biggest concern of management. Therefore in most cases, retention is a very valuable metric. By sorting it by job level, length of employment, and possibly effects of processes such as new hire orientation, supervisory skills, training, etc. you can begin to manage it.

Training Effectiveness is also very valuable. ROI Institute has developed a very effective method for measuring training program outcomes and effects.

Beyond that, HR should focus on how it is attempting to support business initiatives such as time to market, cost reduction, productivity, and customer retention. The question is, how are we contributing to those strategic business objectives?

A new trend emerging in HR is departments starting to hire their own analysts. Any thoughts on this? What do you see as the pros/cons?

[Fitz-enz] If the budget allows it I believe it is best to have HR analysts on staff. This way, their time and efforts can be directed and controlled. Also, they should build relationships with analysts in finance, marketing, and IT. Both sides will benefit from this coordination.

How can HR sell senior management on the value of metrics?

[Fitz-enz] Management wants to know to make the business more productive, produce higher quality, and optimize customer retention. If HR can focus its efforts on working with line management to contribute to those strategic goals and demonstrate it in quantitative terms, management will appreciate HR and support it. My experience is that HR spends too much time looking at its services and not enough on connecting them to the business goals.

I know you’ve recently retired and turned your talents toward writing fiction. Want to share with readers your new project?

[Fitz-enz] I’m writing a series of adventure and romance novels titled the Mike and Grace Novels under the pen name DOCTOR JAC. It focuses on the activity and relationship of a young naval intelligence officer and his brilliant Chinese/American partner and wife. (She is a special agent of the State Department assigned to work with him.)

In the first book, “Undaunted Lovers” they meet and fall in love, but she’s married. The story is how they struggle with that until the last chapter that is a happy ending.

Second book, “Spies with Benefits”, starts one minute after the end of Undaunted Lovers. In this, they eventually marry and take off on a series of clandestine assignments involving recruiting spies for the US, solving a murder, catching a spy, then foiling a diplomat’s kidnapping, and stealing weapon plans in Beijing, China. The books are available on AMAZON and Barnes and Noble.

In the next book, “London’s Secrets”, they’re working in the UK and Luxembourg.

A big thanks to Dr. Jac for taking time to share with us his experience and expertise. If you’re looking for the HR book that will help you take your metrics and measurement to the next level, go buy one of his. And if you’re looking for something lighter to read by the pool, grab one of his new novels.

HR and measurement go together. But we don’t have to learn the HOW alone. There are lots of great resources to help us.

Image taken by Sharlyn Lauby at Boston Logan Airport following a Workforce Institute board meeting.

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About Mildred Blankson

I am a Human Resource Professional with a Masters Degree in Human Resource Management. I have several years of experience in Human Resources and i hope this blog will be a great resource in helping you find the perfect job or candidate that you seek.

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