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The measure of performance: industrial engineers are perfectly suited to manage human capital.

Article Excerpt
WHILE HUMAN CAPITAL HAS ALWAYS BEEN A NECESSARY INPUT for business enterprises, the shift to a knowledge-based economy in the United States has increased its relative importance. Measurement practices in capitalist organizations have traditionally focused on the evaluation of capital and capital goods, but the value of the human element is being increasingly recognized.

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The concept of human capital relies on seeing people and the knowledge, skills, and abilities they possess as critical assets to their organizations. This viewpoint requires thinking about how we manage and measure human capital in our organizations.

Key issues

Our deficiencies in understanding human capital are significant. There is no wide body of applied research to draw on and there are no norms available for comparison. Managing human capital is much more than the sum of recruitment, training, performance management, and compensation--the traditional processes of the human resources function. And measuring human capital is much more than assessing the effectiveness and efficiency of these key human resources processes. Recognizing human capital as an asset adds a new dimension of assessing total value and looking at the big picture. There are several key issues associated with human capital:

* The shift to a knowledge-based economy and the corresponding need for highly educated knowledge workers has increased the relative value of key knowledge, skills, and abilities.

* The global availability of capital goods and goods-producing equipment has reduced the competitive advantage of traditional assets. Increasingly, the most sustainable competitive advantage is more productive human capital.

* An aging work force in industrialized nations is leading to future worker shortages, particularly for positions requiring college-level skills.

* Recruitment, retention, development, and motivation practices will likely have to be more varied to be effective in cultivating an increasingly diverse work force.

* Downsizing, re-engineering, temping, and outsourcing have eliminated loyalty from the employee-employer relationship.

* Organizational strategy, performance measures, and traditional financial reporting and controls must be integrated with approaches from human performance technology, industrial engineering, quality management, information technology, and related change management disciplines to address human capital at the enterprise level.

* Continual change in the enterprise, its environment, and technology prompts the need for ongoing retraining of the work force.

* Improvements must be made in the development and deployment of practices to measure the return on investment in human capital. Better decision supporting tools are needed to prioritize alternative investments and identify which initiatives and drivers must be emphasized to produce business results.

Human performance technology

Studying and addressing human capital issues hasn't been left solely to the economists. The field emerged from multidisciplinary approaches to improving...