Dr. Jac Fitz-enz, Human Capital's new senior editor, shares his expertise and insight on HR.

Last month, Human Capital announced that Dr. Jac Fitz-enz has joined the magazine as senior editor. Although he needs little introduction, this interview allows our readers to get caught up on his latest viewpoints on HR's mission, leadership development and benchmarking. After 25 years in the HR industry, which included founding the Saratoga Institute, where he led the development of the world's most comprehensive human capital benchmark database, Fitz-enz, or Dr. Jac, as he is known by many in the industry, currently directs Human Capital Source. He is the only two-time winner of the Society for Human Resources Management Book of the Year Award for Human Value Management and The ROI of Human Capital, and he is the recipient of the 2004 Human Resource Innovators Award, among many other awards and recognition.

Human Capital: You are the father of HR benchmarking. As you look to the future, how can HR metrics best serve human capital development in today's business environment?

Jac Fitz-enz: We have to start by looking at the landscape, and the field on which we are playing. The marketplace today is more competitive than it has ever been, and competition is only going to increase. Because of advances in science and technology, anyone in any country can produce and ship most items, including perishables, anywhere in the world. So, American producers have to compete with foreign sources while simultaneously learning how to sell to foreign markets.

Add to that the increasing complexity of doing business. As just one example, look at what Sarbanes-Oxley is demanding of companies. At the human level, demographic trends indicate that there are and will be shortages of people for technology and management roles for at least 6 to 10 years. Conversely, technology and decision science tools are improving, thereby helping HR management, while at the same time requiring the profession to learn how to leverage human effort with them.

The conclusion must be that all investment decisions now carry higher risks. The only way to reduce risk is through relevant information, both qualitative and quantitative. Numbers are the language of business and metrics are the pointers. The wise use of metrics improves decision making, which in turn improves the quality of performance as well as working conditions.

HC: What are companies doing now to measure their performance, and how can organizations tap into the power of metrics?

JF: In the 25 years that I have been helping HR managers design and apply metrics and benchmarking I have seen a slow but recently accelerating application of benchmarking. Now, the early adopters are looking over the horizon for new, more powerful means of managing human capital. Such tools are slowly coming into the market.

The key to this type of analysis is not primarily the tools. Statistical analysis and computing capability have been around for some time. The essential element is the concept that preceded and stimulated the desire to build the tools.

In the end, competitive advantage is what tools such as these give companies. Think about it. If you knew which people were best to hire, where productive energy was waning, and who was most likely to quit in the near term, wouldn't you have an advantage over your competitors?

Benchmarking is a very useful tool, but it is not the end of analysis. It is the beginning. Once you have in place an effective HR metrics system for current reporting, you will want to benchmark your data against others. Given that, you should be ready then to move up the chain to more advanced processes. If you choose not to, you give an edge to others. But when you do apply these types of sophisticated analytic tools you gain competitive advantage for your organization.

HC: In your column this month, you encourage HR to take on the role of developing leaders. What are some specific actions HR professionals can take to initiate this process in their companies?

JF: Leadership is one of the most important challenges in American companies for the next 10 years. HR is the natural function to lead a leadership development program. There are two basic approaches; programmatic and experiential.

The programmatic approach taps into formal education and training classes. It also includes support services, such as career planning and succession planning. The experiential approach involves mentoring, coaching and work assignments. In all of these cases, data could be fed back to a central leadership development database. The database would consist of a manageable percentage of each group, including managers, directors and vice presidents. Top executives could review the data periodically to ensure that investments are being made uniformly, and a cadre of new leaders is being developed. HR would be the custodians of the system.

HC: HR is a people business, but the current emphasis is improving the bottom line through human capital strategies. Do you think HR can play both roles: an employee advocate and a strategic partner with top management? Please explain?

JF: I would take issue with the premise that HR is a people business. My view is that HR is a business function whose resources are the talents of the employees. HR's role is to see that talent is leveraged for the good of the business as well as the benefit of the employees. All staff departments are the same except that their resources differ. The major difference is that HR's resource, namely human talent, has feelings and is mobile.

If HR chose to play only one of the two roles suggested above, which would it drop? A fully functioning department must play both roles, because no one else has the broad perspective and the charter to play both roles.

But first, HR has to perform the basic administrative functions well. This can be done from inside or it can be outsourced. Once the machine is running smoothly, HR can move up to more strategic issues. As HR demonstrates its business focus, it is accepted as a partner. Being a partner, it now has no problem playing employee advocate. If HR is not seen as a business partner, then its power as an advocate is severely diminished, and it can be dismissed as a "bleeding heart" for employees.

HC: Just where then is the fine line around managing people?

JF: Practically speaking, anything needed in business can be purchased on the open market at competitive prices. There is only one exception. It relates to people, also called Òhuman talent.Ó Real property, equipment and material are available to anyone who has the ability to pay the going rate. Human talent cannot be purchased in the true sense of the word, but it can be ÒrentedÓ so to speak, and this is where the analogy gets stretched.

We can hire people to come to an assigned workplace and perform job duties. But we cannot keep them against their will. More importantly, we cannot force them to perform at the peak of their ability. A machine, when properly maintained and operated, will run at an optimum rate throughout its useful life. It is not as variable as is a human. Machines don't have hangovers or the flu, aren't distracted by outside problems, and don't spend time talking to the opposite sex nearby. A machine, one might say, is committed by its nature to doing what it was designed and purchased to do. Therefore, it can be placed into a work environment and its potential leveraged by a skilled worker.

People aren't like this. They can't be leveraged by merely giving them the best facility, equipment and material. Leveraging human capital depends on the ability to influence one transitory, emotional factor: commitment. Commitment is potentially the most powerful driver of human behavior. This is where the HR department comes in. Its mission is to develop and tap into that commitment.

At the end of the day, every function within the organization has a very focused mission. No one other than HR has the charter to support both the quantitative and qualitative issues. In order to fulfill that mission, HR probably needs to outsource much of its administrative responsibilities and supervise them as a contract manager. Then it can turn its attention to the strategic business initiatives, such as leadership, performance management, cost management, sales and service support. By applying decision science and workforce analytic tools, HR can become the most effective resource manager in the organization. As it does this, the HR staff become true partners in the business and achieve a level of personal satisfaction that can only come from contributing at that level.