Newsletter Archive
September 2006
HUMAN CAPITAL "AUDITING"
Have you ever wondered why it is that most organizations routinely undertake a financial audit but not a human capital audit? If, after all, people are an organization's "most important asset" (not to mention their biggest cost and only sustainable source of competitive advantage), then human capital auditing should be at least as important (and frequent) as financial auditing.
We believe that human capital auditing is an idea whose time has come. There are three main reasons. First, in an increasingly global and knowledge-intensive economy, the effective deployment of "human capital" is ever-more critical to an organization's success. Second, the vehicles for communicating the outcomes of a human capital audit, such as balanced scorecards and executive dashboards, are increasingly commonplace. Third, the tools for undertaking a human capital audit (and thereby significantly improving the quality of the human capital measures that are included in communications vehicles such as balanced scorecards) are now well within the reach of most organizations.
We have been working on this third front with colleagues from around the globe for the past decade. Rather than focusing on the skills and competencies of individual employees, we believe that it's important to examine capabilities at the organizational level, and we've worked hard to identify a core set of human capital indicators capable of predicting future organizational performance across a wide range of industries. This work therefore has important implications not only for HR executives, but also for CFOs, COOs, CEOs, and Wall Street analysts.