From welfare to work - it's capital

If people are a company's greatest asset, then it is time for Human Capital Services
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Arthur Andersen's Brian Friedman does not beat about the bush when he discusses industry's typical attitudes to employees. "Companies are saying that people are their greatest asset, but it's a lie," he says.

Even leaving aside the cynicism generated by the willingness to tip those assets over the side when the going gets rough, the claim is undermined by the reluctance of managers to think in terms of improving the return on such assets.

Organisations of all sorts spend a great deal on training and development, but, while there is increasing interest in getting value for money from these programmes, there is little focus on what effect such initiatives really have on the individuals concerned.

Pointing out that human resources is "the Cinderella of many organisations", Mr Friedman says his firm has started offering a service whereby - giving away its roots in accountancy - it carries out an audit on the HR function with the aim of measuring how effectively the people asset is being used. "The human asset is unique in that it increases the value the more you use it," he adds.

Such an attempt to quantify what Andersen and others (see main story, above) are starting to call "human capital" fits in with earlier forays into intellectual capital as part of the bid to understand why companies with relatively few physical assets - notably the likes of Microsoft and Intel - were becoming highly valued by stock markets.

But, as Friedman explains, it is also part of the evolution of a discipline that is currently called human resources, but started life in the 1950s as "employee welfare", before becoming "personnel" in the 1960s. It has had its present name since the 1970s, but he is predicting growing use of the term "human capital", and reckons that there will start to be board directors with their responsibilities described in this way.

"The trend is towards being more hard-nosed, more financial and analytical," says Mr Friedman, who developed an early interest in compensation and benefits packages while at the second tier accountancy firm Stoy Hayward. Now his business card from the globally powerful Andersen says Human Capital Services.