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The Independent Online
"HUMAN CAPITAL" is all the rage. So convinced is everybody that we are all - or nearly all - knowledge workers now that accountants are battling to measure just how valuable these "greatest assets" are.

It is arguable that no group of accountants is more determined in this than Arthur Andersen. The firm has long been committed to developing its people, and, in recent years, Brian Friedman and his colleagues have built up a team operating under the somewhat grand name of "human capital services".

Now, Friedman and two other Andersen partners - James Hatch and David Walker - have written Delivering on the Promise. Though the authors stress that they are offering "no magic formulas", the subtitle How to attract, manage and retain human capital suggests some answers.

The key themes of this new book are all about making the most of your assets. Hence, at the outset Friedman and his colleagues claim that reading the book will "help chief executives, senior human resources executives and other managers get the most out of their companies' investments in human resources by enabling them to:

t align human capital programmes with overall business strategy;

t evaluate the current worth of human resources and the efficiency of current human capital functions and programmes;

t measure the amount of funds and time spent to source, develop and manage resources;

t assess the return on investment in human capital;

t manage and minimise the risks associated with the employment of people - the least predictable of all assets;

t maximise the value of human capital - the most valuable of all assets!"

These principles will help businesses plug the gap between strategic intention and practical action. The firm has developed a proprietary approach that has hitherto been kept under wraps. It is only being revealed now because of "clients' needs for a full, integrated approach".

Known as "Human Capital Appraisal", this approach shows how companies can "measure and increase the returns on their investments in people", say the book's authors.

Doing this involves acknowledging that there are stages of development and that improving returns on human capital is dependent upon moving forward stage by stage.

There are five stages of appraisal - clarification of the overall business objectives; assessment - a vitally important stage that involves calculating the cost of investment in human capital and the value employees put on it; designing programmes; implementing proposed changes; and monitoring how the system fits with strategy - "the true test of Human Capital Appraisal".

Human Capital management also has five parts - recruitment, retention and retirement; rewards and performance management; career development, succession planning and training; organisational structure; and human capital enablers, or systems for improving legal compliance, employee and industrial relations, communications and information flow.

In an effort to demonstrate its commitment to this view, the firm has come up with an index for rating the effectiveness of human capital in organisations - "both for the organisations and for their shareholders".

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