Published : 7 years ago, on 03/01/2018

Capital is anything that has value. So, going by the literal meaning human capital are human assets or the human beings that are of value to organisation or country. The knowledge, education, skill sets, capabilities, habits, personality and talents that a human being possesses makes it an asset for the organisation or the country as it can contribute in monetary terms to the value of the organisation or contribute economically towards growth of the country.

Measuring human capital

Statistically, human capital of an organisation can be measured, in monetary terms, as the amount that the employees of an organisation can contribute to its future earnings. Similarly, human capital of a country can be measured as amount that the working age population of a country can contribute to its future earnings. Another approach that you can use to measure human capital is Return on Investment (ROI). This approach measures increase in the income of the company to the investment made in the human capital, that is, amount spent for development of educational qualification, skill set and knowledge of human resources.

Importance of human capital

The importance of human capital is evident from the statement “human resources are the resources that help mobilise all other resources”, all other resources being financial and technological resources. For proper utilisation of any resource, its human resource should be productively operational. Human capital gains much more importance in today’s knowledge based economy where the creation of any other form of capital requires appropriate mobilisation of human capital.

Mobilisation of human capital

By mobilisation of human capital I mean proper utilisation of human capital. The onus of this mobilisation lies on the human resource managers of the company. Developing human capital is a function of Human Resource Management department. For this purpose human resource managers have to focus on growth of skill sets, knowledge, emotional intelligence and educational qualifications of employees. Besides, care has to be taken that a congenial cultural & social atmosphere exists in the organisation so that the people are able to work effectively and efficiently. Promoting creativity and innovation among employees and to harness their maximum potential is also an important task associated with development of human capital. HR department of the company can organise workshops, conferences, MDPs and such other programmes for development of human capital. Investment in human capital is beneficial for the organisation as a whole as it leads to increased job satisfaction among employees. When employees feel that the organisation is taking care of them, they are likely to be happy and satisfied in job, in turn, leading to decrease in employee attrition rate and increase in retention rate. Increased employee engagement leads to better productivity. Also effectively engaged employees , though their positive attitude bring in satisfied clients leading to client engagement. Satisfied internal and external customers lead to a good company atmosphere and culture making the company an excellent place to work in and thus attracting talented millennial workers. Ultimately, this will help organisations to gain advantage over their competitors in terms of market share and revenue.

Thus investment in human capital is of utmost importance for an organisation to retain talent and customers hence promoting growth. This is making organisations go for Executive Development Programmes, Mentoring and Coaching and other customised programmes for development of company specific technical competencies.