What is a company without human capital? Human capital is one of the intangible assets of an organization. You must understand how to handle the most valuable resource your company has if you want it to remain competitive. And that is unquestionably your people. Your employees are also referred to as human capital and they are what drive the success of your company. Human capital management should be included in your company’s strategy. It is especially true in today’s competitive labor market when it is crucial to be able to draw in and keep top personnel. Organizations are in a difficult situation as they try to maintain employee engagement while navigating an impending recession. Rapid adaptation is required in human capital management to reflect these changing priorities.
What is Human Capital???
According to Baron and Armstrong (2007), human capital is an important element of the intangible assets of an organization. Human capital is looked at in terms of quality rather than quantity of the labor supply. Human capital is also referred to as the economic value of an employee’s skills and experience. In addition to qualities that employers admire, such as loyalty and punctuality, human capital also includes assets such as education, training, expertise, skills, and health.
For businesses to perform and thrive, they need human capital. The extent to which a company can advance, innovate and fulfill its objective is determined by its employees. Using human capital management, a business may develop and improve its personnel, making it more productive and more strategic approach.
Examples of Human Capital
Examples of Human Capital include but are not limited to:
- problem-solving skills;
- mental health, personal resilience;
- communication skills;
- creativity;
- technical skills;
- personality;
- work experience;
- hard skills and soft skills;
- intelligence and emotional intelligence;
Human Capital Management
Human capital management is an ongoing journey. The process of human capital management is utilized to recruit top talent as well as to assist and motivate staff members to realize their maximum potential. Employees are viewed by human capital management as valuable resources that must be used to the fullest extent possible.
Organizations that rely heavily on employees to accomplish the majority of their goals allocate resources to expand and improve the fundamental skills and competencies that their staff members require to produce results. They can pinpoint where their competencies are lacking and concentrate recruitment efforts on filling those gaps with the use of human capital management.
Optimizing the effectiveness and performance of a company’s workforce is made possible by human capital management. Scarborough and Elias (2002) as cited in Baron and Armstrong (2007) state that Human capital is most helpful in defining the connection between Human Resources and business strategy. Therefore, it offers a comprehensive strategy to direct recruiting, hiring, onboarding, employee training and development, performance evaluation and feedback, and talent attraction.
Why Human Capital Management is Important???
Now that you know what human capital management is, why is it important? Hopefully, by this time, you have a better knowledge of it. Why is human resource management crucial?
1. Creates a Competitive Advantage for the Organization
Smart executives or leaders understand the value of human capital management as a competitive advantage. According to the statistics, businesses that emphasize employee growth, engagement, and overall well-being are likely to outperform their competitors. It has also been demonstrated that an organization’s ability to effectively utilize and engage its human capital directly affects a variety of Key Performance Indicators, such as productivity, employee turnover, product quality, and customer satisfaction. The health and prosperity of your company depend on effective human capital management, which also gives you the tools you need to succeed in a world that is becoming more and more competitive.
According to Baron and Armstrong (2007), the importance of intangible value is always rising because most of our enterprises’ capacity to innovate, win over customers, build a strong brand, and respond to a constantly shifting marketplace is what keeps them in business. All of this depends on people, and getting the best out of people requires understanding what drives them to work hard, provide exceptional customer service, and go the additional mile when it matters.
2. Assists in enhancing culture and values
People inside and outside of the corporation can now get the inside scoop on managerial strategies, employee attitudes, and salary decisions. With more knowledge of how other firms operate, employees have a wealth of employment choices at their fingertips. As a result, managers now approach staff more like clients.
Employees today are searching for meaning, connections, impact, and personal development. Finding a balance that works for your organization is crucial because managing all these obligations can be stressful. The organizational culture can change to fit this changing workplace by taking into account job design, management, leadership development, and work environment. Finally, it enhances staff engagement and retention, which boosts productivity.
3. Improves the structure of the organization
Companies are rethinking the composition of their organizations in addition to making more investments in human capital. More independence and decision-making power are priorities for prospective employees. Businesses put their efforts into adapting organizational structures to employees’ needs. Many companies think that giving employees more freedom to make decisions and manage their workload makes them accountable and gives their work a new purpose.
4. Recruiting
A key component of strategic human capital management is enhancing effective recruiting strategies, that is, hiring, interviewing, and firing workers. It could make or break how people see your company, who wants to work there, and how you hire the best people for open positions. It’s a scary idea to hire someone to fill a hole. Future issues for the company may arise if the candidate is not a good fit.
To create a comprehensive plan for a candidate’s progression inside the firm, talent acquisition teams need to be aware of their background, areas of interest, and professional goals and competencies. Making human capital management a priority will enable you to identify the right personnel, onboard new hires, and support the employee experience throughout the employee life cycle. You will also be able to engage and keep the talented, high-performing employees you need to be successful.
5. Develops talent
Businesses can implement professional development plans and manage employee performance using human capital management tools. The goal of employees’ skill-improvement efforts is to advance professionally and within their businesses. Additionally, it helps businesses to grow from within, which lowers expensive staff turnover and increases employee satisfaction.
The ability to navigate when people succeed in their tasks and determine whether they need support will be made possible by having critical milestones and mechanisms for tracing success. Employers can efficiently distribute benefits by setting up measures to monitor productivity and performance.
Conclusion
Human capital is an important element of the intangible assets of an organization. Human capital management seeks to maximize and improve an organization’s economic or business value to gain a competitive edge. Every company needs people because it is the that execute the mission. For the business to successfully pursue human capital initiatives, effective human capital management is essential.
Reference:
Baron, A. & Armstrong, M. (2007). Human Capital Management: Achieving Added Value Through People. London: Kogan Page
Kelin Zvomuya is a consultant at Human Capital Experts
0785419889/ 0786249422