Business capital is the money or wealth a business needs to create goods and services, according to Inc. magazine. Usually, the term capital refers to the monetary assets of a business. But human capital is a different kind of company wealth, one which requires careful management. Discover the following four keys to managing human capital in your company.
What Is Human Capital?
According to the Encyclopaedia Britannica, human capital is the intangible resources possessed by people and groups within any given population, such as a department or organization. Knowledge, abilities, experience, judgment, and other attributes possessed by people and the collective are all examples of human capital. Like other forms of capital, these qualities help businesses create goods and services and, by extension, wealth.
According to Derek Stockley, a performance management consultant, the term human capital has evolved to refer not only to the qualities employees have, but also to the employees themselves.
1. Undertake Strategic Workforce Planning
Every management initiative should begin with a strategic plan, and the U.S. Government Accountability Office (GAO) believes human capital management should be no different. The GAO asserts that federal agencies must align human capital schemes with current and future workplace goals and develop long-term strategies for acquiring, developing, and retaining staff to meet these goals. This philosophy could be applied to other organizations.
2. Invest in Education
According to Gary S. Becker, writing for The Concise Encyclopedia of Economics, investing in education is an important way to grow and manage human capital.
Many employers are realizing this concept and offering tuition reimbursement initiatives encouraging workers to get degrees. Luke Landes of Forbes says his former company offered reimbursement without limitations, rationalizing that the degree would help him do better by driving revenue or reducing company expenses.
However, other companies insist that employees stay with them for a predetermined period, often five years. A hospital might offer a plan with this limitation to ensure that an employee who requests tuition assistance doesn’t quickly take the new skills and knowledge to a competing health care firm.
3. Invest in Workplace Training
Becker states that programs like tuition reimbursement are not the only ways to improve human capital. He claims even college graduates are not completely job ready when entering the workforce. These individuals must learn specific workplace practices through formal and informal training programs.
The GAO adds that workplace training is a key area of human capital management. Per the GAO, workplaces should identify the specific training areas that improve performance, see that they’re effectively and efficiently delivered, and assess the performance impact of the training.
4. Undertake Performance Management
Performance management is another key area of human capital management, according to the GAO. Just as financial performance receives monitoring to assess the effectiveness of financial capital, employee and department performance should also be assessed to evaluate the effectiveness of human capital management.
Ongoing feedback can help employees and departments learn how they can best contribute to their company. Rewards for outstanding performance can motivate not only the individuals receiving recognition but also their peers who aspire to receive similar recognition.
Like other types of business capital, human capital requires careful management to ensure your organization retains its most important resources, its employees. This is why leadership and management courses are such important elements of any health care MBA program.