The economic worth of a worker’s experience and talents are referred to as Human Capital. Human capital encompasses assets such as education, training, intellect, skills, health, and other characteristics valued by employers such as loyalty and punctuality. As such, it is an intangible asset or characteristic that does not (and cannot) appear on a company’s balance sheet. Human capital can boost productivity and consequently profitability. The more a firm invests in its personnel, the more likely it is to be productive and successful. An organization is only as good as its people, i.e., its human capital. The Human Resources department also oversees staff acquisition, management, and optimization. 

The concept of Human Capital acknowledges that not all labour is equal. Employers may increase the quality of that human capital by investing in their personnel. This is achieved through education, experience, and talents. All of this has a significant economic impact on employers and the economy as a whole. Human capital investments may be easily calculated since they are based on the investment of employee skills and knowledge through education. HR managers may compute overall profitability before and after making any investments. Any human capital return on investment (ROI) may be computed by dividing the company’s total earnings by its entire human capital investments.

The Importance of Human Capital and its components

The saying “Employees are our most significant asset” is a favourite among managers. Despite this, too many executives still manage and view their staff as an expense. That is a dangerous way of thinking since human capital is the sole sustainable source of competitive advantage for many businesses. Employers that fail to invest in their staff risk their long-term existence. This practice has persisted in part because of the lack of alternatives. Until recently, there simply were no reliable methods to assess how investments in human capital management (HCM)—things like leadership development, job design, and knowledge sharing—affected bottom-line results. But advances in technology and collective knowledge has made it possible to develop a system for evaluating HCM, forecasting organisational performance, and directing organisations’ investments in people.

Human capital management is made up of a series of administrative and strategic components that include:

• Recruitment
• Onboarding
• Payroll, Attendance, compensation and retirement services
• Talent management
• Learning and development
• Reporting and analytics
• HR Generalist

Human resource managers may hire, engage, and retain staff members with the use of human capital management. Additionally, they will be able to do rid of expensive redundancies and synchronise data into a reliable source of decision-making in an integrated Human Capital Management system where HR services are consolidated.

The growth and productivity of the organisation depend on the development of its human capital. The people who operate a business are an asset worth investing in. If they can improve their productivity through self-development, the organisation will experience increased productivity. Additionally, there are instances when it is significantly less expensive to teach and develop existing employees than to find and hire new ones. Employees also feel more powerful when their employer invests in them, and they are more likely to stay with a company that offers a promising career path and cares about maximising their potential and happiness.

Real Change in Organizations through Human Capital Development

Real change in organisations may be categorised into two categories: progress and degeneration. From this perspective, if something changes, it either gets better or becomes worse. Hence, it is crucial to ensure the human capital is to be adapted and improved to match the changes in technology, and talent outside the organization while also ensuring that static or monotonous jobs must gain from incremental developments or developmental gains, such as employee health and lifestyle. In addition, such jobs should be evaluated for their relevancy and necessity to determine whether they need to remain as well. Furthermore, any changes introduced must be developmental and just superficial. It is unlikely that finding a job that does not require improvement in some aspects is a challenge. 

How does Investments Human Capital Development affect Organization Growth?

The process of enhancing an organization’s staff performance, talents, and resources is known as human capital development. Human capital development is a diversified and all-encompassing process since it includes a wide variety of activities, such as on-the-job training, education sponsorship, and team-building exercises. These team-building exercises include numerous spectrums of activities, such as skill development, project management, and morale-boosting.

Human Capital Development can take many different shapes. Coaching, continuing education, job training, leadership development, mentorship, personality tests, psychometric training, workshops, and other methods are all viable options. The fast evolution and deployment of novel technologies in an organization where technology is a leading and dominant force mean that to keep up, employees will need to co-evolve or acquire the knowledge, attitudes, and values needed to master these technologies. Workplace niches for static, non-developing people will certainly disappear in an era of increased automation of lower-skilled professions and increasing dependence of high-skill careers on constantly changing technology.

For instance, if a company is looking to generate more sales or grow sales revenue, it can either train its existing marketing and sales team or hire new staff. That requirement incites new job vacancies. However, if the labour market becomes tight because of a growing economy, businesses will be pushed to train people to fill the skills gaps. Either way, it is an investment by the company in human capital development or it is an organisational growth driver as it influences how well people are trained and developed.

Final Thoughts

Nearly 70% of a company’s operational costs are typically spent on human resources. Many businesses fail to adequately invest in their human capital development, including employee development plans, despite how much they cost. In 2015, the Talent Mobility Research Report found that more than 40% of employers said they offer career planning or development just sometimes or never. If you are a manager, you should rethink your strategy for managing your human resource if your organisation is one of the 40%. Your company needs to make active investments in its people if it wants to get the most out of them and attain organizational growth in the process. There are numerous benefits to investing in your human capital, such as increased employee satisfaction, improved employee retention rates, increased ROI, and greater organizational culture to name a few.