Defining “Human Capital”

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Defining “Human Capital”

Human Capital: The attributes of a person that are productive in some economic context. Often refers to formal educational attainment, with the implication that education is investment whose returns are in the form of wage, salary, or other compensation. These are normally measured and conceived of as private returns to the individual but can also be social returns. (Econterms)

Human capital results in economic gains, supports company growth, and assists overall business success. The term can also refer to how much of an investment you are making in your employees. Companies should think of their employees as valuable investments, paying attention to employees’ education and “the capacity to deal in abstractions, to recognize and adhere to rules, [and] to use language at a high level.” (James Traub, 2000). Look at some key attributes of an employee when determining how much he or she would add to your company’s human capital.

Diverse and inclusive – Make sure everyone on your team brings a unique skill set, and is open and accepting to other ways of thinking.

Deliberately placed – Everyone should be in a department they can excel in, and doing a job that he or she enjoys.

Trained annually – As mentioned before, a company should never stop increasing their human capital, which does not necessarily mean adding employees. Human capital is also increased when current employees grow and improve.

Continually moving – In order to keep employees motivated, there must always be the opportunity for growth. “This simply means making sure your employees have the opportunity to evolve and transition with the demands of their position, or the position and roles they can occupy in the future.” (Arlene Chandler, 2013).

Human resource departments should begin considering current and potential employees in terms of human capital. Education cannot stop when someone is hired; companies need to continuously grow and improve their human capital by seeking good candidates and continually training current employees.


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