“In business, the most important lesson I have learned is that there is one currency that always plays the key role in forming value, and that is human capital—the knowledge, skills and experiences of people.” – Lowell Milken
Businesses are constantly hankering over how to increase the working capital to maintain liquidity. We spoke about various methods adopted to raise money including crowd-funding. However, in this frenzy, even if they know that their people are the most important resource, this human capital is often ignored and sometimes with damaging consequences. The mind-set and demographics of the workplace has changed – the employees have become smarter and are aware of the latest technological advances. The increasing number of companies in the market makes it harder for companies to hold on to their precious human capital unless they have a proper career development plan and great employee policies. Companies have become more aware of these facts and are now willing to change their work processes, improve employee policies and restructure the workloads. The understanding of the many downsides of employee attrition should bring about even more respect for the human capital.
In order to manage and retain their human capital and also ensure that the long term goals of the company are met, companies must have a plan that focuses on the needs of their employees. This strategy must be flexible and adaptable to the changing needs and varied challenges of the human capital. Through the proper management of their human capital, companies will be better equipped to build a pipeline of able workers, a pool of potential leaders and ensure that their top talent gets noticed and rewarded. In the current harsh business environment it is crucial that companies have a robust framework of employee policies and aligned strategies that will ensure that their vital human capital stays with them for a long time.
Even to recognize and build human capital and their capabilities and grow other types of capital, companies require human capital. Even the most technological advancements have been made by human capital and as the need for knowledge and skills increase, so will the criticality and importance of this kind of ‘capital’. It is quite shocking to note that there are still some companies that don’t pay as much attention to this valuable resource as they should and then are perplexed that their best talent leaves them for another company. Employees are no longer content with adequate remuneration – they want more and therefore the need for a plan to manage this ‘more’ for human capital.
The plan for managing human capital in most companies is the onus of the human resource department. They are required to formulate policies to hire, motivate, grow and retain this critical resource such that they can help the company meet its goals and become successful. A company that is able to meet its goals and remain profitable would in turn be able to provide better for their human capital. Human capital is the collection of adequate knowledge base, aligned talents and skills that people possess and which can be used for the betterment of the company they work at and also for their own professional and personal development. Each employee would have their own set of this ‘capital’ – some more defined and evolved than others. Whatever be the level of proficiency, the fact is that companies must have the capability and processes to refine and better these traits in order to increase the efficiency of their human capital. It is in a company’s best interest to be able to effectively manage this resource and ensure that both the company and the employees are adaptable and more amenable to change and growth. The good news is that human capital can get better and can increase through proper training, coaching, guidance and mentoring.
Ignored or taken good care of – either way the human capital will have a major impact on any company and its business. Ignoring this vital resource will inevitably lead to the breakdown of the systems, a drop in the quality of products and customer service levels that would earn your company a bad name. Appreciation and recognition of the human capital will have a direct and positive impact on the company’s bottom-line as product quality increases, customers receive delightful service and employees are energized and willing to partner with the company even in tough times.
The huge and costly mistake that some companies make is to view the human capital as a cost alone. This is a flawed view because it is through the efforts of the employees that companies can expect to move forward and get higher ROIs – investments made in the employees and in other areas of the company. By increasing the capability of each employee a company is able to increase the amount of output and revenue from each and in turn also reduces the cost on aspects like re-hiring, losing employees and other related consequences. We have discussed at length that employees are the first customers and partners for any organization and it is through the proper utilization and recognition of their talents and skills that companies can create a niche market and also build a happy and loyal customer base.
As a company is able to retain its top talent, they are able to build a pipeline of future leaders from within – this reduces the dependence on external resources. Leaders from within a company prove to be more effective and competitive and their understanding of the company leads to better products and continuous improvements in the way customers are served. Such human capital is more productive as they have a better grasp over the company’s processes, goals, resources and vision and they would also have established a sound reputation within the company ensuring that their co-workers respect and cooperate with them when they assume leadership roles.
A robust plan that suitably manages your human capital also means that your company over time will be able to establish some best practices that can be emulated by others. It also means that your company can follow some industry best practices that are most relevant to your employee base and company standards. As a market leader and a company that establishes best practices, your company would gain popularity, respect and become the go-to company for the best talent and also have customers queuing up to do business with you. Ensure that your human capital works as one – as a team. Align your incentive and benefit programs to reward behaviour that will help achieve company goals and foster a deeper sense of belonging and cohesion among the workforce. No achievement and consistent performance must be left unrewarded – the actions your company takes must be such that the employees want to stay and grow with the company.
The company’s human capital must continuously be focused on increasing its value for the company. Ensure that your human resource practices and company goals are aligned such that the journey to achieving the company’s goals is a relatively smooth and easy one and also increases the power and efficacy of the human capital. Building a robust human capital is not a one-off tactic – rather it is a process that needs constant monitoring and modifications as it moves along with the changing times and business scenario. Each company must build their own plan and process to manage their human capital – learning from others is a given but blindly emulating their human capital best practices would be a recipe for disaster. Your human capital is unique to you and must be managed so in order to gain the much needed competitive advantage that is not easily replaced or reproduced anywhere else.
