The Benefits of Investment in Human Capital

Since the 1960’s, when Becker and Schultz wrote about human capital as the value of ‘human capacity’, it has been referred to as the “intangibles” a workforce posses. This includes items like intelligence, skills, health, talent and ability; and investment in these items through education and training. Automatically then, one would assume that human capital investment would be the primary goal of any company. Sadly, this is not the case.

A 2015 report shows that over 40% of companies do not spend the time to provide their employees with any kind of career or development planning. This is a very large percentage of organizations working against themselves by not investing in their people, their most valuable asset, and one of only two drivers of performance. Not many organizations fully realize the benefits to truly investing in human capital. Let us briefly discuss the two primary benefits here: improved performance and increased satisfaction.

Improved Performance. Investments in learning opportunities to increase employee knowledge, skills and abilities have direct, positive impacts of productivity and performance. Through personalized learning opportunities, you can make sure your workforce has the competencies required to deliver on results. It also improves overall organizational knowledge. Finally, the measure of your investments in human capital have a positive correlation to the performance of your ‘workforce health index’, ‘company health index’, and ‘human capital index’; indices I created to measure the true health of companies and their organizations.

Increased Satisfaction. More and more employee surveys indicate our people want to learn and be developed. Investments in learning opportunities lead to increased satisfaction, engagement, sense of belonging, wellbeing, trust and loyalty, among other things. Which, in turn, have an indirect impact on performance. Lastly, employees may also become ambassadors for your company, which increases reputational capital and decreases recruitment costs.

Now we return you to your regularly scheduled programming; except you no longer think human capital measurement is a problem. It is now 56 years after the publication of Becker’s book, “Human Capital”, and we have begun to measure these once intangible data points. Now then, as human resource professionals, we must embrace human capital if we wish to achieve greater investments in our people. Yet, so many human resource leaders today are still so adamantly against even the idea of human capital because it refers to our people as resources and assets, as if this is a bad thing, as if this somehow makes them less human, or we have to treat them as such. When in actuality, you can not have human capital without humanity. This is because it requires understanding people’s individual experiences, knowledge, talent, and abilities to then know how best to invest in them. Especially today when the workforce demands personalization of education, learning and development.

Allow me then to be your resource — your asset — you call on to solve your work and people ills. If your organization needs help in measuring the value of your workforce or learning effective ways to invest in your human capital, then reach out to us at HumInt Labs.

Leave a Reply

Your email address will not be published.