The Human Capital Essay

2588 words - 11 pages

The Human Capital
Human capital is getting wider attention with increasing globalization. Developed and developing countries put emphasis on a more human capital development and usage towards accelerating economic growth and efficient public service delivery. The term “human capital” has been defined as a key element in improving a firm’s assets and employees in order to increase productive as well as sustain competitive advantage. To sustain competitiveness in the organization, human capital becomes an instrument used to increase productivity. Human capital refers to processes that relate to training, education and other professional initiatives in order to ...view middle of the document...

The assessment of this value is related to the body of skill, knowledge, and experience that the employee possesses. Factors such as formal education and participation in ongoing training related to the workplace also help to enhance the human capital that the employee represents. Employing individuals who have the necessary expertise, judgment, and ability to function within their assigned roles allows the business to operate at maximum efficiency. This in turn increases the potential of earning a profit, and remaining successful for many years. A failure to identify individuals with the necessary combination of skills, experience, and education can undermine the efforts of even the most well-organized company.

Human capital is an intangible asset as it is not owned by the firm that employs it. Basically, human capital arrives at 9am and leaves at 5pm. Human capital when viewed from a time perspective consumes time in one of key activities:
* Knowledge (activities involving one employee),
* Collaboration (activities involving more than 1 employee),
* Processes (activities specifically focused on the knowledge and collaborative activities generated by organizational structure - such as silo impacts, internal politics, etc.)
* Absence (annual leave, sick leave, holidays, etc.).

Investing in Human Capital
Businesses often make investments in human capital. Just as a company may invest in new technology to enhance its internal communication processes, the business can identify employees who demonstrate an aptitude for needed skills and arrange for those employees to receive professional instruction. This allows the company to have access to a wider skill set without the need to hire additional people. At the same time, the business helps to raise the economic value of each of those employees.
Education and training are the most important investments in human capital. Many studies have shown that high school and college education greatly raise a person's income, even after netting out direct and indirect costs of schooling, and even after adjusting for the fact that people with more education tend to have higher IQs and better-educated and richer parents. Similar evidence is now available for many years from over a hundred countries with different cultures and economic systems. The earnings of more educated people are almost always well above average, although the gains are generally larger in less developed countries.
Of course, formal education is not the only way to invest in human capital. Workers also learn and are trained outside of schools, especially on jobs. Even college graduates are not fully prepared for the labor market when they leave school, and are fitted into their jobs through formal and informal training programs. | |
The amount of on-the-job training ranges from an hour or so at simple jobs like dishwashing to several years at complicated tasks like engineering in an...

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