Human capital—the elusive asset; measuring and managing human capital: a strategic imperative for HR - 2003 Research Quarterly

HR Magazine, March, 2003 by Leslie A. Weatherly

5. In an environment where mergers and acquisitions are commonplace, and "rightsizing and downsizing" are a natural byproduct of these transactions, many employers are beginning to assume responsibility for employee career development opportunities, in addition to "on-the-job" training and development. Career pathing and/or "competency enhancement" is based on the premise that individuals should be planning their next career move while they are still employed and "stress-free." The benefits that accrue to an employer under this strategic concept are: enhanced employee morale and loyalty, a more competent work force prepared for future internal growth, and reduced expenditures associated with the cost of employees in transition (i.e., the cost of outplacement, unemployment insurance, etc.) in the event the employment relationship must come to an end. This is due to the fact that the departing employee(s) in this scenario should possess skill sets and competencies that give them a competitive edge in the market place.

RECOMMENDATIONS: Develop continuing education and training programs with a focus on career planning and competency enhancement; establish career ladders when feasible; conduct cost benefits analysis and determine ROI on a periodic basis--adjust programs based on business case; openly communicate why the program is mutually beneficial to the organization and its employees.

Conclusion

If we believe that "people are our greatest asset," then we must also believe that organizations compete for business through the people they employ. If this is the case, then it is to the organization's advantage to ensure that its greatest asset, albeit its most elusive one, human capital, is utilized to its best and highest use.

This cannot and will not happen of its own accord. By now, it should be evident that nothing can happen until and unless a human being makes a decision to act, and a plan is developed and put into motion. For its part, the HR function has finally come into its own and has the opportunity to move from the background to the forefront of the business equation. HR practice leaders, who are truly serious about making a difference, need to measure" the business impact HR-driven programs have on their organizations as a means of demonstrating the merit and credibility of any program that they endorse. After all, doesn't it simply make good business sense to do so?

Figure 1

Sample Elements of  Intangible Capital

          Human                    Customer

     Tacit Knowledge        Customer Relationships
        Education                   Brands
Vocational Qualifications      Customer Loyalty
Professional Certification    License Agreements
  Work-Related Know How     Business Collaborations
 Work-Related Competence     Distribution Channels

          Human                        Social

     Tacit Knowledge              Corporate Culture
        Education               Infrastructure Assets
Vocational Qualifications       Management Philosophy
Professional Certification      Management Practices
  Work-Related Know How      Informal Networking Systems
 Work-Related Competence    Coaching/Mentor Relationships

          Human                     Structural

     Tacit Knowledge           Intellectual Property
        Education                     Patents
Vocational Qualifications           Copyrights
Professional Certification         Trade Secrets
  Work-Related Know How     Trade Marks & Service Marks
 Work-Related Competence           Design Rights