The Importance of Focusing on Human Capital

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You have probably heard the common analogy used to explain how companies and even small-time businesses work. They say that it functions like a machine, comprised of different parts with different purposes. Each employee acts as the cogs of the machine, possessing a specific set of skills to fulfill different goals. Collectively, these goals fall under the company’s predetermined objectives. With the efforts put in by each employee, hopefully within a set time frame, those objectives have already been satisfied.

These efforts and skills are termed “human capital.” But what is it, and why should you, as a business owner, invest in it?

What is human capital?

The talent pool required for a company to succeed has been referred to as “human capital” – a term coined by Gary Becker and Jacob Mincer. Basically, it is how one measures the economic value that a person who is hired can provide or has provided. So this does not merely refer to the number of employees, but to describe the experiences, the competencies, and the knowledge possessed by the employees.


More and more companies are seeing the benefits of spending for human capital, and in fact, most businesses today would push big budgets for it. However, there are organisations who have not provided career planning and development to their employees. And for some who do have development plans, it is only a privilege open to employees with a higher rank.


Investing in human capital has countless advantages. Every skill improvement training and wellness program can further add value to an employee’s existing expertise.


Benefits of Human Capital Development Investment


Motivated to improve their skills

According to a survey by Deloitte, they found out that the reason millennial leave their work is because their leadership skills were not being developed. They were not given the guidance nor the work challenges that will give them the opportunity to learn and improve. While some people might shrug this off, note that the millennial generation is part of the current workforce, eager job lookers who are more than capable of accomplishing tasks. They have new ideas that can revolutionise the way you do business, of course, executed with your supervision.


They are already motivated to improve their current set of skills, all you need to do is give them that little push by asking them which areas they want to work on. This can help you with creating a personalised development plan for them, one which should be within the means of the company. You can have them answer a survey so you can cluster employees who would like to get the same training program.


Employee satisfaction that leads to better work efficiency

Not a lot of companies can appreciate the effect of having a satisfied employee. If majority of the workforce are happy with what they are doing, the programs that they are getting from the company, and the way the supervisors are treating them, they will definitely strive to work efficiently. They are inspired to help the company fulfill its goals, they want to get involved in it more so now than when they were hired. This level of commitment does not just come from getting a high pay grade – it comes with being satisfied with work.


Apart from creating programs that would improve their skills, why not create plans to improve their health and well-being. Allow them to form interest groups like painting, writing, even mixed martial arts. All of these clubs should be supervised by the company, though, and actively ask them what they are discussing and learning when they are together. Additionally, show that their mental health is also important by inviting in a counselor or hosting meditations. You can even go further by introducing a remote work system where they can work wherever they want once or twice a week – again with company rules and supervision involved.


Never underestimate the power of offering holistic development to your employees. It will definitely lead to a happier workforce who are inspired to give back what they have received by working hard – something that you can benefit from as a business owner.

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