What Is Human Capital in Management? - Definition & Value

Instructor: Paul Mckinney

Paul has been in higher education for 17 years. He has a master's degree and is earning his PhD in Community College Leadership.

Human capital (or people) management is a process of directing, investing in, and developing an organization's workforce. An organization must take the time to manage human capital so that it aligns with their goals.

Definition

Human Capital Management is an approach to employee staffing that perceives people as assets (human capital) whose current value can be measured and whose future value can be enhanced through investment.

Human Capital Example

Let's look at an example: the Pat Company does not have the infrastructure to answer customer questions after the sale of their product. Therefore, they outsource this process to another company. The AVC Corporation is a call center company that specializes in taking care of Pat's customers. The biggest asset that the AVC Corporation has is its call center employees. Upper management at AVC spends a lot of time reviewing, adjusting, preserving, and maintaining their employees - their human capital.

Taking Care of Human Capital

As an organization grows, it injects capital back into its companies. Typically, when someone thinks about capital, they think of monies being put into equipment, buildings, research, and development. However, many organizations now invest in their human capital and work on strategies to reinforce this asset. Below are a few ways that organizations invest in their human capital:

  • Training
  • Higher wages
  • Health and exercise programs
  • Reimbursement for educational expenses
  • Family support through healthcare and counseling services

Human Resources Role

The ongoing development and investing in human capital has become an important part of the Human Resources Department. This department is now seen as having an important role in helping the organization achieve its mission and goals. Already a key member of the executive team, Human Resources (HR) is being looked upon to evaluate every area of the workforce to maximize the organization's return on human capital. A great HR department should match the roles, skills, and people into the right positions within the organization.

Human Capital

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