Using specialised equipment or technology to transform raw materials into marketable products is an obvious example of value generation; however, human capital is increasingly becoming the most important asset a business can draw upon to create value.
Proving to be a real rival to physical capital as the principal feature of economic accomplishment, the collective skills, knowledge and abilities of workforces make the value of human capital impossible to overlook.
The role workforces play in the value creation process has recently become much clearer – through human capital, organisations can explore a diverse array of ideas, including engagement, culture, diversity and wellbeing; however, there is still work to be done. Although this area of knowledge is currently underdeveloped, people undoubtedly have a significant impact on business value.
The value of human and social capital
Human capital should be approached from a multi-level standpoint because it involves the skills and knowledge of individuals, teams and complete organisations. Additionally, it is important to consider the intersection between human and social capital, which covers the inherent worth of network-based connections and relationships.
Social capital ultimately impacts human capital, which leads to the development of deeper connections and the establishment of a wide range of opportunities to build new foundations of knowledge and understanding. Social capital can be measured in a range of ways; however, monitoring it at an organisational level is widely regarded as generating the most pronounced and quantifiable results.
Most work environments have an inherently social core, which is why understanding both human and social capital is an integral component of developing the knowledge required to increase the value of a business or organisation on a structural level.
The impact of the intangibility of human capital
Human capital is largely intangible, which is why too many organisations fail to show appropriate attention and respect towards their most valuable asset. A lack of consideration is most often perpetrated by investment decision makers who typically value obvious short-term gains over elusive long-term benefits.
Moreover, human capital is complex. Far too often, facets including managerial pay or health and safety are overlooked because they might cause a value to decrease across an organisation. Importantly, information regarding human capital has benefits for teams, organisations and investors alike.
HR and human capital data
Too many organisations find it difficult to deliver the information many external stakeholders require; however, honing effective analytics processes will ensure that businesses can generate effective insights that will reinforce important relationships. Utilising data well is a key challenge facing many HR departments, but work in this area is effectively certain to deliver a solid return on investment.
In addition to solving an array of complex business issues, HR analytics can link specific decisions and processes to performance outcomes. These capabilities make HR a key strategic department to ensure an organisation is making the correct data-driven decisions.
HR data has organisational value because it can deliver in-depth awareness of how businesses can leverage human capital to enable performance and structural improvements. Reporting key workforce traits is valuable to both organisations and stakeholders, highlighting the influence that HR departments can have on both workforce strategies and business growth.