What is Human Capital?

When I talk about my passion for Human Capital people usually identify it with Human Resources. In some ways Human Resources and Human Capital are similar, they both deal with people. However, the mindsets that gave birth to both concepts are very different. The first one considers human beings as resources comparable to computers, locals, and other costs while the second one considers human beings as assets capable of generating capital. I came across a German article (also wrote in German) on Human capital management. This article helped me a lot to articulate the differences between Human Resources and Human Capital.

Those two approaches or mindsets paved the way people are treated in organizations. The Human Resources approach identifies employees as costs and considers how to reduce costs even if it means firing employees or treating them like numbers in an excel sheet. This has implications on companies  moral, financial success and can drive to loss of competencies. I think that we can agree on the following fact: "Humans' life should not be monetized" and yet the Human Resource approach attempt to do it in some ways.

The problem that we are facing today is that the we attempt to give a monetary value for each employee following the stock exchange evolution. It works well as long as your company is growing but when a company starts to lose money the "value"of it employees is also waning. This makes absolutely no sense, does it? Did your employees quality of work decreased overnight with the stock exchange? not at all. We must stop to base our value system on the stock exchange and start to look at offers and demands in the job market. Organizations need to find and retain employees with specific knowledge, experiences, skills while employees look for organizations for which they can use their uniqueness. As soon as we take this approach things start to change. It encourages to take the time to train employees, integrate them in change efforts and make them part of the organizations' life. Organizations want employees to be able to fulfill their goals which serve the organization mission.

The Human Capital approach on the other hand considers that each employee (when well selected) adds value to the organization. The uniqueness of employees' competencies, experiences and knowledge is stressed. Their are valuable assets for organizations. We can talk about capital-gains. For Human Capital employees have something to bringing to the table. The importance of employees is refocused and efforts are made to make the work process more efficient while considering Human factors.

The role of Human Capital is to evaluate organization needs in employees & skills and estimate where optimizations are needed while focusing on the future. This evaluation & optimization should be holistic starting from evaluating employees competencies and risks, to finally make sure that there are no loss of Capital due to bad communication or untapped potential.

Human Capital refocuses the dialogue on people. Money was a principle created to facilitate exchange not to value our worthiness. The day you wake up and realize that your employees are what makes your company different from all others. Then maybe you will start to offer them the best in order to attract them, keep them and thrive with them.

The (re-)emergence of Human Capital in organizations shows a desire to distance ourselves from the "stock exchange" evaluation and look forward to a two-way communication between organizations and their employees.


in German. Zehn Postulate für dasHuman-Capital-Management, Professor Dr. Christian Scholz, Dr. Volker Stein and Roman Bechtel,

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