Once upon a time, the role of human resources was to ensure staff were hired, employees were paid on time, benefits administered and any disciplinary issues were dealt with. Now, the department has a much more complex function, which is known as human capital management.
What is human capital?
Human capital is the collection of factors that make up the economic value of your workforce and includes everything from skills and training to emotional intelligence and employee wellbeing. It’s hard to quantify, but when developed carefully, it leads to strong output and company loyalty.
Why is investing in human capital beneficial?
Employees are the lifeblood of any company and people-related costs are likely to represent the largest part of your budget. In order to optimize this vital resource, the importance of implementing human capital management can’t be overlooked. Strategies in this area should align with the business’ overall goals to maximize the potential in your workforce.
Human capital development should focus on understanding your staff, their needs and the impact they have on your company. After all, improving human capital should be beneficial for everyone involved, leading to happier, more productive employees.
Human capital management strategies
To make the most of your human capital resources, you need a joined-up approach to everything from hiring to payroll and the following strategies will help:
1. Seek regular feedback from employees
Too much investment in human capital is focused on recruiting top talent, but once these individuals have joined a company, their importance is often forgotten. Regularly send out surveys to existing employees, seek their feedback on what works well and which areas can be improved and schedule meetings where they can air their views.
2. Personalize your approach to developing human capital
As a human resources manager, you’re likely to have your own style when dealing with employees, but it’s important to remember they’re individuals. Take into consideration their personal preferences, such as whether they’re motivated by regular check-ins or happier to be left to their own devices. Some staff benefit from face-to-face meetings, while others are more likely to open up when communicating electronically, so respect these choices and incorporate them into your approach.
3. Offer educational opportunities
Taking on staff with strong educational credentials is all well and good, but businesses that invest in developing their human capital by offering professional development opportunities will see the benefits. A one-size-fits-all approach isn’t the best option here either. Let individual staff decide whether they’d prefer to obtain training or certifications from an internal source or outside body and what form it will take.
4. Encourage creativity in the workforce
It’s easy to presume certain tasks are being carried out in the best way possible because that’s how they’ve always been done. But innovation can benefit even the most seemingly rigid industries, so it’s worth promoting a culture of creativity, where employees feel confident to speak out. Not only can this lead to improved practices, but it can have a positive impact on staff engagement too.
5. Don’t be afraid of specialization
Many organizations turn their labor force into generalists by ensuring all employees can do a large number of tasks, but this can be a barrier to specialized skill development. Developing your human capital in a particular niche can make them a true expert in their field, taking an area of the business further and outdoing the work of your competitors.
6. Expand your human capital with diversity
A diverse workforce can increase your human capital by bringing a wide selection of competencies and lived experiences to tasks. A study from McKinsey found executive teams exhibiting ethnic diversity outperform competitors financially by 36%, while gender diversity improves this metric by 25%.
7. Promote direct communication
Effective human capital management should encourage employees to come forward and highlight issues to their supervisors in an open fashion. Such direct communication means small problems can be dealt with before they become larger ones. Most importantly of all though, this culture within a business ensures all staff, no matter how junior, feel valued as part of the team.
8. Motivate staff through incentivization
Recognizing exceptional skills, a high-performing project or outstanding work is an integral part of human capital management. Not only does it help motivate staff to repeat valuable actions in the future, but it can also give other employees the inspiration they need to push themselves further too. Salary hikes are a popular incentive, but there are other benefits that can be rolled out to great effect in a less conventional fashion.