Human Capital Management

Human Capital may be defined as “The set of skills which an employee acquires on the job, through training and experience, and which increase that employee’s value in the marketplace.” In other words, it can be stated that human capital is sum of competences, personality attributes and knowledge that equips an employee to perform his duties in an organization satisfactorily and those tasks he or she accomplishes has an economic value. This ability to perform one’s duties comes from education, experience and a variety of other attributes.

The most renowned economist of all times Adam Smith has human capital as follows: “Fourthly, of the acquired and useful abilities of all the inhabitants or members of the society. The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in his person.

Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor, and which, though it costs a certain expense, repays that expense with a profit.”

Adam Smith highlights the same fact as stated in the first paragraph of this article albeit in a little complex way, though he tries to cover wide range of possibilities that the term ‘human capital’ can summarize. The importance of human capital and leadership programcan be gazed from the fact that an organization or business ceases to exist if it has no people – leaders, directors, members, employees. For human capital is required to maintain an organization’s existence.

However, stating ‘maintain an organization’s existence’ won’t be the correct measure of the importance of human capital. For human capital is required to maintain an organization’s existence. However, stating ‘maintain an organization’s existence’ won’t be the correct measure of the importance of human resources management.

In today’s fierce and cut throat competitive world any competitive edge obtained by the introduction of new processes or technology can be short-lived if competition adopts the same technology. So, it is vital to have good people who are skilled and motivated. And it is these people in an organization that can make a significant difference. But organizations today need to invest in education, training and motivation of employees to gain that human capital.



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