Human Capital Resources

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The term "human capital" commonly refers to the set of skills and value-producing potential that an employee possesses or acquires while on the job through training and experience. The concept can embrace, among other forms, "social capital" (value-creating social relationships and status), natural "talent", acquired and applied skills and "instructional capital" (the potential to teach skills, in addition to or instead of applying them).

Whichever form is manifested, it will represent competencies, personal attributes, and/or knowledge that increases the employee's ability to do their job, produce economic value and sustain or increase his or her value in the marketplace.

A company can invest in the human capital of its employees through continued training, subsidizing higher educational pursuits for the employee, and through wellness plans and rewards. Chief among the objectives of such investment is competence, which, unlike labor or land, can be transferred to others without loss, self-amplifying and self-renewing.

"Human capital", when equated with "raw" applied "labor" or other human effort, has been regarded as a "factor of production", like land, money or machinery. However, on a broader interpretation, some include under the concept of human capital the output and product of that labor and associated talents and skills, especially in terms of the total innovation and production potential of the employee workforce within an organization.

This is similar to the difference between thinking of logs as wood or as potential furniture. In general, the value or utility of any factor of production, including human capital will be estimated in terms of such potential applications or products created through it and the capacities to create them.

Unlike labor in a labor-based concept of human capital, competence is expandable and self-generating with use, as exemplified by the practitioner of a skill becoming more competent in proportion to the use of the skill. Competence is also transferable and sharable by the employee, as shown in the sharing of knowledge, which does not diminish the knowledge of the sharer. For these reasons human capital is more valuable than other forms of capital, such as physical labor and equipment, which once used or transferred are unavailable to the original possessor.

One possible motivation for framing a concept of human capital is to emphasize the parallel paramount importance of the human talents that utilize other forms of capital, in order to better manage all forms of capital and to give workers their due in the equations of wealth creation. In this respect, the objective would be to elevate human resources. On the other hand, the conceptual goal could be to reduce personnel to the level of other quantifiable, extractable, disposable, impersonal resources, all in the name of efficiency and profits.
Which of these prevails in any concrete situation will depend very much on the mind set of management and shareholders-and even, to some extent, on the self-understanding of the workers themselves.

Education, training, and health are the three most important investments in the capital of employees. An HR department should develop ongoing training and wellness benefits for employees in order to provide for their development. This will greatly increase the value of the employees to the company, and therefore increase the value of the company in the market place. This type of investment will also help to reduce turnover in a company, which can be one of the highest costs related to employment, apart from wages and benefits.
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