The Effective Management of Human Capital

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The Effective Management of Human Capital: Retaining Employees & Decreasing Employee Turnover

MGT580x.Fall2011
Laurie Wells

Organizational employee turnover and employee retention issues can be two of the most devastating management issues that an organization will face. Without organizational leadership monitoring and controlling these issues, employee morale can be affected and there can be a severe negative impact on the organization’s mission and vision. Employee retention (retaining high performing employees, especially) can be a challenge for organizations with no clear formula or guideline to follow resulting in guaranteed success. Employee turnover is costly and will cause a decrease in profits and overall morale of the organization. An organization can spend months, and even years, evolving and changing its culture, but if ‘retention of its valuable employees’ is not at the forefront of the planning for this evolution, all efforts previously expended could result in a total loss of organizational resources and time. An organization’s retention of knowledgeable, reliable and creative employees gives it the competitive advantage needed to become an industry leader. If these same employees leave the organization and become employed by a competing organization, the advantage is lost.

Historically, ABC-University System’s corporate culture acknowledged and accredited one of its greatest strength’s and contributors to its profitability as ‘the effective management of human capital’. This historic ‘culture’ has since been ‘modified’ from its former focus wherein the acknowledgement of the organizational value of ‘human capital’ in regards to employees was priority. Recognition of the unique employee skills, knowledge, capabilities and determination as monumentally significant to the organization’s “bottom line” must be rekindled at the corporate round-table of today’s market. The current corporate belief that physical assets are an integral part the organization’s business operation and growth strategy must acknowledge the importance of the weighing of all investment options carefully – both tangible and intangible. Are tangible goods profitable investments for organizations without the efforts of current employees? The human capital, moreover, the intangible assets of organizations (their employees) feed the system; without such nourishment the tangible goods lessen in value significantly. Wikipedia defines human capital as “..the stock of competences, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience.” (Wikipedia, 2011) Similarly, Investorwords.com defines human capital 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.” (Investorwords.com, 2011) Further, it can be said that human capital is an intangible asset due to the fact that it is something that is not owned by the organization that employs it. Common sense tells us that employees will continue to learn and develop throughout their career, thus increasing their individual value with experience and their value to the organization exponentially. Retained employees are continually learning and improving throughout their employment. The ease of transferring this knowledge from place to place or person to person is far more cost efficient and effective than that of a physical asset such as a machine or technology (I pads, Smart Phones, Laptop computers, corporate company cars & expense accounts, etc. are a good examples) which depreciate exponentially over time as compared to a human asset which appreciates over time. The affects of employee turnover on an organization can be very costly and detrimental to an organization’s sustainability. As previously...
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