People are arguably the most valuable asset held by an organization today. People invent new products, find ways to creatively reduce costs, deliver quality services, and build long-lasting relationships with customers. It is also an organization’s people and the collective skills, knowledge, and capabilities they represent as human capital – that are most difficult to duplicate by the competition. Only people can manage and maximize assets so that the assets reach their full potential. And only people can reinvent processes, products, and ways of working so that an organization remains one step ahead of the competition. For many organizations today, long-term competitive success is tied less to the products or services they produce than to the people producing them.
Human capital is a measure of the economic value of an employee’s skill set. The concept of human capital recognises that not all labour is equal and that the quality of employees can be improved by investing in them. The education, experience and abilities of an employee have an economic value for employers and for the economy as a whole.
The efficient management of the supply and flow of human assets is rapidly becoming the primary source of its competitive advantage. The traditional importance of managing of capital assets continues to be important but ever less so. This shift has been caused by fundamental changes in the economy, such as:
• increasing product complexity, accelerating innovation, and shortened product lifecycles - and the attendant demand for higher skilled workers; • new definitions of work and organizational structure; and • increasing number and complexity of employment-related laws and regulations.
Human capital management is not about changing the names of things we are already doing in human resources (HR) and elsewhere. It is about acknowledging, anticipating, and acting on the human impacts of those actions. Human