THE ASSESSMENT OF THE CURRENT VALUE OF HUMAN CAPITAL IS THE STARTING POINT FOR ANY MEANINGFUL INVESTMENT INTO IT
Why do we invest funds in capital? To increase its fundamental value.
When it comes to human capital, the same logic applies. Each component of human capital, whether it's an individual skill, characteristic, the person as a whole, a group of employees, and so forth, inherently holds a certain value. By investing in it, developing it, there is an improvement, which in turn increases its fundamental value.
Financial capital can be relatively easily quantified and evaluated since the unit of measurement is universally determined, even if currencies between countries differ. A €100 bill in the hands of different people is still simply a €100 bill. What these different individuals can create from that bill, however, is another story – a story that is deeply tied to human capital.
Evaluating human capital is less tangible at first glance because the concept encompasses a combination of components that are challenging to objectively measure. Additionally, they hold different significance and useful value in various conditions or circumstances. A specific combination of traits present in individual X might have high added value for one company, while for another, it might be average or possibly redundant and of no benefit.
It's essential for employers to recognize which components of human capital within their company create value and understand why and how they can support or develop them. The first and necessary step in any meaningful and goal-oriented development is an assessment of the current state or the "starting point”.
Modern companies are investing increasingly in the development and education of their workforce, which is inherently positive and welcome. However, from our experiences, this doesn't always yield the desired or anticipated changes. The reason often lies in the (un)focused selection of educational programs and neglect of individual characteristics of the person being educated. Frequently, the perceived or visible issues with a particular individual or group aren't fundamental but merely a collateral consequence of something else. Focusing on the visible elements of the problem may not resolve it; at best, it might temporarily alleviate the situation, but it may revert back to its initial state. It’s like treating the symptoms while remaining ignorant of the true cause.
Furthermore, the choice between upgrading a specific competence for an employee through a group interactive workshop, a webinar, or individual coaching is not inconsequential. Generally, all these formats can address the same content, but the application of acquired knowledge in practice heavily depends on the individual's motivational inclination, preferences in cognitive processing of information, and key psychosocioemotional characteristics. The more critical the content we address or the individual for the company, the more thoughtful we must be in selecting educational programs. The same applies to education at the group level, such as for a team or organizational unit. In this scenario, it may be challenging to tailor the format to individual preferences, but we must certainly consider group dynamics and informal power relations among members.
Therefore, an assessment of the current state is indispensable for any meaningful investments in human capital. It allows us to make deliberate and informed decisions regarding methods, techniques, and forms of development, rather than making arbitrary or marketing-induced choices. Only in this way can we address the right content in the right manner and truly ensure the expected return on investment.
Back