What is human capital?

Human capital is the name given to a specific type of economic value, generated through a set of attributes that favor the performance of people’s work. In other words, human capital is the ability that employees have, with their knowledge and experience, to generate wealth for the company where they work.

Currently, human capital is considered one of the components of what are known as factors of production – although at the time of structuring these factors it was treated as a mere labor force, easily replaceable and less relevant than the other factors.

While the land encompasses all the natural resources used in the production process and capital, the goods collected and employed (such as money and manufactured products), human capital is directly linked to the management of people.

Just as an automaker considers the price (in cost and efficiency) when composing its cars and a soft drink factory calculates the amount of water needed to produce its products, all of them have mechanisms to maximize the work of their employees .

These mechanisms can be efficient or inefficient, considering that there is no single strategy for dealing with workers. Unlike the screw, which we talked about in the previous paragraph, which can be done for years on end in the same way, human capital management is constantly changing.

This is because its management is largely linked to the humanities, to the understanding of human beings in their emotional issues and to the study of cultural and social trends, which change with each generation.

Want to better understand how this works? Why should each business establish tactics to manage and maximize human capital? Stay tuned: it is exactly about these topics that we will discuss in the next topic.

How do companies manage human capital? How does it influence the organization’s results?

Considering the modern world in which we live, where new technologies emerge at every moment, differentiating only by machines and manufacturing processes or providing services is a real waste. This is because it has been understood that, in many cases, what differentiates how valuable a company is to its customers is the ability of its employees to generate value for them.

Having innovative ideas, understanding how consumers feel, maximizing the application of material and immaterial resources of the business … These are just some of the skills that the components of a company’s human capital can develop. Not infrequently, when looking at the future of companies, it is predicted that technology will occupy more and more place and human beings should be applied only strategically.

But theories linked to human capital are nothing new. In 1950, economist Theodore W. Schultz coined the term and developed a series of studies focused on highlighting the existence and importance of human capital in all organizations.

In fact, it is his definition of the term that dictates that “human capital is the capacity for knowledge, skills and personality attributes of a person when performing a job in order to produce economic value”.

Schultz, who was even awarded the Nobel Prize in Economics in 1979, was primarily responsible for pointing out that the development of programs and policies focused on employees was really capable of increasing their productivity and, consequently, the company’s earnings.

But an important differentiation to be made is between human capital and intellectual capital. While human capital is restricted to the worker, intellectual capital also extends to so-called structural capital (such as patents and registrations).

 

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