Human Capital — is a personal experience and skills with a certain economic value. Human capital can’t be listed in the balance book, but it directly influences the national economics and the success of the company.
This phenomenon was described by economists Theodore Schultz and Gary Becker. They affirmed that the investment in human capital is a profitable investment like an investment in equipment. They developed the theory of human capital and received the Nobel Prize for it.
Types of Human Capital
Human capital includes the human qualities that can influence economic growth and economic performance. Not all employees have equal labor qualities. But the employee can increase their value in the labor market if they develop the most demanded labor qualities. Such an investment is good both for the person and the company.
Qualities of human capital:
- professional training;
- mental health;
- communication skills;
- people management;
- ability to handle stress;
If the company hires educated professionals with diverse skills, the quality of production, or service will increase because the executives are talented and motivated. The more companies invest in the workforce, the more economic value they get in the end.
Human Capital Management
Human capital management (HCM) — is a process of selecting and managing employees to optimize their productivity. This process includes both administrative and analytical functions.
Elements of human capital management:
- employee orientation;
- professional training;
- conflict management;
- team building;
- lateral transfer.
The Human Resources (HR) manager is responsible for this process. Firstly, HR has to create an announcement about the necessary vacant position and place it on the special resources. Then, they collect the CVs from job-seekers and analyze them. The candidates with the necessary work experience are invited to the interview.
In the interview, the job-seeker and HR manager present themselves and define whether their future cooperation is possible. After the series of interviews, HR selects the most advantageous candidates and contacts them to make a job offer. If a candidate agrees with the company’s offer, they will be taken on the staff.
The second important stage is the adaptation of the new employee. HR should introduce the staffer to the supervisor and tell them about the company’s business processes. The period of the newcomer’s adaptation is called a probation period. During this time, the employee tries one’s hand at the new position to understand whether this job or company suits them. In turn, the company evaluates the quality of the newcomer’s work to define whether they suit to work here.
At the end of the probation period, the company and the newcomer decide if they continue to cooperate. If the working conditions or the quality of work don’t satisfy them, they terminate the employment contract. This is a normal process because it is difficult to decide during the interview whether a certain company suits you or whether a person will be good for a certain position. If everything is good, and both participants of the labor relations are satisfied, the newcomer will be finally put on the payroll.
Problems of Human Capital
Human capital has several serious problems the government should deal with. The first one is a brain drain. If the working conditions in a country are bad, the people migrate to other countries with higher salaries and developed economics. To overcome the brain drain the government should support the entrepreneurs and local business community, and create highly technological workplaces.
Another serious issue is unemployment. Such a situation increases the number of crimes and drug addiction. To solve this problem the government should develop social programs that help the unemployed find a job.