The Valuation of Human Capital in an Organization

Human capital is the knowledge and skills that increase your productivity. There is tight relationship between poor education and poor wages. Skills will more than likely improve by getting a higher education. The more knowledge and skills you have the more likely you could help the economic growth. The Opportunity cost of your degree is basically the income you earn during the time you are in college. My husband transferred part of his GI bill to me to help with college and even though it still doesn't cover what I was making while dispatching it has helped a lot with income. Regardless if I was getting paid to or not I was still going to go back to school to get my bachelors degree it just makes it a little easier to do so. The way I see

Human capital plays a vital role in providing the organisation with a valuable competitive advantage; in addition a reward and pay system concerning the employment relationship, is often viewed as a key method in obtaining maximum human capital, and thus a central part of managing a business.

An organization 's human capital must be aligned to the business strategy so that every employee is focused on the same goal.

Human resources are the primary concern of all businesses in the world, for without the engagement of human intelligence, fortitude and resourcefulness business is all but lost to the competition. The basic resource in any company is the people that are employed to do the tasks assigned to them to meet the customers demand for new, improved products and services. Training and development of the human capital has evolved from the hands-on approach to technological classroom and virtual training. Globally the evolution in training is moving rapidly but the capital to provide comprehensive training is often restricted and funding is challenged. How does a corporation measure the training and development of their human capital? Can an organization establish realistic goals and provide a clear method of accounting for training in relationship to the business strategy? It is my goal to address these questions by first looking at a brief history of human resource accountability, then exploring the key components, variables and obstacles of the Return on Investment evaluation method.

But, it is very difficult to imagine measures for these quantities. Hence, in the current state of HR there is a clear rift between what is measured and what needs to be measured. As mentioned in the introduction, the role of HR is no more just administrative. It has a much broader, connected and strategic role to play. But, these statements must be substantiated. The reasons why HR must be considered as a strategic asset must be highlighted. A strategic asset is something difficult to trade or imitate. They are normally a set of scarce, special or even exotic resources and capabilities that bestow a firm its competitive advantage. An unlikely paradox is that the very intangibility of human capital that makes it so difficult to measure and evaluate, also proves to be the one quality that makes it a strategic asset. Consider the difference between being able to align employee efforts with the company’s strategic goals and instead having innovative policies of performance appraisals. The latter is a policy. It is visible to competitors and can be easily copied. The former on the other hand is a strategic move. It is not easy to imitate since it is a very circumstantial effort, which depends on the specific firm, its goals and its people. This proves to be a strategic asset i.e. something that competitors cannot see but that can be utilised to gain a competitive advantage. It is thus

Robert E. Ployhart says it best when stated in (PLOYHART, R. E. 2015) the field of strategic human capital and the field of organizational behavior need each other, they just don’t know it. To better emphasis in order to optimize the competitive advantage for organizations that comes from human capital organizations have to enhance their employees attitudes towards the company and create a culture that best fits the organizational goals. A company’s human capital asset is the collective sum of the attributes, life experience, knowledge,

Human capital theory states that workers with higher skills levels receive higher compensation since they are more productive. Human capital has been described as the production of wealth through labour, skills and knowledge (Tan, 2014). Employees with more general skills perform more complex tasks. This requires more rigorous recruitment practices and an increase in demand for more educated workers. Human capital theory is formulated with the goal of addressing the benefits in academics and training in an organization that understands these functions. In this theory, human beings are characterized as a developmental capital. Increased productivity due to possession of complex skills in the workplace, points to better remunerations which, outrightly leads to wage differentials in the workplace. The human capital theory is epitomized in the rational choice paradigm. The paradigm seeks to understand and predict human behaviors. In the context of human capital theory, there are conditional imperatives for gaining high compensation in the workplace. These can only be achieved through increased productivity relative to fellow workmates. The rational choice paradigm underlines the need for individuals to maximize their interests by making optimal decisions. The optimal designs rests in obtaining more training and expertise in order to increase one’s productivity (Tan, 2014)

In the contemporary business world, companies are engrossed towards acquisition of talented human capital. Human capital serves as the backbone of any and every organization. In today’s modern business arena, organizations are aware of the fact that it is essential to satisfy and retain talented workers in order to run business functions smoothly and meet the expectations of ultimate customers. Human capital of the organization is considered the internal customer of the company and it has been explored in the research studies that in order to satisfy external customers, it is critical to satisfy internal customers. With the increased awareness of importance of talented workforce, it has become more difficult for employers to

The purpose of Human Capital Management (HCM) in organisations is to achieve business objectives through the work force in the most effective & efficient manner. This comes combined with challenging aspects of retaining knowledge & talent plus ethical dimensions of looking after people.

Because HRM is such a fast-changing study it seems appropriate here to explain the alternative terminology that is starting to make the scene. "Human capital" was introduced in a statement by David Walker (2000), the Comptroller General:

The HR Function can and increasingly is making significant contributions to building an organization that is staffed by the right human capital to carry out the work of the firm and enable the accomplishment of business strategy. By doing this every end of the corporation will benefit from it, and be able to grow in the business world. (Johnson, 2015)

Human capital theory can be identified as studies of organisations, individuals or nations which accumulates stock of productive skills and technical knowledge from study of investments (Becker, 1964).By following the judgement of human capital theory it can be said that it represents a path for the individual to develop his or her charisma to the labour market .Human capital theory is used as a analysis of theoretical frame , development of competence , formal education and job tenure probably are the

As competition increases around the world, leading companies in every business category have recognized that having a quality workforce can help the company gain a competitive advantage in the market. Many companies have started hiring people irrespective of their race, sex, religion, nationality etc. The critical thing for any company is to understand and use potential of their workforce. Building and managing top-quality workforce is not as easy as it may seem. In order to get to this point, a company has to believe that the human resource department is an investment and not a liability. Having a diverse workforce can invite a lot of issues that dent the company’s performance. Human resource management plays a strategic role in managing people, workplace culture and environment. In order to be the best in human resource management an organization has to be the best in planning. The plan that the human resource management develops will come from the company’s master plan and the strategies have to reflect the company’s priorities. The basic essence of HRM is to concentrate on recruiting, managing, organizational development, safety, wellness, benefits, employee motivation, training.

Human resource development is a broadly used term that refers to the helping employees develop their personal and organizational skills, knowledge, and abilities (The Balance. N.p.). The term has different connotations as it may refer to development of human capacities with the aim raising profit in business but also, especially in developing countries, with the aim of achieving personal and societal advancement (Cengage Learning, 2016.). Human resource development can be used by both public organizations, such as governments, and private corporations (Cengage Learning, 2016.). The focus of all aspects of human resource development is on developing the most superior workforce so that the organization and individual employees can accomplish their work goals in service to customers (The Balance. N.p.). Also, it is the framework for the expansion of human capital within an organization through the development of both the organization and the individual to achieve performance improvement (Boundless Business, 26 May 2016.).

One of the challenges that HR’s leaders are faced with is to convince the business executives that human capital is one the most important resources in which the company or business needs to invest in. So now this return on investment is an essential part of the argument for including HR as part of an overall business strategy.