In recent years the term “human capital” has become more and more popular in business, displacing “human resource”. However, this change does not simply mean renaming some corporate positions and departments. It marks a new page in the relationship between employer and employee, the way they interact with each other and affects the whole process of finding, developing and retaining employees and the overall life in the company.
In today’s issue we will focus on the term ,,human capital”. What the new term implicates, it’s meaning and how it affects business.
“Resource” describes a certain one-sidedness in the employer-employee relationship. The interest of the employer is exclusively on the employee as such. The business has a certain need and when the “resource” is exhausted, a new employee is found and so the work continues. The feedback from this long-standing practice is unequivocal – human resources prove to be an exhaustive source.
Finding the right candidates is proving to be increasingly difficult. The market in some areas of business is oversaturated with candidates whose level does not meet the required standards, in others due to the specifics of the business, the number of qualified candidates is extremely limited, despite huge demand /as is the case, for example in the Life Science and Biotech niche/. The result in both cases is the same – companies must focus on retaining their employees and positioning themselves as desirable employers.
The roots of the term “human capital” /HC/ can be traced to the Scottish economist Adam Smith from the 18th century. In essence, the concept includes the set of knowledge, skills, experience and social qualities that contribute to a person’s ability to perform work in a way that produces economic value. Like any other investment options, the interest in investing in HC would be if it could develop exponentially and it can. The development of these qualities is reflected in the personal /individual level/, in the collective /departmental level/ and in the corporate /company and competition level/ results. This shows the deepening of the relationship between employer and employee.
The consequence of this change? The workforce is no longer depersonalized as a whole and the interest in workers is not limited to their official work duties. Greater importance is given to the individual employee – he is no longer seen as a replaceable part of a larger machine, but as an important element of the organism that represents the company.
Among the factors that give rise to this change is the difference between the generations. Studies show that Millennials (born between 1981 and 1996) and Gen Z (born between 1997 and 2010/2012) attach much more importance than previous generations to the nature of the work they do and how it makes them feel. They have no interest in climbing corporate ladders, tend to ignore slightly higher pay if their work creates a sense of satisfaction and significance. An expression of the development in this direction are the growing popularity of start-ups and the tendency of young candidates to choose smaller-scale and newer companies than established large corporations.
All this leads to the strengthening of the role of HR /or now HC departments/, because in order to continue the competitiveness, the company they work for must offer more than just work in a certain position. This provides an opportunity for true creativity in marketing positions and in creating a magnetic employer image. To achieve this requires not only financial investment, but investment in the form of attention.