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Human capital

andmanagement

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Human Capital

Human capital represents the human factor inthe organization; the combined intelligence, skillsand expertise that gives the organization its

distinctive character.

The word Human Capital was introduced byA. W. Lewis in Economic Development with

Unlimited Supplies of Labour.

Human capital is the part of intellectual capital.

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INTELLECTUAL CAPITAL

Human capital Structural capital Relationship capital

What is intellectual capital?

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Intellectual capital

The stocks and flows of knowledge available to anorganization. These can be regarded as the intangibleresources associated with people which, togetherwith tangible resources (financial and physical assets),

comprise the market or total value of a business.Total valueof the firm

=

Intangible resources(intellectual capital)

+Tangible resources(financial and physical assets)

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Intellectual capital=

Human capital+ structural capital +relationship capita

l1.Human capital includes:

knowledge, competencies and the experience and

expertise of staffs.

2.Structural capital includes:

Information systems and databases ,R $ D, patent, copy

right, trade marks, IT systems etc.

3.Relationship capital includes:

Customer relationships ,customer satifaction,brand

images, franchising agreements, supplier relationships.

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Human capital advantage

1.sustainable competitive advantage is

attained when the firm has a human resource

pool that cannot be imitated or substituted by

its rivals.

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2.The concept of Human capital has relatively

more importance in labour-surplus countries.

The surplus labour in these countries is thehuman resource available in more abundance

than the tangible capital resource. This

human resource can be transformed intoHuman capital with effective inputs of

education, health and moral values.

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3.The problem of scarcity of tangible capital in the

labour surplus countries can be resolved by

accelerating the rate of human capital formationwith both private and public investment in

education and health sectors of their National

economies. The tangible financial capital is an

effective instrument of promoting economic growthof the nation. The intangible human capital, on the

other hand, is an instrument of promoting

comprehensive development of the nation because

human capital is directly related to humandevelopment.

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4.The Human Capital is developed by health,

education and quality of Standard of living.

Therefore, the components of HDI are directly

related to Human Capital formation within thenation. HDI is indicator of positive correlation

between human capital formation and

economic development. If HDI increases, thereis higher rate of human capital formation in

response to higher standard of education and

health. Similarly, if HDI increases, per capitaincome of the nation also increases.

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An example in India

In India, rate of human capital formation has consistently

increased after Independence due to qualitativeimprovement in each generation. In the second decade of

21st century, the third generation of India's population is

active in the workforce of India. This third generation is

qualitatively most superior human resource in India. It has

developed the service sector of India with the export

of financial services, software services, tourism services and

improved the Invisible balance of India's Balance of

payments. The rapid growth of Indian economy in response

to improvement in the service sector is an evidence ofcumulative growth of Human Capital in India.

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HUMAN CAPITAL RISK

Human capital risk accumulates in four primary categories:

Absence activities (activities related to employees not showing upfor work such as sick leave, industrial action, etc.). Unavoidable absence

is referred to as Statutory Absence. All other categories of absence are

termed "Controllable Absence";

Collaborative activities are related to the expenditure of timebetween more than one employee within an organizational context.

Examples include: meetings, phone calls, instructor led training, etc.;

Knowledge Activitiesare related to time expenditures by a singleperson and include finding/retrieving information, research, email,

messaging, blogging, information analysis, etc.; and Process activities are knowledge and collaborative activities that

result due to organizational context such as errors/rework, manual data

transformation, stress, politics, etc.

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Why measuring the value and impact of

human capital Human capital constitutes a key element of the market worth of a

company. A research study conducted in 2003 (CFO ResearchStudies) estimated that the value of human capital representedover 36 per cent of total revenue in a typical organization.

People in organizations add value and there is a case for assessingthis value to provide a basis for HR planning and for monitoring

the effectiveness and impact of HR policies and practices. The process of identifying measures and collecting and analyzing

information relating to them will focus the attention of theorganization on what needs to be done to find, keep, develop andmake the best use of its human capital.

Measurements can be usedto monitor progress in achievingstrategic HR goals and generally to evaluate the effectiveness ofHR practices.

You cannot manage unless you measure.

W O I

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Ways or Organ zat ons to IncreaseHuman Capital

1.constant training

2.monitoring performance

3.Direct communication 4.define job responsibilities

5.motivation

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Human Capital Management

HCM refers to the management of an

organizations employees for them to contribute

significantly in the overall productivity of

organization. Every employee tries his level best

to utilize his knowledge and skills to benefit his

organization and become an indispensableresource in due course of time.

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Aims of HCM

To determine the impact of people on the

business and their contribution to value;

To demonstrate that HR practices produce

value for money in terms (e.g. ROI).

To provide guidance on future HR and

business strategies.

To provide data that will inform strategies and

practices designed to improve the

effectiveness of HRM in the organization.

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THANK YOU