What is human capital its financial value importance and Measures

Human capital

Human capital encompasses technical skills and social skills that, together, allow the company to carry out its activities. As an organization’s most precious asset, it must care for and develop its human capital.

But there is a more complete – and therefore more interesting – way of better understanding what this means.

Human capital is everything that each person represents and adds to the company: their skills, the knowledge acquired even during their time at home, their personality, the ability to work with others, etc.

Realize that, behind this, there can be a whole investment of time and money by the employer to develop these talents .

Even today, there are those who believe in hiring a professional only based on their resume , hoping that, from there, the employee will simply do the job.

In a different situation, the company sees value in spreading its organizational culture , applying training and establishing partnerships for professional improvement courses.

As a result, it has even more valuable professionals with it, because they have become more competent to perform their duties.

With this in mind, it is possible to establish a relationship between the importance given to human capital and the desire to retain talent .

Any employer knows that being able to keep good professionals is better than having to constantly look for new ones in the market.

Giving importance to human capital involves showing employees that their value is recognized and that the company appreciates having them on its staff. But, why give value to these people?

A reflection on the expression human capital

The Priberam dictionary presents two interesting definitions for the word “capital”:

  1. main, essential, fundamental;
  2. that which constitutes a fund or value, capable of producing profits or advantages.

It is common that, in the business context, the word “capital” is related only to money.

In fact, it is the work of the employees that favors the achievement of profit, but not only to stop there, we also draw attention to “capital” as being essential.

A company is made up of people and they are essential. An organization can be based in a modern building, have a flexible policy that breaks rigid market norms – such as the possibility of working in shorts on hot days -, rely on high technology and many other things like that.

For this to make sense, you have to have people working. And for all this to have good results, it is necessary to have people being valued because, otherwise, they don’t even want to stay in this company, even with all the apparently legal benefits that it has available.

The (financial) value of a company’s human capital

All this is not merely speech. Sometimes the best way to understand the weight of words and understand why it is worth giving importance to human capital is to talk about values ​​in figures, that is, in money.

A study published by Maxis Global Benefits Network in February 2019 proves that companies that invest in the well-being of their employees profit more .

Investing in well-being , it is worth mentioning, is a way of giving importance to human capital.

The study points out that, in a period of 11 years, companies that bet on creating a positive culture in the workplace saw a 682% increase in their revenue.

Those who did not pay attention to it registered a much lower increase, of only 166%. Something that helps us understand that betting on the well-being of workers is really an investment and not a simple expense to meet any whim.

What is lost with the devaluation of human capital

If, for some reason, it’s not easy for you to project the increase in profitability that a company can have by recognizing the importance of its human capital, let’s go to the other end.

Have you ever thought about the money that can be lost by not giving due value to employees and not encouraging more humanized management ?

Looking at the aforementioned Maxis Global Benefits Network study, Leena Johns, VP Global Healthcare at MetLife, explains that investing in wellness reduces costs for the company and lowers turnover ― the situation in which employees decide to quit their jobs, causing the company to lose its talents.

When turnover is high, the company spends much more, because it has to go through more frequent  selection, hiring and training processes .

And, as new employees prepare for the role, goals can be compromised, generating losses.

Still, according to Leena, companies that do not invest in well-being spend about 50% more on the mental and physical health of their employees.

In addition, in a stressful and negative environment, workers are 37% more absent and suffer 49% more accidents at work. It is in this type of environment that illnesses such as burnout syndrome manifest.

As you know, unexcused absences can be deducted from the worker’s pay.

However, this is not always an adequate compensation situation. Unexcused absences can lead to delays, missed deadlines and compromised customer relationships.

Situations that harm the company in a way that the discount in finance is not enough to repair.

Furthermore, work-related accidents are related to absences and the costs related to the sick pay due in these situations.

The first 15 days must be paid for by the employer, a responsibility later taken over by the government.

Still, we cannot forget the possibility of accidental leave to generate the need for investment in hiring and training a replacement, even if temporary.

The importance of human capital for companies

By now, you have certainly understood that companies that give due importance to their human capital profit, also because they lose less money.

This also has to do with some other effects that creating a good working environment has. Let’s look at some examples that help to better visualize this issue.

Let’s consider a trade. The way in which human capital is treated by the company has a very visible impact on business results.

A stressful environment can make even the best-prepared salespeople take out their frustrations on customers.

The unwillingness to attend and the lack of initiative to present more products and try to value the sale affect profitability.

On the other hand, when the environment is positive, the mood improves and the willingness to serve well also increases.

Accompanied by this change comes productivity , proactivity and other characteristics so desired by the market.

This example also applies to other contexts, even in companies where employees do not have direct contact with customers. The internal climate of an organization impacts its daily processes.

A worker who is unmotivated due to a stressful and uninviting environment can still access automatic reports generated by management software .

It is more likely, however, that only a worker motivated by being in a positive environment will feel inspired to “get out of the box” and present insights based on the report generated by a machine.

Without the stimulus to get involved with their own work and without the motivation to be an increasingly valuable employee, professionals tend not to take full advantage of their skills, nor of the software and other advanced tools available to them.

On a day-to-day basis, the absence of positive feedback is not always compensated for by the beer machine in the company lobby, which is available to everyone after working hours.

The lack of effort to achieve partnerships between the company and a training course does not compensate for the existence of a manager who only gives orders and does not know how to lead .

When an employer sees all this, they have a chance to turn the tide. By adopting measures that value your human capital, you can:

  • improve productivity and engagement levels, creating more favorable conditions for achieving goals;
  • reduce the occurrence of errors and rework;
  • reduce the number of unjustified absences and delays , avoiding the need to issue warnings;
  • retain talent and create a positive employer brand , making more qualified professionals interested in working for the company;
  • develop leaders aligned with the company’s culture, being able to guide others to correctly follow the processes and obtain increasingly consistent results;
  • improve the quality of the work carried out, making the company, little by little, become a reference in its area.

Measures that value the human capital of a company

We have already mentioned the offer of improvement courses as one of the ways to value the human capital of a company. Certainly, however, this is not the only measure.

Check out other ideas that are adopted by companies that give due importance to the well-being of their employees and creating a positive work environment.

1. Career plan

When, still in the job interview, the recruiter asks the professional “where do you see yourself in five years?”, among other things, he wants to evaluate that person’s prospects and his intention to continue in the company in the medium and long term.

If the company values ​​its human capital, it knows that employees with more years of service tend to be more valuable. 

For this reason, it seeks those who are willing to stay and add. For this, however, it is necessary to offer a counterpart, the career plan being one of them.

Qualified professionals want to be recognized and grow professionally. This means that, for them, it is important to know that they will have the chance to occupy hierarchically higher positions in their trajectory in the company.

Something that cannot be a mere speculation presented as a possibility, needs to be a concrete plan.

Promoting someone who already works at the company, knows its processes and resources well can be better than hiring a new professional.

Therefore, the company must be willing to prepare its employees to take on new positions as they achieve goals and acquire new skills.

2. Identification and engagement

The idea of ​​the career plan can be presented from the job interview . For everything to work out once the employee already belongs to the company’s staff, however, more is needed.

You may already know the importance of each professional’s profile being compatible with the company’s profile, the so-called cultural fit .

The values ​​need to be similar so that there is identification between the parties, especially because, without this, the employee may not be engaged with their tasks, with the goals and objectives presented by the company.

Someone who doesn’t understand your purposes, even with good will, struggles to do what’s necessary to help you achieve them. Understanding this indicates that professionals are not driven solely by money.

Good relationships with colleagues and superiors contribute to the feeling of belonging. 

The existence of goals, career plans and leadership that guide the achievement of objectives makes the professional feel that his effort is very welcome and worthwhile.

3. Leadership and autonomy

Speaking of which, it is good to highlight the role of leaders. Do you know what leadership is ?

Leadership is about inspiring employees so that they can deliver their best on a daily basis.

Something that requires more involvement and participation than the simple act of delegating tasks.

Understanding the strengths and weaknesses of each professional, giving positive feedback, assigning tasks that match their main skills and providing valuable guidance for professional improvement ― the so-called upskilling .

These are attitudes of a leader that help a professional to feel that the company cares about their development because they want to have them around.

Leadership is also about transmitting confidence and empowering professionals and teams.

It is the kind of attitude that leads the employee to understand that the company believes in him to assume responsibilities, which makes him more interested in improving himself to fulfill his role well.

4. Bonuses and Awards

Let’s not ignore the fact that the financial part plays a role in valuing a company’s human capital.

Good professionals need to be well paid, otherwise, they leave for new opportunities that offer them a gain more in line with their qualities.

A company that cannot invest in very high salaries can evaluate the possibility of offering bonuses and awards linked to the achievement of goals and results.

Although it is not the only reason for the satisfaction of a professional, the financial return contributes to their daily motivation, as well as to their well-being in the company.

5. Point control

Law No. 13,874 , known as the Economic Freedom Act , determines that only companies with more than 20 employees are required to have a timekeeping system . However, the others can opt for marking to reap their benefits.

When each employee’s journey is properly monitored and recorded, the company is less likely to make erroneous calculations for compensation.

Any overtime or delays are computed securely, avoiding conflicting information and undue payments.

According to the legislation, the company can choose to use a manual, mechanical, electronic or alternative marking system ― as is the case with the Tangerino application .

More modern systems, in addition to being more practical, are also safer. Through the app, both the employer and their employees know that it is not possible to circumvent appointments and that, therefore, any addition or discount will be made fairly.

It is the kind of tool that helps to increase trust between the parties, something that also favors the relationship with the company and the well-being of the workers.

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