How to Maximize the Value of Your Firm’s Human Capital

Andy Cook | January 16, 2018

Think about all the information that gets passed around in a typical work day. Customer issues are resolved on Slack. Company goals are sent over email. New employees are trained in onboarding sessions during their first week by exports or through one-on-one mentoring. All of this knowledge is valuable and known as human capital. It’s the intangible, collective resources and knowledge possessed by groups of people usually within an organization.

These resources include things like knowledge, skills, experience, wisdom, and judgment. They’re the type of resource that organizations have long been trying to retain regardless of employee departures and company restructuring. The tips and tricks that you pick up throughout your career add up quickly, but you might not be aware of the knowledge that you actually hold.

For example, think about the last job you started at. Chances are there was lots to learn, like who in the organization actually knows what, or how to use a new computer system to take customer orders. If you don’t know how to do the answers to your questions, how do you do your job? Or if you don’t know how to use the computer system and there’s no one to help you while you’re on a call with a customer, how do you take an order?

While these are just two basic examples, they highlight why human capital is an important asset for organizations. The problem that organizations face is how to accurately assess, and manage the value of human capital over time.

Does investing in human capital impact an organization?

When talking about the impact of human capital in an organization it’s best to start looking at employee turnover. Did you know it costs tens of thousands of dollars to replace an entry level knowledge worker that leaves your organization? Multiple that by dozens of people that might leave in a year in a larger organization and we’re talking substantial monetary costs adding up.

Luckily, the good news is that if your organization is able to effectively train and manage employees through investing in human capital, also known as you people, it should experience higher employee retention.

Take ConAgra as an example. They compared the performance of trained and untrained supervisors to determine the impact of training on leader retention. The results showed that the 12-month turnover rate of trained supervisors was just 5.3%, versus the 11.4% for untrained supervisors. That saved ConAgra a hefty $2.3million in year one of the training initiative.

How to maximize the value of your firm’s human capital

Similar to most other business and resource management matters there isn’t a one size fits all solution. However, there are certainly a few things to consider that should have a positive impact on your firm’s human capital value.

Don’t expect high salaries to attract the best talent

A common mistake made today is for larger organizations to use the allure of high salaries and compensation packages to attract young talent. That’s simply not going to cut it for today’s younger workforce, who value things other than money.

For example, 58% of Millenials believe that an improved quality of life is more important to them than an increased salary. Not convinced? 74% of the same age group say that their priority is on finding a job where they feel like their work matters.

Developing the human capital value of your organization relies on two key things:

  1. Your firm’s ability to retain talent
  2. Your firm’s ability to ensure that your most experienced employees are also willing to share their knowledge.

In order to make sure these both occur, your organization has to tick the boxes that matter:

  • Engaging work environment
  • Meaningful causes
  • Flexibility
  • Regular feedback

Encourage collaboration across your organization

Encouraging collaboration across departments and teams in your organization is more of a culture change than a policy. There are a number of ways that you can make this harder or easier, but hiring individuals who are willing to learn and share their knowledge with their colleagues is one of the most relevant factors.

Something to keep in mind is that departmental silos often create walls that stop knowledge from transferring between teams. While these blockers exist, you can still put the infrastructure in place to ensure that teams have scope to share knowledge where it is valuable.

Introduce knowledge management

Knowledge management exists to ensure that knowledge held within people’s brains can easily be accessed by the wider company. When an employee joins the company, it’s vital to establish a process that runs until they leave the organization.

This might include things such as:

  • employee orientation,
  • establishing a mentor relationship,
  • mapping their roles, responsibilities and their work, and
  • executing a comprehensive exit interview

However, the chances are that knowledge may be lost during one-on-one conversations between employees who fail to pass on everything in as much detail. In that case, you might always find a knowledge management platform helps teams manage and share organizational knowledge could be helpful.