The concept of human capital in an organization refers to the employees, the skills they have, their knowledge and abilities. These aspects are very significant assets for an organization (Mello, 2015). It's the educational level of an employee, his knowledge, skills, experiences, habits of working, motivation and their relationships with co-workers, regulators, suppliers, customers and other stakeholders.
Human capital should be considered as an important asset by organizations since unlike other assets, human assets cannot be duplicated. This means it can act as a competitive advantage among competitors (Effron, Gandossy, & Goldsmith, 2003). It is important to manage human capital since it reduces hiring costs by lowering turnover. Prospective employees are more attracted to organizations that manage human capital.
Measuring human capital is not very easy in organizations. However, two methods exist for this. The first one is called Human Capital ROI which measures the return from human investment in relation to productivity and profitability. Additionally, human capital can be measured in terms of rate of turnover. Turnover rate measures the efforts of the workplace to retain its employees. This includes direct costs, stability, moral, profitability and productivity (Lawler III & Mohrman, 2003). The rate is also used to measure the success of retention and reward program.
References
Effron, M., Gandossy, R., & Goldsmith, M. (2003). Human Resources in the 21st Century. Hoboken, New Jersey: John Wiley and Sons, Inc.
Lawler III, E. E., & Mohrman, S. A. (2003). Creating a Strategic Human Resources Organization; An Assessment of Trends and New Directions.
Stanford, California: Stanford University Press.
Mello, J. (2015). Strategic Human Resources Management (4th ed.). Mason, Ohio: South-Western Cengage Learning.
I wrote the above discussion forum. Below I need help answering the Professor question. The response should be at least 300 words and at a graduate level.
Post by James Krolik 10 hours ago
Reply to Charley
You raise interesting points on assessing the value of human capital. There are a variety of reactions depending on the title or status of the individual. If you followed your thought of return on investment, can you really measure an employee's commitment to the organization? What do you think?