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Human Capital

(June 01, 2004) - We toss the phrase around as if everyone agreed that it was a good idea. Human Capital, in the loosest of terms, means something like "the value you get from people". For a more liberal interpretation of the idea, you might consider "the value contained and produced by the people within an organization." Since the question of who owns the Human Capital (and can it be separated from the human beings that contain it?) comes up quickly, it's not surprising that a general agreed upon definition is slow to evolve.

We wonder just how you manage something that you can not define.

The definitions we offer below are a fair sampling of the currently available views Human Capital (HC). Most of them overlook the fact that HC is a metaphor and not a thing at all. It is most important to grasp that a metaphor is a comparison and not a literal thing at all.

In other words, it is not useful to throw a life preserver to a man who is drowning in debt. It is a mistake to hunt for the script that must be used if all of the world is a stage. HC is a way of talking about something that is harder to name.

Here are some sources and offerings:

  • WordIQ: Human capital is a way of defining and categorizing peoples' skills and abilities as used in employment and otherwise contribute to the economy. (very interesting article contained in definition)
  • InvestorWords: The set of skills which an employee acquires on the job, through training and experience, and which increase that employee's value in the marketplace.
  • Campbell R. Harvey's Hypertextual Finance Glossary: The unique capabilities and expertise of individuals.
  • Knowledgepoint: that which is in the minds of individuals: knowledge, competencies, experience, know-how etc.
  • Sustainability.com: reflects the knowledge, skills and talent of the company's employees and contract labour, which are important in determining its ability to innovate and compete. This factor may include:
    • Ability to attract and retain employees.
    • Increased staff satisfaction and employee motivation.
    • Increased employee empowerment and ability to innovate.
    • Consultation and engagement activities that proactively address problems, leading to new innovations.
  • Center For Alternative Development: the collective 'assets' and 'wealth' in terms of talents and capacities of a group of individual human beings when viewed as part of the development process.
  • Agtrade: The knowledge, skills, abilities and capacities possessed by people. Human capital can be accumulated in many ways, including education, on-the-job training, on-the-job experience, investments in health, outreach and extension programs, life experience, migration, and searching for information about goods, services, employment opportunities, etc.
  • Taleo's Ives Lermusiaux describes the underlying principles of Human Capital Management
  • Worldbank: the stock of accumulated skills and experience that make workers more productive.
  • The Canadian Government offers a potent view of value drivers.
  • Econoterms: Human capital is the attributes of a person that are productive in some economic context. Often refers to formal educational attainment, with the implication that education is investment whose returns are in the form of wage, salary, or other compensation. These are normally measured and conceived of as private returns to the individual but can also be social returns.
  • Assett Analysis: another name for labor (specifically, the skills and abilities of trained or educated workers).
  • LineZine (a lovely casualty of the crash) produced a number of literate articles on the subject.
  • Auburn University (Paul Johnson): A loose catch-all term for the practical knowledge, acquired skills and learned abilities of an individual that make him or her potentially productive and thus equip him or her to earn income in exchange for labor. The figurative use of the term capital in connection with what would perhaps better be called the "quality of labor" is somewhat confusing. In the strictest sense of the term, human capital is not really capital at all. The term was coined so as to make a useful illustrative analogy between investing resources to increase the stock of ordinary physical capital (tools, machines, buildings, etc.) in order to increase the productivity of labor and "investing" in the education or training of the labor force as an alternative means of accomplishing the same general objective of higher productivity.
  • Free-Definitions: Human capital refers, in macro-economics, to the capacity of a workforce to yield financial capital, in parallel to the way physical capital yields goods. 

John Sumser

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