What is human capital investment and why is it important to your business? Human Capital is defined as the combined knowledge, skills and abilities (KSAs) of your total workforce. Human Capital Investment is important because the companies who utilize this cost and leadership strategy depend on their workforce to give them the competitive edge. In our current business climate of increasing government regulation, competitive world economies, and global markets, investing in human capital helps your business retain its competitive edge. Microsoft and Apple are two great examples of companies who utilize the Human Capital Investment strategy. Their results are well known. Can we all perform as well as Microsoft and Apple? Maybe not, but let’s think about how investing in your workforce is the smart thing to do.
Human capital investment strategies must align with the organization’s business goals and objectives as well as its organizational values. When reviewing your organizational values, make sure your business practices, words and actions reflect your values. We’ve all heard; “our people are our greatest asset,” but after reviewing a company’s employment practices and benefits, we sometimes find their words and actions fail to reflect that philosophy. If you truly believe your people are your greatest asset, human investment means allocating resources to improving the knowledge base of your total workforce and the skills and abilities of high potential employees. Remember, your goal is to capitalize on their KSAs to gain competitive advantage. This is an area in which Human Resources (HR) can contribute to your company. How?
HR must actively participate in your organization’s strategic planning process in order to understand how to align HR programs to meet the organization’s goals and objectives. HR can implement the following employee programs as part of human capital investment strategies.
Is it SMART?
A meaningful performance management system holds both individuals and managers accountable for meeting performance standards, assesses individual KSAs, and provides constructive feedback as a means to improve performance. Managers should utilize the SMART Model to set clear goals and expectations. If you’re unfamiliar with this model, just Google it. It really works.
Develop a succession plan
This is a long term systemic strategic plan that identifies individuals with potential leadership abilities to fill key positions in the organization. HR works with executive management in designing the program to develop employees over time to be ready to step into crucial roles as current executives leave the organization. Fast tracking, competency models and mentoring programs are useful tools for individual development. To ensure the success of this program, hold managers accountable for creating a work environment that allows the employee to grow. Managers should schedule regular feedback session to keep the employee on track to becoming fully competent for the new position within a specific time frame.
Utilize a hiring and selection process that allows the hiring manager enough time to hire smart and choose the best person who can contribute the most to the job. Train managers how to ask behavioral type questions, check backgrounds and work experience and other relevant information in order to get the best candidate. When utilizing outside recruiters or agencies to meet your hiring needs, instruct them on how to properly screen applicants in order to send you the best candidates.
HR must do a good job at vetting recruiting agencies and reviewing their screening process to ensure it poses no liabilities to the organization. It has been my experience that many ask discriminatory questions on their application process.
Invest in professional development
Budget for training, education and seminars conferences so that individuals can update or acquire the knowledge and skills for professional development. To get more bang for buck upon completion, have the conference attendee pass along their new found knowledge to others by holding a seminar on the subject matter. During the seminar, ask the question, “How can we apply this to our organization?” This ensures everyone takes learning seriously and the transference of knowledge occurs.
Pay and recognition
Design employee compensation and recognition programs that rewards high performance based on specific criteria.
Review existing employee benefit programs to ensure they include healthcare, wellness, accommodations for work and life issues, flexibility in work schedules and work sites, sick leave, and 401K. Numerous studies show that organizations who provide these benefits are more productive because employees are healthier and less stressed.
With the dwindling workforce, employers must think about how to retain valuable employees. While a certain amount of turnover is healthy, we want to keep our best and brightest. As a business owner or CEO, the question to ask yourself when evaluating whether or not you should utilize the Human Capital Investment strategy is not, “can I afford it?” It is instead, “can I afford not to?” In a tough global economy doesn’t it make good economic and business sense to invest in human capital?
Betty McHale, MS, SHRM-SCP is a Pike County KY native. She served as the President and Owner of Workplace Solutions LLC, a Human Resources Consulting Company located in Hurricane, West Virginia for eleven years. She currently resides in Florida. She co-authored a book, What’s Next in Human Resources, released in 2015 by Greyden Press. She is currently available for speaking or training engagements and may be contacted at 304.561.7009 or at firstname.lastname@example.org.