Human Capital
Our Human Capital team have a track record of advising businesses specialising in:
- Consulting services
- Human Recourses services, including recruitment, interim management, employee training, payroll processing and benefits administration
- Professional services, in particular legal and accounting services.
Our proficiency in providing transactional advice within the human capital services and solutions sector enables you to uncover and refine corporate and human assets that epitomise the gold standard for long-term business success.
Our adept human capital advisory consulting expertise empowers our clients to recognise and navigate business deals rooted in the principle of generating profits through the development of people.
What is human capital?
A basic human capital definition incorporates the idea of the economic value that employees contribute to their employers (and nations) through their level of work performance. This value extends to the local and global economies as these workers participate as consumers.
The most enduring and exceptional businesses frequently share a common factor: the quality and dedication of their employees. While defining human capital may initially appear challenging, these somewhat abstract concepts constitute the fundamental essence of what we refer to when discussing ‘human capital.’
Human Capital includes those business practices that involve the management of human resources to ensure the provision of particular skill sets and competencies to a business based on its organisational and market requirements. These practices are carried out in three main areas related to a company’s workforce, namely:
- talent acquisition
- talent management, and
- talent optimisation
Examples of human capital can’t be easily quantified, or seen as separate or discrete from those who display or demonstrate them.
Why is human capital important to an economy?
In line with human capital theory and gauged by the World Bank’s Human Capital Index (HCI), a component of the global Human Capital Project (HCP), there exists a robust correlation between economic growth and a flourishing bottom line and the degree to which a company prioritises effective human resource management by investing in its human capital.
This discernible connection arises from the refinement of the mentioned human capital abilities, qualities, and traits through investments made by employers and governments. The subsequent heightened outputs by their employees and citizens can be directly attributed to the improvements in human capital that have been implemented.
The benefits of employer and national investment in human capital also accrue as direct financial benefits to the individual workers on the receiving end of the investments, in terms of higher earning potential and income. This improved earning power enables these individuals to access greater disposable income and build wealth, allowing them to participate in – and so, also help grow – the economies in which they are economically active.
However, as with all assets, human capital can depreciate in value if, for example, workers experience prolonged unemployment, or if they are unable to stay abreast of developments in areas such as innovation and technology. Organisations that are mindful of this phenomenon will thus actively seek to empower and improve their human capital to prevent this kind of devaluation. These are the kind of organisations that represent worthy investment vehicles.
What is the essence of human capital?
The value of human capital, both for a business and, by extension, an economy, is articulated through intangible assets and qualities. These include the skills and experience acquired by workers through education and training.
Moreover, types of human capital can be assessed in terms of workers’ health and wellbeing, inherent or cultivated intelligence, and other challenging-to-quantify attributes highly prized by employers, such as:
- Engagement, loyalty, and punctuality
- Problem-solving capabilities
- Strong communication skills
- Expertise in people management
As an intangible asset, human capital eludes numerical capture on a company’s balance sheets. The term ‘human’ in ‘human capital’ emphasizes that the capabilities and qualities underlying this form of value are inherent or intrinsic to the individuals who possess or acquire them.
What is human capital management?
Due to the fluctuating nature of equality in the labor market, the enhancement of the value and advantages of human capital development is more achievable when employers invest in the education, training, and provision of substantial benefits for their workers.
Recognising that prudent investment in human capital contributes to heightened worker productivity, and consequently, increased profitability, underscores its significance as a crucial element in the strategies that organizations should adopt to ensure their sustained success.
In particular, when considering potential investment transactions, it is useful to take into account that the most effective business practices frequently involve skilful human capital management (HCM) and investing in employees in a variety of ways, most significantly through education and training, and by providing beneficial work conditions to employees.
If you want to know what makes for a successful transactional investment or prospect, examine how a business looks after, nurtures and cultivates its talent.
To summarise: Good human capital management is grounded on the understanding that an organisation stands a far better chance of succeeding in the competitive market place in which it operates by investing in its culture, its people and their capabilities.
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