Understanding your intellectual capital and how to manage it is very key for any forward thinking business owner especially in the highly competitive corporate space.
Broadly, intellectual capital can be defined as the collection of all informational resources a company has at its disposal that can be used to drive profits, gain new customers, create new products or otherwise improve the business. It can be considered as a core asset of an organization as it is the sum of employee expertise, organizational processes, and other intangibles that contribute to a company’s bottom line and increases its competitive advantage. Now Intellectual Management is the maximization of the value and utilization of the total knowledge that exists in a company and its personnel.
Some of the subsets of intellectual capital include human capital, relational capital and structural capital. For the purpose of this article I will be focusing on the human capital subset of intellectual capital.
In simple terms, human capital is the value that the collective knowledge and abilities of employees and owners contribute to the business. It refers to the skills/competencies, training and education, experience and value characteristics of an organization’s workforce that is in the minds of individuals, i.e. knowledge, skills, competencies, experience, capabilities and expertise of the human members of the organization.
The concept of human capital can be applied to the individual firm as well as to the economy as a whole as studies have shown that investments in human capital are essential for sustaining economic growth over time. As important as this element is to business success, most organizations still tend to overlook it because of its perceived ‘intangibility’ which is not a smart move. On average, total human capital costs are almost 60 percent of a company’s operating expenses and despite how much employees cost, many companies do not properly invest in an employee development plan.
This lack of proper investment is due not knowing the value of human capital and this can create a lot of problems. So while your business has metrics to measure its other most important indicators, such as production costs and sales revenue, there are few standard measurement metrics for the most important drivers of business success. Now this is very possible as there are Human Capital valuation metrics and Human Capital reporting standards that can be used to express the value of human capital in various ways.
To reap the most benefits from employees your business needs to invest actively in them as this is very important to their job satisfaction and can save a lot in employee turnover.
It is clear that more tools are becoming available for human capital reporting and so investing in your human capital should be given its appropriate and enviable position.
Your employees want to learn, they want to develop their careers, and they want to enjoy going to the office every day and by seeing your commitment to HC Investment, you will have a better employee satisfaction, engagement, and communication lead to an improved overall culture.
Succinctly, people will remain your organization’s most critical components and it should therefore continue to be a major priority to investigate and incorporate methods to assess just how valuable those people are to your organization’s continued success.
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