Human Capital Competency

By   /  26 June 2009  /  Comments Off on Human Capital Competency


The Human Capital Side of Business

Competency (skills, behaviour, knowledge, experience and values) statements are a highly descriptive language that communicates strategy and performance improvement required of people in an organisation. They convert potentially disaffected members of the workforce into measurable and therefore manageable human capital. Once people become human capital the bias, familiarity and subjectivity towards them can be replaced by a fairer, more dispassionate, objective and efficient method of channelling their power. Using competencies to define human capital through role profiles enables all gaps between current and required state to be identified and addressed. Individual gaps are aggregated as an organizational capital risk. This gap becomes the liability on the corporate human capital balance sheet. It also defines what must be addressed to achieve business performance improvement.

Human, Capital, Competency,

Jasper Global Corporation

Human Capital can be described as an approach to people management that seeks systematically to analyze, measure and evaluate how policies and practices create value for an organization and to put in place the processes and systems which would help in measuring the value people bring to the business, it is treated as a high-level strategic issue.

Human Capital can be described as one of three factors that make up intellectual capital, the other two being organisational and social capital. HR critics of HC sight dehumanising the people aspects of a business by focusing on business financial and share value performance measures – in reality this is not the case, what HC really does as with competence management is to link the people directly by valuing them to the business.

Human Capital Management (HCM) plays a critical role in managing an organisation’s most important asset, its people. As any business principles should state, the quality and performance of your people is what will set you apart in an intensely competitive market.

Organisational capital is capital owned by the organisation, patents, copyright or knowledge stored in knowledge management systems. Human capital is the skill, experience and capacity to develop and innovate that is owned by individuals (inside your organisation or your clients outside). Social capital in contrast represents the structures, networks and procedures that enable the individuals to acquire and share their capital. These can include training programmes, discussion forums, knowledge management systems, the design of jobs themselves and people management processes.

Human, Capital, Competency,

Jasper Global Corporation

HCM (human capital management) specialists need to know the difference between the book value (somewhat similar to the earnings per share, but it relates the stockholder’s equity to the number of shares outstanding, giving the shares a raw value) and market capitalization of their organisation (the market value of a quoted company which is calculated by multiplying its current share price by the number of shares in issue)

The most important stakeholders in HCM are external not internal:

  • HCM is about value not cost. People are value adders not overheads (creativity and innovation is seriously valued).
  • HCM has to show the value generated by people management in the annual operating and financial results.
  • HCM means demonstrating a clear and causal link to organisational performance, not just following best HR practices
  • HCM is about measuring organisational outputs (profit, revenue, service levels).

The idea of Human Capital Management can be expressed within a framework of cornerstones for success; these cornerstones are the four most important levers in impacting on organisational efficiency.

  • they must add value to a firm’s production processes
  • the skills the firm seeks must be rare, since human performance is normally distributed
  • the combined human capital investment a firm’s employees represent cannot be easily imitated
  • finally, a firm’s human resource must not be subject to replacement by technological advances or other substitutes if they are to provide a source of sustainable competitive advantage

The heavy reliance on technology replacement strategies has had a positive significant impact on reducing work time and head counts but a substantial negative impact on creativity and innovation and lost competitive advantage.

People are assets whose value can be enhanced through a continual measured investment and, as with any investment, the goal is to maximize value while managing risk. Technology investment should enhance and improve the ability of people to succeed not undermine it.

The organization’s human capital management should be structured, implemented and measured by the benchmark of how well it helps the organisation achieve results (book value and market capitalisation).

Human, Capital, Competency,

Dr Marshall Potts

Jasper Global Corporation

Jasper Global Corporation

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