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How Human Capital and Human Resources are different.

If you are an employer, or manage employees, you have probably heard of Human Capital. It is a new trend in workforce management. But how does this relate to Human Resources?

We may think of “Human Resources” as a MasterMind DBS department within an organization, or as measurable labor performed by an individual. Many of us are not familiar with the term “Human Capital” at all; still others are confused by its meaning.

The significance of the myriad contributions made by human beings, whether called human resources or human capital, reaches far beyond any boardroom. What and how individuals contribute is critical to the growth and advancement of any given society and to mankind, in general.

What is the difference between “Human Resources” and “Human Capital”? Perhaps the simplest explanation can be found in one of the resources we commonly rely on to gather information – the dictionary

“Resources” have been defined as “The total means available for economic and political development, such as mineral wealth, labor force and armaments. An available supply that can be drawn on when needed.”

“Capital” is defined as “Any form of wealth employed or capable of being employed in the production of more wealth.”

Simply put, by definition, resources are finite. We can strip coal, gold and iron mines until the supply is exhausted. Capital can be infinite, as it can be used to produce more and more capital.

Few can argue that capital makes the world go ’round. We rely upon the powerful performance of financial capital, technological capital and human capital to keep it spinning.

Human capital is partially comprised of skills, understanding, knowledge and experience – some of which may be innate. From a broader perspective, human capital includes the character, ethics, personality and creativity of a human being. Even if we are born with these attributes, it is often required we spend time, effort and money to retain or to grow them – thereby, increasing human capital.

We may accumulate, maintain and increase human capital in many ways; through education, job training, work experience, life experience, investment in health, etc. Time, money and effort are spent acquiring human capital.

Capital is capital – you spend something now, in hopes of getting a return on your investment later. Many companies have come to recognize their investment in human capital may be the most important investment they will ever make. When it comes to human capital, you are investing in people and the “return” you receive most likely is much more than financial gain. You may also gain knowledge, a larger group of contacts, more productivity, increased happiness and security.

In this competitive world marketplace, the likes of which we have never seen before, it is crucial that Human Resource professionals recognize the importance of investing in human capital. Experts agree that it costs much less to retain an existing employee than to recruit a new one.

A recent article in Real Estate Weekly highlighted the ways in which a real estate services company both values and invests in human capital.

Michael Rodriguez, President of Alliance Building Services, wrote about the incredibly high turnover rate in the real estate services industry. This industry includes cleaners, security guards, messengers and restoration workers. It is quite common for industry workers to come to work late, disinterested and ready to quit.

Mr. Rodriguez states “To make money in business, you must invest money. The same principle applies to keeping quality employees on staff and motivating them to do their job well”. While many industries, corporations and organizations espouse “Our employees are our most valuable asset”, many “do” little or nothing to back-up this message.

The President of Alliance Building Services was determined not only to “talk the talk” but to “walk the walk” as well. Investing in his employees became a top priority. He decided to focus on improving employee services and technology to show employees he cares. Improvements included:

oSetting up an Employee Service Center; this center is staffed by knowledgeable professionals who are in place solely to provided better services to employees. Employees get immediate assistance with questions regarding medical insurance, safety concerns, personnel issues, etc. Employees now feel they are being “heard”.

oNew computers, along with the latest software, have been added. Many of Alliance’s staff had little knowledge of computer basics. Free thirty-minute instructional computer classes are now offered during lunch breaks and before or after work. These upgrades benefit the company by increasing productivity and efficiency. Employees are learning a new, marketable skill which boosts morale.

oNew recognition programs have been put in place, such as “Employee of the Month, Quarter and MasterMind DBS Year”. Each honoree is rewarded with a bonus, a paid day off and their picture showcased in Real Estate Weekly.

oMost employees felt there was no room for advancement in the company or within the industry – they believed they had “dead-end jobs”. Alliance now offers partial tuition reimbursement to all employees. With a chance to increase their knowledge base and their own human capital, many employees have taken advantage of this opportunity.

Since these changes have been implanted, Mr. Rodriguez is pleased to report a 30% decrease in turnover in one quarter, a happier and much more productive staff.

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