Different human capital models, such as strategic management, statistical analysis, and empirical studies, help companies understand how to best utilize their employees. Strategic management focuses on placing the right people in the right positions, while statistical analysis looks at the cost-benefit of investing in employee education and training. Empirical studies analyze various variables to make informed decisions about a company’s workforce.
Human capital models typically represent studies of how a company can best utilize its greatest asset: its employees. Different models are available as few business situations are the same or remain static in the long run. For example, some types of human capital models include strategic management, simple statistical analyses, and empirical studies of human capital use. Each provides a different look at the use of human capital and the investments a company can make in its overall workforce. The latter two models make extensive use of variables and statistics to gain a mathematical understanding of this business.
Strategic management is an ongoing business endeavor that seeks to place the best people in the best places at all times. Owners, managers and executives conduct in-depth reviews of all aspects of their company’s business processes. Allocating properly educated and trained workers to specific business activities is the main purpose of strategic management-based human capital models. If a company does not have the right employees, it may be necessary to hire new workers. This process does not stop as companies continue to seek the best competitive advantage through the use of employees and their knowledge, skills and abilities.
Simple statistical analysis often looks at investments made in employees in terms of education, training, and similar skill sets. This analysis often relies on basic economics as a company is likely looking for the point where diminishing returns begin. For example, companies can examine the costs of the wages and benefits provided within these human capital models. Plugging the information into a statistical formula provides insight into where a company is no longer benefiting from spending more money on its workforce. In short, this point represents the dollar limit for attempting to improve employee conditions as the company will not be able to increase its current competitive advantage.
Empirical studies of various models of human capital tend to be the most aggressive. Major statistical studies are needed to determine how different variables affect a company’s workforce. The data collected could be internal or external as these studies can use external data to provide trends that will ultimately mimic the company’s internal human capital. A hypothesis is also needed, which can explain the relationship between at least two variables. The information gleaned from this model is only used for decision-making purposes as the firm itself cannot make decisions on its own.
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