Companies can avoid high turnover and slow growth by assigning value to human capital. Employers can evaluate employee performance and skills to measure human capital, and may engage HR or consultants to assist in the process.
Companies that have the ability to assign value to human capital could avoid some pitfalls that result in higher turnover or slower growth. Human capital, which can be defined as the quality of an employee’s job performance as well as the skills, talents and abilities brought to bear, can be difficult to quantify. This does not mean, however, that the value of human capital cannot be measured. Employers can begin the process by taking an analytical approach to the output individuals receive and evaluating future succession planning.
A human resources (HR) division of a company might have some involvement in determining the value of human capital. Human Resources managers practice personnel management and may reasonably participate in the processes used to evaluate employee performance. The human capital an individual brings to an employer could be judged on the skills acquired through formal education or professional experience.
In an analytical approach, employers can evaluate the resources currently devoted to attracting and retaining talent to perform certain tasks within the organization. If there are issues with employee retention in a particular division that is essential or part of a company’s core operations, perhaps there is not enough human capital value assigned to these roles. High turnover could indicate that a company needs to reevaluate its approach. An organization may need to better identify personnel who are likely not only to perform job tasks appropriately but who will also demonstrate attributes that suggest they will remain engaged over time.
To perform a human capital analysis, company executives may decide to create certain standards against which to measure employee performance. Business executives can base the value of human capital in relation to the individual’s output against the barometer created. Standards might be formed based on some of an organization’s top performers or in relation to a set of metrics and expectations set by managers. Employers may also decide to evaluate the performance of individual employees on certain procedures and outcomes and use the results to measure the value of human capital in the organization.
Some professional consultants specialize in assessing the value of human capital. A business may decide to engage these service providers in order to assign value to human capital within an organization. Consultants can add further insights by using findings from other case studies to illustrate how a firm’s human capital stacks up against competing firms.
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