Monday, April 2, 2018

In today's world, where does Human Capital rank against ROI?

When I think of ROI, my mind goes directly to thinking "financial gains". And, in business it’s this type of thinking that is carved into people’s minds. We constantly have to consider the bottom line. Around the workplace, people talk ideas. Ideas spark innovation. Innovation feeds business. And, business talks money. When a company makes any decision to invest in a new idea, the fundamental question decision-makers bounce back to is, “how much money will that generate for the business?” But, taking a step away from money talk for a moment, is there a way to reframe ROI more creatively to not only look at the financial return on investment, but also a more widespread benefit to the whole organization? In the spirit of today’s push for social responsibility, I want to bring up the term “human capital”. 

Human capital is defined by a person’s or population’s value defined by a specific set of skills, knowledge, and experiences which add to the collective wealth and productivity of a community or organization. In fact, this is nothing new. It’s Economics 101 and is light-years more antiquated than ROI, but it’s something we seem to have forgotten about when it comes to making (big) decisions in business. 

Adam Smith (1723-1790) was the first to really dig deep into human capital in his book, An Inquiry into the Nature and Causes of the Wealth of Nations. Smith believed, “improvements to human capital through training, education, and experience make the individual enterprise more profitable, but also add to the collective wealth of society.” 

In the context of business, that “human” element of capital would be the employees. When companies invest in their employees, they effectively engage this “tone from the top” mentality to influence a well-rounded culture. This is relevant to today because as systems move towards automation, we cant forget humans still play a fundamental role in the decision making process. And, as seen in so many examples of good vs. bad business, when a company can effectively educate their employees and create a more engaging environment they’ve got a good thing going. 

To ensure employees are effective contributors to the organization, it is critical they remain content and are made to feel part of the company's culture using effective human capital strategies. An organization that values open communication should consider establishing common areas where employees can congregate and share ideas. Also, employees are motivated by feeling recognized by the organization and their peers. This can be as simple as issuing an employee with an achievement award or even announcing a birthday! 

Human capital strategies are critical to factor into daily operation. When employees automatically make the right decision, it minimizes friction in that decision making process and makes them more efficient in their job. This increases productivity and employee morale, while aligning behavior with the workplace policy and required regulatory standards. Thus, a happy employee is an employee who makes your business healthy, wealthy, and wise. So what is the link between human capital and ROI? Well, happy humans are better money makers. Simple as that!

Written by Charlotte Whiteman - Defense Mitigation & Remediation Advisor

Neztec Solutions Inc.

For more information, email at

No comments:

Post a Comment