We are all geniuses. But if you judge a fish by its ability to climb a tree, it will live its whole life thinking it is stupid.
A. Einstein
Human capital theory has had a profound influence on modern labor economics.
The realization that the main value of an organization is its employees, accumulated knowledge and technology, largely changes the approach to making management decisions, assessing performance, and selecting investment objects. Human time is recognized as a key economic resource, and the value of intangible, intellectual assets in some companies exceeds the value of material ones. Today, it is human capital, and not equipment or raw materials, that is the key to competitiveness, economic growth and efficiency. Therefore, we can conclude that effective management in a modern organization is impossible without taking into account the principles of the theory of human capital. An employee’s knowledge, experience, intellectual and physical abilities may not generate any income, remaining the personal property of the employee. Therefore, the employer needs to have certain conditions and established institutions that transform human qualities into the form of human capital. According to the author of the essay, three main institutions can be distinguished: the human capital market; Institute of Social Partnership; policy of incentive remuneration and motivation systems aimed at personnel development.
A distinctive feature of the demand in the human capital market is that the employer does not need the knowledge and experience of employees per se. They are valuable only in conjunction with the employee’s desire to produce specific goods or provide specific services. In other words, by offering a vacancy, the employer creates conditions for the applicant to unlock his potential. In this case, the applicant acts as the owner of the resources that make up his individual human capital. They must act in a unified manner, otherwise the result of joint activity will be negative. This idea is figuratively illustrated by A. Einstein’s statement in the epigraph about that same fish. The human capital market is considered the most complex of all resource markets. People have different physical attributes and abilities, put different levels of effort into achieving their goals, have different qualifications and experience, and they have rights and opinions. In addition, unlike machines, people can change, acquire or lose skills, improve or degrade, share corporate values or contradict them.
The concept of social partnership assumes that an organization voluntarily assumes responsibility to society, and also takes additional measures to improve the quality of life of its employees and their loved ones. This is more than guaranteed by law, and is often criticized due to the length of time it takes to wait for an economic effect. However, there is no doubt that social partnership plays a leading role as a means of developing the human capital of an organization.
As for an adequate system of remuneration and motivation, personnel reserve and other corporate development programs, behind the obviousness of these measures lies a difficult task. Since high wages in themselves do not guarantee the effectiveness of employees, training is ineffective without indoctrination, and motivation only stimulates a person to improve the quality of the work performed when it is based on his individual values.
Let's summarize the discussion. Human capital is a synthesis of human capabilities, knowledge, culture and potential. And how skillfully an organization can use it will be the main indicator of the effectiveness of its activities. Corporate institutions for the development of human capital create conditions in which the organization receives a powerful resource. A resource in the form of qualified employees, full of enthusiasm and sharing common values. The possibilities of these people are truly limitless.