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Human Capital Development: 4 Steps to Make it Work

How do you ensure your Human capital development is optimal? Here are 4 easy steps to follow!

Human capital
Company Culture
Development

Leen Sawalha

VP Product & Growth

Thursday, June 12, 2014

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According to classical economics, any organization, large or small, needs three types of resources to produce its goods and services; land, capital, and labor.

Labor, or human capital, does not refer to the number of employees you have, but to what they possess in terms of their knowledge, skills, experiences, and commitment invested in the organization.

More inclusively, human capital comprises of the knowledge, education, vocational qualifications, professional certifications, work-related experiences, and even the competencies of your workforce.

Now that we got that out of the way, the big question remains: how do I become a human capital development master?

Step 1: Know your Human Capital’s ROI

Just like any other asset, it is important to know whether or not you are getting a return on your investment (ROI). How do you calculate your human capital’s ROI? Easy! Just use this formula:

“Investment on Human Capital” here refers to the amount of money your organization has put in to develop its human capital; i.e. recruitment and selection, training and development, compensation, etc…

With this formula, the Conference Board of Canada estimated that the median human capital ROI of Canadian organizations was $2.26. However, this figure does vary depending on your industry and organizational strategy, so make sure your figures are comparable to your specific situation.

Step 2: Analyze your Human Capital

Now that you have identified your human capital’s ROI, is it time to figure out how to improve it. But before you start spending money in an attempt to strengthen every aspect of your HR system, it is best to pinpoint where the weakness lies.

The analysis should include at least three parts: an organizational analysis, an operational analysis, and a person analysis.

The operational analysis is what you expect from the operations of the business in terms of output; sales, goods, service, employees’ behavior, etc. The person analysis, on the other hand, is what you actually have at this specific moment. As for the organizational analysis, it identifies the organization’s objectives, strengths, constraints, and limitations.

With the information you have acquired from your operational and person analyses, you will be able to clearly identify the gap in the organization’s performance. From the organizational analysis, you will be able to determine which aspect of the gap requires the most attention, and how it can be resolved effectively and efficiently.

Armed with your analyses and information, you will now be able to attack the issue of developing your human capital.

Step 3: Develop your Human Capital

When trying to develop your human capital, there are at least two things you must ensure: that knowledge is being transferred to your employees, and that your employees are actually motivated to learn them. Without these two components, your time, money, and efforts spent into the development will be in vain.

So how do you go about ensuring these two components? Let’s take it one step at a time:

Knowledge, skills, abilities, and competencies can be learned if they are administered correctly to a specific person. Not all people learn the same way, so you can’t expect to get the same result from everyone if you give them all the same training. Evaluating your trainees’ thinking structure and learning mode will ensure that your training efforts are optimized.

As for motivation, I think we can all agree that the more motivated you are to learn, the more likely is it for you to acquire the information and reflect it in your behavior. For this reason, it is important to assess your trainees’ motivation, and determine what it is that drives them.

The Atman test evaluates individuals on 11 dimensions under 5 headings. These headings include, among others, thinking structure and motivation. With the assessment and evaluation of those dimensions, as well as others, organizations will be ensure their human capital development is optimized.

Step 4: Evaluate your Human Capital’s Development

The most often neglected step yet the most important for stakeholder: Evaluating your human capital’s development. When evaluating any HR initiative, it is important to consider the 5 C’s: Compliance, Customer Satisfaction, Culture Management, Cost Control, and Contribution.

Compliance

It is crucial to ensure that any and all HR initiatives comply with laws and legislation, including developing your human capital. Make sure that you inform your employees of their rights and obligations, and that you avoid legislative issues, such as discrimination.

Customer Satisfaction

The customer here is not the organization’s clients, but the employees who are being subjected to your developmental efforts. Formal or even informal surveys and questionnaires provide constructive feedback for both the organization and its employees.

Culture Management

The importance of culture management rests in the following premise: an organization’s culture affects its employees’ attitudes, which in turn affects their behavior, which then affects their performance and the organization’s overall success. Assess your employees’ attitudes towards the organization’s culture and developmental activities to ensure that effective communication is taking place.

Cost Control

It is pertinent that your human capital development is efficient in terms of costs. Analyze, assess, and evaluate development needs, your organizational strategy, and your employees to capitalize on your expenditures.

Contribution

Are your developmental activities contributing to your company’s bottom line? Ensure that your human capital development is effective, and that it is directly contributing to your organization’s overall success. Provide your trainees with relevant, motivating, and effective training that can transform into desired behaviors and be reflected in the bottom line.

And now you have it all!

Analyze, assess, evaluate, and develop your human capital! Try Atman’s psychometric test and explore various other solutions that will allow you to develop your human capital effectively and efficiently.

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