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Human Capital

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Human Capital

What It Is and Why People Invest It

Jossey-Bass,

15 min read
10 take-aways
Text available

What's inside?

Your employees are investing their own human capital in your business. If you want them to stay, make their investment pay.

Editorial Rating

7

Qualities

  • Analytical
  • Eloquent

Recommendation

The 1990s may well be remembered as the decade of employee empowerment (at least in management theory circles), but very few companies ever put their money where their mouths were when it came to dismantling the old "command-and-control" structures. Thomas O. Davenport makes a fresh case for empowerment by placing the argument in the context of the current tight labor market, and presenting scarce knowledge workers as investors of human capital. These human capital investors should be valued, nurtured and rewarded by companies in much the same way that financial investors are cared for. Although many of the conclusions that result from this novel theory mirror those of earlier works in employee empowerment, getAbstract strongly recommends this book for its original take on the changing nature of the employer-employee relationship.

Summary

Workers as Investors

Language matters. Metaphors give leaders the ability to create and describe reality. "People are our most valuable asset" became the buzz phrase of the 1990s, but few companies practiced what they preached.

Even using the term "asset" to describe people can be somewhat demeaning. Assets are objects or legal rights that can produce future service, be owned or controlled, and be valued in monetary terms. Furthermore, assets are bought, sold, or replaced at whim by their owners. Instead, evolve to the next level of the metaphor and think of your workers as human capital investors. The investor metaphor emphasizes ownership and return on investment. Human capital simply means the time, energy, behaviors and abilities people contribute to their work. Workers who act as investors place their capital where it will yield the highest return.

Employment trends illustrate how "knowledge workers" have capitalized on the new economy. As employees realize that what they know is more powerful than what they produce, the market in human capital continues to evolve. More education equals more capital to invest and potentially greater returns on investment...

About the Author

Thomas O. Davenport works in the San Francisco office of Towers Perrin, a worldwide consulting firm. He gives Fortune 500 clients advice on human resource strategy, organization effectiveness and business strategy.

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