Investment In Human Capital Costs Big Money

The change from simple human resource management to human capital management is a drastic change in mindset.

Many companies used to think of Human Resource Department as a support department. Some even view it literally as a cost center instead of a value added department.

However, with the rising importance of human capital concept, many companies are willing to spend big money for investment in human capital.

Where does the money go?

Before we answer that question, we can review the process of investment in human capital in the corporate world.

1. Recruitment

The first step is always the recruitment process.

Even before the actual recruitment starts,

time and effort is spent on describing the tasks, and determining the qualities needed for success.

There is no point hiring a creative person for repetitive tasks.

It is a job misfit.

2. Selection

In order to get the best fit between the candidate and the organization, many companies are investing in tools for selection.

The company does not want to hire a person to stay on the same job for the next thirty years. It wants to hire a person that will grow, and lead the organization in the future.

Assessing the skill set is easy. Assessing the potential of a person is not easy.

That is why money is spent on developing tools to assess the capability of the candidate, and the potential for growth.

Investment in human capital starts from getting the right person.

3. Induction

Induction is part of the training program for new hires.

All new hires must understand the corporate culture, and develop the qualities for success in the company.

Some companies are traditional in nature. Everyone puts on formal corporate wear.

Some companies have a dress down policy to encourage creativity, and innovation.

Induction can take a full day or a full week.

4. Performance, work attitude and potential assessment

Performance appraisal is not just a formality.

It is an assessment of performance and work attitude.

The person with the best performance and work attitude, plus the potential for growth, will be trained for higher position.

That is why training needs analysis always goes with performance and work attitude assessment.

The training needs analysis forms the basis for future investment in human capital.

5. Learning and development

When you know what to train, you have to decide on how to train.

Regardless of the form of training, it takes time and money.

Investment in human capital is a concerted effort for the whole company.

Some employees face the problem of not having enough time for training. Their managers give them projects upon projects, until they have no time to attend any training.

They will leave the company, because their skill set is


stagnant. They also feel that the company is more interested in leeching the life out of them, rather than viewing them as an asset.

That is why the company has to provide the motivation, time and money for employees to attend training.

6. Returns on investment

Since investment in human capital is big money. The money goes to trainers, and the employees, there is a need to ensure that the money is well spent.

Even if the training is on the job training, both the supervisor and the employee have to set aside time to learn.

It is a loss of man hours to the company.

While it is easy to compute the return on investment for hard skill training, it is difficult to do so for creative courses.

How do you compute the return on investment for creativity class?

A great idea only comes to a person once in a life time!

No matter how smart or how creative a person is, great idea that changes the world does not happen everyday.

Investment in human capital is easy when money is available.

However, getting an accurate number to account for the return on investment is not easy.

That does not mean the company has to reduce its investment on human capital.

After all, a business needs people.

Machines and equipments do not sell products. Machines and equipments cannot create new products.

You need people to do that.

The ultimate success in the investment in human capital occurs when a company can produce outstanding CEOs for the foreseeable future.

About me:
Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways 



Article Written By scheng1

Last updated on 27-07-2016 76 0

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