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Human Capital Development - Why Should We Care?

A company is not a company without its hardworking human capital. Thus, in a scenario where human capital can either plateau or grow, it is always wiser for companies to opt for the latter. However, human capital development is still often overlooked and needs further assessment.


Photo by Ryoji Iwata on Unsplash


The World's Situation

First, it's important to clarify the definition of human capital. Kenton (2020) defines human capital as the "economic value of a worker's experience and skills," this includes education, health, overall productivity, training, loyalty, and many more.


There are a number of ways you can calculate for human capital. The World Bank calculates its Human Capital Index as potential productivity losses caused by shortfalls in health and education. For most countries, their Human Capital Index increased from 2010 to 2018 but decreases from 2018 to 2020, i.e., when the COVID-19 pandemic started to hinder workspaces. The figures are drastically different for those who handled the COVID-19 pandemic well and for those who didn’t. For example, Australia had an HCI score of 0.75 in 2010; a child in Australia would reach 75% of his/her potential in the future. This score increased to 0.78 in 2018 and decreased to 0.77 in 2020. In more severe cases, the point drops could be as much as 8% (e.g., Serbia).


Why You Should Care

Lack of human capital development is very detrimental to a company's success. Mamaqi and Miguel (2014) found that human capital development, such as training, positively correlates with business performance. A good business performance means to be more efficient and effective in conducting business. This would allow your company to potentially increase revenue and growth.


Most importantly, in a world where many variables are changing - partly due to COVID-19 and partly due to digitalization, attention to human capital is vital. Recruiter's article suggests that companies should further prepare for technological changes, ensure human capital changes are in line with talent evolution trajectories, and reevaluate (and enhance) careers that are static (i.e., repetitive work). It is certain that many changes are going to come, thus, it is only wise to start developing your company's human capital now.


Photo by Leon on Unsplash


Let's Jump on the Trend

According to the previously mentioned World Bank report, Indonesia is still placed below average in term of its Human Capital Index. There are many gaps that needs to be improved. However, Indonesia is slowly catching up. Your company wouldn't want to miss out on this trend.


There are many ways to develop human capital. Mostly, it’s institutional and requires the effort of many government agencies, such as increasing healthcare and providing gender equality in education. However, in its essence, human capital is everything that adds economic value to workers and employees. Any response that answers “How can our employees be more productive” is developing human capital at a company level, for example, workshops, skills development, mentoring and training, and or hiring a consultant. Kitameraki can help you with this!

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