Measuring Human Capital
Before we discuss measuring Human Capital we must define what it is, and its role in a 21st century business organisation.
Human Capital is the human expertise necessary for any business to create wealth which when developed to certain minimum required levels and built into the fabric of a business, can be relied upon for its sustainable competitiveness. In other words people are not just a resource to be used in the process of making money, but are the essential reason companies are able to make money.
The Problem
This is of course the ideal situation which in reality is often not the case. The problem is that often companies are at significantly increased risk because unmeasured inertia towards new revenue generating ideas and activities, and unmeasured obsolescence hidden by the momentum of a business, seriously constrain progress, and result in considerable waste of resources.
The Solution
This is where measuring Human Capital becomes critically important and hugely valuable to a company who recognises that the real force behind its financial results and its true capacity to compete and generate wealth into the future is revealed by measuring the strength of its 'Entrepreneurial Drivers'. This strategic insight into a business provides immediate access to its hidden core, creating the platform for its accelerated development.
Five Entrepreneurial Drivers
Whatever the financial results of a business, they can be traced back to the extent to which five 'Entrepreneurial Drivers' were behind all the activities of its people. Below are the five 'Entrepreneurial Drivers', each of which can be measured and indexed.
- Customer Impact - Expressed throughout a company, as the prime generator of income and profit.
- Innovation - Directed externally as the means to customer impact, and internally to focus on new revenues and margins.
- Risk and Reward - Direct participation by the organisation in the consequences (good or bad), of the financial performance of the company, as the catalyst for innovation.
- Competitive Engagement - Enthusiasm by people at all levels in an organisation for their participation in actively building the business, by expanding their contributions beyond current experience.
- Leadership - The enthusiastic translation of a company's vision and strategy to the people who must execute it.
Article submitted by James Raath.
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