What is Human Capital: Functions and Types in 2022

What is Human Capital: Functions, Tasks, and Types

What do you mean by Humans Capital in 2022

Human Capital can be broadly defined as the stock of knowledge, skills, and other personal characteristics embodied in people that helps them to be productive. Simply put, human capital is human capital. It is called human capital because it is an aspect of knowledge, expertise, ability, to skills in one package that makes a human being an asset to the company.

Human capital is an effort to develop and manage human resources to achieve the most important level that is higher if judged from a performance perspective.

Now, human capital is an added value for the company in carrying out its daily operations through motivation, competence, and teamwork between teams. Although it has a very important role in supporting the operational activities of a company, it turns out that there are still many people who do not know about human capital. Maybe including you, huh?

Contributions given by employees can be in the form of developing employee skills to increase company productivity. It can also be a transfer of knowledge possessed by employees to the company, as well as changes in the culture in the company. More fully, let’s discuss in this article, Entrepreneurs.

What is Human Capital?

Let’s start with the notion of human capital, shall we?

In a company, there is a department that takes care of human resources or commonly known as HRD. Well, Human Capital means human capital.

More fully, human capital is a combination of aspects of knowledge, expertise, and skills that can make an employee an asset to a company. These employees can be part of the HR capital because they contribute to improving the abilities of other employees.

The employee also devotes the knowledge he has to the company’s needs and may make a cultural change in the company.

Human capital usually places more emphasis on employees, that they are quite important assets for the sustainability of the company. Thus, employees have the opportunity to increase their potential to increase their performance products in the company.

Human capital views humans as the primary key to an entity. Human capital always focuses on strategic planning to maximize the talents and skills of human resources in implementing the company’s or organization’s business strategy.

Difference between Human Capital and Human Resources

Maybe you have a question, are human capital and human resources the same? Or is it different?

Let’s look at the definition first, shall we?

Human resource is a department that manages people as company resources to support the targets to be achieved by the company.

Human capital is a department that manages people as valuable capital belonging to the company that needs to be increased in value so that it can provide benefits for the company.

Human Resources / Humans as Resources

When humans are considered as a resource, of course, the people in this company will run out, decrease in value, and decrease in productivity over time.

The company, to get maximum profit, must maximize the resources it has.

All costs incurred in the recruitment process and while employees work in the company must be able to provide maximum benefits for the company as well.

The employee will be judged on the results of his work, so the better the employee’s performance, the better the award received by the employee.

Human Capital / People as Assets

Meanwhile, when people in the company are considered assets, the perspective will be different.

Employees of any level are investments owned by the company, which have been started since the job search stage.

Starting from the recruitment process, training, then developing into a talent, to paying salaries and compensation, is a form of company investment in employees so that over time talent can continue to increase in value.

Ideally, by increasing the value of this talent, it is expected to bring progressive profits to the company in general.

Modern Human Capital Theory

Nowadays, human capital theory is often discussed, broken down, and further studied to measure the intangible components of human capital, such as social capital, cultural capital, and intellectual capital.

1. Cultural Capital

Cultural capital is a combination of knowledge and intellectual intelligence that can increase a person’s ability to achieve a higher social status or to be able to do work that is more economically useful.

In the world of economics, further education, job-specific training, and talent are ways a person builds cultural capital to anticipate higher levels of wage income.

2. Social Capital

Social capital is mutually beneficial social relationships that have developed over time, such as corporate values ​​and brand recognition.

Social capital is different from human assets. For example, someone’s charisma because will not be able to be taught or transferred to others even in a way that can be done by knowledge and skills.

3. Intellectual Capital (Intellectual Capital)

Capital is a very intangible value that can provide a competitive advantage to the business.

The most common examples we find are intellectual property, creations of the mind of workers, inventions, and works of art and literature.

In contrast to human capital assets in the form of skills and education, this intellectual capital will remain in the company, even after the employee resigns.

Why is that? Because generally it will be protected by patent law as well as copyright and non-disclosure agreements signed by the employee.

Human Capital and Sustainable Development
Human Capital and Sustainable Development

Types of Human Capital

There are several types of human capital that you need to know.

1. General Human Capital Management

This type of human capital focuses on developing managerial competence, leadership, functional skills, and the ability to make appropriate decisions.

In this case, general human capital management is suitable to be developed in human resources with an equivalent level of executive management or higher.

2. Strategic Human Capital

The scope of strategic human capital includes strategic expertise and skills gained from experience when dealing with certain situations or conditions.

Generally, the skills that will be developed are in the form of strategic abilities to manage or manage finances related to budget cuts to be more efficient when financial conditions are less favorable.

3. Industry Human Capital

Industry human capital is closely related to various knowledge about industrial aspects. Usually, this is covered in the context of regulations, suppliers, and technical implementation.

This type of human capital applies to entities whose business operations refer to similar rules.

4. Relationship Human Capital

Broadly speaking, relationship human capital has the main focus on increasing the intelligence of human resources in terms of communication and creating good and effective interactions with other people.

So that the implementation of their duties becomes smoother and the performance of employees or the company will grow.

5. Company Specific Human Capital

Company-specific human capital is related to the structure and works culture of a company.

Employees are required to be more adaptive to everything covered by the internal provisions of the company concerned.

Thus, employees can carry out their duties and responsibilities by the company’s vision and mission. Finally, the development of the company will be easier to live.

How Human Capital Function

Human capital has the function to design strategies that aim to build engagement, increase employee loyalty, and reduce turnover rates.

The importance of the human capital function for one important reason, namely to avoid big losses if the assets and investments that have been invested by the company cannot develop and leave the company.

In line with the assessment of talent every day, starting from its growth, contributions made, and skill enhancements that directly provide change and encourage organizational development.

Broadly speaking, human capital will focus on developing talent/ employees for the good of the company.

Human Capital Tasks

Some examples of human capital tasks are as follows:

1. Recruiting Employees

Recruiting employees is a very important initial process. To obtain good human capital, the HRD team must be able to carry out employee recruitment activities appropriately.

The process starts by creating job vacancies, sorting incoming candidates, conducting applicant tests, conducting job interviews, to signing work contracts.

A company that has good HR will generally look at the psychological condition of prospective employees. This will provide an overview of the prospective employee.

2. Assign Jobs and Responsibilities for Each Employee

If you have obtained employees according to their positions, then assign the work and duties of each. Each employee has different duties, even though they are in the same department.

By distributing and delegating work regularly and according to the abilities of each employee, the performance in a department will be maximized rather than just giving tasks.

3. Manage Workload

For companies that are experiencing rapid development or large companies with heavy workloads, they must think carefully about the workload of their employees.

Is the current number of employees considered sufficient to carry out all tasks? Or should new employees be recruited so that the company’s work performance can increase?

Human capital can implement an overtime work system. However, the decision depends on each company’s conditions.

If the type of work that already exists turns out to be too heavy and it is no longer possible to charge overtime to employees, it is better to recruit.

4. Provide Training

Human capital can assess the ability of employees. Among the many employees in your company, there will be one that stands out among them. Maybe from the educational background, or from the employee’s work performance.

Their strengths can be improved even better by doing training. The potential they have can increase the self-worth of employees and the value of the company in the future.

5. Check Attendance and Punctuality

This is very important. By checking the attendance rate and also the punctuality of each employee, it will be seen how employees value time.

This will later reflect on them their work, are they taken seriously or not?

Those who are punctual are more likely to have a high sense of responsibility and can be relied on well on.

6. Leveraging Technology for More Efficient Performance

With the rapid development of technology as it is today, human capital activities can be carried out in a more organized and hassle-free manner.

Now, many human capital work processes use technological developments, such as using certain software.

In addition, the attendance and timeliness of each employee will be saved automatically. This technology will show the level of performance of each employee and how they value every time at work.

Q.1 What are the duties of human capital?
Answer: Some examples of human capital tasks are as follows: (1) Recruiting employees; (2) Assign jobs and responsibilities for each employee; (3) Regulating the workload; (4) Providing training; (5) Checking attendance and punctuality; (6) Utilizing technology for more efficient performance.

Q.2 What is called human capital?
Answer: Simply put, human capital is human capital. It is called human capital because it is an aspect of knowledge, expertise, ability, to skills in one package that makes a human being an asset to the company.

Q.3 Why is human capital important?
Answer: The importance of the human capital function for one important reason, namely to avoid big losses if the assets and investments that have been invested by the company cannot develop and leave the company.

Q.4 Explain what things are included in human capital?
Answer: Human capital includes (1) General Human Capital Management; (2) Strategic Human Capital; (3) Industry Human Capital; (4) Relationship Human Capital; (5) Company Specific Human Capital.

Conclusion

Now you know that human capital is a form of asset that must be owned by a company so that its business operations can run smoothly and develop rapidly.

Nirmala Sitharaman, Minister of Finance of India, revealed that in addition to infrastructure, investment in human capital, including training and education, can increase labor efficiency and productivity.

Ultimately, a focus on human capital will accelerate economic growth in Indonesia.

Entrepreneurs need to know that there is a direct relationship between the fiscal health of an organization and improving the quality of human capital.

The success of human capital is considered effective in giving influence at the national level. Are you ready to invest in human capital in your business?

Also Read: What is a Financial Statements? Meaning, Types & Purpose

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