Human Capital is a critical element of Intangible capital. It can be either an asset a liability--depending on how stakeholders view the performance of your human capital. Human capital is people. And people are at the heart of any organization. Calling people human capital is not meant to demean or de-humanize people. Rather it is a necessary step to identifying specific competencies, knowledge, social and personality attributes, including creativity, that people contribute to an organization’s collective ability to produce economic and non-economic value.
People bring with them their own backgrounds, influences and experiences. Their contribution to an organization can be enhanced by education, training, communication and social interactions provided or facilitated by the organization. Human capital is what creates innovation, emotional intelligence, “connectivity” and definition to an organization and its culture. Human capital is also the heartbeat of relationship capital, the originator of strategic capital and the sustainer of structural capital.
Unfortunately, Accountants must treat human capital as an expense--people are not an asset in the traditional sense as they are clearly not owned by anyone. Yet human capital is a core asset in a modern sense. The modern collaborative enterprise begins with people and requires constant input from smart people to sustain and innovate. That’s why ICountants are needed to bring different perspectives and measures of human capital.
The value of human capital is determined by the sustainability of the culture, the quality of leadership and how and organizations defines its purpose and the requirements to fulfill that purpose. Ultimately, it is the organization’s strategy and the stakeholders’ needs that provide the measuring stick for the success of human capital.