Over a decade ago some experts considered the expression "human capital" taboo because it reduced humans to being of mere economic interest. Since then, employees have advanced from being of pure "economic interest" to being the most important prerequisite for business success in the eyes of employers. So it has not been possible to banish the term 'human capital' from business jargon. Instead, the expression has become accepted, and with it, also the importance of each individual employee to the company.
Knowledge is more important than ever
Human capital includes the entire know-how that a company has accumulated under its roof. The company's competitiveness, innovation and potential for change are all dependent on it. With the increasing complexity of machines, equipment and IT infrastructure, the knowledge and experience of employees is more important than ever. There is no payback on investment in technology if no one in the company is able to use the new equipment. And it is not only rapid technological change that is making human capital a key factor in long-term success; the tight labour market is as well.
Human capital is only on loan
What makes it special? Even where, collectively, human capital is a significant part of the company, it is still individually generated by each employee. This personal potential is unique and non-interchangeable. Each employee brings specific skills, talents, abilities and experience with them, which they take with them again on leaving the company. Training may be financed by the employer, but the knowledge gained does not "belong" to the company. Human capital is always linked to the individual and not the company itself. This gives HR the challenge of retaining and developing human capital in the long term, by supporting employees individually, recognising their needs and making optimal use of their skills.
Social capital must be built on trust
In contrast to human capital, social capital comes from employees' willingness to interact with each other and other people. It is an important factor in organising efficient processes and creating a good working atmosphere within the company. And it is not only the relationships between employees that play an important role here. How people deal with superiors, customers and partners can also have a positive or negative effect on social capital. Building social capital requires a basis of trust, on which a culture of cooperation and mutual support can develop. Teamwork isn't possible without social capital.
Strong teams for strong performance
Studies have shown a correlation between the level of social capital, employee satisfaction and business success. But the amount of social capital can vary between departments, and even individual working areas. The stronger and more reliable these networks are, the better people perform. An employee oriented corporate culture, in which values are taken on board by employees and practised by managers, promotes both the psychological and physical wellbeing of employees. This is an important prerequisite for developing strong social relationships. In a nutshell: Where employees feel comfortable in the company, they will feel valued and trust colleagues and managers, which in turn increases their commitment.
Social capital strengthens your presence in the job market
Because social capital is not only a reflection of the relationships between employees themselves, but also involves external contacts, it is of particular importance to HR. The networking done by your employees, particularly via social media, increases your company's presence in the job market. Staff should be encouraged to use these channels. By providing suitable content for Facebook and LinkedIn etc., HR can involve employees in the recruitment process. However, before this happens you need to convince people to act as champions. Because to be recommended, a company needs to be worth recommending! This shows how much social capital is worth.
CareerBuilder e-Bbook: More social capital means more recruitment potential
Find out how to make the best use of your company's social capital in our e-Book "Employee Referral Programmes - How to make employees ambassadors and headhunters". Facts and figures provide information about the recruitment potential of your own employees. Practical tips show you how employee referral programmes can be quickly and effectively implemented in your organisation.
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