Human capital has been defined in different ways by various interest groups. In our view human capital is basically the capability of an individual to contribute some value to the community, employer or society he or she lives in. A higher level of human capital would enable even better value being created.
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A human child may be described as having no human capital and is in need of support as it grows up in the community. The young child needs food, education, home and security as he or she grows up. The support comes from the parents, extended family, the local schools and perhaps government contributions where available. It actually consumes human capital.
With education at school and further learning at college or university, the young adult begins to acquire some ability that is beginning to be useful and valuable to a sustainable life in the community and society. The ability to read and count are foundation skills. This is enhanced further by specific learning of subjects that increase the capability to add value such as programming a computer, cooking for a restaurant, marketing and selling products, and driving an agricultural tractor at the farm, or teaching young kids at the local school. All these are called skills. These skills add value to life and is invaluable, and it’s now referred to as human capital here. These skills generate a salary or wage, or financial income.
It is useful to note that human capital creates financial capital that is usually recognised as crucial to enterprise and economic development traditionally. Through human efforts and skills, a person creates monetary value from work activities, and saves some of this value, to become financial capital for a commercial or industrial enterprise, or simply any business opportunity. As such perhaps we should see financial capital as a derivative of human capital.
The world we live in today is the outcome of contribution, efforts and skills of people through the ages and it will continue to evolve with technological advancement and social development.
Each phase of change from an agrarian society to an industrial one has been down to the availability and application of human capital and its derivative – financial capital, at work. The process now continues the transformation of our society from being an industrial one to a knowledge-driven economy and, soon, Society 4.0 where information is the main driver.
In Society 4.0, we expect to see daily activities, events, life and work in different forms, that could be vastly different from what we are currently experiencing, or have experienced in the recent past. The introduction of the internet and the smart phone has changed life globally and profoundly. As this continues, as it will in the near future, many more changes at work and personal life will be experienced and there is a serious risk of the inability to cope with these changes, for many people of our times.
Older people who are not adept at the use of technology will become victims of discrimination at work and in society in general. Poor computer skills and lack of ability to use the smart phone and its functions are simple examples. These people at work are at risk of early redundancy and shut out of the workforce forever.
Younger people on the other hand, lack life experiences and maturity to deal with life’s issues. Despite having a college education, many are likely to end up jobless when the use of Intelligence becomes the norm for large international conglomerates round the world.
For both these two segments of our society, there is an urgent need to re-look at the personal human capital of the individual in its present context and quickly evaluate its usefulness in the coming decade or two. To begin with, knowledge, experience and skills acquired 20 years ago, may hardly be relevant for work or life in the next 10-20 years. Perhaps what was learnt in the MBA degree 10 years ago might be increasingly irrelevant or outdated.
In this evaluation, new knowledge and skills for the future will have to be considered very seriously. As society changes, new knowledge and new skills are necessary at the work place because employers will intensely compete with each other for customers and markets. The individual at work must keep up and able to contribute and adapt to his or her organisation’s changing environment. Basic work roles are going to be replaced by Artificial Intelligence such as Engineering Robotics in factory production and use of cloud computing for automated accounting and business planning.
New knowledge and skills will be the new human capital required for the next two decades – for both workers and entrepreneurs.
We are fortunate today to have the global electronic networks which are a huge depository of knowledge and information to be shared by anyone keen to learn. This is a far cry from the days of the 1970s when people acquire knowledge by travelling kilometres away to libraries, or hundreds of kilometres to attend campus-based classes in universities and colleges. If an individual is not endowed with sufficient finance for a plane ticket and living expenses for a good period of time, the dream of acquiring a degree will be just a dream, even within one’s home country.
Other people learn and acquire knowledge by correspondence studies – which is the use of specially predesigned study packages mailed from correspondence schools of the 1960s-70s, which was fairly popular then, especially for students studying on their own for the University of London external law degree. This still exists in a modified form today, which we refer to as e-learning. Here the person acquires knowledge and information from the worldwide electronic networks in the split of a second without loss of time and discomfort. Course providers are also many and varied on various subjects and fields of studies. All these make the process of human capital acquisition much easier and cheaper than before.
Acquiring relevant knowledge
While the global electronic networks enable people to acquire information and knowledge, it is also necessary to be discerning in the selection of sources and relevance of information or any learning courses offered, whether free or otherwise. Without a clear understanding or guide, one may end up learning and acquiring irrelevant knowledge and non-marketable skills, or sometimes, incomplete information and knowledge. The subject of management is popular and the amount of information and course offerings are so overwhelming that it is beyond any description. Some providers of these management courses are great and relevant, but many more are not. Needless to say, many of these e-learning courses are also expensive, especially degree award courses. Therefore, care has to be diligently exercised before enrolling and spending time to acquire knowledge that can be developed into skills, and hopefully become human capital for the future.
Human capital development takes place first at the individual level. The person with initiative decides on his or her future and embarks on a learning journey to acquire information, knowledge and a certificate of learning as evidence of learning achievement. It is very much a personal effort and self-motivation must be the key.
In an organisational environment of today, employers need to stay competitive in the market place. It needs people with skills in customer service, sales and marketing to supervise the business operations and control the use of resources. As the organisation grows in size and business activities, it needs more of these skills. Many resort to hiring skilled people from other organisations including the staff of competitors. Some, however, motivate their employees to develop skills through learning and training. These forward-looking organisations consider employees as part of their human capital and talent pool.
Employees who are keen to learn are identified as part of the firm’s human capital pool. Investments are made in the form of organizing training events, providing learning resources and also rewarding learning and skills acquisition with attractive bonuses and rapid career advancement. Poor-learning employees are given some motivation and assistance. Those employees with little inclination to learn and improve at work will probably be encouraged to change their work roles or even leave the organisation altogether.
All these not only develop the total human capital stock in the organisation because they also form part of a strategy to reduce employee turnover and keep talent. Many employees do see the effort as part of recognising their contribution and career status in the organisation. Therefore, the human resource function of an organisation needs to make the learning and training process a highly visible activity to all employees and made that communication to employees a part of senior management agenda. A good organisation attracts and keeps better employees.
In the coming decade, the nature of work will change, especially with industrial automation, robotics, artificial intelligence and cloud computing. Most work roles that we understand of the conventional economy of today may be modified or even disappear in 10 years.
The individual will need to make some observations of changes in the employment market and review his or her current knowledge and competency level, relevance of existing skills and new skills to acquire as preparation for the next stage of our changing world. As mentioned earlier, knowledge and skills acquired some time ago, may be out of date and the individual would need new learning and advanced training. Yet in others, totally new skills may be needed for the future.
As routine jobs are taken over by automation and robotics, the individual will need to acquire more management and personal skills. These include creative problem-solving, leadership and people-oriented skills such as customer care, computer coding and those skills for working in the cyberworld. Some of the skills are indicated below.
Active learning or skills at learning
Oral and written expression
Reading comprehension – summarisation and making conclusions
Information and communications technology literacy
Monitoring self and others
Coordinating with others
Training and teaching others
Resource Management Skills
Managing financial resources and material resources
Judgment and decision making
Equipment maintenance, repair, operation and control
Technology and user experience design
Knowledge and skills acquisition have never been an issue in human development. It is only the content, form and speed of knowledge acquisition and development of skills. As the environment changes, the human being adapts to these changes, some more quickly than others because of a variety of reasons. Strategies to acquire and develop human capital differs from one individual to another. Among some the strategies include the following.
Request the employer organisation to provide learning of new knowledge and skills.
Attend formal structured lessons and earn certification as evidence of achievement.
Conduct personal research on the subject matter through the internet or library.
Continue learning through reading and writing on the subject matter of interest.
Give a briefing on the newly acquired knowledge or skills to the team members at the work place – both as a personal recapitulation as well as a sharing session to benefit others.
Participating in subject matter discussions at meetings, seminars or discussion groups.
Apply or practise the newly acquired knowledge at the work place or whenever a suitable occasion arises, such as in problem-solving situations or managing a group of workers.
Volunteer to lead or participate in situations where there are opportunities to apply the newly acquired knowledge or skills in order to improve further.
Actually, in the workplace there are numerous occasions or opportunities for the individual to apply and practise his or her learning and knowledge acquired. While new knowledge may be learnt outside in a seminar or college, the workplace is where skills and competency are developed through application and practise on a regular basis. Communication skills, decision making skills and problem-solving skills are some of those skills that are always required in daily work in dealing with customers, suppliers, colleagues and senior management. All these skills are part of the human capital stock of the individual.
Likewise, the organisation and its management would be identifying employees with talents and skills that they can treat as valuable human capital. At every event and work occasion, the individual employees are being observed for their level of knowledge and skills’ competence that will enhance the organisation’s performance and competitiveness in the marketplace. Employees with clear personal learning strategies will be noticed at some stage and such initiative is also a display of personal character and understanding of the ever-changing environment that the forward-looking employer organisation would also value.
The Australia New Zealand Institute (ANZI) was incorporated as a limited liability company in New South Wales, Australia, 1988. The ANZ Institute, is a learning and training organisation. Its mission is to promote, develop and enhance the human capital of individuals across all communities and their organisations