The Measurement of Human Capital

The full article can be read at:  https://ssrn.com/abstract=4049062

The term human capital refers to the economic value of an employee’s experience and skills. Human capital includes assets like education, training, intelligence, skills, health, and others that employers value, such as, loyalty and punctuality. As such, it is an intangible asset or quality that is not listed on a company's balance sheet/statement of comprehensive financial position, yet has a profound and direct impact on its financial bottom line.  Human capital is perceived to increase productivity and thus profitability. The more a company invests in its employees, the higher the levels of its productivity and success become.

The psychological-behavioural value drivers of human capital reside in the following factors:

*Psychological wellness/being  

*Psychosocial health and safety 

*Employee engagement/Job satisfaction, including training and learning opportunities/Job performance

*Organisational Culture 

Employing any form of capital holds inherent risks for business managerial-leaders.  Human capital is no exception.  This asset is in the final analysis made from flesh and blood, tends to become emotionally upset, becomes fatigued, falls ill, disengages, experiences personal problems, is often subjective, loses interest and motivation.   Risks, and their effects cost the organisation money, whether in direct economic costs and/or indirect opportunity costs.  

The risk of e.g. absenteeism, as a result of factors, such as, psychological un-wellness, un-safeness, job dissatisfaction, disengagement, lowered job performance and toxic culture, is one of the major factors for business managerial-leaders to take into account, when employing human capital. 

AssessmentWorld Pty Ltd offers quantitative organisational surveys, enabling management to calculate human capital risks and their real cost effects.  The results of these surveys, over time, also enables management to implement interventions, measure, track, and report on their effects.  These statistics and their graphic displays can further be utilised in organisations' annual integrated reporting documents.