Investing in Human Capital
buttons.Investment into human resources
Enterprises become increasingly aware that proper investment into human resources can have a significant impact on their performance, which of course also affects their competitiveness. The corporate culture exactly offers the greatest source of competitive advantage of enterprises. Continual adaptation to changing market conditions attracts businesses to invest their energy and finance to staff by improving their competencies. Businesses improve their human resources and consequently increase their psychological and professional assets by investing into human potential of individuals by improving their skills and competencies. There exist various ways of investment into human resources. Businesses can invest in general human capital, which is an investment into specific or general training that enables acquisition of general knowledge usable in various companies. This results in higher future expected return of investment. The second option of investment into human resources is to invest in specific human capital. Specifically, it is investing in the improvement of specific competencies and skills for a particular job. This form of investment is less risky in terms of staff turnover as the use of specific knowledge is less likely to be used in other companies.
There are also other forms through which the company can provide investment in human resources, for example, by improving working conditions by using more efficient and innovative protective aids and tools. The second way is to improve the health conditions of employees through quality social programme. The third form of investment in human resources could be improvement and expansion of business skills, competencies and abilities achieved by high-quality corporate education. All the above-mentioned forms of investment into human resources aim towards the overall development of individuals and also his/her acquisition of new skills, competencies and abilities, as well as a change in behaviour and attitudes of individuals towards the company and its objectives.
When investing into human capital, the enterprise should pay attention to the criteria used for investments into fixed capital, taking into account also the specifics and factors that affect the overall investment process. When considering the philosophy of strategic planning into human resources, it is necessary to take into account two criteria: first, feasibility of investment which answers fundamental questions about the availability of necessary resources, efficiency, time factor, the size of capital invested and the like. The second criterion is the eligibility of the investment. Then, the investor confirms the correctness of the decision to implement the investment. The evaluation process will take into account the appropriate approaches and methods, including the time factor and also the risk of investment into company's human resources. Another issue to be taken into consideration in company decisions to invest in human resources is the fact that such decision is limited and depends mainly on the estimated volume and availability of capital expenditures and also on the expected amount of income from investment management, cost of capital and optimally quantified assessment of the investment period.
Investment into education of company's human resources
In economic theory, investments in education of the employees are the most common assessment of the investment in connection with the analysis of investment in human capital. The development of required skills of the employees is mostly provided by two key elements: personality training and education. Personality training can be understood as the process of creating the personality of an individual. Education is a form of development and shaping of the personality of an individual. These two elements represent important components of the activities of personnel management. Personnel management, by influencing behaviour and skills of employees, seeks to effectively achieve the objectives within the frame of the company's strategies. In this process, creation of suitable conditions for the implementation of individual education of employees, organised informal learning and quality corporate learning system play the most important role. Further, business system of education in the broader sense focuses on the formation of working skills and social characteristics essential for creating healthy personal relationships of the employees [8]. This is a repeating cycle based on the objectives of the corporate strategy and also based on the principles of corporate training policy. This cycle further relies on organisational and other business conditions of education. It consists of four phases of the long-term process of effective training and development, as presented in Figure 2.
Figure 2. Four phases of the effective training and development in the company.
In order to effectively evaluate investments into human resources, it is necessary to carefully plan company's educational and development activities. A common problem, however, is usually insufficient budget for the required scope of education, training and other activities. The lack of subventions is also the main reason why trainings are carried out irregularly. There are two ways of investment into human resources: companies may choose internal (intra-unit) and external (outside the enterprise) form of education. Each of these options has their advantages and disadvantages. The internal form of education, which includes coaching, assisting, working on projects, internal briefing in the performance of work and so on, is by the majority of businesses considered to be a more effective form. On the other hand, the main obstacle to application of this form is usually a lack of the required volume of financial resources and a lack of suitable trainers. External form of education, carried out outside a company, is also considered to be faster and easier. The problem may occur if the supply institution misunderstands requirements, which immediately reflects in the amount and structure of the expected total return by investing in human capital of the company.
Investment into benefits in the field of human resources
Except for investing in corporate education system, it is also important to invest into business benefits for human resources to ensure that capable employees that create a competitive advantage in business are recruited and retain in business. We assume that investing into an effective system of distribution of corporate employee benefits is a key solution to recruit and keep employees but also a way to further develop teams of high-quality employees.
Business benefits presented in Figure 3 should be arranged so that they increase employees' motivation and interest. It is therefore necessary to regularly evaluate business benefits and check how effective, fair and appropriate they are in order to contribute to the assessment of employees' success and consequently to the system of rewarding.
Figure 3. Business benefits.
