Human capital and innovation economy

Human capital and innovation economy

Part One of a Two-Part Series Examines Managing People to Produce Maximum Business Benefits and Return on Investment in Their Development

A team of talented employees and managers tackle tough business issues.

In an article published in the Bangkok Post in February, I explored how the management of people has changed along with the economic evolution of humanity, from a society of hunter-gatherers to the agricultural era and industrial until the age of knowledge and information. Today, let’s discuss how effective people management in the innovation economy requires a new perspective on how best to manage people: human capital.

The OECD defines human capital as the stock of knowledge, skills and other personal characteristics embodied by individuals that help them be productive. Investopedia views human capital as the economic value of an employee’s repertoire of knowledge, skills and experiences, including assets such as intelligence, education, training, skills, health and other elements valued by employers such as resilience, loyalty and punctuality.

As such, the concept of human capital views talented employees and managers as assets for a business. But these human assets are not listed in a company’s balance sheet. As a creative person, my automatic response is: Why not?

A fundamental assumption of the concept of human capital is that all investments in human capital increase the productivity, profitability and growth potential of an individual, a business and an economy. Thus, HC management aims to bring the right talents on board to build a base of capable and well-aligned human assets, and then invest in further development (such as continuing education programs and individualized upgrading and requalification). ) to preserve and possibly increase its value.

Human capital is also essential to help a company deliver meaningful innovations. After all, innovation begins with creativity, with great ideas springing from the brains of talented individuals who collaborate on a worthwhile idea to transform it.


The deeper the expertise and the broader the general knowledge, skills and repertoire of experience of each talent, the easier it is for them to connect the dots to come up with truly exceptional ideas that form the basis of meaningful evolutionary innovations. or revolutionary revolutionary innovations.

The more innovation companies produce, the more innovative and prosperous the economies in which these companies operate.

In recent years, the human capital movement has gained momentum, and with good reason. But to elevate human capital from a buzzword to a new workable people management paradigm, we need to understand and address several interesting challenges and unresolved issues with the concept.

Human capital migration captures the challenge that many high-level talents tend to move from rural areas to work in cities, and from developing to developed countries. While this might be a logical step for a high thief, it is unfair to rural communities and emerging countries who have provided talent with a basic education. They suffer from a brain drain which further limits their potential for economic development and being able to offer attractive conditions that could convince their brightest minds to stay.

Low employee loyalty and high turnover rate pose a comparable challenge for companies investing in human capital development, to see their employees leave for a competitor who offers them a higher salary in order to benefit from their new skills without pay for the training itself.

Our education systems were originally designed to meet the needs of industrial companies. Nowadays, they continue to teach outdated knowledge and skills, which is another great challenge for the full advent of human capital management.

In particular, many experts lament that many graduates entering the workforce lack the digital know-how, comprehensive entrepreneurial and cognitive skills needed to be successful in the modern and rapidly changing and complex innovation economy.


Here’s another interesting dilemma: Those who invest in preschool and university education as a “human good” (often the family or, in some developed countries, the state) do not get a direct financial return on that investment.

In other words, companies go out there freely enjoying the benefits of acquiring educated human resources to work for them without having to pay for their primary and secondary education.

Now, managers can rightly claim that companies pay wages to their employees and taxes to the government. However, these payments are still not a compensation for the initial investment in education, but rather an equivalent for the work actually done or for the government providing the infrastructure and stability necessary to do business.

Another challenge is that experience is often not properly captured in human capital. For example, as a junior corporate banker dealing with a default for the first time, you may consider yourself lucky if an older coworker can walk you through the legal steps to follow and pitfalls to avoid, as you go. through the bankruptcy proceedings of a client.

Unfortunately, many companies have started to “outperform” their senior managers and employees to cut costs, which will lead to a dangerous “experience leak” down the road. Effective human capital needs a healthy mix of generations, and a long working life full of experiences can make as valuable contributions to results as the latest know-how.

In the second part, I will share with you a creative solution that promises to solve most of the challenges related to the concept of human capital and to fairly reflect the investments made.

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