One of the concepts that has been receiving a lot of attention lately is the idea of “human capital.” Human capital represents the knowledge, expertise and skills that someone has as related to an ability to contribute economic value.
Human capital is not a particularly new concept. Indeed, the immortal Adam Smith recognized the importance of developing skills, and the impact that a person’s skills could have on his or her ability to produce. In the second book of his Wealth of Nations work, Smith pointed this out about the development of skills:
Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor, and which, though it costs a certain expense, repays that expense with a profit.
Paying Attention to Human Capital in Your Business
Pay attention to the people you hire for your business. Indeed, the wise entrepreneur knows how to match needs with talents. Figure out what skill sets you need to add to your business in order to increase efficiency and quality. When you focus on hiring the right people with the right skills, you will realize net profits.
In some cases, this means that you have to pay a little extra or offer better benefits for better employees. Your extra investment in human capital can pay off when your employees accomplish great things — and lead to better economic results for you. Hiring an expert means that you don’t have to spend as much training someone. Hiring someone proficient in a skill means that he or she can perform the work more efficiently, saving time and money.
Developing Your Own Abilities
You can also enhance your own “worth” in terms of human capital. Developing a marketable skill can make you a valuable commodity. The sum of your knowledge, abilities, talents, and expertise all contribute to how much human capital you have to offer.
Capital is something that a business or individual starts with. It is put to work and hopefully earns a return beyond the original value. That is the hope with human capital. Your abilities should make you useful in providing a return for your knowledge and skills. What you are able to do should translate into economic value for a business — especially your own business. Take what you already have and build on it. If your skills can provide value, and a return on investment, then you have high human capital.
Make an effort to develop your abilities so that you have high human capital. That way, others will be more willing to take a chance on you. When others are willing to use the human capital you provide, you are more likely to earn more money for yourself as well as contribute to the economy.