Once it was personnel, then it became human resources, now it's 'human capital management’. The new term symbolises the up market, strategic, talent-related aspects of human resources, and it seems that all the major consultancies are using this term for their people-related services, (although it has not generally been taken up in operational ‘people’ departments).

Just as we might question whether knowledge can be managed, so we may ask the same of human capital. The truth is, an organisation does not own it in the way it might own other forms of capital. What happens is that the time of people is hired - whether on a full time, part time or occasional basis – and those people put their personal human capital at the disposal of the hiring organisation. Human capital management involves the securing of such capital, and then the retention of its availability as long as it is valuable. In addition, it is mutually beneficial to invest in growing the value of individuals’ capital – especially those with a semi-permanent commitment – on the basis that the higher the value they bring, the higher the value they can create for the stakeholders of the organisation.

As an individual, my human capital is the sum of my personality, personal competences, professional knowledge and skills, qualifications and experience, ability to learn, and my network of contacts. It is likely to increase in some small way every day, but some events and experiences may give it a real boost. These may be deliberately planned, or emerge unexpectedly. Normally, my human capital will increase over time, and thus my value to an organisation. People are assets that do not (normally) depreciate. We have to say normally, because it can be the case that knowledge and skills can become outdated and redundant. People can indeed literally become a ‘liability’ instead of an asset.

The health of relationships in life generally revolves around expectations, and so it is for hired human capital. At the time of hiring we are given a set of expectations, some of which may be backed contractually, and others which are less tangible. If these are not met, we begin to ask questions as to whether we should continue with the particular organisation concerned. These less tangible areas include such things as social events, travel opportunities, equipment provision and so on, and almost certainly opportunities to grow. Lynda Gratton, of the London Business School, has made an interesting division of the expectations employees may have of human capital enhancement in her book The Democratic Enterprise.1 Like Thomas Davenport2 before her, she suggests it is better to consider employees as investors rather than assets – they invest their own personal capital in an organisation with a view to growing it.

This capital, she suggests, is divided into three elements. The first is intellectual – increasing explicit and implicit knowledge through experiences and planned learning events. An individual’s desire and capacity to learn are crucial factors here – learning at every stage of the learning cycle. The stronger these qualities, the more successful the investment and the greater the gain in value.

The second element is emotional capital. This comprises self awareness, individual resilience and integrity. The experiences of work provide many opportunities that are not available in other arenas. So we learn how to build relationships with a great variety of people, how to deal with different types of stress, how to give and receive feedback constructively and when to admit mistakes. As we mature we understand more about politics and power. It is very noticeable in the first couple of years how graduate trainees change and grow as they develop emotional capital, a process which ideally continues through life.

Finally, social capital provides the third element. This is about relationships. Organisations provide the scope for people to build both friendships and mutually beneficial work relationships that develop an ever increasing network of people who are willing to help them. Relationships are both given (through the situations we are placed in) and sought (through initiatives we may take). Very few people recognise the importance of ‘social capital’ as a part of overall capability, whereas capability frameworks will almost always cover the emotional, and usually the intellectual.

As individuals grow, and increase their value, so the organisation benefits if it is smart enough to recognise and harness the growth. All the elements can lead to both enhanced performance and the development of potential. Emotionally mature people make better decisions, especially where people are concerned. Networks and contacts bring their own benefits in better functioning teams, securing open doors for business, or acquiring knowledge.

So what does this mean for personal development plans? It implies a much broader dialogue than merely the development needs arising from appraisal. These three elements can provide a platform for planned development of a person’s human capital. Even though promotion possibilities may be limited, the challenge for managers is to organise work experiences and choose off the job learning opportunities which provide continuous growth. In particular, thinking about work challenges in terms of these three elements may give quite a different perspective to ‘on the job learning’.

Talented employees know it is time to move on when they are conscious that the rate of learning is too slow – in other words their intellectual, emotional and social capital are just not increasing fast enough. The challenge to managers and developers is to both know when this is happening and to be able to respond to it before it is too late.

References
1. Lynda Gratton, The Democratic Enterprise, FT Prentice Hall, 2004.
2. Thomas O Davenport, Human Capital, Jossey Bass, 1999.

Andrew Mayo is a consultant, speaker, writer and facilitator in international HR management, specialising in people and organisation development. He can be contacted on +44 (0) 1727 843424.

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