The Logic of Human Capital
Most of us think of human capital as human resources or the people that are employed in the business. This is one part of human capital. Human capital includes people as human personnel capital.
Human capital also includes the capital that improves innate human performance. This capital includes human capabilities as a separate set that can be developed and managed to produce results. This capital also included human knowledge as a separate set that can be created and delivered to assist humans utilize other performance solutions and produce higher-value results. Human capital is logically defined as “the personnel, capability, and knowledge capital that is mobilized through performance solutions to execute enterprise operations and produce results”.
Logically all capital must be defined as performance solutions to be deployed and utilized to produce a specific result. The post on August 6, 2007, The Logic of Capital Management, provides the background.
Capital utilized by the business is organized into four categories
Capital utilized by the business requires different professional capabilities to be professionally managed, which organizes four categories of capital:
- Business organization, process, and data capital to manage capital that directly produces a result and cannot, generally, produce another result. Business capital requires business knowledge and analytical capability
- Human personnel, capability, and knowledge capital to support and develop the worth of human capital. Human capital requires human handling, development, and coaching capabilities
- Facility equipment, supply, and record capital to manage reusable and consumable tangible assets and records. Facility capital requires expertise with the specific capital and administrative ability
- Management strategy, tactics, and intelligence capital to plan results and performance investments, to keep on course, and to know opportunities and ward off threats. Management capital requires management analysis and research capabilities
All capital must be professionally managed as capital utilized to produce results.
Human capital is organized into three classes to be integrate other capital and produce a specific result
Human capital is managed by a human capital unit that is responsible for developing, supporting, and maintaining human capital, for providing human performance solutions, and integrating human capital with other solutions to produce results.
Business capital is the integrating capital for all other capital categories. All performance solutions; including human personnel, human capabilities, and human knowledge; are integrated with the business solution in their capital class. There are three classes of solutions:
- Readiness capital includes business organization capital and integrates human personnel, facility equipment, and management strategy with the business organization to be ready to produce a set of results
- Production capital includes business process capital and integrates human capabilities, facility supply, and management tactics with the business process to produce a specific result
- Information capital includes business data and integrates human knowledge, facility records, and management intelligence with business data to produce results and document results produced
When the capital is integrated with business capital in the same class, the business can be managed and operated efficiently.
So, altogether there are twelve solution types, when capital is properly categorized into four categories for professional management and support, and when each category is classified into three classes to be integrated with the business capital and utilized in the business to produce results.
Human personnel capital is professionally-managed to keep the business ready to produce results
Human personnel are readiness capital to keep personnel in a readiness state to produce results. Each individual employed by the business, contracted to work for the business, provided by a business or consulting service, seconded for use by another business, or otherwise utilized to produce results are specific human personnel solutions.
The human personnel result unit must plan and acquire the qualified personnel solutions needed to produce specific results. Personnel must be maintained in a readiness state through orientation, incentives, and activities that help them understand and be positive toward the business. Personnel must be rewarded for their time, capabilities, result value created, etc. according to management tactics policy and human capital worth. Personnel must be deployed, where they have the qualifications and desire to produce results. Personnel, who are not producing results needed, may need counseling and improvement. Personnel, who cannot be utilized effectively to produce results of value to the business, may be developed and assisted to produce results of value for another business.
Human personnel capital is integrated with business organization capital. Business organization capital defines the human roles needed to produce specific set-results and end-results. This enables human personnel capital deployed to a set of results to be organized and utilized. Human personnel capital is managed by the result manager to produce results day by day. The result manager is supported by the human personnel unit for any human personnel performance problems.
Human personnel capital must be in place so the business is ready to produce sets of planned results, and normally are utilized by time to produce results in the set. The human personnel capital unit provides the personnel support needed so that personnel are ready to produce results.
Human capability capital provides a capability needed to produce a specific result
Human capability capital provides the specialized capabilities needed to produce difficult high value-quality results. Specialized human capabilities are defined by the business process, where specific innate ability, training, or experience is required to produce the results. The capability solution is salesmanship, problem solving, maintenance expertise, research ability, knowledge creation ability, etc needed. Human capability capital is defined independent of human personnel capital, which are the specific individuals providing time and capabilities. Several personnel solutions may provide the same capability solution.
The human capability unit organizes learning and human development needed by the business. Normal human learning is directed toward the performance solutions utilized and results produced by the business, and new solutions implemented and new results needed. Human capital development is directed primarily toward developing the specific capability solutions needed by the business. Human career development plans a capability development path for human capital to develop higher worth capabilities and produce higher value results. This specific business-specific learning and development enables human capital to produce higher-value results and increase their human capital worth.
Most human capabilities are deployed as personnel solutions to apply their capability routinely to produce a set of results. In some cases such as maintenance and customer service problems, results are organized around the human capabilities required. Some capabilities are latent to be utilized when specific occasional results are needed. Personnel can be redeployed when there is an overriding need for their capability solution to produce other results. Some personnel with specialized capabilities may be scheduled or redeployed to produce results in different result sets across the business.
It is very important to know the human capabilities required by the business to produce difficult results and the capabilities available as performance solutions to the business, and to have the flexibility to apply capability solutions, as needed, to produce high value-quality results effectively.
Human knowledge capital is the information that enables personnel to utilize solutions and produce results
Knowledge management normally manages knowledge with some relevance to the business by a subject and makes it available for use. Knowledge capital for the business is logically knowledge needed to enable other human capital to utilize specific business solutions to produce business results. Knowledge is not just made available for access, but is delivered where and when needed for use in the business. Knowledge is integrated with business data or accessible with business data access.
Knowledge includes all procedural or step-by-step instructions, explanations of result rationale and guidance in handling specific situations, result quality determinates and risk avoidance, computer help aids, and other knowledge needed to utilize performance solutions effectively to produce high-quality results.
The knowledge capital unit manages the creation, organization, maintenance, and delivery of knowledge. Most business knowledge is organized by result and performance solution to relate knowledge directly to the business. Knowledge is created normally by managers with knowledge development capability and experience with the results and performance solutions involved. Knowledge must be created by all development projects for the new solutions developed and improved results to be produced.
Human capital must be managed to manage business effectiveness and quality
Human capital has high impact on the effective utilization of solutions to produce high-quality results on time. Human capital must be managed as capital rather than as employees. Human capital must be acquired to provide qualified performance solutions needed to produce specific results. Human capital must be maintained like other capital through remuneration, incentives, morale building, counseling, etc. Human capital must be humanely retired or out placed when the business is no longer able to keep them productive.
Human capital must be developed continually. Human learning must enable utilization of new performance solutions to produce higher-value results. Human development must build on innate capabilities and experience to develop high-worth capabilities to produce difficult high-value and high-quality results.
Human knowledge is more than general business related knowledge available. Human knowledge must relate to the business to guide the utilization of solutions and the specific results produced. Knowledge must be delivered where needed in the business.
The business must integrate human capital with the business, keep human personnel capital productive, and support human personnel capital with the knowledge, learning, capability development, and incentives needed to utilize performance solutions effectively to produce high value-quality results on time.
