As the term human capital makes its way into the corporate lexicon, many companies are bandying it about freely while making no attempt to measure or manage the asset to which it refers. It's hard, after all, to make the connection between what's rattling around in employees' brains and the company's financial results. Many misunderstand the whole concept of human capital and see it as an effort by companies to create artificial worth by attaching a dollar value to employees' knowledge and skills. But a few progressive organizations, most notably Skandia Insurance Co. Ltd. of Stockholm, Sweden, have embraced the idea of human capital wholeheartedly and have made concerted efforts to track its value and manage it, achieving impressive bottom-line results in the process. Intellectual capital is the broader of the two, encompassing the accumulated knowledge that an organization possesses in its people, methodologies, patents, designs and relationships.
Human capital is a subset of that concept.
Hatch says that human capital also goes well beyond just knowledge and skills to encompass other qualities such as loyalty, motivation and teamwork. Paying attention to human capital is becoming increasingly important because in the current job market, employees have a lot of discretion in choosing an employer. Human-capital management helps to tap into the experience and knowledge of employees to help them realize their full potential. Proponents of human-capital management believe that by measuring the broad impact that employees have on the financial value of an organization, companies can hire, manage, assess and develop employees in a way that converts human attributes into hard financial figures. Although this involves finding ways to value qualities that heretofore have been considered intangible, champions of the process point out that the business market already does that.