That is, an owner and investor of human capital will place this asset where it will generate the highest return. Return on human capital investment, therefore, is the set of rewards that an employee receives in return for investing his or her knowledge, skill, talent, and behavior. Those rewards come in financial forms through pay, benefits, and stock options. A little later, we ll consider how companies should manage and deliver this portfolio of rewards. Risk Risk is defined as exposure to the possibility of injury or loss.
Financial investors consider risk when they structure their investment portfolios.
Human capital investors face their own special forms of risk. In the early 1990s, when the spectre of downsizing haunted the workplace, an employee s greatest risk was loss of a job. When this happened, the chance to earn a return on human capital investment fell to zero for some time. The investable asset wasn t directly threatened layoffs eliminated jobs, but didn t make people incompetent. In our post-millennium world, however, risk means something different.