What is Human Capital and Why is it a Firm’s Greatest Asset?


Firms live and die by way of market sentiment gleaned through their operational prowess, the results of their tangible powerHowever, the intangible fruit of human capital is what truly drives success across several aspects of business. The following will define human capital as well as how investment in human capital leads to improvements in human capital management, liberalizes organizational knowledge, increases individual value, and improves employee loyalty. It is an organization’s greatest asset essentially. 


A healthy, functioning human body needs all of its systems to perform at their best while simultaneously and effectively communicating with every other system. Likewise,” human capital is a collection of resources, it comprises of all the knowledge, talents, skills, abilities, experience, intelligence, judgment, and wisdom possessed individually and collectively by individuals" (Srivastava and Das, 2015, p. 115). As an idea and a discipline, human capital views the employee as more than an economic means to an end – they are the lifeblood of brand. What does this look like in action?


Human capital management, or knowledge management is an entire framework which exists in order to measure the complex dynamics between its talent and overall condition. The elder discipline is mainly concerned with acquiring, managing, and measuring productivity. Focused, strategic human capital investment among management has a trickle-down effect enhances the feedback loop between, for example, human resources and prospective employees. The tendency to turn staff into future leaders who view their positions as more than steppingstones to greater career opportunities elsewhere is one of the many benefits of such a practice. 


 Asymmetric information is a systemic problem in business, and when it comes to human capital management and investment, refusing to disseminate valuable expertise renders most business activity ineffective. In fact” ... In the trading behavior of the capital market, there is often a huge conflict of interest, and asymmetric information provides opportunities for fraud and unethical behavior in pursuit of interest (Du, Shu, and Xia, 2020; ). Firms who view human capital favorably readily share vital information across departments, therefore encouraging collective wisdom that leads to improved performance and less corruption. 


In relation to the individual, psychological factors underlying human capital investment, there is a positive correlation. More specifically, firms who view discipline as essential retain people who are more optimistic about the future, absorbed in a resilient state-of-mind, and are more likely to seek out additional avenues for education. If companies want a more conscientious workforce, then examining how human capital affects human development is more than a worthwhile study. 


 The intangible is the source of the tangible - this is true for every system including business. Although firms are judged on earnings and interest before tax as well as net profits, it’s the intangible nature of human capital that silently yields upward mobility. This upward mobility creates a better life for management and staff alike.