How Leadership Can Have a Real Impact on “Human Capital”

In a world that seems to rotate faster every day and in which the words “globalisation” and “digitalisation” play prominent roles in all areas, one factor becomes more and more important for every leader: the promotion and the continuing education of their motivated and qualified employees. Within a global economy, in which the financial resources are not the only necessary conditions able to ensure a competitive advantage, another form of capital, the “human capital” is more and more valorised. As the 15th Annual Global CEO Survey, carried out by PricewaterhouseCoopers found out, “talent shortages and mismatches are impacting profitability now.”[1] Although more and more people are educated and mobile, many tasks can nowadays be fulfilled from anywhere in the world, in part thanks to technology. This might mean talent gaps in certain markets or certain industries where highly skilled employees are simply not available. The human being hence moves centre stage and becomes a major ingredient of a company’s success. As a result, the capacity to motivate and retain talent is in fact more important than ever.

But what can be understood when speaking about “human capital” and why, over the last decade and in some cultures, did the notion sometimes suffer from a negative interpretation?[2]Although many different ways exist to describe “human capital”, a common definition says that it is (…)the stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labour so as to produce economic value[3]. Obviously, through this definition and when reading pertinent literature[4] about the subject, one can easily understand the feeling of uneasiness that befalls us as there is always a slight thought or “after taste” comparing humans with machines and other production factors. Human capital becomes in a way substitutable which adds a certain insecurity to the discussion.

But, as we will all agree, human beings and individuals are more than a mere “factor of production” and one thing is for sure: (…)the loss in productivity and time when a valuable employee leaves, as well as the expense related to retraining (…)”[5] are huge and nowadays this is more and more noticed. As a consequence job-hopping becomes a fear of every employer. Moving forward, organizations are now making efforts to identify talented managers as early as possible, in order to devote time and resources for their ongoing development and motivation.

As a leader, you too can make a real difference as to a certain extent, you are able to create the conditions that allow qualified staff members to feel at ease at their workplace and identify with the corporate culture. By “leading through example” you can foster a climate of trust and transparency, allowing for growth and personal satisfaction. A “happy” employee will be less likely to accept other competitive job offers that he/she will most certainly receive during his/her career. Intrinsic motivation can be far more powerful than extrinsic motivation and the key lies in your hand, as a proactive and empathic leader!


[2] See German speaking literature like for example: http://www.harvardbusinessmanager.de/heft/artikel/a-622148.html

[3] http://en.wikipedia.org/wiki/Human_capital

[4] See for example articles from Gary Weber who carried out an extension of the applicability of economic theory in his analysis of relations among individuals outside of the market system.

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