Human Capital and Productivity

An organisation’s human capital is one of the most, if not the most, scarce resource that is utilised by a company in the constant battle for improved organisational performance.

Human capital can be measured by three elements:

Talent: the employees’ skills and capabilities

Time: The measurable hours an employee puts into their role

Energy: The passion, focus and level of engagement an employee has with their role and duties

When these three elements are combined, a tangible effect on business performance is evident through productivity levels and economic value. The productivity level and economic value of these three elements combined is compounded over time; creating a lasting competitive advantage when utilised strategically and effectively.

Delving into these three elements a little deeper, the magnitude of effect of each component individually becomes apparent. Firstly, let’s take a look at time.

On average, a company loses 21% of its productive power in time-wasting interactions (The Economist Intelligence Unit, 2016). These can be either a product of organisational structure or behavioural issues, but nonetheless a vital area to focus on changing to increase organisational performance. Developing organisational designs that reduce time wasting in operational models, hierarchies and systems is vital; as well as developing or shifting organisational culture in relation to decision-making norms, organisational values, performance appraisal systems, accountability and specifically how behaviours are reinforced, rewarded or penalised.

Talent is the next highest contributor to organisational performance, with companies receiving a 29% boost in productivity from the talent they employ. What is important with talent is how a company deploys and matches talent against business-critical roles and enterprise-level initiatives. A well-matched talent prospect, let by an inspirational leader who knows how to extract and utilise the output of the company’s teams and individuals is a productivity multiplier.

Completing our productivity trifecta is energy. For most organisations, energy is the largest source of productivity and competitive advantage. An employee that is engaged, inspired and happy within their role is two times as productive as an employee working at the engagement level norm. In order to encourage employee inspiration and engagement, three things can be actioned immediately to see tangible results:

  • Remove processes within a job role that steal time from an employee or hinder their ability to do their jobs.
  • Redefine the working environment to centre around the performance enhancing concepts of accountability and autonomy. Inspire your employees to actively engage with their role to improve upon it. Listen to their thoughts and suggestions and where possible, action their advice and suggestions to improve their working environment.
  • Help employees to link their job tasks and role to the broader company mission and organisational goals in order for them to visualise and see in a tangible manner the results and effect their position is having on the overall organisational output.

Managing employees effectively plays a critical role in advancing an organisation’s performance and productivity. When managed correctly, the return on human capital investment can be tenfold.

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