How to evaluate human capital?

Influence of Human Capital – Knowhow to Business results  January 16, 2016 – 05:49 am

In the classic business literature it is hard to find the clause about the competences and the value of know how in end results. Since ideally it is assumed that businesses are managed with high experienced managers and enterprise has/can get all competence assets any time. This makes our university level  business education much more easy, where with quantitative terms we can relate the inputs and outputs to each other.  Every business is a promise to earn more profit on current assets much more than other ones. That’s why one company can attract funds and another is challenged, since everything is about the guess of “will it work? ” question. Unfortunately in real business environment it is not that easy to input money, do your stuff and earn money.  Companies compete in different markets including resources (asset, human, environment, e.t.c) and customers. Also , companies need to have right decisions on right times.  So in overall if we look into the enterprise from limited resources side , it is much more challenging that books have been telling us for so much time.

Leveraging business performance

Just imagine a car, with dashboard, steering wheel, windshield, seats, gearbox and everything else what you can see in a car nowadays. Although it is ideally arranged and built masterpiece of machinery, but, without a real outcome of taking people from A to B its value only total of metal and plastic it is prepared from. So at first step we have to understand that,   when we evaluate the car we do not calculate the cost sum of materials it is build of, instead, we pay for the way of its arrangement and idea, knowhow and further more features that are designed to add value to our experience. So even if material price of 2 different car brands can be the same, but the , real retail price can vary in times. This is the price what we pay for the knowhow and the value that car manufacturer prepared for us.  If we relate that car to business, the business is not only the total of assets that it has, no, but it is a total of everything, including the power of design, engine and future promises. When we evaluate the companies that’s why we get so much intangible value over the assets that it has.

Source: Imran Baghirov's personal site

McGraw-Hill How to Measure Human Resource Management (3rd Edition)
Book (McGraw-Hill)

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