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Human capital is one of the most important intangible assets of an organization. The other intangible assets include Copyrights, Patents, Trademarks, Brands, and Company Images. Apart from these the knowledge, creativity, and imagination of the people in the organization is critical to the success of the organization. 

The knowledge and skill of people come from education, training, and experience.  If the right people with the right knowledge and skill are invested, then they will be instrumental in the development of the business. It is one of the greatest assets an organization can ever have. Human capital to a large extent is non-standardized, tacit, dynamic, context-dependant, and embodied in people. These characteristics make it difficult to evaluate human capital.

There are some elements in Human Capital and they are

Intellectual Capital: It consists of the stocks and flows of knowledge available to an organization. These can be regarded as intangible resources which, together with tangible assets (money and physical assets), comprise the market or total value of a business. The intangible resources are the value-generating processes of a firm under its control. 

Social Capital: It is defined as the features of social life – networks, norms, trusts – that enable participants to act together more effectively to pursue shared objectives. World Bank defines Social Capital refers to the institutions, relationships, and norms that shape the quality and quantity of a society’s social interactions. It’s not just the sum of the institutions which underpin a society – it is the glue that holds them together.

Organizational Capital: It consists of the knowledge owned by the organization rather than by individual employees. It can be described as embedded or institutionalized knowledge that may be retained with the help of information technology on readily acceptable and easily extended databases. It can include explicit knowledge that has been recorded on a database or in manuals and standard operating procedures.

Human Capital Management (HCM) is the strategic and coherent approach for managing an organization’s most valued assets – the people working there who individually and collectively contribute to the achievement of the objectives of the business. The terms “human capital management” and “human capital” (HC) have largely replaced the term “personnel management” as a description of the processes involved in managing people in organizations. Human capital management is evolving rapidly. Human capital management is both an academic theory and a business practice that addresses the theoretical and practical techniques of managing a workforce. 

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The main activities of HCM are

Recruiting and hiring the best talent available: Recruiting the right people at the right time for a job is essential. It’s the HCM’s responsibility to check whether a certain candidate is fit for a job or not.

Developing and motivating people to reach their fullest potential: Again it’s the HCM’s responsibility to train, groom, and motivate the employees to improve their performance levels. This as a whole will improve the productivity of the organization.

Retaining talent and the investments made in them: If better-performing people want to leave the organization, it is the responsibility of the HCM to check what are the issues that they are facing, and why they want to leave the organization. is there a way to motivate them not to leave the organization by offering them what they want, if it is within their reach 

Minimizing the risk and cost of the human side of the business: There is always a certain amount of risk associated with the human side of the business. The employees are assets of an organization but not like the fixed assets of a company. The employees can leave the company at any time. If they are retained forcefully by the company, that amounts to a Human Rights violation. So, there is always a risk of workers or staff can leave the company. And the company invests much of its resources and time in training them. This will result in a huge loss to the company, so there is this risk element always involved.

Implementing a performance-based compensation system: A performance-based compensation program is nothing but, giving incentives to employees based on their performance. This is a good motivation for employees as they can receive extra money apart from their usual basic salary and they will perform better and will increase the productivity of the organization.

Designing coaching and mentoring programs: Coaching and mentoring programs increase the aptitude and technical skills of the employees. This will equip the employees to use new, efficient, and productive technologies which increase the efficiency of the organization.

Applying performance management technologies: Performance management is a study where the performance of each and every employee is measured using pre-set standards and they are compared against the actual performances. This study on each and every employee will give the management a picture of the average performance of the employees and they will take steps to increase the standard or decrease the standard and will let them know who the top-performing employees are and how their working techniques can be applied by all. 

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