Should we still invest in human capital?

With the aim of continuous growth worldwide, human qualities seem to be paramount in business. Human capital includes all the skills and knowledge (qualifications, aptitudes, experience) that an individual accumulates over the course of his or her life. It is used to assess individual and group work capacity. The question then becomes why we need to focus on human capital. We will try to answer this question in three points.

 

The change in the economy

Following the Second World War, we left the catch-up economy (catching up with needs). Since the 80s, we have been in an innovation economy. Demand still has a role to play in this economy, but there is also supply dynamics. Supply depends on innovation research.

To compensate for competitiveness, recruiters are focusing more on knowledge, which includes the creative process (creating new markets and new technologies) and thus focusing on human capital.

Aligning yourself against competitors

The context of globalization is forcing “developed countries” to increase their qualification standards. Indeed, the “emerging countries” are rapidly catching up, or even surpassing, the “developed countries”. Faced with them, two solutions are emerging. On the one hand, aim for a medium range in order to maintain competitiveness and thus reduce labour costs (example of Spain). On the other hand, focus on added value (technology), towards high-end and therefore salary maintenance. This solution is only possible by facilitating development, innovation and relying on higher qualifications and therefore human capital (example of Germany).

The case of France is halfway between the two, oscillating between average value added and not enough reforms to facilitate innovation. To rise like its neighbour, France must focus on training, technology and human capital. Thus, it is possible to reduce the unemployment rate (as in Germany where the rate is very low).

Need for more autonomy

In addition, with the rise of digital technology, employees are demanding more autonomy, consideration and exchange, which consequently requires more training. Increasing the autonomy of the employee will make it possible to obtain a more efficient organization.

Employees need to be valued, to feel involved by a hierarchy that is closer to them. It is in this sense that participative management is a more than wise choice to meet the expectations of the employee. This type of management makes it possible to involve a group and not just one person in the various processes put in place, but also to be able to delegate tasks according to the skills and time of each person. In addition, opting for a flat hierarchy (not very centralizing) allows for faster changes because everyone is autonomous and can make a decision. This autonomy requires better continuous training in various themes (autonomy, management, etc.).

To find the original article by Olivier Klein: https://www.hbrfrance.fr/chroniques-experts/2018/10/22661-pourquoi-investir-dans-le-capital-humain-est-il-aujourdhui-plus-important-quhier/

By Guillaume Dupont – Associate Director, WAYDEN