This chapter offers a comprehensive overview of the concept of human capital management. The chapter starts by explaining the definition of human capital management and the concept of human capital. Human capital is the knowledge, skills, abilities and capacity to develop and innovate possessed by people in an organization. It is an aspect of intellectual capital – the stocks and flows of knowledge available to an organization – and is associated with the concepts of social capital (the knowledge derived from relationships within and outside the organization) and organizational capital (the institutionalized knowledge possessed by an organization that is stored in database, manuals and so on).
The chapter continues with stating the significance of human capital and the importance of human capital measurement. Human capital management is important because it enables organizations to make more productive use of people through measurements, analysis and evaluation rather than guesswork. Therefore, the interest in the development of methods of measuring the value and impact of human capital was raised. Those reasons are (1) human capital constitutes a key element of the market worth of a company; (2) people in organizations add value; (3) focus attention on that needs to be done to make the best use of human capital; (4) monitor progress in achieving strategic human resource goals and evaluate human resource practices and; (5) you cannot manage unless you measure.
The chapter introduced three approaches to measurement: the human capital index by Watson Wyatt; the organizational performance model by Mercer Human Resource Consulting; and the human capital monitor by Andrew Mayo. It demonstrates that there are various levels of measurement. Meaningful information on human capital relies on meaningful data. After introduced different approaches to measurement, the different types of data and the problems of collecting them are then described. The chapter...