Measuring Human Capital

Introduction In the past, personnel (HR) experts have created programs and policies targeting employees, compensation, training, and other employees and have adhered to them legally. Human resources functions are often placed at the end of a business chain with emphasis on activities rather than achieving results (Dunn, 2006). However, over the past decade, personnel managers have struggled to become business partners by aligning their work with business strategies. This is important as the strategy implies impacting company goals and objectives.

Whatever the project is doing, the organization needs human capital to operate its business. Therefore, to measure the profitability of an organization, it is also necessary to measure human capital. Measurement of human capital is a measure to evaluate how employees perform their duties and how their productivity affects the profitability of the organization. This type of performance management is not new. Indeed, Koontz (1971) pointed out that there is parallel performance management in the Wei era of China, AD 221 - 265 AD. He further stated that Ignatius Loyola set up a formal structure for Jesuits (Jesus). This is the start of measurement or management of human capital performance. Therefore, the performance will ultimately affect the profits of your business, so organizations need to measure performance.

Human capital is easy to measure in agriculture and manufacturing industry. Human capital of workers in the assembly line can be measured with simple productivity, such as the number of widgets generated per hour. In mining, human capital may be closely related to the physical strength and quantity of daily coal. Higher education / services have a wider range of employment and require different skills. These skills and qualities are more difficult to measure the output. For example, the human capital of a teacher can not be measured by the university degree and A level. The best scholars may lack some leadership, such as empathy, motivation, and the ability to direct the classroom.

Since the level of human capital of the country is produced at home, school, workplace, measurement is difficult. Economists use human capital such as population literacy level, calculation level, book production / per capita level, average school education, average test scores for international exams, cumulative depreciation expenses for formal school education, Try to use various agents to measure. The most commonly used measure of human capital is the achievement (average year) of schools in a country based on data development by Robert Barro and Jong-Wha Lee. This method is widely used as Barro and Lee provide data to many countries every five years.