Measuring human capital

Abstract

PurposeThe aim of this paper is to identify how human resource (HR) professionals can best approach the measurement of human capital. This is an evolving area and those organizations held up as exemplars are constantly reviewing their approach and measures and striving for better understanding of people contribution.Design/methodology/approachThe paper draws on experience and research from within the Chartered Institute of Personnel and Development in the UK since 2000 and up to 2011, as well as external research sources.FindingsThe paper finds that there is no one way to carry out human capital measurement as it is context‐specific. However, there are certain people management measures that when applied would provide managers with useful insights in most organizations. More important than specific measures is that the processes around measurement are accurate and trustworthy.Practical implicationsAll forms of capital must be evaluated and analyzed in context to understand how people drive business performance. Human capital only adds value if it can be successfully converted into goods and services that will make a profit.Originality/valueThe paper examines people management measures which provide managers with useful insight in most organizations. However, it concludes that it is more important that the processes around measurement should be accurate and trustworthy.