Human Capital: What It Is and Why People Invest It

Human Capital: What It Is and Why People Invest It

Human Capital: What It Is and Why People Invest It

Human Capital: What It Is and Why People Invest It

Synopsis

No longer mere company "assets," today's in-demand workers have become free agents who can and do invest their ability, behavior, and energy-their human capital-in the companies of their choice. And the companies they choose, the companies that will win in the marketplace, will be the ones that know how to create and deliver the best return on that investment. In this book, author Thomas O. Davenport explores the dynamics of this emerging workplace phenomenon and describes specific strategies that companies and workers can use to build mutually beneficial relationships in the new knowledge economy.

Excerpt

Career politicians, a group roughly as popular as fire ants, can teach us something about the value of human capital. Cynics said the Washington careerists won a victory in March 1995, when the U.S. House of Representatives voted against term limits. The vote followed months of overheated oratory, with House members debating the evils of making careers from posts that our founding fathers meant to be temporary.

Embedded in the House vote, however, was another message—that wisdom gained with experience, a critical form of human capital, has value that should not be lost. Representative Henry J. Hyde, a Republican from Illinois, stated his opposition to term limits by recalling the words of American statesman Robert Livingston. In the 1788 debates over constitutional ratification, Livingston questioned the wisdom of term limits, asking, “Shall we then drive experience into obscurity?” Expanding on Livingston's point, Hyde argued, “To do your job around here you've got to know something about environmental issues, health care, banking and finance and tax policy, the farm problems, weapons systems, Bosnia-Herzegovina, North Korea, foreign policy, the administration of justice, crime and punishment, education, welfare, budgeting in the trillions of dollars, immigration. The list is endless, and we need our best people to deal with these issues…. Tradition, history, institutional memory—don't they count anymore?”

Whatever our views on term limits, we can all agree that governing the country requires knowledge and judgment heightened by experience. And so do jobs in the modern corporation. In the early 1990s, executives seemed oblivious to this reality, as they tried to downsize their way to prosperity—or to survival, anyway. Companies viewed workers as costs, and they treated people just the way they treated other costs—by cutting. As the decade progressed, however, organizations awakened to the reality that human capital—the . . .

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