Human Capital Management 4.0

By Pepitone, Dr James | Management Services, Winter 2019 | Go to article overview

Human Capital Management 4.0


Pepitone, Dr James, Management Services


Industry 4.0 marks the beginning of a new era in the design and management of human work. The promotions of tech companies focus our primary attention on the availability and impending adoption of new AI-based technology. However, one could argue that the more fundamental issue for management is to utilise this new technology to get in front of the evolution of human work.

Furthermore, the kind of work that will evolve with this new technology is not the same 'manual work' that has evolved nearly out of existence through the adoption of technologies during the 19th and 20th centuries (eg electronic controls, machines, standardisation, training). Surely AI-based technologies will further the demise of manual work, yet it's principal opportunity in the evolution of human work will be to fundamentally change and greatly enhance the achievements of 'knowledge work.'

Knowledge work

Knowledge work is known for its unstructured complexity and need for uniquely human traits of perception and judgment, relationships and empathy, situational adaptability and opportunism, and more. As examples, jobs of predominantly knowledge work include managers, entrepreneurs, designers, inventors, sales, entertainers, analysts, craftspeople, physicians, consultants, and politicians.

All jobs include a combination of manual work and knowledge work, as depicted in Figure 1. Just as managers are required to perform manual paperwork-processing tasks, the unskilled labourer has the discretion to be cooperative and perform better than required.

It is becoming critically important for management to recognise the differences between knowledge work and manual work because each contributes differently to organisational, financial, and strategic performance, and because each requires a different approach to work design and management (see Figure 2). Furthermore, the more important opportunity for AI is its application to knowledge work, which represents a shift of management attention away from utilising technology primarily to replace manual workers.

Human capital

Human capital is a business term that has rocketed into use, especially during the last two decades since its first publication in the 1960s. From this term's wide-ranging usage, one might think human capital is nothing more than a sophisticated metaphor for 'people' or the preferred term for 'labour' following 40 years of unrestrained shareholder supremacy.

Still other usage suggests it might be a post-modern name change for the human resources (HR) function, or perhaps a surreptitious attempt to enslave workers as business property. One predominant attempt to insert human capital into financial statements seems intent on requiring greater financial reporting transparency by disclosing the 21st century's greatest source of earnings, profit and share valuation, though it may have the unintended effect of justifying greater spend on workforce training, education, perks, rewards, or other uncapitalised business expenses.

No one person or institution controls the meaning of words, not even the originator. In its attempt to make sense of human capital, the Humaneering Technology Initiative (HTI), whose mission it is to develop a science-based management technology for today's human work, has focused on a definition of human capital that is consistent with financial terminology and business acumen, and both understandable and useful to management and organisation members at all levels. That definition is, 'human capital is a person's capability to create socioeconomic value'.

Further clarification may enhance understanding and consistent usage.

* Capital refers to financial assets (eg cash, debt, equity), physical assets (eg facilities, equipment) and intangible assets (eg brands, reputation, know-how). Non-capital materials (eg raw materials, components) and labour (eg time, effort) are consumed as part of a production transformation process. …

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