Human capital is the measure of the economic value that an employee provides, through their knowledge, skills, and abilities.
On average, total human capital costs are almost 70 percent of a company’s operating expenses. Despite how much employees cost, many companies do not properly invest in an employee development plan, in their human capital.
According to the 2015 Talent Mobility Research Report, more than 40 percent of organizations claim that they rarely, or never, provide career planning or development. If your company is part of this 40 percent, you should strongly reconsider your approach to managing your human capital.
To reap the most benefits from employees your business needs to invest actively in them. Here are eight benefits of investing in your human capital development.
1. Increase Employee Satisfaction
Investing in professional development for your staff can lead to greater job satisfaction. According to a 2014 survey by the Society for Human Resource Management, 42 percent of employees said their organization’s commitment to professional development is “very important to their job satisfaction.”
Internal professional education for your staff shows them that your business cares about their careers. When your employees feel that their workplace cares about their development, they are more likely to be satisfied with their jobs.
2. Improve Retention Rates
Almost 54 percent of workers said that career advancement opportunities are more important than salary when looking for work. Additionally, 44 percent of employees cite a lack of opportunity for growth and advancement as a top source of work stress. These statistics show the importance of career growth to employees.
Workers who are receiving professional education and development are less likely to seek other employment opportunities. So, if an employee can advance within the company, he or she won’t have to look for advancement opportunities outside of the company.
Opportunities to develop are especially important to millennials. A 2016 Deloitte survey found that 70 percent of millennials cite a lack of leadership development as the main reason for wanting to leave their current position.
It’s estimated that it costs an average of six to nine months salary, to replace a salaried employee. A little investment in an employee development plan can save a lot in employee turnover.
3. Develop Employee Engagement
Increasing employee engagement is a priority for every business. Engaged employees are more productive for, and more loyal to, the company. According to a survey by Gallup, only 32 percent of workers feel engaged at work.
Investing in employee development can help to grow your employee engagement. Giving your staff career advancement opportunities, and investing in their development, gives them a reason to be engaged at work.
Ideally, each business should ask its workers what areas they want to develop, and then offer opportunities in those areas. Personalize your development opportunities to engage your employees the best.
4. Develop Client Engagement
As previously discussed, employees who are given growth opportunities are more likely to be satisfied with their job and engaged in the company. Employees are the face of every organization.
When customers interact with staff that is engaged and satisfied, they are more likely to have a positive experience. Every positive experience, in turn, increases customer engagement and satisfaction. The more satisfied your employees are, the more likely your clients are to be satisfied in return.
5. Improve ROI
Every company invests in human capital, whether it understands it or not. Your staffs’ salary, benefits, and perks are all an investment in your firm’s human capital.
Spending this money, but not paying a little more for employee development is like paying a significant amount of money for a Super Bowl commercial spot, but then refusing to spend money to make a quality commercial. That would be an awful investment for your company.
Don’t throw this money out of the window. Your business has to spend money on developing its workers to maximize the return on your human capital investment. Improve your employees by offering opportunities for growth and learning; it will ultimately improve your bottom line.
6. Improved Organizational Communication
Human capital management allows for an enhanced flow of information throughout your company. Investing in your human capital can work to better communication by improving the quantity and quality of information passing up and down your business.
For example, the relationships forged through a mentorship program can lead to lines of communication between superiors and subordinates that never would have existed otherwise.
Human capital development works to improve every facet of employee performance, including communication. This process can help your company to discover employees who may be lacking communication skills and assist them in remedying this situation.
When communication improves, so does your business. Better communication leads to better employee satisfaction and engagement. This improvement, in turn, leads to enhanced overall performance and productivity.
7. Better Recruitment
Yes, human capital development helps you to retain your employees. But it also helps you to recruit prospects. The importance of human capital development in the recruiting process will only continue to grow as more millennials enter the workplace.
Earlier this year, Gallup found that the number one factor for millennials when applying for a job was opportunities to learn and grow. Millennials want to work for a business that invests in their human capital.
A company with a proven human capital plan already in place can demonstrate their commitment to employee development to millennial candidates.
8. Greater Company Culture
Another benefit of investing in your human capital is improving your organization’s culture. Better employee satisfaction, engagement, and communication lead to an improved overall culture.
Employees want to learn, they want to develop their careers, and they want to enjoy going to the office every day. A positive culture leads to engaged and happy employees.
This happy culture increases your employees’ productivity, which improves your bottom line. Happiness makes workers 12 percent more productive.
According to Entrepreneur, companies with happy employees outperform the competition by 20 percent and earn 1.2 to 1.7 percent more.
More than 60 percent of workers expect career development from their employers. These eight benefits demonstrate why it’s important to invest in a human capital development plan to get the most out of your employees.
Without this investment, your human capital will likely be lowercase.