Investing in Human Capital

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D. Moinis Shujaa

One of the most important returns on capital...

<According to Wikipedia, human capital is defined as the stock of knowledge, habits, social traits and creativity represented in the ability to manage work to produce economic value, and I may also add to it the cumulative and diverse experiences that the employee or the work team as a whole possesses, and this important aspect may not be considered, developed and invested in due to lack of attention to its importance!

Whether the business is a finance company, a bank or a factory, any expenses and benefits spent on human capital in order to maintain employee satisfaction and loyalty in return for the greater financial return resulting from their management will be considered one of the indicators of the management efficiency of the top management.

Return on investmentROI means “if one Saudi Riyal is spent on this project, how much will it profit” and the method of equation in this return = total profit ÷ total cost × 100, for example, company (X) cost one million riyals and made a profit of 250,000 riyals during a year, the return on investment = 250,000,1000,000 × 100 = 25% As for the return on investment in human capital, the formula is done in a different way according to the following “ Revenue - (Operating Costs - Salaries and Benefits Costs) ÷ Salaries and Benefits Costs.

Perhaps what we are interested in here is to clarify the importance of minimizing the turnover rate so that the organization does not lose the experience of the former employee, especially if he was professional and disciplined, and at the same time avoid the cost of training the replacement employee and his lack of practical experience.