Human Capital Does not Depreciate

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Human Capital Index > Best Practices > Human Capital Does not Depreciate

Human Capital Does not Depreciate
H. M. Faridur Rahman, HR Consultant, Bangladesh, Member
HC is the only capital of an organization that has got no depreciation. Rather human capital becomes more valuable in the course of time and adds more value to the organization.

@Faridur Rahman
Chris Bennett, Business Consultant, Singapore, Member
Human capital only maintains its value and appreciates if someone invests in learning and development. Otherwise skills and knowledge become outdated or superseded and the human asset of the enterprise depreciates.

Non-depreciation of Human Capital
Jaap de Jonge, Editor, Netherlands
Perhaps it is useful in this topic to see that human capital (as is also the case with knowledge) does not depreciate or decrease in value BECAUSE OF USING IT, as is normally the case with other forms of capital. On the contrary it will rather increase / become more valuable.
I believe Chris is right to point out that when human capital is poorly maintained it will become outdated and will decrease in value. We can see this effect clearly when bright employees are not challenged and actively developed. First they will become bored and next they will look for challenges outside of the company. This then decreases the value of the remaining human capital of the first company.

Dependency on Point of View
Ulrich Schweiker, Director, Germany, Member
As Einstein and Heisenberg have pointed out, all depends on the standpoint of the valuator. Thus we have to take into consideration who is doing the valuation when we discuss human capital.
If the processes we run in a company stay stable then the usage of human capital does neither depreciate nor increase.
If, however, the processes change - for example due to technology shifts - then human capital decreases if not readjusted / updated through skill development or similar activities. The same may be true if psychological aspects like motivation, identification with goals, personal well-being, liking of coworkers, team spirit, etc. become relevant.

No Carte Blanche for Investments in Learning and Development!
Ulrich Schweiker, Director, Germany, Member
As usual HR claims to have a stand-alone argument for spending money - independent of context.
We should learn that customers, competitors, technology availability, speed of changes, internal and external causes / interferences do heavily influence the (e)valuation of human capital: there is neither an automatic depreciation by doing nothing nor an automatic increase due to learning and development. In any case we need to draw the connecting line between what is needed, what could be achieved, what is the cost of doing so, etc. to valuate human capital.
By the way: the same is true for financial capital - just having more money does not guarantee increases in market share, revenues, earnings, profits... Neither does the lack of financial resources equal no profits: remember the selling of ideas and visions resulting in high earnings in the pre-going-public market of illusions!).

Human Capital Appreciates over Time!
martin muthomi, Student (University), Kenya, Member
Human capital is an asset that appreciates over time.
As such it is better to hire fresh professionals and mould them to conform to the organisation's culture. They do not come with external cultural influences. They grow with the organisations interests and ways at heart.

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