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Measuring Human Capital: what's coming and why it matters

The global pandemic hasn’t just forced corporations and employers to rethink physical health and safety, it’s placed a spotlight on the importance of mental health, with a laser beam intensity. As a result, what employees are thinking and feeling has cascaded beyond the effects of the pandemic and into the new workplace culture.

You may have heard people talking about the great resignation. According to the U.S. Bureau of Labor Statistics, 4 million Americans quit their jobs in July 2021. This is due, in part, to employee dissatisfaction around how they are treated and compensated in the workplace. NPR contributor Andrea Hsu reports, “many are rethinking what work means to them, how they are valued, and how they spend their time.” Across the globe, the valuation of human capital is changing rapidly.

As a result, there’s a great deal of talk about the importance of ‘human capital’ including how to measure and develop it. What exactly is human capital? “The term human capital refers to the economic value of a worker's experience and skills. Human capital includes assets like education, training, intelligence, skills, health, and other things employers value such as loyalty and punctuality. As such, it is an intangible asset or quality that isn't (and can't be) listed on a company's balance sheet. Human capital is perceived to increase productivity and thus profitability. The more investment a company makes in its employees, the chances of its productivity and success becomes higher”, according to Investopedia.

Here's What's Coming

While on one hand, it’s uncomfortable being thought of as capital. On the other hand, the factors underlying each employee’s value, such as mindset, mental health, and loyalty have been unacceptably overlooked and, until now, largely unmeasured. Now, a spotlight has been aimed squarely at the importance of the mental and emotional health of the employee, for the benefit of both employers and employees.

Recently, the ISO (International Standards Organization), “developed the standard (ISO 30414) that will enable organizations to gain a better understanding of their impact on staff and help maximize employee contribution for long-term success.” Dr. Ron McKinley, Chair of the ISO technical committee that developed the standard, said “Workforce reporting is about rethinking how organizational value should be understood and evaluated, and allowing for more data-driven decision making across workforce management.” Additionally, the SEC has on the table a “rulemaking petition to require issuers to disclose information about their human capital management policies, practices and performance.” Passing this rule which will require additional metrics to comply with these new regulatory standards.

As a result, there’s likely to be increased focus on the employee’s mindset, perspective, experience, and needs when it comes to workplace culture and productivity. This shift from prioritizing the needs of the corporate entity to including the needs of the individuals that make up those corporate entities is a long time coming and clearly a high priority or organizations like the SEC and ISO would not be as attentive. Additionally, these amended requirements are already being pushed through Congress.

So, what does all that mean for employers and employees? Here’s how it’s likely to play out. Companies like 2DaysMood are already distributing comprehensive tools for measuring workplace ‘mood’ and culture. "2DAYSMOOD has given Eastman a comprehensive insight to our employees happiness and engagement at work and in life. The software provides such essential and pinpointed data to allow managers to take the temperature of their teams and make changes as necessary to become more high functioning. We have been delighted with 2DAYSMOOD and look forward to what else it can do for us!" says Trevor Stevenson, Vice President at Eastman Machine.