For any business undertaking to succeed, it needs capital. But when we hear the word ‘capital’ our mind often plays a trick on us and we only get to think of capital in form of financial resources. However, every successful business owner knows and understands that capital in a business is not limited to finances but it also includes something that is as important as finances-if not even more important.
As you read this, you may be wondering what could be as important or perhaps more important than money in a business. But before I let the cat out, let me make an assertion-Whether your business is a start-up or has been in existence for many years, it needs capital to grow and thrive. Therefore, having a solid understanding of capital and how it can benefit your business can help you regardless of what stage your business is at.
So, the question is: “What is capital?” Well it is anything that increases your ability to generate value. Now, if you think critically about that definition, you will realise that you need more than finances in order to be able to create value in your business. Apart from finances, you also need humans. This is what we call Human Capital.
There are many arguments for and against whether human capital is as important or more important than financial capital. However, I think this is an old and tired debate which is time consuming and is not a subject of my discussion. Instead, I prefer to look at the two types of resources as being equally important for any business venture to succeed. The two are not mutually exclusive. You need both finances and humans for your business to succeed, period.
Now, the main purpose of my article is to focus on the importance of managing your human capital well in order for your business to thrive and grow, especially amidst the disruption that has been brought about by the Covid-19 pandemic which has left many businesses either shut or stunted. The importance of finances is a discussion for another day. In this article, shall focus on the need to properly manage the human capital aspect for your business to succeed.
First and foremost, as you start your business even as the only person in your company, you are the number one human capital. As you start, you do literally everything. You are the Accountant, you are the Human Resource Manager, you are the Marketing Manager, you are in charge of Procurement, etc. but if you want your business to grow beyond you, you need to invest in other human capital-and I am talking about competent, skilled and talented human capital. In short, invest in having the best people to handle key aspects of your business. It is tempting to remain a jack of all trades but be a master of non. However, this can cost your business in the long run. Get accountants to handle your books, engage experts to handle your marketing, hire HR experts to handle your people issues. I am sure you get the idea.
You may think this is costly, but how much costlier is a business which is stunted because you are doing everything on your own! For your business to create more value, you need to invest in human capital. The more value it creates, the better the return for the business and the more your business will make in terms of the bottom line.
It goes without saying therefore that if the aim of your business is to thrive and grow, then investing in human capital is not an option. Your company needs to come up strategies of attracting and retaining human capital that will add value to the business.
Nowadays, your business can also avail itself to modern approaches of accessing the right human capital that will help it create value at cost effective and competitive prices. There is what is called outsourcing. How this works is that your business can engage experts to handle certain critical aspects of your business such as HR, accounts, marketing, etc. but these people are not sitting on the payroll of your company. Instead, they are on the payroll of the outsourcing company. In this way, you get to access expertise that will help your business without the stress of maintaining them on your payroll. This usually works out to be much cheaper than employing full time experts whose emoluments and benefits you will have to finance at the time of separation.
Truth be told, you need human capital to exploit financial capital for it to add value to the business and help the business to thrive and grow. You can have all the money to pump into your business, but without the right people, that money can end up becoming a sunk cost. No wonder then that one of the commo
n denominators of Fortune 500 companies is that they always prioritize investing in human capital who will bring value to the business and increase the bottom line. They ensure that they put in place policies that are aimed at attracting and retaining the best human resources on the labour market. Therefore, the need to properly manage the human capital function in any business undertaking cannot be overemphasized. Businesses that have figured this out are most likely to succeed. Properly managing human capital for any business is absolutely not an option if the business is to succeed.
By Ronald R Sambo, Aka Mr Ron
HR Expert, Entrepreneur and Fellow of ZIHRM