Human capital is one of the major factors that influence the extent to which an organization succeeds in the market. In addition, it is a factor that can influence the competitiveness of an organization in the market. It is against this background that attempts are always made to explore the concept of human capital (Mahroum, 2007). In addition, attempts have been made to identify methods that can be used to measure human capital. One of the company’s used approaches is the output-based approach. In this case, the focus is one determining the human capital utilization in an enterprise.
Examples of parameters that can be used in the output-based model include enrollment rate and turnover rate. The output-based method is usually used in cases where the focus is on determining the extent to which stock of human capital affects the activities and operations of an organization. The main disadvantage of the approach is that it does not consider the productivity of the organization when exploring the subject of human capital. The second approach that has been used in measuring human capital is the cost-based model. In this case, the focus is on determining the costs that are invested in the organization’s human capital (Mahroum, 2007).
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The costs are usually summed and weighed against the level of productivity in an organization. There are a wide range of procedures that can be used when determining human capital on the basis of costs. For instance, those tasked with the process can focus on the individual investment costs, depreciation, and operation costs. In other instances, the approach entails indirectly determining the stock of human capital based on investments and discounted income. The outcome of the measurement process can helped determine whether the organization is using its human capital to achieve the desired business objectives.
References
Mahroum, S. (2007). Assessing human resources for science and technology: The 3Ds framework. Science and Public Policy 34 (7), 489–499.
