Human Capital Management: Definition, Benefits, Challenges And More


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Have you ever had doubts about how to manage your human capital? In this article, we are going to talk about how to do it. Human Capital Management is the process of managing human resources, which goes from the correct hiring of staff, the correct communication with your workers and the optimization of these in order to achieve a better productive level.

In every company it is necessary to manage employees, it is the people who add value to your company. So if you are interested in improving the conditions of your workers, and therefore, the efficiency of your company, continue reading.


  • In every company, clear communication practices must be managed to avoid misunderstandings among employees.
  • Any investment made in human capital is always long-term, the profitability of this accumulates over time and your human capital will increase.
  • The best way to know if human capital management is being effective is to know the satisfaction of customers and employees.

What you need to know about human capital and its management

Human capital is the most important part of a company. It is made up of people and the value they bring to the company. There are different “markers” that serve to measure the value that a person brings to the company, such as education or experience, together with other types of values or characteristics that fit well with the business culture of each place.

How is human capital built?

To build human capital it is necessary to keep in mind that people are the ones who make it up, therefore, there must always be a long-term investment in them. Thus, points such as the following are important:

  • Ongoing staff training
  • Constant monitoring of staff performance
  • Hiring the right people for available vacancies
  • Retaining those people through incentives and living wages
  • Recognition of the value of each employee
  • Ongoing employee motivation

Why is human capital important?

Human capital is the engine of the company, basically, if the company does not have a staff willing to do their job, simply will not move and will not produce, and even more, if the right people are not selected for the jobs.

The workers are the ones who produce the famous “surplus value” through their work capacity, they are the ones who allow the company to generate profits in exchange for a salary. If they are motivated and feel good in their jobs, the surplus value will be maintained and even, with proper management, will increase.

What is human capital management for?

Human capital management is responsible for managing human capital and calculating the profits it is capable of generating. It is also in charge of keeping the company’s payroll in order and defining the objectives to be met by the company’s employees.

Good human capital management ensures productivity, efficiency and profit generation.

It must be taken into account that the investments you make in this area of the company will pay off in the long term, since they will be investments in the education of the workers, and if you are a good boss, in keeping them happy in their workplace, in addition, you will avoid the constant rotation of personnel.

What are your objectives?

The main objectives of human capital management are:

  • Increasing company productivity through human capital management
  • Promote employee motivation
  • Retain talent and human capital
  • Achieve the fulfilment of objectives
  • Strengthen workers in the company
  • Monitor employees‘ work performance

Needless to say, the above objectives are generic, and each company defines which objectives it must meet depending on its needs and circumstances.

Benefits of human capital management

A good human capital management process results in increased employee and customer satisfaction. In addition to increasing employee productivity and expanding the value of your human capital. It will also improve the company’s internal communication, which facilitates people’s work tasks.

Good human capital managementPoor human capital management
Increased employee motivationFrustrated workers in dissatisfied workers
Increased customer happiness and customer loyaltyFailure to win customers
A good reputation of your businessHigh staff turnover
Higher profitsLower profits
Greater stability in your businessBusiness stagnation

It is not only the workers at the base of the structure that must be addressed by good human capital management; managers and bosses must also be taken into account; constant training and motivational talks are always useful and positive in the higher parts of the business structure.

What challenges does human capital management help to overcome?

If you have a company with employees, good human capital management will be beneficial to your business. Thus, the challenges that human capital management will help you face are the following:

  • It will help you define a clear strategy for managing your human capital and achieving your objectives
  • It will improve the quality of your company’s production
  • It will save you time and resources to carry out your business strategy
  • It will help to maintain the labour structure of the company

What to do to have good human capital management?

We can say that good human capital management can be measured by the satisfaction and performance of workers when performing their work in the company. If you want your company to succeed, you must always keep in mind that workers are people, just like you.

(Source: Nicolás Henao Bard/

Good labour practices together with good preparation are necessary to guarantee the success of your company. In the following image, you can find the seven best practices to maintain good human capital management.

What are the signs of a company with poor human capital management?

(Source: Nicolás Henao Bard/

Poor human capital management can lead a company to fail. That is why you should always keep in mind what are the signs that can manifest in your company, so you will avoid headaches for yourself and your workers.


As we have seen, the attention you pay to the productivity of your company must be equal to the attention you give to your human capital, since it is this that generates the quality of the services and products offered. Good communication, constant training and a fair corporate culture promote the well-being of the company.

The best human resources departments are those that promote the practices mentioned above and are those that lead companies to success. So if you see some signs of poor HR management, consider the information found in the article. We hope you found it useful.


1. Bohórquez, E., Pérez, M., Caiche, W., &amp, Benavides Rodríguez A. Motivation and work performance: human capital as a key factor in an organization. University and Society Journal. 12(3),:385-90.

2. Signs that your HR department is overwhelmed [Internet]. The HR Gazette and HRchat Podcast. The HR Gazette; 2019 [cited 2022 Sep 21, 2022]. Available from: Source

3. World Bank Group. The Human Capital Project: Frequently asked questions. World Bank Group; 2022.

4. Productivity, human capital and educational policies [Internet]. [cited 2022 Sep 21]. Available from: Source

5. Human Capital Management: What is it and how to improve it? [Internet]. UNIR Mexico. [cited 2022 Sep 21, 2022]. Available from: Source


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