When managers are faced with the decision of whether to grant a slight pay raise or do everything possible to retain an all-star employee, what’s the right choice?
The answer is managers need to be concerned with high turnover costs associated with finding and filling vacancies as much as the financial implications of failing to retain highly skilled, perhaps irreplaceable, team members. Understanding human behavior is critical to making the right decision.
Turnover costs – in terms of training, loss of productivity, and superfluous recruitment efforts – can total 20% or more of that position’s annual salary, which means that failure to retain can do more than sting – it can essentially make or mar a fiscal year.
Human Assets are Everything
Organizations literally couldn’t function without human capital (a.k.a., human assets), and manager’s goals depend on human capital to achieve any degree of measurable follow through.
Many managers even prefer using the terms “human assets” and “human capital” for the following reason. To say that employees are human capital first conveys that employees are an asset that allows an organization to generate more revenue and reach its strategic goals.
Human Capital in Context
Human capital, though, is slightly broader than capital generally speaking since human capital encompasses all of the talents, experience and knowledge that make employees indispensable to managerial success.
We’re also in an information economy that’s informed by ever-more-complicated technology. Heavier automation is also on the horizon. All of this might seem like it threatens to erase, supplant or downplay the importance of human assets, but it really doesn’t.
The job of creating and harnessing new technologies still falls on the shoulders of an organization’s human capital. In fact, those businesses with the most talented human capital will seize the lion’s share of benefits in increasingly winner-take-all markets operating in a knowledge-centric economy.
Any Asset Can be Enhanced
Like any other kind of asset, human capital isn’t a static variable: a human asset can become more valuable through continuing education and staying up to date on the latest technologies. How does this work?
Remember that human capital encompasses the collective knowledge and relevant job skills of a given employee.
Bearing that in mind, whenever that employee increases his or her talents (e.g., a programmer learning a new piece of open-source coding software that allows cross-device compatibility), s/he also increases the organization’s ability to create revenue, bring in more customers and meet annual benchmarks.
This is all to say that a human asset isn’t necessarily a limited resource like oil – the right incentives programs, on-the-job training and employee retention initiatives can bolster the quality and quantity of human capital at any business.
Retaining Top Talent
Talented employees (i.e., those with high human capital) know that their skills set them apart, provide a leg up over the competition, and virtually guarantee them robust future earnings.
These same employees know that their superior human capital furnishes them with protection against inflation – since irrespective of currency and market fluctuations, their skills will continue to predispose them to high paying jobs and excellent employment prospects compared to their competition.
Strategies to Follow
Nurturing rising talent depends on delivering timely training, employee development opportunities and financial incentives (e.g., stock options).
According to the Harvard Business Review, job performance and engagement from top talent is strongly linked to feeling a sense of camaraderie to senior management and connection to the organization’s overarching corporate strategy. It all comes down to understanding human behavior and identifying the intangibles that make the job worth it.
Conclusively, extending relevant job training and corporate strategy to top talent is a sure fire way to increase productivity and engagement from an organization’s most valuable resource: human capital.