Human Capital? Talent? How About Treating Employees as People?

Listen to article

Companies will maximize revenues when they value employees for their whole selves.

Consider this my plea to boards and business leaders to stop referring to their employees as “human capital” or “talent.” 

“Human capital” is a useful global term in the economic realm. However, the word “capital” when used to describe humans conjures the image of livestock, a commodity that is turned into profits. Although people do generate revenue for companies, treating them like a commodity is not a winning strategy. Human beings have aspirations, drives, fears, families and friendships within and outside the work environment. A successful company understands this and values the whole person, not just his or her use to the company for making money. A person is also more than his or her talent. Talent is a person’s aptitude, skills and ability. Calling people “talent” is shortsighted and reduces people to a single dimension.

The Oxford Languages definition of “capital” is “wealth in the form of money or other assets owned by a person or organization or contributed for a particular purpose, such as starting a company or investing.” So, does the phrase “human capital” imply that the company owns its employees?

As for “human capital,” Oxford Languages defines the term as “the skills, knowledge and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country.” By this definition, ownership of capital belongs to the individual — not the company — and the value is given to the company by the employee.

The concept of human capital is more than a century old. Social scientists have used it to designate personal attributes considered useful in order to generate revenue for an employer. Human capital includes knowledge, intelligence, competency, skill, health, education and more. Successful companies invest in training their employees, thereby increasing the value of their people as individuals, resulting in increased organizational worth. 

The World Bank publishes a “Human Capital Index” as a measurement of a country’s economic success based on the amount invested in education and health care for young people. Obviously, the term “human capital” provides useful information on a larger scale. Can this measurement also be a useful tool in assessing a company’s overall health and vitality? Usable key performance indicators for measuring a company’s progress toward investing in their people and any return on that investment are extremely difficult to develop. Employee recruitment and retention, as well as the profitable, sustainable growth of any company, depends on investment in its people. This means treating employees like human beings, not calling them “capital” or reducing them to “talent.”

Progressive companies are striving for environmental, social and governance (ESG) excellence. The social part of this requires inclusive policies to ethically deal with people. Positive, inclusive relationships with people, communities and society in general can only help any company be successful and sustainable. Diversity, equity, inclusion and belonging (DEIB) initiatives also focus on valuing the whole human being. 

Calling people “human capital” or “talent” undermines both ESG and DEIB intentions and initiatives. Are you sending mixed messages to your people when trying to implement these initiatives while using condescending terms to describe them? Employee engagement will be difficult to accomplish if an employee’s only perceived value to the company is generating revenue. Human resources may not be the most ideal term; however, it is not demeaning, like the other two options. Instead of using euphemisms like “human capital” or “talent,” I prefer to use employees. It is simple and unpretentious.

Regardless of what business you are leading, without people, the business is not going to succeed. Invest in your people and they will be more than willing to give value to the company.

To be a profitable business, it’s necessary to maximize the revenue generated by your employees. However, treating humans as humans — more than just capital or the sum of their talent — will result in more revenue being generated. People want to work for, and will be loyal to, a company that values them for who they are, knowing they aren’t there to simply make money for the company.   

Rajan Sheth is an independent director for Moffatt & Nichol, Larson Design Group Inc., V3 Companies and FGM Architects. He served as CEO of Mead & Hunt Inc., an engineering and architectural consulting firm, from 1994 to 2018, and chairman of the firm’s board of directors from 1994 to 2020.

Other related articles

  • Behind the Record Number of Say-on-Pay Failures in 2022

    Published March 22, 2023
    By Bill Hayes

    Investors are showing no hesitancy to object to nonpreferred pay decisions and program features.

  • The Ups and Downs of C-Suite Compensation

    Published March 16, 2023
    By Bill Hayes

    A new report finds CEO and CFO base salaries increasing but bonuses on the decline.

  • What Directors Are Thinking

    Published March 14, 2023
    By Charles Zimmerman, DMin

    What Directors are Thinking

    Charles Zimmerman, DMin

    Independent Director: 
    Univest, Clemens Family Corporation

  • Don’t Drop the Baton: Talk More About CEO Succession Planning

    Published March 09, 2023
    By Naveen Bhateja

    With more than half of companies failing to plan for CEO succession, the topic needs to become more prevalent at meetings.

    In a relay race, dropping the baton is catastrophic. All the advantages and momentum gained up to that point in the race are lost. Even the most talented teams have a slim chance of recovering from a dropped baton.