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6.4.3 Ingredients to HCM

In the New Economy, an employee’s capabilities (skills, knowledge, cultural ‘fit’ and mind set required to perform) have economic value to an organisation because these capabilities enable the organisation to perform and adapt to change. In this context, value has come to refocus on people as they constitute the organisation’s human capital.

Organisational efficiency and effectiveness of KM strategies has become as much about building ‘human capital’ value as they are about transferring knowledge or generating learning outcomes. An equation has been proposed to summarise this:

KM + HRD + Performance = HC

where KM is Knowledge Management, HRD is Human Resource Development, and with performance together equate to HC or Human Capital.

This formula is a subset of Knowledge Capital formation whereby:

HC + SC + STC = KC

where HC is Human Capital, SC is Social Capital, STC is Structural Capital and KC is the resulting Knowledge Capital.

The measurement of HCM can not only be tied to different individuals in a variety of occupations, positions and contexts, but also to encompass how the knowledge assets resident in people can contribute to the overall Knowledge Capital value available to the organisation. HCM requires both the management of knowledge and the development of human resources to optimise value.

Figure 4 From capabilities to human capital

Figure 4 From capabilities to human capital
(Bowles, 2003:204)

Activity 4

To gain a more comprehensive understanding of not only the link between different forms of Knowledge capital (or IC) and ways to manage and develop HC you may wish to access the UK’s national report on Accounting for People:

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