CHANGE MATTERSNOT LONG AGO a colleague shared a story with me about a layoff that happened in her company. All employees in the affected departments were called into a meeting room and told that immediately after the meeting notifications about who would be fired would go out via email. If you didn’t receive an email, you still had your job. She described the scene of people silently filing out of the meeting room and going back to their desks and waiting to hear the ‘pings’ signifying a new email being received. My colleague talked about this event as if it had just happened, but in fact, it had happened a few years before.

And that, my friends, is the difference between treating your employees as human beings or as human capital. And just so we’re all on the same page, this story is an example of treating your employees as human capital.

My hope is that you are as equally appalled that a corporation (a major one by the way who should, in my opinion, know better) would do this to employees, just on humanitarian grounds alone. How humiliating, how soul sucking, how inhumane can it be to do this to someone? And for what reason? If we keep in mind that we are all human beings then we would know better than to treat people this way. As if they don’t matter, as if they aren’t worth a short conversation, in private, that let’s them keep their dignity if not their job.

Now I’m sure those of you who are ‘human capital specialists’ are probably incensed at me right about now. Because you know that the term Human Capital wasn’t supposed to do that at all. It was supposed to do the opposite. The term was first coined in the mid 1960’s by American economist Theodore W. Schultz and was used the term to refer to the knowledge and skills workers possessed that could be expanded or utilized differently by organizations. The theory of human capital was furthered by Gary S. Becker, a student of Schultz who, according to the Encyclopeadia Britannica Online, treated human capital as the outcome of an investment process. In other words, individuals and organizations could invest in their human capital by sending them for training or education that would give them better skills (which in turn would benefit the organization). HCM professionals will tell you that their job is to humanize employees even more, not the opposite.

On the other hand looking at the origin of the phrase (from economists), as well as how it is often used today, can you see how the “human” in Human Capital got lost? So although it was possibly meant to actually re-humanize the way workers were treated, over time it has had the opposite affect. Organizations have taken the term and used it in just the opposite way. When they are thinking of downsizing or merging or assessing their workforce in some way, they bring in HCM consultants who help them analyze the skills and abilities of their workforce. Not a bad thing, but it is what comes after that I have an issue with. Through these processes, organizations lose sight of the humanity in their human capital. They look at the spreadsheets and the numbers and forget that everything they see represents an individual, like Joe from Accounting, Jane from Marketing.

And they forget that we are more than just a list of our skills. We are whole human beings who use all three parts of our mind – the affective, the cognitive and the conative – to take actions and solve problems at work. Human Capital really just looks at skills and knowledge, which is only cognitive. What about the other two parts of our minds? Why aren’t the values of those things put on our workforce planning spreadsheets?

And here’s another aspect of this that really puzzles me. That layoff which I mentioned before, which was meant to save the company money, actually cost them money. If you are going to be inhumane at least don’t completely undermine your original goals! It makes absolutely no business sense at all. In case you aren’t following, here’s why it cost them money. By calling all employees into a room and delivering a generic message, they caused a disruption to the entire workforce and everyone’s productivity. Even those who felt relief when their computers didn’t ‘ping’ were still negatively affected by the way the layoff was handled. The inhumanity of the action caused them to feel bad and to continue to feel that way, even though they got to keep their jobs. That causes a huge dip in productivity, even more so than usual. And not only that, that dip lasts a lot longer. So instead of working, they were distracted, feeling bad about how the whole thing was handled, feeling bad for their colleagues who lost their jobs, wondering if they were going to be next, wondering if they were going to also be told in front of everyone else. Feeling badly and worried is natural and in any layoff eventually tapers off and people get back to work. But when a layoff is done in a way that is so counter to how you want to be treated, or thought the company would treat you, it doesn’t go away so fast. So you don’t work as hard. You don’t stay late. You finish projects but you don’t go that extra mile or two that is needed. Maybe you call in sick a few days. Maybe your work pace slows exponentially. Often employees aren’t even aware of what they are doing differently. They just know it is harder to walk in the door, harder to concentrate, harder to stay past those long 8 hours.

The treatment of those involuntarily leaving directly affects the productivity of those who stay. Am I the only one who knows that? When I hear stories like this, I sometimes think I am. But I know there are more of us out there – there just has to be.

When we start to think of employees not as human beings but as human capital, it is easier to forget about the human part of the equation. We treat them like capital – like the machinery we own, or the desks or the chairs. Businesses don’t categorize their employees as capital on the balance sheet, yet for some reason we are talking about then and treating them accordingly – like we would that forklift on the loading dock (which really is capital). This is a troubling trend and one we need to reverse. Even if that wasn’t the original intent of the term, that is the reality that exists today. Not everywhere, of course, but in enough organizations to make it troubling.


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Jane Anderson

WOW! This is so much a part of my thought – even as I read the title. I definitely don’t like the term human capital and I’m not even in favor of human resource. A resource is something I can buy, capital is something I spend. A being is living, breathing, person with abilities far beyond what can be bought an sold. I don’t even want to utter the label that conjures up! This was meaningful. I hope every reader reconsiders how they look at people in general. “We are whole human beings who use all three parts of our mind – the affective, the cognitive and the conative – to take actions and solve problems at work. “

Beth Banks Cohn
Beth Banks Cohn

Thanks Jane. I’m so glad this topic resonated with you. As I talk about ‘human capital’ more I find responses such as yours. I feel sad for the Human Resources industry. In an attempt to ‘get a seat at the table’ they have moved farther and farther away from the Human part of their title. I think Human Resources was a step up from Personnel but I totally get what you are saying. Thanks so much for weighing in.

Genara B. Pacana
Genara B. Pacana

How wonderful it is to know that someone cares for human beings who contribute much in the workplace not just because they are being paid but because they too have dignity and deserve to be treated well with kindness and respect.

Massimo Scalzo

Thank you Beth. The mere fact of considering people as something that may serve… never pays. Many people are forgetting, or do not want to see… or pretend not to realize that WE ARE HUMAN BEINGS. … behind the figures there are human beings… companies don’t succeed, PEOPLE DO! I might be wrong, but I think that with this attitude, many entities are travelling down a very slippery slope. That’s why these are the years in which business leaders and governments are also experiencing a profound crisis of trust and legitimacy triggering a loss of confidence in traditional modes of operation, in many respects. Once there were “dogged executors”… now I believe there’s people out there who want to do what they like to… who would seize the chance to change their life, if they were given the opportunity to do so. I think that when someone doesn’t consider other people’s happiness or lives… they’re taking the wrong road. PEOPLE IS ALL. Thank you.

Dr. Rebel Hanna

Very interesting Article raising a serious Question: Are we Human Capital or Human Beings? The answer is very simple We are Human Being having a substantial value of the Capital. In my Researches in HCM I always confirm that Financial Capital and Human Capital are BOTH important for any Organization. I say more, Money can never make people and talents but skilled and talented people are the money maker. the problem behind this dilemma is related to the Corporate Culture and Ethics, which are today’s serious concern at all levels. Nowadays, Globalization increased the attention to the ROI and the Results and reduced drastically the Ethical Attitude and the attention to the Corporate Culture. Corporates are simply Money Driven and Executives and Seniors forget totally that they are Human Beings dealing with other Human Beings. They are Drunk of their position, power and achievements, they believe that they are the Supermen and forget that they are only Harvesting what other Human Beings Invested in Time, Knowledge, Passion, Commitment and Money. This is the real problem. ADDRESS THE ETHICS.
Thank you for the great article.

Ken Vincent
Ken Vincent

To a degree, it is the result of our drive towards buzzwords. Those buzzwords are not in and of themselves a problem, but as in the case of “human capital,” they often get overused and even take on a context that was never intended.

Whoever decided to terminate those people by email had obviously never been fired or laid off themselves. I have long argued that those having the power to terminate employees should have lost their job once. It keeps a human perspective in the process and an empathy as to what you are doing to people’s lives.

Chris Pehura

I’m biased towards human capital. Because if I don’t use the phrase, our clients will treat their non-executive employees as costs. They just won’t invest in them. The other challenge is investing in data. The same way you invest in human capital is the same valuation approaches as you invest in data capital. For business to understand to invest in data, they need to better invest in their employees.

But also in the same breath, I distinguish humans for traditional capital. We must invest in our humans intangible things such as warm, respect, and trust. A machine or a piece of furniture doesn’t need any of those things to function well.

Also, I’ve worked with sociopaths and they would use human capital approaches to threaten, bully, and abuse employees. Man, I hate those Machiavellian monsters.