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
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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
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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
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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.

Beth Banks Cohn
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Beth Banks Cohn,PhD

Genara, I’m so sorry I never responded to your comments. I too agree that it is wonderful when someone cares for the humans that contribute in a workplace. It happens more often than we think (or at least i like to think so.) Thanks for reading and commenting.

massimo scalzo
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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.

Beth Banks Cohn
Guest
Beth Banks Cohn,PhD

Massimo, you raise some really important points. You are right, as is Dr. Hanna and others who have commented that ‘companies don’t succeed, people do’. The trust crisis is simply that people have figure out that the only person that cares about them and who can take care of them, is themselves. Once leaders actually thought about the impact of their decisions on their employees. Now it is profits and their employees just have to live with the consequences. But we can change that, and I think we must.

massimo scalzo
Guest
massimo scalzo

Thank you Beth! Yes… I fully agree with you Beth… we can and I think we must…

Dr. Rebel Hanna
Guest

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.

Beth Banks Cohn
Guest
Beth Banks Cohn,PhD

Dr. Hanna, thanks so much for your comments. I had never thought of it from the Ethics perspective. In my naiveté I guess I thought that was a given. Your comments have given me something to think about – and perhaps write about at a later time.

Ken Vincent
Guest
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.

Beth Banks Cohn
Guest
Beth Cohn

I totally agree Ken. Sometimes I find that even if they’ve been fired or let go (especially if it has been early in their career), the farther away they are from it the less they remember about it. In fewer words, they forget where they come from and begin to believe they are above that kind of thing. I’ve been on the receiving end of the ‘sales job’ by consultants that firing someone by email or in a big room with others also being fired is actually an OK policy. I sometimes wonder how they sleep at night. Their rationale is that it saves the time of the HR folks that is better used in handling other HR issues. “It would take too much time to lay off 25 people in a day, so we should just do it all at once and then follow up.” I believe, as you say, that the use of the term ‘human capital’ has been taken out of context and exploited. And as I say, the end result is treating people as a thing rather than a human being.

Ken, thanks so much for weighing in on this issue. I appreciate your comments.

Ken Vincent
Guest
Ken Vincent

I’ve fired quite a few people, not something I’m particularly proud of though as I consider each case to be a failure of mine to varying degrees.

I lost sleep every time I had to terminate someone. I lost a lot of sleep.

I would have to question what HR or a supervisor is doing that is so much more important than showing compassion and humanity to fellow employees.

Beth Banks Cohn
Guest
Beth Cohn

I totally agree Ken. I have found that it really depends on the HR organization and those who lead it. In my experience it depends on who the HR organization treats as their customer. If they think the employees are their customer then they will absolutely show compassion and humanity to their fellow employees. But if you think the company is your customer then you will do what is most expedient for the company. Sadly I have seen compassionate, humane HR people turn into automatons because they have been told that they must satisfy their customer – the company – and not employees. I have never met an HR person that went into HR expecting that, but it does happen.

I think that your personal story of when you’ve had to fire people says volumes about you (in a good way), but not everyone is like you. And not everyone that goes into management thinks of their people in such a compassionate way.

Chris Pehura
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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.

Beth Banks Cohn
Guest
Beth Cohn

I see your point Chris, but I have seen the term used so inappropriately that I can’t condone it any more. Even if there are individuals, such as yourself, who use it correctly. I know that is why the term came into being in the first place, but I see it used exactly the way you say it wouldn’t. Even as they use the term Human Capital I have seen companies treat employees as disposable, not bothering to invest in training or development or even just treating folks with plain old human dignity. I think it is a good term gone bad and we should try to find a new one that helps leaders of companies remember that their employees are both human and the only thing that will drive their profits.