A company’s intellectual capital is its value based on its intangible investments and assets. Human capital is one of the most crucial facets of any business’s intellectual capital.
Overall, intellectual capital helps determine items such as customer experience, sales, revenue, and a company’s net worth.
Therefore, investing in your employees is also pertinent to your business’s bottom line.
Although not easy to quantify, human capital and intellectual capital as a whole directly affect quantifiable aspects of your business. For instance, having untrained employees could mean losing clients, which directly affects your revenue.
You invest in employees by improving their professional competence, their social skills, leadership capabilities, and keeping them motivated.
Why is it so important for companies to invest in their employees? How important are employees to your company’s worth?
Here are the answers.
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Why Invest in Your Employees?
Employees cost a lot in operating costs, right from recruitment, wages, salaries, and everything in between.
They’re part of a company’s heaviest investment, and it’s only right if your company can recuperate from these costs.
How do you do that? You may ask. By maximizing their value.
Value is measured by an employee’s skills and competence, and increasing that helps a company.
- Build a strong team
- Yield long-term return on investment
- Attract better talent
- Have high employee retention rates
If done right, investment in employees also yields the greatest returns, directly and indirectly. Employee investment takes the form of:
- Creating a productive environment for your workers.
- Developing employee learning and training models to improve their skills. You could create custom online courses using tools such as Thinkific, and Teachable.
- Providing opportunities for employees to further their education.
- Rightfully compensating your employees to keep them motivated.
- Availing resources that make work easier for employees. For instance, you can provide email list management software for marketers handling email campaigns.
According to a 2022 LinkedIn report, 72% of companies’ L&Ds (learning and development departments) are focused on growing employee skills in 2022, as shown.
This proves just how important and strategic it is for your company to invest in employees. So how does this improve your company’s intellectual capital?
We discuss this in the next section.
How Investing in Employees Improves Your Intellectual Capital
Any form of intellectual capital, whether structural, relational, or human, should ultimately increase your company’s profitability.
Your human capital achieves this through increased productivity.
Here’s how investing in your human capital increases productivity and your company’s wealth.
Increased Job Satisfaction
When you equip your employees with the right skills, they will perform their tasks better. This makes them more content with their positions.
It happens not only through improving their skills but also by providing them with opportunities to advance their education. This could be in the form of:
- Training sessions
- Issuing certifications
- Availing short courses
All are relevant both to their personal growth and their positions.
When you provide your employees with opportunities to be better, they feel valued.
This further increases their satisfaction in their position and their loyalty to your company.
The result, then, is that you have a productive team, long-term.
Satisfied employees are also likely to create employee referrals that will attract better talent for your organization.
Increased Employee Retention Rates
Employee retention has positive effects on a company’s long-term return on investment. Retention happens more when you provide employees with opportunities to grow.
Therefore, they were more likely to stay in a company that invested in their upskilling.
Here’s an infographic for the same.
Imagine having a team of competent employees working for you for 10 years, because you invested in their skills and well-being.
Now, compare that to having to employ people every other six months, because you’re afraid of investing in their knowledge, skills, health, etc.
Not only does it cost you time, but it may also have direct financial repercussions due to poor customer experience or poor decision-making.
Additionally, having long-term employees comes with an extra advantage: experience. This increases productivity both through competence and time saved in handling tasks.
Looking at all these factors long term, your return on investment will be higher.
Better Team Management
Intellectual capital also means great team leadership. Management affects the workplace in more ways than one.
Take work culture, for example. A team’s values and attitudes are greatly influenced by its team leader or department manager. Another is the team’s satisfaction with their working environment, and more.
Therefore, to foster better team performance and productivity, you need to invest in your company’s management team.
According to a LinkedIn Workplace Learning Report, more businesses are recognizing the role managers play in their company performance. Therefore, they’re investing in leadership training.
Here’s what the report found.
Many managers get overwhelmed in their positions, and this affects their teams as well.
Training programs such as strengthening their coaching skills and time-management skills, can help in their overall productivity.
Also, in this dynamic business world, you need a versatile manager to lead your employees through the changes in your company or industry.
For instance, changes in technological practices and company culture can overwhelm employees. Learning programs can help managers guide their team through such changes more effectively.
Create online forms and share them with your employees to get their feedback about your organization and work culture. Make sure your employee’s identity remains secret in this form to get fair and actual feedback.
Saving Company Costs
Investing in a better employee team shouldn’t be about the fear of equipping them with skills they’ll use in the next job. You should approach it from a cost-effectiveness angle.
Whether these employees quit their jobs or not, it’d be better to have a well-trained, motivated and satisfied team than an incompetent one.
Even if the results of investing in employees are not visible short term, the long-term effects will always be greater.
Take customer engagement for instance. A competent team will attract and retain more customers long term, compared to an untrained team.
Investing in employee motivation improves a company’s intellectual capital because:
- Motivated employees take on more tasks
- Their commitment rates are higher
- Their performance improves
- Their quality of work is better
- The relationship between employees improves
Here are some ways your company can help employees overcome burnout and stay motivated.
- Offering opportunities for promotion, especially with the training and upskilling programs.
- Allowing employees to take up decision-making roles.
- Incentivizing employee performance with rewards and bonuses.
- Recognizing employees’ individual efforts and achievements.
- Creating a friendly work environment for your employees.
A well-motivated team is more productive and profitable.
Your Employees Are a Worthwhile Investment
By far, your employees are the most valuable asset you have. Therefore, investing in them will always yield significant returns. They are also the face of your business for the most part, and your goodwill partly depends on them.
It doesn’t stop at the hard skills.
Instilling soft skills in your team is just as important.
For an improved intellectual capital, you need a holistic team of employees. This is one aspect you can leverage for a competitive advantage over your competitors.
Furthermore, with the benefits mentioned above, you should have no doubts about how crucial investment in your team is.
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