KNOWLEDGE-BASED ECONOMY

The new technological, informational and communicational changes we have seen

in recent decades have marked the transition from natural resources-based economy
to knowledge-based economy. In the new knowledge economy, the wealth is based
on knowledge acquired and their use and not only on material factors of production.
In this context, human resources, along with information resources, acquires a
special importance and are experiencing upward increasingly strong. Experts now
agree that human capital is the fundamental factor of overall progress and long-term
investment in human capital development has effects on all levels: individual,
organizational, national and global level. This paper presents some aspects on the
significance of human capital development in the context of knowledge-based
economy, emphasizing the importance of lifelong education and training.
In today's society organizations, knowledge is a new category of resources,
considered to be more complex, difficult to assess, and much more effective
compared to other categories of resources. Under the impact of knowledge occur
quantitative, qualitative and structural changes in all other categories of resources.
KNOWLEDGE-BASED ORGANIZATION

Knowledge-based organization represents a new paradigm in business since the

beginning of XXI century.
Operation of this type of organization is based on three fundamental processes:
- INNOVATION (creating new knowledge – R&D)
- LEARNING (assimilation of new knowledge)
- INTERACTIVE PARTNERSHIP FOR KNOWLEDGE

In the new type of organization, the managerial act is based on the priority systems
and processes based on intangible assets, focusing on the development of adequate
strategies and coordination actions permanent change of creative, competent
professionals, capable of self-management and self-empowerment actors, with a
proactive behavior and a new attitude toward work, organization and its values.
HUMAN CAPITAL & THE KNOWLEDGE BASED ORGANIZATION
In the knowledge-based organizations, and generally, in the information society,
human capital is recognized as the fundamental factor of overall progress, and
experts agree that long-term investment in human capital has strong drive-
propagation effects at the individual, organizational, national and global level.
Human capital shows the quality side of human resources. It refers to a person’s
education, skills, and background necessary to be productive in an organization or
profession. Human capital is the measure of the economic value that an employee
provides, through their knowledge, skills, and abilities.
Human capital is all the brainpower that “leaves work at 5:00 p.m.” It represents the
knowledge inherent in employees and contractors. It is difficult to calculate. The best
way to assess it is to calculate the potential inherent in human knowledge—the value
that has not yet manifested itself.

According to Armstrong’s conception, intellectual capital has three components:

- human capital - knowledge, skills and abilities of employees in the organization;
- social capital - accumulation and knowledge flows arising from the networks of
relationships inside and outside the organization;
- organizational capital (also called structural capital) - institutional knowledge held
by an organization, stored in the database, manuals etc.
This tripartite concept of the intellectual capital emphasizes, that although
individuals (human capital) are those who generate, store and retain knowledge, such
knowledge is enhanced by interactions between individuals (social capital),
generating institutional knowledge that possess the organization (organizational
capital). Although knowledge and skills of employees are those that create value,
however, organizational effectiveness depends on proper recovery of human
knowledge. This knowledge must be developed, collected and traded (knowledge
management), to create organizational capital.

Skandia, a Swedish insurance company, has made strides to quantify its intellectual
capital through further exploration. Using work that won the 1992 Nobel Prize in
Economics, Skandia has divided IC into several subsets:
 1. Human capital, the ability of individuals and teams to apply solutions to
customer needs, competencies, mind-sets.
2. Organizational capital, the codified knowledge, culture, values, norms.
3. Customer capital, the strength of customer relationship, superior customer-
perceived value, and customized solutions.
The intellectual capital model is thus the relationship between human, customer, and
organizational capital that maximizes the organization’s potential to create value.

KNOWLEDGE MANAGEMENT IN THEORY AND PRACTICE - kimiz-dalkir

BENEFITS OF INVESTING IN HUMAN CAPITAL

Investing in human capital is extremely important in order for a business to thrive in today’s
marketplace, and also for economic improvement. Let’s take a moment to think about this decision. If
you choose to invest in associates by buying them that new, comfortable office desk and chair, how
long will their productivity increase? Chances are only until those wheels start to ware and they set
their sights on the latest and greatest office desk; then that increase in productivity and appreciation
will start to falter. So what exactly is involved in investing in human capital? Providing opportunities for
growth and advancement to associates through education and improvement programs. Investing in
human capital is investing in the skills and capabilities of your human assets- whether that consists of
front-line staff, sales representatives, managers, supervisors or any associate; organization-wide.

1. Increase Employee Satisfaction

Investing in professional development of staff can lead to greater job satisfaction.

Internal professional education for your staff shows them that your business cares
about their careers. When your employees feel that their workplace cares about their
development, they are more likely to be satisfied with their jobs.
2. Improve Retention Rates

Career advancement opportunities are more important than salary when looking for
work. Additionally, 44 percent of employees cite a lack of opportunity for growth
and advancement as a top source of work stress. These statistics show the importance
of career growth to employees.
Workers who are receiving professional education and development are less likely
to seek other employment opportunities. So, if an employee can advance within the
company, he or she won’t have to look for advancement opportunities outside of the
company.
Opportunities to develop are especially important to millennials. A 2016 Deloitte
survey found that 70 percent of millennials cite a lack of leadership development as
the main reason for wanting to leave their current position.
It’s estimated that it costs an average of six to nine months salary, to replace a
salaried employee. A little investment in an employee development plan can save a
lot in employee turnover.

3. Develop Employee Engagement

Increasing employee engagement is a priority for every business. Engaged

employees are more productive for, and more loyal to, the company. According to a
survey by Gallup, only 32 percent of workers feel engaged at work.
Investing in employee development can help to grow your employee engagement.
Giving your staff career advancement opportunities, and investing in their
development, gives them a reason to be engaged at work.
Ideally, each business should ask its workers what areas they want to develop, and
then offer opportunities in those areas. Personalize your development opportunities
to engage your employees the best.
4. Develop Client Engagement
As previously discussed, employees who are given growth opportunities are more
likely to be satisfied with their job and engaged in the company. Employees are the
face of every organization.
When customers interact with staff that is engaged and satisfied, they are more likely
to have a positive experience. Every positive experience, in turn, increases customer
engagement and satisfaction. The more satisfied your employees are, the more likely
your clients are to be satisfied in return.

5. Improve ROI
Every company invests in human capital, whether it understands it or not. Your
staffs’ salary, benefits, and perks are all an investment in your firm’s human capital.
Spending this money, but not paying a little more for employee development is like
paying a significant amount of money for a Super Bowl commercial spot, but then
refusing to spend money to make a quality commercial. That would be an awful
investment for your company.
Don’t throw this money out of the window. Your business has to spend money on
developing its workers to maximize the return on your human capital investment.
Improve your employees by offering opportunities for growth and learning; it will
ultimately improve your bottom line.

6. Improved Organizational Communication

Human capital management allows for an enhanced flow of information throughout
your company. Investing in your human capital can work to better communication
by improving the quantity and quality of information passing up and down your
business.
For example, the relationships forged through a mentorship program can lead to lines
of communication between superiors and subordinates that never would have existed
otherwise.
Human capital development works to improve every facet of employee performance,
including communication. This process can help your company to discover
employees who may be lacking communication skills and assist them in remedying
this situation.
When communication improves, so does your business. Better communication leads
to better employee satisfaction and engagement. This improvement, in turn, leads to
enhanced overall performance and productivity.

7. Better Recruitment
Yes, human capital development helps you to retain your employees. But it also
helps you to recruit prospects. The importance of human capital development in the
recruiting process will only continue to grow as more millennials enter the
workplace.
Earlier this year, Gallup found that the number one factor for millennials when
applying for a job was opportunities to learn and grow. Millennials want to work for
a business that invests in their human capital.
A company with a proven human capital plan already in place can demonstrate their
commitment to employee development to millennial candidates.

8. Greater Company Culture

Another benefit of investing in your human capital is improving your organization’s
culture. Better employee satisfaction, engagement, and communication lead to an
improved overall culture.
Employees want to learn, they want to develop their careers, and they want to enjoy
going to the office every day. A positive culture leads to engaged and happy
employees.
This happy culture increases your employees’ productivity, which improves your
bottom line. Happiness makes workers 12 percent more productive.
STEPS IN INVESTMENT IN HUMAN CAPITAL

1 – What is it all about ?

Human capital is essential for boosting productivity, pivotal for economic growth
and also vital with regard to the resilience of economies.

human capital is a way to quantify the economic value of a specific employee’s set
of skills.

Like all forms of capital, human capital is an essential component of your company’s
long-term assets. The collective profile of skills for all your employees ideally meets
your company’s needs, but more importantly, it also adds to your company’s
intrinsic value.

Developing that capital -- that is, investing in the further enhancement of those skills
in a way that adds to that value -- is a smart financial investment in your own
company. It’s also a way to increase employee satisfaction and engagement levels.
Put simply, when employees feel that management understands and appreciates their
value, they’re likelier to stay with the company, further enhancing the company’s
value.
A company’s human capital costs can account for a large portion of its overall
operating expenses. However, most companies admit that they don’t do enough
investing in their employees, through career development opportunities, skill
enhancement training, or otherwise.

Investing in your employees is not only a smart way to hold on to valuable, skilled
employees who have the drive and passion to grow (and help your business grow,
too), but it’s also in a very real sense an investment in your own company. Capital
investments bring dividends to the business itself, in terms of increased productivity,
higher quality of product and service, and a fatter profit margin. Human capital
investments are no different.

2 – Help employees keep up with necessary skills

Human capital development plans often focus primarily on improving employee

skill sets or helping them acquire new sets of skills and abilities. The investment is
directly related to the business and results in a direct benefit to the company through
greater skills and improved productivity. You have to ensure that your company’s
human capital assets keep up with your company’s needs and the changing landscape
of your field or niche. In other words, if technology is changing rapidly in your
industry, the profile of your workers’ skill sets must keep up with those changes if
your company is to remain competitive.

3 – Make life easier for static-skill workers

Of course, not all workers will benefit equally from skill development opportunities.
Many positions require some static form of skill -- for example, operating a machine
that doesn’t change, or any sort of repetitive work such as sorting or point of sale
operations.

For these workers, investing in them as human capital could mean making their lives
easier in some way. Look for creative ways the company can help these “static skill”
workers reach other types of goals. For example, you could partner with other
community organizations or businesses to provide opportunities for these workers
to learn new languages, save money, plan and take a trip, or improve their health in
some way.

4 - Invest in the best supplies, tools and equipment.

Human capital investment doesn’t just mean investing directly in employees. It also
means maintaining a harmonious workplace that helps your employees be more
productive at their jobs.

As one example, making sure that your workers are given the best office furniture
and equipment that your business can afford immediately produces a more positive
work environment. Additionally, you should objectively assess each workplace
environment for detrimental conditions, such as improper lighting or sound
pollution, that can make work unnecessarily unpleasant for your workers and remedy
those conditions.

5 - Empower your human resources professionals to develop new ways to invest in

human capital.

Experienced human resources professionals are the best equipped to evaluate not
only what your staff needs most but how to prioritize the investments your company
makes in your workforce.

Your job is to first communicate clearly to your HR staff that human capital
development is a priority for the company’s leadership, and then to ensure that goal
is adequately funded. With the right charge and budget, HR can then analyze the
various needs and opportunities specific to your business.

Benefits of Investing in Your Human Capital Development

To reap the most benefits from employees your business needs to invest actively in
them. Here are some benefits of investing in your human capital development.