Human capital strategy was defined by Nalbantian et al (2004: 79) as ‘… a blueprint for securing, managing and motivating the workforce needed to support the organization’s strategic goals. To be effective, the management practices that influence the workforce should be consistent with one another and mutually reinforcing’.
The whole area of human capital management presents both an opportunity and a challenge. An opportunity to recognize people as an asset that contributes directly to organizational performance, and a challenge to develop the skills necessary to identify, analyse and communicate that contribution and ensure it is recognized in business decision making. By developing strategies to generate better and more accurate information on human capital, and communicating this information both internally and externally, organizations will not only improve their business decision making but will also enable stakeholders to make more accurate assessments about the long-term future performance of the organization. There is evidence of a growing demand, from the investment community in particular, for better
information to explain intangible value. Many organizations are beginning to understand that, in an increasingly knowledge-intensive environment, the key to good management lies in understanding the levers that can be manipulated to change employee behaviour and develop commitment and engagement. This in turn encourages individuals to deliver discretionary behaviour or willingly share their knowledge and skills to achieve organizational goals.
A human capital management strategy that includes the systematic collection and analysis of human capital data can help managers to begin to understand factors that will have a direct impact on the people they manage. It can also help executives to understand and identify areas in which there are issues regarding the effective management of staff and to design management development programmes to address these.