Economic growth and development depends on human capital as well as physical capital and also on the factors affecting productivity. Investments in these areas complement and reinforce each other. To be productive, a workforce needs physical capital, such as infrastructure, equipment and a stable well-governed economy. In turn, a healthy, educated workforce can earn more and invest more in an economy’s physical capital.
The boundaries for skills is moving very swiftly hence bringing both opportunities and risks. There is mounting evidence that countries cannot achieve sustained and inclusive economic growth unless they strengthen their human capital. Moreover, they will not have a workforce prepared for the more highly skilled jobs of the future and would not be able to compete effectively in the global economy. The cost of inaction on human capital development is going up. Human capital consists of the knowledge, skills, and health that people invest in and accumulate throughout their lives, enabling them to realize their potential as productive members of society. Investing in people through nutrition, health care, quality education, jobs and skills helps develop human capital, and this is key to ending extreme poverty and creating more inclusive societies. The gaps in human capital are at risk of flaring-up amongst swift global changes in technology, demography, fragility and climate.
The investment in people is often neglected. Conflict events and pandemics such as the current COVID-19 crisis can have a devastating effect on human capital through loss of life, livelihood, nutrition and interruption of essential health and education services. The impact of COVID-19 would likely to resonate throughout many individuals’ life limiting their efficiency. Human capital development is critical for countries at all income levels. Not only the poorest countries who are facing large steeplechases in improving their health and education sectors but also the world’s strongest human capital are required to stay focused on investing in their people, if they want to remain successful and competitive in the global economy.
The COVID-19 pandemic has been unexpected for all of us. The transition from business, as usual to crisis response, has meant that daily routines are no long routine and future planning is in a state of constant revision. Everybody is learning new ways to source essential goods and connect with people. This applies to organizations also. The COVID-19 illustrates the importance of proactive business planning and robust risk management systems. Therefore, now companies’ ability to respond to shocks and adapt to changing circumstances are being tested profoundly.
COVID-19 has a deep impact on the roles of employees. The recent events have reminded both individuals and companies how they depend on humans for essential functions, while also illustrating the fragile position of many professions. 81% of the global workforce lives in countries with mandatory or recommended workplace closures. It has been forecasted that the reduction in economic activity and working time in the second-half of 2020 could add up to a decrease of an equivalent of 195 million full-time positions globally. The direct and indirect workforce consequences are vast and companies and investors alike should be mindful of not overlooking the long-term implications on human capital.
COVID-19 has created a lot of anxiety and fear among employees and the immediate response has rightly focused on acute needs of people. The short term measures could serve the purpose. The strategies currently being deployed to support workers are crisis-based and reactive. This could result in providing a roadmap for transitioning workforces amidst other transformations and shocks in the future.
The proactive, strategic and well-reasoned thinking would be better than merely instinctive reacting. Companies should now not only focus on remaining alert and acting responsibly during this pandemic but also have a long-term planning and resources recovering afterwards. Nobody knows the future; but at least we do know the process is not going to be easy and companies need to be ready to manage the new realities and capitalize on the opportunities. Hence there would be need of accomplished, healthy, committed and devoted employees.
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Amid this pandemic situation, it has been noted that some companies continue to pay salaries and health benefits to employees out of work because of the functions they normally fulfill having become obsolete. This is certainly appears not only a more responsible approach but potentially also more successful in the long term. These human capital strategies that align with the needs of the organization and that support employees through difficult changes give companies a competitive advantage to attract diverse talent, alleviate probable staff shortages and create a strong culture. This has various direct business benefits. Retaining talent is more cost-effective than hiring. There is a strong correlation between employee satisfaction and productivity. Likewise, the lack of a skilled workforce and robust human capital practices could hinder smooth adaptation and innovation. It would also endanger the optimum exploitation of emerging technologies and revenue streams in the post-crisis stage. This will result in companies missing out on the related benefits, such as regaining financial stability and improved market share.
Companies that look after their workforce and actively engage with the challenges and possibilities inherent in the current crisis are likely to be better positioned to handle other uncertainty. Many organizations are already going through and preparing for a major transition brought on by this fundamental change. While that process could be relatively structured and staged, it needed to consider the challenge of marked shifts in economic circumstances, human behavior and market dynamics as presented by rapid demographic and technological changes. Henceforth the reaction to the COVID-19 may actually be a lesson for companies that were looking at a transformation because of the Fourth Industrial Revolution.
This might not feel like the top priority while we find ourselves in the middle of the storm but also exploring and implementing the lessons learned. Likewise, in the context of COVID-19, investors should assess the lessons from the pandemic and incorporate these in their active ownership efforts as all sectors look to manage immediate and future business opportunities and human capital risks and impacts.
Companies responding positively to investor engagement can have a more holistic preparedness overall. In the case of dialogues concerning human capital, the potentially resulting advanced talent management and risk mitigation systems are likely to contribute to corporate strategies that improve resilience against various shocks and ensure employment practices supportive of innovation. Moreover, investors should aim for impacts beyond individual companies by, for example, advocating participation in multi-stakeholder collaboration to create conditions conducive to a fair and well-functioning labor market more broadly, and explicitly being prepared to assume a more active role as a stakeholder in integrated responses to employment-related risks and opportunities.
Regardless of what the future of work and the world after the acute phase of the COVID-19 crisis will look like, preparing for the unexpected and treating employees well will provide a good foundation in calm and stormy periods alike.
In the words of the futurist Alvin Toffler, “the illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn”.
And I also like to quote Mark Carney, the retiring governor of the Bank of England who was quoted as saying last week that the pandemic could cause a fundamental shift in how companies in future will be judged based on how they treated people in the crisis.
[box type=”note” align=”” class=”” width=””]The author, Mr. Nazir Ahmed Shaikh, is a freelance columnist. He is an academician by profession and writes articles on diversified topics. He could be reached at nazir_shaikh86@hotmail.com[/box]