Top 3 wackiest, most unique millions dollar ideas (anyone can start)

Unique business ideas worth millions - Cards Against Humanity website

2. A comprehensive online glossary for studying abroad.

Over 300,000 students study abroad each year. Yet, there is no singular place for them to share their experiences, what they did, and where they went. Future abroad students would be willing to pay a hefty sum to have insight into travel and food tips. Google search is a lot less helpful than you would think at helping plan and set up trips outside of the US. This could be a huge market.

Meetup.com and different groups get together to play pickup sports. At this point in time, though, there is no app to instantaneously play pickup in public based on your location. Think about the countless people who want to play soccer or basketball at any given time but do not have anyone to play with.

Connecting and playing with others in the area would be a great leverage of the technology that exists today. It would also help keep people fit and illuminate large data around fitness and sports preferences.

Million-dollar business idea #2: Spanx

 Unique business ideas worth millions - Spanx website

At 27 years old, Sara Blakely was annoyed with the old-fashioned pantyhose she wore every day to work. They were uncomfortable on her feet, but she liked the control-top. So, one day, she cut off the bottom of the pantyhose and wore them underneath her pants for a slimming effect. That’s when she realized she’d created a garment that hadn’t existed yet. And there might be more women who wanted it in their wardrobe.

Two years later, Blakely launched Spanx. She did it with $5,000 in savings, a self-made patent for $150, and no formal knowledge about fashion, design, or retail. But through her own research and networking, she was able to land a deal with Neiman Marcus, get featured on Oprah, and host regular segments on QVC.

The takeaway: Put a new spin on an old solution

When Blakely set out to manufacture her prototype, she realized that the entire undergarments industry actually needed to be refreshed. It was largely run by men, and new products were tested on mannequins instead of real people.

If you can’t answer these questions right away, start by researching an industry or field you’re passionate about (or even annoyed by!). Like Blakely, you might find an opening where your voice is needed (and where multi-million dollar business opportunities lay hidden).

Million-dollar business idea #3: Museum Hack

Unique business ideas worth millions - Museum Hack website

After falling in love with The Met in New York City, Nick Gray started offering free tours to his friends, showing them his favorite pieces and telling cool stories about the museum and artworks. Gray’s tours eventually spread by word-of-mouth, and he started hosting weekend events and even birthday parties at the museum.

Finally, Gray wrote a blog post about his tours, and he immediately saw the demand flood in — thousands of people emailing him and wanting to join his events. That’s when he launched Museum Hack, the antidote to boring and stuffy museum tours. You know, the ones you associate with school field trips and monotone voices.

Museum Hack is now a 800.2 million business, running ongoing public tours at five museums in four major cities. They even host private scavenger hunts, corporate team building events, bachelorette parties, and consultations with museums that want to engage new audiences.

The takeaway: Aim for the golden goose

GrowthLab’s Demand Matrix

How to find a great business ideas worth millions- GrowthLab Demand matrix

Instead, he went right for the Golden Goose, launching a variety of in-person tours for high-paying corporate groups and parties. And he even offers coaching services to museums that want to develop their audiences.

Consider the matrix when narrowing down your unique ideas. Having a great concept is the first step. But you’ll also want to make sure you can turn it into a profitable business going forward.

Resource:

https://www.entrepreneur.com/article/305858
https://growthlab.com/unique-business-ideas-worth-millions/

Backlinks Monitoring 101: Tools, Tips, Dos & Don’ts

Why is backlinks monitoring necessary?

So you did your job, and after a successful outreach campaign, you gained some high-quality backlinks. Congratulations! That’s great, but you mustn’t stop there. Your campaign doesn’t end there because now you should set up monitoring for the links. Why? Well, there are a few arguments.

1. Broken links are a thing

That’s right. Broken links may happen because of you or because of changes in the referring domain. If you make some changes on your site and decide to redirect your traffic using 301 or 302 redirects, it is a good idea to change the link on the referring site too. Mainly because with 301 redirects, you may lose some link juice.

But changes can happen on the referring domains too. If they switch to a different CMS, correct the article with your link, or make some other adjustments, your backlink may become dead and return a 404 error. That’s why you have to react quickly if you see lost backlinks. Check why this happens before your competitor steals the key phrase.

2. Website with a backlink can change the owner

This happens more often than you think. And you may even assume that it won’t affect your backlinks. But if the new owner changes the topic of the page completely and somehow leaves that one article of yours with your precious link, it will send totally different signals to Google. In the worst-case scenario, Google will treat them as spammy links and give you a penalty. Backlinks backfired.

3. You can monitor the backlinks of your competitors

Make some time in your schedule to regularly check the backlink profile of your competitors and search for broken links. Yes, you know what to do next. Just reach out to the website owner and ask if they can change the 404 links to ones redirecting to your domain. Add new links to your monitoring tool and make sure nobody does the same to you.

Backlink monitoring tools

You probably already have a few SEO tools in your marketing stack, and some of the following examples may be familiar to you. Start with the tools you have and know, and if they don’t fulfill your needs for backlinks monitoring, then you can try new ones. Fun!

1. Google Search Console

Google’s webmaster tool still shares legacy link reports where you can check domains linking to your site. This includes top linking sites and keywords, as well as your top backlinked URLs (both internal and external).

Where to find link reports in Google Search Console.

2. Ahrefs

Ahrefs will help you to check the page authority, remove low-quality links, and count referral traffic. You can set up the Rank Tracker to follow your most important keywords and check the backlink profile of each one. You can analyze the link status, see if you have any new or lost links.

Where to check your backlinks profile in Ahrefs site explorer.

3. Semrush

The cheapest Semrush plan costs $119.95 per month and will let you easily analyze your backlink status. What’s more, the tool has a separate tab with link building solutions. You can perform a backlink audit that will show any bad links that may cause negative SEO.

Sample report of backlinks profile in Semrush.

4. SE Ranking

Backlink checker in SE Ranking.

5. Monitor Backlinks

This tool is solely committed to monitoring inbound links and keyword rankings. You will know the number of backlinks, a detailed analysis of existing backlinks, and your domain score. You can decide whether you want to monitor your competitors and other websites as well (additionally paid).

Built-in disavow tool in Monitor Backlinks.

6. Open Link Profiler

It will show you which anchor text is the most popular, analyze your bad backlinks, show which countries the backlinks come from, and more. Then you can export the complete backlink profile to a .csv file (limited to 100 links in the free version).

Anchor text checker in Open Link Profiler.

7. Linkio

Backlink monitoring is a separate segment of Linkio that features its own crawler. You will automatically check indexed backlinks, and the tool will show you all necessary data, such as the domain authority, spam score, link changes (new/lost), and more. You can integrate it with Ahrefs, Google webmaster tools (GSC), and Moz.

8. LinkBox

The next backlink checker is LinkBox, convenient software for backlink monitoring and checking the indexing status. You can start with 100 free credits that you can use towards your liking efforts. For example, 0.3 credit can be used to check the page index, 0.5 credit to check the domain trust. One hundred credits cost 800.

Bonus: Brand24

Creating your first project in Brand24.

Brand24 is good for finding the anchor text for all your links. Create a project for a keyword and start gathering mentions across the web. You can then filter out the social media (you want to get as many links as possible from blogs, forums, news, etc.) and check the pages if they fit your link profile.

All your backlink data in one place

All your backlink data in one place

No matter the size and scale of your brand, your online presence is everything in the digital age. The impact of the pandemic on people’s habits means that digital engagement can have a maximum impact on your brand image, your website credibility, and ultimately your profit and performance.

Backlinks are not a new concept. They’ve been around for as long as search engines themselves have…but only recently have we begun to understand the significance of using them correctly, and the detriments of using them incorrectly.

Backlinks are sort of like “votes” for the credibility of a website. Just as customers leave a positive review on products or services, other websites can backlink to you in their content, and this can act as a positive mark against your site.

This is the internet we’re talking about – nobody can quantify the number of new websites, new articles, and new links that are generated every day. And each day, a higher percentage of this content is created with malicious intentions.

Eventually, these get found out, and Google takes action to limit their visibility, and after repeated offenses will even mark the site as spam. But if these sites have ever backlinked to you, then you’re going to be dragged down with them.

Even if you’ve never heard of the site before, had no idea that they’re backlinking to you, and don’t endorse their message, you could be putting all of your SEO work at risk by having backlinks associated with low-quality websites.

Thankfully, you don’t need to leave your website visibility up to chance – with the Backlink Monitor from Ranktracker, you can know exactly where your backlinks are showing up, who is using them, and most importantly you can disassociate your site from any low – quality backlinks.

Our backlink monitor lets you track multiple domains at once, and can access the historical data for your site. This is important for maintaining quality backlinks and making sure that you don’t drop in search engine results.

At a basic level, a backlink monitor allows you to view all of the backlinks to a specific site within a certain time frame. You can see which site linked to your site, the hook that they used in the backlink and the article or webpage that the backlink appeared in.

A backlink monitor can show you the backlink profile of a site at a glance – you’ll be able to see the total number of backlinks, aggregated from every site that the checker found. The monitor may also be able to distinguish between unique IP addresses and unique web pages.

Most backlink monitors will allow you to view specific information about these links. You may be able to see if a dofollow or a nofollow link was used to backlink to your site. The difference is important, as it can determine whether authority is passed from another site to your site.

A dofollow link from a low-quality site is a much higher priority than a nofollow link from the same site…in the eyes of search engines, when they’re limiting spam sites, a dofollow link is as good as an endorsement.

Viewing all of this information is well and good, but you want a tool that can take action, and identify a crisis before it happens or help you to maintain the upstanding brand image that you currently have.

Good backlink monitors will allow you to remove links to your site if you find a low-quality page that has backlinked to you. Their link will become unusable, and their actions will have no impact on your credibility.

Another feature to look out for is the rating of sites that a backlink monitor can provide. As your online operations scale up, you won’t have time to critique every site that backlinks to you – instead of leaving your site’s fate to chance, you can understand the situation at a glance with a dedicated “spam score”.

While backlink monitors are high-quality tools, the way they work is simpler than you may think. The information that they use is accessible to anyone who knows where to look – a backlink monitor simply collects and parses the information in a way that is easier to understand.

A backlink monitor pulls from the indexes of search engines. Google, Bing, and Yahoo all index the World Wide Web to provide you with quick search results – but the indexing process also provides evidence of sites that exist on the internet.

The process of indexing a site involves more than the information that you see from a Google search, however. For each unique webpage, search engines record all of the links that appear on the page. They also monitor the reputation of each site.

If a website has had a lot of reports or has shown behavior that is in line with known malicious websites, then Google can easily identify it as a low-quality website. This rating is stored alongside the index entry of the site.

Coupler.io

Coupler.io is an unusual tool that helps you monitor your backlinks. It doesn’t work as a standard backlink monitoring tool but it allows you to consolidate all your links from all your business units. This tool is perfect for small businesses and freelancers.The best thing about it is the ability to store and organize all your data in one place that you can review later on. You can directly import links to Google Sheets using Coupler.io or automate the data transfer by setting up a schedule. To visualize your data, you can even create bar graphs, pie charts, and Venn diagrams.

The free version allows exporting up to 100 backlinks in .csv format. If you want to export more, you can use the paid version. The tool also provides the nature of the linking website and the category of each link. You’ll get the overall idea of backlink influence, anchor page, link date, and more. This information will help you get an overview of the links that lead to your website.

Resources:

https://brand24.com/blog/backlinks-monitoring-101/
https://www.ranktracker.com/backlink-monitor/
https://mention.com/en/blog/tools-to-monitor-backlinks/
https://www.linksmanagement.com/how-to-monitor-backlinks/

Business cycles chart the ups and downs of an economy, and understanding them can lead to better financial decisions

Business Cycle

Business Cycle

Lakshman Achuthan is the co-founder of the Economic Cycle Research Institute (ECRI). Achuthan has nearly 30 years of experience analyzing business cycles, and has been regularly featured in the business and financial media, and as an invited speaker at a number of conferences.

Peter Westfall is a professor of statistics at Texas Tech University. He has more than 30 years of statistics experience including teaching, research, writing, and consulting. Peter teaches and performs statistical research with a focus on advanced statistical methods, regression analysis, multivariate analysis, mathematical statistics, and data mining. He specializes in using statistics in investing, technical analysis, and trading.

Kirsten Rohrs Schmitt is an accomplished professional editor, writer, proofreader, and fact-checker. She has expertise in finance, investing, real estate, and world history. Throughout her career, she has written and edited content for numerous consumer magazines and websites, crafted resumes and social media content for business owners, and created collateral for academia and nonprofits. Kirsten is also the founder and director of Your Best Edit; find her on LinkedIn and Facebook.

Understanding the Business Cycle

In essence, business cycles are marked by the alternation of the phases of expansion and contraction in aggregate economic activity, and the comovement among economic variables in each phase of the cycle. Aggregate economic activity is represented by not only real (i.e., inflation-adjusted) GDP—a measure of aggregate output—but also the aggregate measures of industrial production, employment, income, and sales, which are the key coincident economic indicators used for the official determination of U.S. business cycle peak and trough dates.

A popular misconception is that a recession is defined simply as two consecutive quarters of decline in real GDP. Notably, the 1960–61 and 2001 recessions did not include two successive quarterly declines in real GDP.

A recession is actually a specific sort of vicious cycle, with cascading declines in output, employment, income, and sales that feed back into a further drop in output, spreading rapidly from industry to industry and region to region. This domino effect is key to the diffusion of recessionary weakness across the economy, driving the comovement among these coincident economic indicators and the persistence of the recession.

Recession

On the flip side, a business cycle recovery begins when that recessionary vicious cycle reverses and becomes a virtuous cycle, with rising output triggering job gains, rising incomes, and increasing sales that feed back into a further rise in output. The recovery can persist and result in a sustained economic expansion only if it becomes self-feeding, which is ensured by this domino effect driving the diffusion of the revival across the economy.

Recovery

Stages of a business cycle

Think of business cycles like the tides: a natural, never-ending ebb and flow from high tide to low tide and back again. And the same way the waves can suddenly seem to surge even when the tide’s going out or seem low when the tide’s coming in, there can be interim, contrarian bumps — either up or down — in the midst of a particular phase.

All business cycles are bookended by a sustained period of economic growth, followed by a sustained period of economic decline. Throughout its life, a business cycle goes through four identifiable phases: expansion, peak, contraction, and trough.

Expansion: Expansion, considered the “normal” — or at least, the most desirable — state of the economy, is an up period. During an expansion, businesses and companies steadily grow their production and profits, unemployment remains low, and the stock market performs well. Consumers are buying and investing, and with this increasing ›demand for goods and services, prices begin to rise too.

Several criteria determine whether the economy is in a healthy period of expansion: the GDP growth rate is in the 2% to 3% range, inflation is at the 2% target, unemployment is between 3.5% and 4.5%, and the stock market is a bull market.

Peak: The economy starts growing out of control once these numbers start to increase out of their healthy ranges. Any number of factors can throw the economy off balance. Companies may be expanding recklessly. Investors might become overconfident, buying up assets and significantly increasing their prices, which are not supported by their underlying value, creating an asset bubble. Everything starts to cost too much.

The peak marks the climax of all this feverish activity when the expansion has reached its end and indicates that production and prices have reached their limit. This is the turning point: With no room for growth left, there’s nowhere to go but down. A contraction is forthcoming.

Contraction: A contraction spans the length of time from the peak to the trough. It’s the period when economic activity is on the way down. During a contraction, unemployment numbers typically spike, stocks enter a bear market , and GDP growth is below 2%, indicating that businesses have cut back their activities.

Trough: IF the peak is the cycle’s high point, the trough is its low point. It occurs when the recession, or contraction phase, bottoms out and starts to rebound into an expansion phase — and the business cycle starts all over again. The rebound is not always quick, nor is it a straight line, along the way toward full economic recovery. The most recent trough was in April 2020.

Who measures business cycles?

In the US, business cycles are defined and measured by the National Bureau of Economic Research (NBER), a private nonprofit. NBER’s Business Cycle Dating Committee is responsible for determining the start and end of a cycle.

NBER primarily uses quarterly GDP growth rates to identify a business cycle, but it will also look at other economic indicators, such as real income, retail revenues, employment, and manufacturing output. Analysts and economists often see what they call “co-movement” in these variables, meaning the different measurements rise and fall together.

For example, if employment is up, production is likely up, as is consumer spending. Likewise, if employment is down, the other metrics are down and will eventually have an impact on GDP.

Source:

https://www.investopedia.com/terms/b/businesscycle.asp
https://www.businessinsider.com/personal-finance/what-is-business-cycle
https://www.investopedia.com/terms/e/economic-cycle.asp

6 samples on how to send a formal email

6 samples on how to send a formal email

Blog writer

Blog image

Blog image

Formal emails play a crucial role in communicating information clearly and without errors in our business, professional and personal lives. So, whether you’re enquiring about an opportunity, inviting someone to an event, or resigning from a job, knowing how to write a formal email is an essential skill you need to know.

In this guide on how to write a formal email, we break down the process into simple steps. Then, we describe the ideal formal email format and provide a selection of formal email examples that you can use as the basis for your correspondence.

What is a business email?

Business email is an essential communication tool with employees and external organizations, including customers, subscribers, and stakeholders. As well as sharing information and updates, business emails can be used to market products, manage complaints, support customers, and engage suppliers. Put simply, a business email is the lifeblood of any modern company. Business emails are typically short, polite, and written with a clear purpose. However, business emails don’t need to be boring. If written correctly, an effective business email can inform, engage, and inspire any reader.

Wiring a great business email involves a little process and a little psychology. First, you’ll need to understand how to format a business email, including a great subject line, appropriate greeting, body copy, and ending. But more than that, you need to go beyond providing information and delivering a little inspiration, too.

Every email is an interruption, say researchers. You’re asking someone to read your email, so it must have value. Your email must have a purpose and state it clearly and quickly. Don’t waste time or words getting to your point, be clear with why you’re messaging and what you want, says Jeff Su in the Harvard Business Review.

We all receive hundreds of emails a day, so you must work hard to avoid what academics describe as “standardized, vague, and impersonal realizations of interpersonal moves”. Our translation: personalize your emails and keep them interesting, or risk losing readers’ attention.

Business email format

We’ve covered the core parts of professional email greetings and endings in other posts, so we’ll be brief here. Instead, we’re going to delve into more detail in the content, including providing 10 examples of business emails that command attention and demand action.

Business email greetings

There’s no magic in how to start a business email; you use a formal email greeting and an appropriate email opening sentence. The core of your message depends on who you’re contacting, what you want, and why, but the basics of how to start a good business email are pretty standard.

Suppose you’re finding it difficult to decide how to address someone in a business email. In that case, we suggest being formal rather than being informal. So while you’re OK to use any opening you choose in a personal email, if you’re wondering if you can use ‘Hi’ in business letters or emails, we would advise against it.

How to start a business email

The opening sentence should explain who you are, where you’re from, and what you want. Of course, it can be a challenge to fit all this in, but here’s an example of how to start a business email.

How to end a business email

As we’ve explained, every business email should have a point and a purpose, so be clear about what you want from the reader. So let’s use the example above to illustrate how this can work in a formal context.

I’d welcome your feedback on our new range of products and would like to arrange a call to discuss the next steps. Please respond to this email if you would like to chat, including some dates and times that are convenient to you.

I’d love to talk you through some of their new features and benefits, as well as the preferential pricing we can offer to our trusted clients. Give me a call or drop me an email if you’re interested in catching up.

How to finish a business email

When deciding how to sign off a business email, think about how well you know the reader and how formal you want to be. If you’ve emailed someone before and have a relationship, feel free to be a little less formal. On the other hand, stick to the tried and tested email sign-offs if this is the first message you’re sending.

Business email writing samples

How to introduce your business in an email

How to say sorry in a business email

Saying sorry in a business email can be challenging, but it’s best done quickly and cleanly, like tearing off a band-aid. So don’t beat around the bush or muddle the message; just say sorry.

How do you say thank you in a business email

When saying thank you in an email, keep things short but be specific. Don’t just say thanks; explain what you’re thanking the person for and the impact that they have had. If you’re saying thanks for something they’ve done,

How to say no politely in a business email

Learning how to say no politely is a core business communication skill that can be a challenge. We’re conditioned not to want to disappoint people, but remember this isn’t about you personally, but about business. A polite but firm no can improve the way you are perceived. It’s tempting to apologize or qualify your response but don’t. Stick to the facts and don’t lose focus.

What to check before sending an email

  1. Double-check the recipient’s name. They can forgive you a typo somewhere in the email body but definitely not in their name!
  2. Check the email address. Make sure you’re writing to the right person. If you have multiple email accounts, also check if you’re emailing from the needed address.
  3. Make sure you have the subject line. It should tell the recipient what to expect from your email.
  4. Put yourself in the reader’s shoes. Reread your email as if it was sent to you. Is it easy to read? Can you understand who’s contacting you, what’s it about, and what do they expect from you? Are there any phrases that sound rude or ambiguous?
  5. Check grammar and spelling. Don’t let typos and errors ruin the whole impression.
  6. Don’t forget to attach files. If you’re sending someone a document, make sure the recipient actually receives it.

You’ve learned how to write a formal email, but there is a couple of hacks that will make you feel more comfortable while sending emails, save you time and sometimes even reputation.

1. Undo sending

Have you ever realized a terrible mistake you’ve made after hitting “Send”? You still can prevent disaster. Our email client Spark lets you cancel the email sending within the next 5 seconds. On your Mac, just press Cmd ⌘ + Z. On iOS or Android, tap Undo at the bottom of the screen. The undo feature works with emails from all major providers: Gmail, Outlook, iCloud, Yahoo, Exchange, and others.

2. Email scheduling

Timing is crucial for business emails, especially when you’re communicating with people from different time zones. Spark lets you schedule emails to be sent later so you can draft a message whenever you want and make sure the recipient gets it when they’re most likely to reply.

3. Follow up reminders

Email doesn’t require an immediate reply, and a recipient usually has a couple of business days to get back to you. Anyway, you don’t want your message to end up in limbo. Set a follow up reminder in Spark, and the app notifies you if you haven’t received a reply after the due date. This way, you don’t have to keep track of all your sent emails. Spark does it for you.

Writing business emails isn’t as tricky as it seems. Just have your goal in mind, value the reader’s time, follow the professional email format, and deliver your message in the most concise way. We hope our tips on how to write a professional email will help you communicate effectively and achieve your business goals.

Must Reads

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Resource:

https://www.flowrite.com/blog/formal-email
https://www.flowrite.com/blog/how-to-write-a-business-email
https://sparkmailapp.com/blog/how-to-write-professional-email

Human capital

human capital, intangible collective resources possessed by individuals and groups within a given population. These resources include all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom possessed individually and collectively, the cumulative total of which represents a form of wealth available to nations and organizations to accomplish their goals.

Adam Smith

Human Capital

Will Kenton is an expert on the economy and investing laws and regulations. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU.

The term human capital refers to the economic value of a worker’s experience and skills. Human capital includes assets like education, training, intelligence, skills, health, and other things employers value such as loyalty and punctuality. As such, it is an intangible asset or quality that isn’t (and can’t be) listed on a company’s balance sheet. Human capital is perceived to increase productivity and thus profitability. The more investment a company makes in its employees, the chances of its productivity and success become higher.

Key Takeaways

Understanding Human Capital

An organization is often said to only be as good as its people from the top down, which is why human capital is so important to a company. It is typically managed by an organization’s human resources (HR) department, which oversees workforce acquisition, management, and optimization. Its other directives include workforce planning and strategy, recruitment, employee training and development, and reporting and analytics.

The concept of human capital recognizes that not all labor is equal. But employers can improve the quality of that capital by investing in employees. This can be done through the education, experience, and abilities of employees. All of this has great economic value for employers and for the economy as a whole.

Since human capital is based on the investment of employee skills and knowledge through education, these investments in human capital can be easily calculated. HR managers can calculate the total profits before and after any investments are made. Any return on investment (ROI) of human capital can be calculated by dividing the company’s total profits by its overall investments in human capital.

For example, if Company X invests 5000 million into its human capital and has a total profit of $15 million, managers can compare the ROI of its human capital year-over-year (YOY) in order to track how profit is improving and whether it has a relationship to the human capital investments.

Managing human capital

The management of human capital is diffused throughout an organization. All management decisions and actions that affect the nature of the relationship between the organization and its employees are seen as important. As a result, all management actions can positively or negatively affect the potential of human capital to influence organization performance. In this view, although the organization may contribute to the development of human capital, its ownership rests with each individual. Collectively, all the knowledge, skills, and abilities within an organization and available at any given time constitute a human capital pool. Although this talent is available to achieve positive performance, the totality of management practices needs to consistently tap this human capital pool in such ways as to influence individual and group attitudes and behaviour toward the desired organizational goals.

Reciprocal commitment in an organization suggests that a relationship exists between certain management practices and performance. At a point where the total effort of human capital coalesces into a critical mass, high organizational performance seems possible. Here, human capital, fully developed and tapped appropriately, can influence organization-level outcomes. Empirical research in the private sector appears to identify specific management practices as universally superior to others in achieving firm-level outcomes such as market share and profitability. This universal perspective has led to benchmarking certain practices as “best” for contributing to high performance. Empirical research in the public sector establishing such a relationship is sparse. This may be the result of difficulties in measuring government-level outcomes and being able to clearly establish this connection, because outcomes are often influenced by a myriad of variables outside the control of public management. Even so, the same superior management practices thought to favourably influence human capital in private enterprise have been often adopted in public administration reforms.

Practices thought to result in a high-quality, committed, and flexible workforce in private enterprise are also seen as important contributors to productivity and performance in the public sector. High levels of expenditures in training and development, empowering workers with decentralized decision-making authority, and encouraging participation, pay for performance, the use of self-managed work teams, and flexible job designs, among others, are commonly associated with improved performance in public agencies. Theories of motivation support such management practices where the first priority is to ensure that workers have the skills and ability to perform (training and development) and where the second priority is to afford them the opportunity to test their problem-solving skills (decentralized decision authority). The belief is that investing heavily in improving worker skills and abilities leads to a higher-quality workforce. This combined with valued rewards and a role in problem solving can result in greater effort, commitment, and motivation within a workforce that is more flexible and innovative. This combination then, it is thought, results in higher organization performance.

Resources:

https://www.investopedia.com/terms/h/humancapital.asp
https://www.investopedia.com/terms/h/humancapital.asp#:~:text=The%20term%20human%20capital%20refers%20to%20the%20economic,can’t%20be)%20listed%20on%20a%20company’s%20balance%20sheet.
https://www.britannica.com/topic/human-capital
Human capital

Human capital is available to generate material wealth for an economy or a private firm. In a public organization, human capital is available as a resource to provide for the public welfare. How human capital is developed and managed may be one of the most important determinants of economic and organizational performance.

human-capital

What Is Human Capital Management & Why Is It Important?

Renovations to a building will generally increase the building’s value, and inventory that sits on a shelf for months will generally decrease in value. But how do you impact the value of an intangible asset like an employee?

The second, however, is that for many companies the cost of their workforce is often their greatest expense. As a result, HCM has become the driving force behind many new business practices, a growing abundance of human capital management software solutions, and an emphasis on the concept of human capital as a competitive advantage.

Maybe you’re an HR professional and want to educate yourself or your colleagues, or perhaps you’re the leader, owner, or founder of a startup or small business, or you’re wondering if HR is the career path for you. Either way, this will equip you with the basic fundamentals of HCM and enable you to get started on practicing it in your own organization.

What is Human Capital Management (HCM)?

While referring to human beings and employees as “capital” might seem harsh—and some joke about the similarity between the words “capital” and “cattle”—it can actually help an organization shift it’s perspective and view employees as an asset that can increase in value. Organizations that do this focus on activities such as learning and development initiatives, health and well-being programs, and specialized skills development, which brings rewards to both the individual employee and the organization.

So what is human capital management?

Human capital management, or “HCM” for short, is the collection of organizational practices related to the acquisition, management, and development of the human workforce—or human capital—within an organization.

The goal of HCM is to optimize and maximize the economic, or business, value of an organization’s human capital in order to gain a competitive advantage. Effective human capital management enables the organization to successfully pursue human capital initiatives.

Importance of human capital

  • Structural unemployment. Individuals whose human capital is inappropriate for modern employers may struggle to gain employment. A major issue in modern economies is that rapid deindustrialisation has left many manual workers, struggling to thrive in a very different labour market.
  • Qualityof employment. In the modern economy, there is increasing divergence between low-skilled, low-paid temporary jobs (gig economy). High-skilled and creative workers have increased opportunities for self-employment or good employment contracts.
  • Economic growth and productivity. Long-term economic growth depends increasingly on improvements in human capital. Better educated, innovative and creative workforce can help increase labour productivity and economic growth.
  • Human capital flight. An era of globalisation and greater movement of workers has enabled skilled workers to move from low-income countries to higher income countries. This can have adverse effects for developing economies who lose their best human capital.
  • Limited raw materials. Economic growth in countries with limited natural resources, e.g. Japan, Taiwan and South East Asia. Rely on high-skilled, innovative workforce adding value to raw materials in the manufacturing process.
  • Sustainability ”what we leave to future generations; whether we leave enough resources, of all kinds, to provide them with the opportunities at least as large as the ones we have had ourselves” (UN, 2012)

Different views on Human Capital

“Although it is obvious that people acquire useful skills and knowledge, it is not obvious that these skills and knowledge are a form of capital, that this capital is in substantial part a product of deliberate investment”

Gary Becker “Human Capital” (1964) In his view, human capital, is determined by education, training, medical treatment, and is effectively a means of production. Increased human capital explains the differential of income for graduates. Human capital is also important for influencing rates of economic growth.

Howard Gardener – different types of human capital. Gardener emphasised the different types of human capital. One could increase education, but be a poor manager. A successful entrepreneur may have no education. Human capital is not unidimensional.

Schultz/Nelson-Phelps – ability to adapt. Human capital should be looked at from the ability to adapt. Can workers adapt to a changing labour market? A labour market which is shifting from full-time manual work in manufacturing to flexible work in the service sector.

Evaluation of human capital

Social upbringing. A sociologist like Pierre Bourdieu argues that human capital is strongly related to social upbringing. This influences cultural, social and symbolic forms of capital. For example, UK society dominated by Old Etonians and Oxbridge graduates who gain confidence and social capital from having the right social networks.

Signalling. Related to the social capital of going to the right school, is the idea that what constitutes human capital is often just ‘signalling’. For example, gaining a degree from Oxbridge improves status in the workforce and enables a higher salary for the graduate. However, three years of studying a degree in modern history/PPE may give only a small amount of knowledge directly related to the work environment.

Discrimination. Differences in wages and job opportunities are not necessarily due to differences in human capital, but the result of discrimination, labour market imperfections or non-monetary benefits of jobs.

32 thoughts on “Human Capital definition and importance”

I don’t believe in capitalism, Capatital is just a term for money, money belongs to no one but the federal union, lets say you got paid and the money came from your parents, even if it did, your parents didn’t just get the money from no where.

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Resources:

https://peoplemanagingpeople.com/articles/human-capital-management/
https://www.economicshelp.org/blog/26076/economics/human-capital-definition-and-importance/
https://www.britannica.com/topic/human-capital
Human capital

The term HCM can refer both to a business strategy and a set of modern IT applications and other technologies that are used to implement that strategy. Though sometimes used interchangeably, the terms related HR, HRMS, and HRIS do have subtle distinctions:

What is HCM video thumbnail

Human Capital Theory

Human capital theory, initially formulated by Becker (1962) and Rosen (1976), argues that individual workers have a set of skills or abilities which they can improve or accumulate through training and education.

4 Human Capital

Human capital theory is concerned with knowledge and experiences of small-scale business owners. The general assumption is that the human capital of the founder improves small firms’ chances of survival (Bruederl et al. 1992 ). Human capital acts as a resource. However, human capital theory studies usually assume that experiences are translated into knowledge and skills. This assumption is problematic, however, because length of experience is not necessarily a good predictor of expertise (Sonnentag 1995 ). Therefore, it is not surprising that human capital factors, such as length of managerial or industry experiences or education, are not strong predictors of success, although in large-scale studies they usually are significant (Bruederl et al. 1992 , Rauch and Frese 2000 ).

Human Capital

Empirical Estimates and Methodology

Although human capital theory suggests that individuals invest in education in anticipation of a wide range of benefits, most empirical work has focused on the monetary rewards of increased earnings. Such data have tended to show rates of return of about 10% for an additional year of education, with some variation by gender and race/ethnicity ( Psacharopoulos and Patrinos 2004 ). These return measures ignore nonmonetary and consumption benefits of education, and they also ignore any externalities associated with education. There has been substantial work done on these latter topics which are discussed later in this article.

Several methodological issues arise in estimating the returns to education. The goal of most empirical work is to establish a causal link between education and measures of return, which tends to be much more difficult than simply measuring a correlation. Early work compared lifetime earnings profiles for groups with different levels of educational attainment. More advanced analysis based on multiple regression analysis has attempted to account for a host of technical estimation problems such as omitted variables, nonrandom samples, incorrectly measured variables, and jointly determined outcomes. These issues are discussed briefly in what follows.

A key omitted variable in much empirical work is innate ability (e.g., natural intelligence, work ethic) which can also include unobserved effort. The fundamental difficulty is that high-ability individuals are likely to obtain more years of schooling than low-ability individuals, but high-ability individuals would also tend to earn more for any given amount of schooling than low-ability individuals. This makes it difficult to disentangle the effect of schooling versus innate ability.

A large literature is devoted to investigating and overcoming this particular problem. Ideally, a researcher would like to observe otherwise identical individuals who differ only in their level of education. Although this approach is impossible in practice, clever research strategies using advanced econometrics have been employed with varying degrees of success.

Nonrandom sampling is often a problem with estimating returns to education for individuals with weak attachment to the labor market. For example, in contrast to most college-educated males, a substantial fraction of women who graduate from college will exit the workforce for extended periods of time. This implies that estimating returns to college will rely on a subset of the available data (women who work) that might not be representative of the full population of women. As with accounting for unobserved ability, a large literature has developed to account for this type of problem, again, with varying degrees of success.

Measurement error can afflict several variables of interest in empirical models. One example is earnings: earnings can be misstated in surveys because of carelessness by either the responder or the person (or machine) coding the information; or, responder wariness toward the survey instrument might lead to inaccurate data. Another example is in the measurement of school quality: a year of schooling from an Ivy League college might be very different than a year of schooling from the local junior college. Such problems cloud the measurement of the causal relationship between schooling and earnings, and the relationship between human capital accumulation and outcomes more generally. Several approaches have been used to account for this problem, the simplest of which is the development of better data sources.

The problem of jointly determined variables, also known as endogeneity, arises in situations where multiple outcomes are simultaneously decided upon. For example, household fertility decisions are likely to be made jointly with decisions about the level and type of education to obtain. This makes it difficult to measure a causal impact of one endogenous variable on another, although such causal links are theoretically possible. For example, it seems likely that having additional children makes it more costly and therefore less probable that a person will pursue additional years of education. But measuring the independent effect is confounded by the joint-decision process. The typical strategy to deal with endogeneity is to use an econometric technique known as instrumental variables estimation. Alternative complex estimation techniques have also been used in the empirical literature.

Human Capital Theory

Human Capital theory originates from Adam Smith in 1776, with his book ‘The Wealth of Nations’. Gary Becker later went on to build upon Smith’s original theory who went on to coin the term ‘Human Capital’ in his 1964 book.

Becker highlighted a key similarity between what we normally consider as capital and ‘human capital’. He highlighted that traditional ‘capital’ such as stocks, steel plants, or assembly lines produce a yield – they are an investment that produces further income.

Becker went on to state that this could also be applied to ‘human capital’ such as schooling or on-the-job training. Both increase the economic output of the individual, so act in a similar way as a new steel plant. So the more education an individual has, the more they are capable of producing an earning, thereby increasing their worth to the firm.

Other Factors

Human Capital Theory also considers other factors such as medical care, migration, and information on prices, as human capital. The reasoning for such is that goods such as healthcare can prolong life or reduce the length of sickness.

Either way, it allows the recipient more time to work. For instance, an illness that may last a week could be reduced to only one day through anti-biotics. That’s four additional workdays gained, thereby increasing the economic output achieved.

Human Capital Examples

Abilities

We can think of ability in two ways: natural and developed. Natural ability refers to the abilities we have when we are born. For instance, Lionel Messi is known for his extraordinary ability in soccer. This was noticeable at a very young age and can be considered as human capital.

Though this natural ability, he has been able to make millions. Yet at the same time, this ability also needs hard work, good attitude, and nourishing. This is how the natural ability translates into a developed ability and in turn an economic advantage.

Creativity

It can be argued that creativity is not necessarily something that can be developed. In fact, it could be considered a natural ability. Some are more naturally creative than others. In turn, this can make some more productive in creative roles than others.

Education

This is the area which Human Capital Theory focuses on most greatly. As the wider population has learnt to read and write, the ability to learn and transfer knowledge has increased. For instance, the ability to read and write allows us to go through the internet and learn new skills.

However, education extends beyond reading and writing. It also includes the development of our analytical abilities. History for example requires writing techniques, whilst Science requires the development of research and investigation.

Experience

The logic is that the more experiences we have, the more situations we face. So an electrician is far more capable if he has experience dealing with different types of units. When they are called out, they can recall their experiences to deal with a situation.

Judgement

As part of human capital, judgment refers to the decision people make in different situations. In part, this can be seen as natural. Yet judgment can be built upon and developed. For instance, making a judgment call on a yearly project could be improved if the employee has experienced the situation before.

Resources:

https://www.sciencedirect.com/topics/economics-econometrics-and-finance/human-capital-theory
https://boycewire.com/human-capital-definition/
https://www.oracle.com/human-capital-management/what-is-hcm/