Capital Resources: How to Strengthen Your Intangible Assets

Some of the capital resources that sustain your business, create value and profitability, and help it to grow are intangible. But they’re just as real as the physical tools and materials of your trade. And more valuable.

What is a capital resource?

To fully understand what capital resources are, let’s break down the phrase: Capital is any asset that benefits or provides value to a business and helps it to grow. Resources are the assets, actions or strategies necessary to carry out business activities.

Capital resources are man-made assets that a business uses to accomplish the activities necessary to generate revenue. Some capital resources are physical: tools, machinery, buildings, etc. But capital resources – as they pertain to human resources – are intellectual capital. While they are still man-made, they’re not physical assets. They are the products of training, innovation, experience, relationship building and business development.

Intellectual capital is a collection of the intangible assets that contribute to an organisation’s value. This includes its intellectual property and the sum of knowledge and expertise of its employees.

Examples of intellectual capital:

• Organisational processes
• Patents and copyrights
• Business training programs
• Business relationships
• Employee skills and expertise

Intellectual capital is typically broken down into three categories – human capital, relationship capital, and structural capital – all of which feed into the other. They form the foundation of a business. As such, they can be built up to strengthen a business.

In this article, we’ll explore the relationship between each type of intellectual capital, how each drives business value, and how they can be nurtured to enhance business value.

Investing in Human Capital

Human capital is the economic value attributed to the capabilities and expertise of an individual employee or the entire workforce.

Examples of human capital:

• Education
• Skillset
• Talent
• Life experiences
• Work experiences
• Health

Human Capital Management (HCM) is the primary function of human resources departments. We tend to think of HCM in terms of the systems that manage the onboarding, payroll and benefits of our workforce. However, according to Gartner, HCM is a set of practices related to hiring, managing and optimising our human capital resources.

Along these lines, the four key areas of HCM are managing workforce acquisition, education, retention and morale. To truly optimise our human capital resources, we must invest in practices that increase workforce satisfaction, longevity and loyalty.

Human capital theory is the concept that businesses increase productivity and efficiency when they invest in the education of their workforce. American economist, Greg Becker, who coined the idea of investing in people, was a pioneer for Human Capital theory.

Let’s look at the tactics businesses use to strengthen human capital resources, thereby improving productivity, efficiency and profitability.

• Attracting and hiring the people with the right skills and experience and personality
• Career development of existing employees in the form of training, education, mentorship, and coaching
• Retaining employees with work flexibility, job autonomy, fair pay and opportunities for advancement
• Cultivating morale through wellness activities, good communication and developing a positive work culture

Becker’s works reveal that investing in employee education and training is directly related to workplace productivity and efficiency. In addition, workers who are more productive benefit from higher earnings and greater employability. Holistically, investing in humans builds loyalty and creates a team that is satisfied in their jobs and whose increased productivity and longevity increases profitability. It cultivates a positive employee-employer relationship, which translates to positive relationships with clients, suppliers and intermediaries.

Investing in Relationship Capital

Relationship capital the network of relationships a company has with its book of business, workforce, partners and other stakeholders.

Examples of relationship capital:

• Clients
• Employees and leadership
• Vendors, suppliers
• Intermediaries and third-party contractors
• Board members and shareholders

Business growth and sustainability are directly impacted by human-to-human interaction. For this reason, it’s crucial to build and maintain healthy business relationships.

You can do this by fostering relationship capital through open and honest connections that include:

• Active listening
• Seeking ways to add value
• Treating others with respect and trust
• Communicating with transparency

When you invest in your relationship capital, you form strong connections with prospective and existing customers that can result in more sales and lower churn. Good relationships with vendors can reduce purchase costs and increase reliability. And a positive employee-employer experience can boost employee retention, loyalty, morale, and company culture.

Investing in structural capital

Structural capital is the organisational knowledge – or infrastructure – a business uses to achieve its objectives.

When the office is closed and your employees have gone home, structural capital is what is left. And yet, the knowledge and ideas that make up your business infrastructure cannot exist without the knowledge and innovation of your employees. Nor would it exist without your business relationships.

Likewise, your structural capital provides the means and methods with which you train and motivate your human capital. It provides the values that feed into your relationship capital.

Examples of structural capital:

• Core beliefs, mission statement, culture
• Company procedures and policies
• Business processes
• Client database
• Training documentation and videos
• Intellectual property such as brands, trademarks, patents, copyrights and proprietary information

Just like your business relationships and your employee experiences, structural capital must be continually cultivated. They’re not one-and-done. A 1991 training manual isn’t going to benefit employees in 2023. You must re-evaluate and restructure your core beliefs, your procedures and processes. You must update your client database. You need to renew copyrights and trademarks when they expire. And you should be continuously adding to them as your business grows.

Don’t Allow Your Capital Resources to Depreciate

Like all capital, intellectual capital can depreciate. If you don’t constantly build up your human capital, relationship capital and structural capital, they will all lose value. Your human capital, relationship capital and structural capital are key to sustaining and growing your business and your bottom line.

CoachHub digital coaching services can help you train and educate employees. It’s one of the most effective tools for talent retention. Working with a coach can improve your teams’ soft skills, increase workplace health and wellness, and build effective leadership. Explore our website to learn more about how digital coaching can transform your company.