As I start to write about the importance of human capital in any business, the obvious discussion that crops up in my mind is the present conflict between human performers and AI-empowered machines. How much human intervention can we replace with artificial intelligence? While I plan to write on this some other time, let me share an experience here.

At a conference, a nationally respected doctor was once asked if AI will take over jobs from medical professionals. In reply, the doctor had asked the person if he will agree to fly in an aircraft with no pilot, flown only by machines. He said that in the future doctors who understand AI will have no issue, while he prayed for those who ignored the technological advancements.

We do not know where the future will take us, but as we stand now, human capital is one of the most important elements of any business. Depending on the nature of the business it would hover between the top three elements that create value and contributes to the financial well-being, growth, and sustainability of the company.

How an organization manages its leadership, organizational culture, and values, and looks after its human resources are parameters that contribute to the growth of the company, directly translating to its financial health. Training and skill development of the employees are also equally important for productivity and innovation driving long-term success. For any investor, these aspects should contribute to decision-making.

The challenge that we have today is how intangible KPIs (key performance indicators) translate to tangible evaluation criteria. It is more so because every business has its nature and the need for human contribution. It is different for a technology-driven operation from that which needs a more human touch. Many have come up with various definitions like voluntary or involuntary attrition rates, training spends, skill, experience, type mapping, productivity measurement, and several other measures, but in my view, they will all be important in different proportions in different organizations. Till now, it is left to the judgment of the investor to make an apple-to-apple comparison when choosing between two investment opportunities in different industries.

Though a lot of work is being done in this field, my personal view is that it will remain difficult to relate human capital affects an organization's financial performance.

We all know it; the issue is how to show it!