Developing Human Capital: Why is it so important to invest in people?
“For the poorest people, human capital is often the only capital they have” - World Bank Group President Jim Yong Kim.
In October 2018, the World Bank released the Human Capital Index aimed at encouraging more meaningful investment in people to accelerate economic growth and equity. Dubbed a project of the world, the Human Capital Project under which the index was published highlights the current emphasis on investment and funding which has been traditionally geared towards improving hard infrastructure with less value placed on human capital despite its direct correlation to both economic and social growth.
As an organisation, Mowgli Mentoring has for the past 10 years pioneered and worked to build the recognition of investing in human capital through mentoring by showcasing the impact achieved through its 360 degree mentoring programs, which support both the personal and professional development of individuals to drive inclusive economic and social growth.
The Sustainable Development Goals (SDGs) created and adopted by United Nations member states provide a clear blueprint on what countries need to do to ensure prosperity now, and in the future. Some of the key goals identified include quality education, decent work and economic growth, zero poverty and hunger, and reduced inequalities just to mention a few, many of which showcase the dire need to direct more investment into the development of individuals who then bring about social and economic development.
With the burgeoning youth population who globally take the largest share of the workforce, there is no better time to call on local and international governments as well as the private sector to direct more investment into the long term and sustainable development of individuals, which looks at both their capabilities (skills, knowledge and behaviours) and their capacities (self-leadership, confidence, motivation, resilience and mindset). A good example is Sub Saharan Africa, a continent with the world’s youngest population and one which will have to create 18 million jobs per year to absorb new labour market entrants, as the continent’s labour force is estimated to reach 450 million people by the year 2035. The situation in the Middle East and North African region (MENA) is just as dire as the youth unemployment rates stand at 30 percent according to the 2017 Arab Youth Survey.
Ironically in those two regions, governments are now the least creators of employment. It therefore makes sense that the call to invest in people, in particularly those driving economic and social development, is growing louder and becoming more prominent.
Exploring human capital and its role in the entrepreneurship ecosystem
Incubators, accelerators, hubs, angel/seed investors and venture capital firms are some of the key organisations that come to mind when the entrepreneurship ecosystem is mentioned. And why not? They provide the much-needed space, access to investment and infrastructural support required by entrepreneurs particularly start-ups, to develop sustainable businesses. However, various studies have shown that human capital is one of the most neglected yet key components of the ecosystem. As is the case with any support environment, for it to adequately sustain the individuals or sector that need support, it must be well balanced.
Having delivered over 100 mentoring programs across the Middle East, North Africa and Sub-Saharan Africa, Mowgli Mentoring has identified that there are 4 key pillars that make up the ecosystem namely; 1) Environment — schooling, parenting, 2) Infrastructure — incubators, accelerators, utilities, regulatory frameworks, 3) Finance — access to working capital, seed, angel, debt and equity finance and 4) Human Capital — business skills training, business coaching and mentoring. Mentoring provides an empowering environment that brings light to and nurtures both capabilities and capacities which are critical to the long-term growth and success of individuals and economies.
Our Mentoring Effect on Economic Growth report provides insight into the value of having an ecosystem which has balanced investment in all pillars. The average Return on Mentoring Investment (ROMI) for the region in 2016 was 890%, with differences between ecosystems ranging from 250% to 1160%. Our data shows that countries that have a developed and entrepreneur-serving ecosystem, with equal investment across the four pillars, achieved higher job creation levels than those that do not. In addition, our findings showed that mentoring which focuses on supporting both the business and personal aspects of the entrepreneur is key to ensuring the greatest Return on Mentoring Investment (ROMI) from other support initiatives such as business skills training and financial support. Mentoring clearly needs to be a key cornerstone of any entrepreneur-serving ecosystem or support initiative.
How about on an organisational level?
Mentoring also plays a key role in supporting the development of human capital and leadership at an organisational level. In Kenya, we are working with the largest telecommunications company, Safaricom PLC to not only begin to embed a mentoring culture within the organisation, but support their gender inclusivity and diversity agenda.
“We aim to build a human centric and inclusive leadership culture in the organization that gives equal opportunities to all and supports our employees to be at their best. Our Women in Leadership program supports our goal of achieving diversity in leadership. In addition it helps enhance capacity building for our women as we prepare the women leadership pipeline for the 50:50 senior management gender representation agenda by FY 2020,” Paul Kasimu, Safaricom Director for Resources, Safaricom
Human Capital is undoubtedly one of the key drivers of long term and sustainable development for growing economies. By investing in the development of people’s capabilities and capacities, individuals become stronger leaders who are more productive, innovative and adaptive to the emerging changes developing in the future of work.
When governments, ecosystems and organisations fail to focus their investment on the development of their citizens, beneficiaries and employees’ human capital, we are faced with reduced social growth through increased levels of migration, insecurity, socially detrimental behaviours and burgeoning ‘lost generations’ and as a result reduced economic growth and trade.
To echo the sentiments of the World Bank; “Human Capital — the potential of individuals — is going to be the most important long-term investment any country can make for its people’s future prosperity and quality of life.”