Calculate the net present value of this stream of earnings for all employees, discounted at an appropriate rate, and you have the worth of the human resources of your company. This figure can give the management an idea of how important the human resource pool is. The corollary being that if your human capital is so important, you should take care of it accordingly.

There are several problems with this approach. A company cannot own human capital, in the way that it owns other assets, and an employee is free to walk away any day. Valuing a company by its human capital is thus impossible. Nor is the total value of human capital important - rather, it is the return earned on that capital which is more to the point. Such measures of efficiency were in use much before theconcept of human capital appeared on the scene, and mundane ratios such as employee costs to sales, when compared across companies in the same businesses, and concepts such as business per employee were useful tools to gauge the contribution made by employees.

The idea of human capital holds particularly in sectors such as software, but it is equally applicable to firms of accountants or lawyers, hotshot salesmen and managers, and doctors. The crux of the matter is that it is not only the amount of capital invested in an employee which determines his salary, but the demand for the individual's services. There are plenty of graduates selling vegetables. Investing in human capital is no doubt important, but creating demand for labour is equally so.