As a social impact leader, your work seeks to benefit people. This human-centered vision is likely embedded in the nonprofit strategy your organization deploys to advance its mission. The same drive that shapes the outcomes your organization pursues can also inform and improve the nonprofit management you undertake within your organization. 

The common denominator is people. 

People infuse an organization with value every bit as precious as its financial or infrastructural resources. The experiences, education and cultural identities its people possess make up an organization’s human capital. Becoming more comfortable with this concept can help you to better recognize the value people give to your organization. Given the relatively limited resources many nonprofit organizations face, cultivating human capital can increase the impact of different managerial approaches.

Taking a human capital approach not only makes sense as a general management practice but also aligns organically with the values most social impact leaders already share: a belief in the innate capacities of human beings and a desire to nurture and develop those capacities for a greater good.

What is Human Capital Management and Why Is It Important?

The ultimate aim of human capital management  is to create and maintain an environment people want to fully engage with, in which they eagerly use their existing talents to advance the organization’s mission and when necessary to acquire new skills for the greater good of the organization.

This occurs when managers attend to the full life cycle of engagement or employment:

  • Hiring: how will you identity and attract talented people who will be a good fit for your organization?
  • Organizational acculturation: how will you onboard new hires and maximize the chances that they will succeed?
  • Performance: how will you foster engagement and meaningful productivity? 
  • Compensation: what rewards and incentives are within your capacity to bestow in order to foster the talent you have?
  • Development: how will you cultivate the talent within your organization, so that your staff can become multifaceted and limber enough to respond effectively and efficiently to unforeseen or rapidly changing circumstances? 
  • Structure: how can you design an organizational structure that better supports the human capital within the organization?

The importance of human capital management, especially in an organization with limited staff, which may also rely heavily on volunteers, is probably self-evident. People are not widgets. We all do better when our talents and experiences are valued and nurtured.

From a nonprofit management perspective, it can be helpful to keep in mind Booker T. Washington’s notion of casting down buckets. Washington, the late nineteenth-century educator and reformer, prophesied the importance of human capital management. As part of a strategic approach to increasing both the civil rights and the economic standing of black men in the United States, Washington implored white business owners to recognize the human capital that already existed within their own segregated communities, using a simple parable:

A ship lost at sea for many days suddenly sighted a friendly vessel. From the mast of the unfortunate vessel was seen a signal, “Water, water; we die of thirst!” The answer from the friendly vessel at once came back, “Cast down your bucket where you are.” A second time the signal, “Water, send us water!” went up from the distressed vessel, and was answered, “Cast down your bucket where you are.” A third and fourth signal for water was answered, “Cast down your bucket where you are.” The captain of the distressed vessel, at last heeding the injunction, cast down his bucket, and it came up full of fresh, sparkling water from the mouth of the Amazon River.

Wasington’s admonition is helpful to keep in mind when developing a human capital strategy. Whenever possible, try giving people opportunities to apply their talents on behalf of the organization, even if what you are asking them to do falls outside the parameters of their job description on your organizational chart. 

Thinking of people as capital rather than resources is a great way to implement this strategy.

Human Capital Management vs. Human Resource Management

A resource is something an organization utilizes or deploys within certain contexts and according to certain capacities. Capital is something an organization values and cultivates. 

This distinction applies as much to the people within an organization as it does to an organization’s other assets.

Unlike larger corporations, whose infrastructures may support a more disconnected organizational structure, many nonprofit organizations by necessity take a more integrative approach to resource management and organizational administration. In such cases, the importance of human capital management cannot be overstated, because most social impact organizations simply are not big enough to support siloed approaches to recruitment, development and performance. 

The difference between managing human resources and managing human capital is nuanced but significant: a human resources approach tends to assign strategic tasks in line with formal roles and job descriptions as defined by an organizational chart, whereas a human capital approach is more integrative, seeking to achieve strategic outcomes by aligning tasks with the actual talents, training and experience that already exists within the organization irrespective of its organizational chart. 

It is all about maximizing the potential of the people in your organization. 

Here are some approaches you can take to start implementing strategic human capital management in your organization. 

  • Look for opportunities to empower your staff. Allow your team to participate in as many aspects of the organization as possible, including strategic planning, program development and assessment, fundraising and communication. You may find, for example, that the colleague you hired for their knowledge of general accounting principles is an excellent social media curator.
  • Leverage your team’s stories. An organization’s case for support is always tied to its mission, but the narratives you use to advance that case are adaptable. Human capital management gives you access to the narratives and voices your team brings into your organization. This can help your organization connect with donors in ways you might not otherwise have anticipated and at the same time nurture future leadership opportunities, especially within traditionally underrepresented groups

And from this perspective, strategic human capital management can also help with building capacity in nonprofit organizations. 

Nonprofit Capacity Building

From a leadership perspective, nonprofit capacity building is an essential responsibility. Knowing when to recruit new staff and when to invest in the development of existing staff can be difficult, but its potential impact on your organization is significant. If you are fully cognizant of the human capital that already exists within your organization, these decisions become easier to shape and hopefully easier to make. 

Here are some other aspects of capacity building that benefit from a human capital approach:

  • Succession planning: when it comes to succession planning and board replenishment, taking a human capital approach helps you think about people as investments, but it also helps you identify areas of expertise your board might benefit from acquiring or tapping into.
  • Networking: effective capacity building in nonprofit organizations is often the result of the intentional development of new networks. Strategic human capital management is a great way to grow your organization’s network of support.

Investing in human capital management training is a great way to support and develop your team. If you need a general overview of employee management, check out this great free resource from the National Council of Nonprofits, and as you review it keep in mind the benefits of adopting a human capital approach. And also check out our catalog of free courses, including our course on human capital management training specifically designed for social impact leaders and organizations from the perspective of the nonprofit and NGO administrator. 

November 18, 2019


Gina is our Marketing Manager at Philanthropy U. She has a background in international education, international development and scaling enterprises.


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