Introduction

The most important part of intangible resources is human capital (HC) (Sveiby, 1998; Koziol, 2018; Lubacha, 2023), i.e., employees’ knowledge, skills, and knowledge to do the things that ultimately are responsible for the company’s success. A company’s performance, competitiveness, sustainability, and value depend on several factors (Lee et al. 2023; Laporsek et al. 2021; Ahmadí et al. 2021; Ionescu et al. 2020; Chalastra et al. 2019). However, the level of performance, development, competitiveness, and achievement of set goals of individual companies and entire economies is increasingly dependent on the knowledge and skills of employees and citizens (Mubarik et al. 2020; Perera and Thrikawala, 2012; Timothy, 2022; Safrankova and Sikyr, 2018). HC also increases the efficiency of the use of physical capital and contributes to the faster dissemination of technological progress with a high level of added value and innovation (Marimuthu et al. 2009; Adomako et al. 2022; De la Cruz Prego, 2021; Oyinlola et al. 2021). Currently, the field of human capital management (HCM) is influenced by Industry 4.0 and its elements, the implementation of which in the company can increase the productivity and efficiency of processes in the field of HCM. Also, because of these technologies, it will be necessary to increase the qualifications of employees through various training courses (Cameron et al. 2024). As technology is constantly changing and developing, lifelong learning needs to be emphasized. Especially in countries such as China, the importance of the so-called company's universities, which ensure that the employees of the given company are constantly educated (Han et al. 2024).

The importance of this asset is emphasized by several authors for individual types of companies such as trading companies (Dusek, 2021; Kotkova and Hromada, 2021; Pirogova et al. 2020; Pavlova and Khavrova, 2020; Enström, 2020; Zainon et al. 2020; Shen, 2020; Yang, 2020; Hassan et al. 2015), manufacturing companies (Yao-Ping Peng et al. 2024; Ogbeyemi et al. 2020; Guo and Chen, 2023; Lusena-Ezera, Liduma, 2018), or service companies (Vila et al. 2023; Ni et al. 2021; Monroy and Suárez, 2018). All authors confirm that HC is for different types of companies because it affects the success of any processes, be it personnel, financial, or production, as well as motivation processes, introduction of digital technologies, quality improvement, value building, work safety, or the company’s sustainability process.

When implementing the HCM concept in the company, it is necessary to carry out thorough analyses of all parts of the company. This is so that critical processes and bottlenecks can be identified. In the same way, thanks to the analyses, key performance indicators (KPIs) will also be determined, which will always move the company forward. It is possible to include among such KPIs sales volume, revenue, profit, costs, customer satisfaction, etc. KPI can be considered in the company as a tool for measuring the efficiency of various processes over time. This method can be used to evaluate the performance of the company, but also to evaluate specific processes. One part of the KPI focuses on economic data (revenues, costs, operating cash flow, profit, etc.), and the other focuses on processes and departments (marketing, HR, IT, production, sales, etc.) (Klučka et al. 2022; Mehrifar et al. 2023; Gruenbichler et al. 2021).

Although economists have addressed the topic of HC, Becker (1993) is the author of a comprehensive theory of HC. He defines him as the sum of an individual’s innate talents and abilities and the skills he acquires through upbringing and education. Based on his findings, several authors build on the term, supplementing the term with their own findings and knowledge. HC is considered part of a company’s intellectual capital and market value (Edvinsson and Malone, 1997; Davenport and Prusak, 2000; Armstrong, 2007; Pitra, 2008; Zane, 2022; Wirasedana et al. 2024). Many factors influence the degree of application of HC in company practice. These are, for example, motivation (Kampf et al. 2017; Afriyie et al. 2022) remuneration and growth system, corporate culture, talent care (Oladimeji et al. 2023), credibility (Tokarcikova, et al. 2016) quality of management by managers, use of technology, etc. (Lizbetinova et al. 2020a; Kohnova et al. 2020; Blstaková et al. 2020; Lorincova et al. 2018; Chodasova et al. 2016; Lorincova et al. 2016 Botella-Carrubiet et al. 2021).

Professional scientific literature is only partially devoted to the issue of the HCM concept, and the metrics intended to quantify HC in the company. The literature mentions the importance of HC, as well as its impact on companies operating in various industries. The problem is the absence of articles devoted to the very implementation of the HCM concept in the conditions of a real company, as well as the proposal of metrics for measuring the value of HC.

Therefore, the article aims to explain the essence of HCM, offers new metrics for measuring the effectiveness of HC, and wants to point out a possible approach to implementing HCM in a specific small trading company.

The theoretical contribution of the article is a detailed review of the issue of the implementation of the HCM concept and metrics for quantifying the value of HC, which is currently being increasingly emphasized. This is because HC is a means that enables companies to achieve a competitive advantage and increase their efficiency. However, to manage and develop HC through investments in education, health or working conditions, the company must implement the HCM concept. The essence of this concept is the implementation of activities that are supposed to ensure the greatest wealth for the company—people with their knowledge, skills, and experience—to understand the value of HC for the company.

Other benefits of our contribution include the implementation of HC value quantification through measurable indicators. The first of them is the human capital cost factor (HCCF), which, according to Veselinovic et al. (2021), quantifies HC through total costs (labour costs, benefit costs, absenteeism costs, turnover costs). Another is human capital value-added (HCVA), which makes it possible to quantify the added value of employees in creating the value of the entire enterprise (Vithana et al. 2023). The human capital efficiency (HCE) indicator, according to Hasnaoui et al. (2021), presents an indicator that evaluates the knowledge and skills of employees—they are of the opinion that knowledge and skills increase people’s cognitive abilities, which also leads to higher performance of employees and the company. Human capital return on investment (HC ROI) is another metric for quantifying the value of HC. According to Vorobyov (2020), it refers to the value that employees contribute to the production of products or to the execution of a service compared to the resources that were spent on them. It makes it possible to better identify and understand the factors that help or hinder the productivity and performance of the company. The last metric is the net present value (NPV), which, according to Shou (2022), represents an indicator aimed at calculating the increase in the value of human capital, which was increased through investments in human capital (three basic types of investments in HC—education, health, working conditions).

To measure the value of HC, it is also possible to use the metrics proposed by us, which were designed directly for a business company, on the example of which we introduce the concept of human capital management into practice:

$$\begin{array}{l}{\text{CVHC}}\,({\rm{cost}}\, {\rm{of}}\, {\rm{HC}}^{\prime} {\rm{s}} {\rm{value}})\\\qquad\qquad\displaystyle=\frac{{{\rm{sum}}\; {\rm{of}}\; {\rm{defects}}\; {\rm{and}}\; {\rm{damages}}\; {\rm{caused}}\; {\rm{by}}\; {\rm{the}}\; {\rm{employee}}}* {{\rm{personal}}\; {\rm{expenses}}}}{{\rm{number}}\, {\rm{of}}\, {\rm{employees}}}\end{array}$$
$$\begin{array}{l}{\rm{HCI}}\,({\rm{human}}\,{\rm{capital}}\, {\rm{income}})\\\qquad\qquad\displaystyle=\frac{{{\rm{costs}}\; {\rm{associated}}\; {\rm{with}}\; {\rm{claims}}\; {\rm{and}}\; {\rm{complaints}}}}{\text{sales}}\end{array}$$
$$\begin{array}{l}{\rm{HCEH}}\,({{\rm{human}} \,{\rm{capital}} \,{\rm{efficiency}}\, {\rm{per}}\, {\rm{hour}}})\\\qquad\qquad\displaystyle=\frac{{\rm{hourly}}\; {\rm{wage}}\; {\rm{of}}\,1{\rm{employee}}}{{\rm{number}}\, {\rm{of}}\, {\rm{customers}}\, {\rm{per}}\, {\rm{employee}}\, {\rm{per}} {\rm{hour}}}\end{array}$$
$${\text{SHC}}\,({\rm{sales}}\, {\rm{per}}\, {\rm{HC}})=\displaystyle\frac{{{\rm{sales}}}}{{\rm{number}}\, {\rm{of}} \,{\rm{employees}}}$$

The benefit is the calculation of these indicators based on accounting documents (financial statements) that companies must publish, i. e. the mentioned data can be obtained from any company, regardless of the state in which it is located, size or industry. Since the HCM issue is usually solved in large companies, our task was to point out the possibility of implementing the HCM concept in a small business firm. Thanks to the mentioned benefits, this article can be an inspiration for other companies that would like to increase their performance and competitiveness through the HC of their employees.

Literature review

Human capital management

In company practice, in addition to human resource management (HRM), the concept of HCM emphasizes and draws attention to current human knowledge, its importance and use for the company, and its systematic development and strengthening. This is how HCM creates advantages over the competition (Podhorcová et al. 2023; Boateng and Olexová, 2023). At the same time, it represents the ability to use the potential of people, both for everyday work and for increasing quality and innovation (Aust et al. 2014; Yang et al. 2022). HCM provides a way to reconcile people’s views from an economic and human point of view. Ingham (2007) and Bai et al. (2023) describe that HCM recognizes that people are investors in its HC, which is a significant source of value for the company.

Of course, financial reporting standards do not allow for the accounting of HC, as in the case of financial or physical capital. However, it can be considered valuable, something that, if properly managed, can be recognized and used to achieve not only short-term profit. A strategic approach to HCM is emphasized by several authors, documents, and institutions (Han et al. 2024; EPPP, 2016; Samson and Bhanugopan, 2022). Kearns (2005) and Cam and Özer (2022) understand HCM as the overall development of human potential expressed through company value. In their opinion, HCM is about creating company value through people. Shafiee et al. (2023), Ahluwalia (2015) and Nikitochkina (2021) argue that in today’s competitive global economy, companies place more emphasis on developing the potential of their people than ever before. Thus, given the full understanding of the financial impact of this effort, the concept of HCM emerged. HCM can be also understood as an approach to employees that perceives them as an asset whose present value can be measured and whose future value can be increased through investment. Considerations about the necessary measurements in the application of HCM are supported, for example, by Armstrong (2007), Armstrong and Taylor (2014), Dadd and Hinton (2022), Acar et al. (2022), and Dar and Mishra (2021). Companies are beginning to realize the importance of their employees for the development and effective operation of the company (Hryvkivska et al. 2019) and the creation of its value. HCM considers people to be wealth, which is an asset that is necessary to invest constantly, while human resource management perceives people more as a cost item (Sveiby, 1997; Bontis et al. 1999; Bontis, 2001; Bublyk et al. 2021; Kaliyeva et al. 2022).

The role of HCM is to obtain, analyse, measure, and evaluate information on the effectiveness of HC. Therefore, in the next chapter, we decided to focus on metrics and measuring the value of HC.

Measurements and metrics within the implementation of HCM

Metrics about the status, decrease, and increase in HC value, the effective use of HC, and the efficiency of investments are essential parts of HCM. If a company knows how to determine the value of HC, it is crucial to determine whether it is used effectively (Plotnikova and Romanenko, 2019; Da Silva and Jardon, 2019). If not, responsible managers need to identify problems and measures that would lead to improving individual company´s processes. Accurate quantification of HC magnitude and efficiency is difficult. In any case, when selecting and constructing direct or indirect (auxiliary) indicators, the metrics must be linked to key performance indicators of the company. For companies, this can be, for example, profit, productivity, turnover, market share, etc. (Lin and Weng, 2019; Mehrifar et al. 2023; Contini and Peruzzini, 2022). A difficult part of measuring efficiency in connection with HC usage is primarily the effort to find appropriate measures that would capture the size of the HC.

Some approaches to quantifying the HC value were summarized by Armstrong (2007), Safonov et al. (2023), and Weqar et al. (2022). Other metrics have been published to calculate the HC value, for example, the human capital index—HCI (Wyatt, 2001; Abdelkhalek and Boccanfuso, 2021), human capital monitor—HCM (Mayo, 2001), human capital cost factor—HCCF (Fitz-enz, 2009; Veselinović et al. 2022), compensated income factor, cost factor (Bontis and Fitz-enz, 2002; Koziol et al. 2014). Several authors have suggested using different metrics to calculate HC efficiency, for example, human economic value-added—HEVA (Fitz-enz, 2009; Wijaya, 2021), human capital effectiveness—HCE (Andriessen, 2003; Polcyn, 2021), human capital value-added—HCVA (Marr, 2012; Meizary et al. 2023), human capital market value—HCMV (Fitz-enz, 2009; Veselinović et al. 2022), total cost of workforce per FTE—TCOW per FTE (HCM Institute, 2023).

One of the most used understandings of measuring the effective use of HC was a study by Bontis and Fitz-enz (2002). The proposed conceptual framework for measuring HC efficiency through four metrics is also used by other authors such as Kucharcikova et al. (2016), or Mubarik et al. (2018). Within it, HC efficiency measurement usually uses a conceptual model through four primary metrics: revenue factor, cost factor, profit factor, and HC ROI. However, we consider the last of these factors to be a metric related to the efficiency of investments in HC. The first three metrics are directly influenced by the size of costs, profit, or income in the numerator, while the denominator includes the FTE indicator (number of full-time and part-time employees and number of temporary workers). In essence, however, it is an indicator of labour productivity. Investing is the tying of funds to obtain financial compensation for the investor in the future for the time when he tied up his investment funds (Malichova and Mičiak, 2022). The most common methods for evaluating the effectiveness of investments in physical capital are return on equity—ROE, return on total capital—ROA and return on long-term invested capital—ROI, payback period, and methods with discounting criteria (net present value, economic value-added, internal return percent) (Kislingerová et al. 2010; Chen and Rahman, 2023). Investments in HC are all costs associated with increasing the scope and quality, increasing the efficiency of HC, and prolonging its operation (Becker, 1964; Chhaochharia et al. 2024; Terai, 2023). To evaluate investments to HC, researchers modified different approaches to the traditional method (return on investment—ROI) (Mankiw et al. 1992; Fitz-enz, 2009; Evans, 2007; Manuti and de Palma 2014; PwC, 2023; Wijaya, 2021; Meizary et al. 2023; Dadd and Hinton, 2022). The difference lies mainly in how they understood what investment to the HC is. In some mathematical relationships, investing in HC is represented by the cost of one specific activity to increase the HC available in the company. In other relationships, investments in HC are defined by employee remuneration (compensation) or total employee-related costs. Due to the specifics of HC in every company, it is impossible to consider these metrics universal.

Theoretical framework

In both sections, as part of the literature review, we briefly characterized the theoretical basis of our results (Fig. 1). The conceptual framework consists of four levels. The first of them consists of scientific methods (content analysis, questionnaire survey, observation in the company), through which we obtained primary and secondary, quantitative, and qualitative data necessary for the creation of the article. The second part of the framework consists of the theoretical background, on the basis of which it was necessary to define basic terms and connections between them, as well as to point out the possibilities of HC quantification. The individual theoretical starting points were linked in the conceptual framework to its third part, namely the seven-step HCM concept. This concept, including the design of metrics for measuring HC and the efficiency of HC use, was implemented in the real conditions of the chosen small trading company “Market”.

Fig. 1: Conceptual framework—connecting the literature background with the HCM concept implementation.
figure 1

Source: Own processing.

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HC and its impact on the company, investments in HC, metrics and ways of measuring the value and effectiveness of HC were defined, and we also pointed out the importance of investing in HC. All the mentioned areas are part of the seven-step HCM model, which we implemented in the conditions of a real small trading company.

Methods

The article aims to explain the essence of HCM, offers new metrics for measuring the effectiveness of HC, and wants to point out a possible approach to implementing HCM in a specific small trading company.

Scientific methods

The article uses various scientific methods, such as observation, analysis, synthesis, statistical analysis, induction, comparison, or the method of questionnaire survey. These methods were used to fulfil the defined objective of the article.

We used the analysis method both when analysing the content of scientific articles, which provided us with a theoretical basis for fulfilling the article’s goal, and when analysing internal documents, from which we obtained a practical basis for the fulfilment of the goal, the obtained data related to the areas human resources and HC, training in the company, financial results, etc. We applied the comparison when comparing the opinions of individual authors on the investigated issue, but also when comparing total and partial indicators to determine the value and effectiveness of HC. Synthesis is the opposite of analysis; simultaneously, it complements it and forms a necessary whole with it. We used the synthesis to select suitable indicators to measure the value of HC, the efficiency of HC, and the efficiency of investments in HC. Also, in the creation of a proposal for the calculation of indicators of effective use of HC. We used the deduction and induction to derive generally applicable rules for specific company conditions and to create and evaluate a proposal for implementing HCM. Authors, such as, for example, used these basic scientific methods in their articles (Boateng and Olexová, 2023; Podhorcová et al. 2023; Cameron et al. 2024; Lee et al. 2023).

Mathematical methods were applied to create formulas to calculate HC metrics associated with company performance. The design of the formulas was based on the review of the literature and the results of the observation in the selected small trading company. It was through this method that part of the stated goal of the article was fulfilled—the proposal of new metrics for evaluating the effectiveness of HC.

We chose observation as the main method of obtaining the data necessary to fulfil the article's aims. Through it, we obtained data about the selected small trading company, in the conditions of which we proposed the implementation of the HCM concept, including metrics and the method of measuring and quantifying the value of HC. We applied this method mainly when obtaining data related to the company’s operating principle, the way in which employees with their HC participate in achieving the company’s performance, but also the method of rewarding performance and using indicators designed to measure the value of employees’ HC. The observation method was also used by Koman et al. (2023).

Questionnaire survey

In the article, we use the results of a questionnaire survey, which was conducted in the past only in connection with pointing out the importance and topicality of the topic of the article and the investigated issue. The authors of the articles use the method of sociological research in the form of a questionnaire survey technique mainly for the advantages that result from the use of this technique, such as quickly obtaining more answers from different corners of the country without the need for travel or physical contact with the interviewer. Thanks to this method, researchers can save time as well as money. The questionnaire survey was also used by the authors whose studies we process in our paper (e.g. Afriyie et al. 2022; Hitka et al. 2014; Malichová and Mičiak, 2022; Oladimeji et al. 2023, Yao-Ping Peng et al. 2024; Lee et al. 2023).

The questionnaire survey, on the basis of which we claim that it is an interesting and current issue, was carried out at the turn of 2016 and 2017. The respondents were managers of commercial companies. A total of 350 companies were contacted at that time, and all companies filled out the questionnaire (the return rate of the questionnaire was 100%). Despite the fact that it is older data, the obtained results were very interesting and provided us with the basis for the creation of this article. Since this research is only a starting point for solving the problem in the article, we publish only some necessary facts about it.

The questionnaire at that time (2016–2017) consisted of open (space for the respondent’s statement) and closed (yes/no answer) questions. At the beginning of the questionnaire, the identification part of the companies was examined, where we will include questions regarding the size, industry, nationality of the owner (domestic, foreign), duration of operation on the market, and average age of employees. The size criterion of companies in Slovakia is divided according to the number of employees as follows: micro (1–9 employees), small (10–49 employees), medium (50–249 employees), large (250 or more employees) company. The most represented were medium-sized enterprises (36%), followed by small (29%), large (22%) and micro (13%). Within the sectors, 63% of enterprises operating in the service sector filled out the questionnaire, and 37% were manufacturing enterprises.

The core of the questionnaire focused on the HCM concept, including measurement and metrics. At that time, the questionnaire monitored the impact of HC on the company, the use of the HCM concept in the company, the use of metrics to quantify the value of HC and to measure the effectiveness of the use of HC, including their specific types, or the reasons for their creation. The absence of these metrics was also investigated. It also monitored the use of metrics for evaluating the effectiveness of investments in HC, their specific types, reasons for absence in the company, or principles for the introduction of the HCM concept in the company, as well as future changes in the use of HC.

Among the biggest findings from the questionnaire, which provided the basis for the creation of the article, we included the fact that up to 89% of participating companies do not use HCM. The main reason they gave was ignorance of the concept of HCM, its meaning, and its contribution to the company itself. However, it was positively assessed that companies at that time were aware of the impact of investments in HC on the overall performance of the company, but mainly on its profit (on average 4.86 points out of 5 possible). Managers in companies understood HC as a significant cost item, which forced them to minimize their costs. Companies did not implement metrics to measure HC mainly because they were unfamiliar with them and did not know how to measure HC. In the case of metrics for measuring the effectiveness of HC investments, most companies stated that they did not need this indicator to operate successfully. For their measurement, classical indicators, such as labour productivity or the percentage of product failure, were sufficient. Therefore the main problem was identified as the lack of awareness of companies about the nature and importance of HC for the company.

Results—Example of HCM implementation

Based on the results obtained from the survey, we decided to point out the possibility of simple but effective implementation, including the procedure and use of some metrics from the field of HCM in small and start-up companies in the field of service provision. It is a trading company with an orientation in retail sales of food and consumer goods, which has been operating on the market since 2016. The mission of the company with the brand “Market” is to create opportunities for young people, promote a healthy lifestyle, and be a role model in reducing food waste. Implementation demonstration and statistical data from 2016 to 2020 provided by “Market” were used (we do not publish the actual name of the company) (Grivalská, 2016).

The HCM process must be in line with the company’s strategy. The complete HCM process consists of seven phases that follow each other. In the first phase, critical company processes are identified so that key HC components and key performance indicators (KPIs) can be assigned to them. The determination of KPI is dealt with, e.g., Stacho et al. (2021). This achieves the connection of the whole process with achieving high performance. Performance and sustainability development is a fundamental definition of company success and how companies achieve their objectives (Tokarcikova et al. 2014 Janosova and Tokarcikova 2021). Through the synergies of various areas of the company, which also includes HCM, the company can invest more effectively precisely in sustainable solutions (Holubcik et al. 2023). Subsequently, it is necessary to quantify the value of HC directly or indirectly in the company. In the third and fourth phases, the HC efficiency is evaluated using appropriate metrics. The remaining phases of the process then include the identification of deficiencies in the area, adopting corrective measures, and communicating results through reporting. Given the above text, in the article, we have shown and commented on the implementation of the HCM process in the conditions of a small trading company. The identified critical company process is the process of selling food and consumer goods.

Key performance indicators (KPIs)

“Market” is a retail trading company, so we consider sales a key performance indicator. Sales have been growing steadily since opening. During the financial year 2018–2019, the sales began to stagnate due to the departure of the tenant (butcher), who supplied fresh goods. During the financial year 2019–2020, sales increased by 18%, as a gradual “refit” of trade began, the listing of new items, and quality and whole “fresh” departments were built (Table 1).

Table 1 Development of sales and profit of “Market” (€).
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Quantification of HC value

Selected data relating to the number, structure, and movement of employees are necessary for the use of metrics of HC value, efficiency of HC use and efficiency of investments in HC. This data is also beneficial for analysing the development of these metrics and their impact on company performance. As of January 2020, the “Market” employed 34 people, of which 16 were permanent employees, and 18 were temporary workers. The “Market” has mostly stable employees, but temporary workers change frequently. The increase in temporary workers is recorded mainly in the summer months and during the Christmas period. One of the main priorities of the “Market” is to create opportunities for young people using their potential and sophisticated skills. The company tries to adhere to this priority. The age structure of the majority (53%) of permanent employees is between 25 and 40 years, and temporary workers up to 25 years. Employees with a secondary education degree have the largest share, up to 47.06%. 14.71% of employees have a university degree. The remaining 38.24% are students employed by the “Market” as temporary workers.

The turnover rate as an indicator of employee movement has a crucial informative value about employee behaviour and is generally used as one of the indicators of HC. High fluctuations can cause a low return on investment in HC. However, a certain degree of fluctuation is necessary and is not a negative phenomenon because new employees also come with new thinking, experiences, etc. Thus, fluctuation can also lead to an increase in the HC value in the company. The optimal turnover depends on the company’s area of company, the profession, the required qualification, and the length of the adaptation process of employees. A fluctuation rate below 5% is acceptable (Zalai et al. 2004). Low turnover helps the company n maintain innovation potential and growth. If it reaches 5% and higher, its adverse effects prevail. The turnover rate was expressed as the total number of redundant employees’ ratio to the average monthly number of employees in%. The turnover rate of employees with full-time contract is around 1–2% in all years of operation. This turnover rate indicates the high sustainability of its permanent employees. The manager’s efforts should aim at ensuring that employees apply their competencies in the work they perform, thus increasing their subjective job satisfaction and, at the same time delivering higher work performance. Maintaining a satisfactory turnover rate can save the cost of hiring and adapting new permanent staff (Table 2).

Table 2 Development of the annual turnover rate of employees and temporary workers (%).
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The annual turnover rate of temporary employees is slightly above 6%. This fact harms the company’s overall operation and the achievement of its sales and profits. Employees must constantly train new temporary workers and devote their working time to them. Temporary employees reduce employees’ work performance by constant questions and problems, which disturbs the atmosphere and causes nervousness among colleagues. This higher temporary worker turnover rate also negatively impacts customer satisfaction (Ližbetinová et al. 2020b). The customer feels insufficient information about the goods and services, the customer service time is decreasing, and the critical attention is missing.

Metrics for quantification of HC value

After analysing the nature of the various metrics that are reported in the literature and identifying their advantages and disadvantages for use in HCM in small and young companies, we propose to use the human capital cost factor (HCCF) metric to calculate the HC value in a small trading company “Market”. HCCF metric calculation according to Veselinović et al. (2022):

$$\begin{array}{l}{\rm{HCCF}}={\rm{wages}}+{\rm{cost}}\; {\rm{of}}\; {\rm{benefits}}+{\rm{wages}}\; {\rm{of}}\; {\rm{temporary}}\; {\rm{employees}}\\\qquad\qquad+\,{\rm{costs}}\; {\rm{associated}}\; {\rm{with}\; {\rm{turnover}}\; {\rm{and}}\; {\rm{absence}}}\end{array}$$

The lowest HCCF was in operation in the first financial year. At that time, most of the costs were spent on adapting new employees their training and inclusion in the team. As all employees worked in the company for less than one year, no employee loyalty costs were incurred. In the financial years 2017–2018 and 2018–2019, the costs of the HCCF were approximately the same, amounting to around €120,000. In addition to payroll costs, in the financial year 2018–2019, the company “Market” increased the costs of loyalty rewards paid to 13 employees and the cost of severance pay for two employees. The highest costs for the HCCF were in operation in the financial year 2019–2020 for €137,723. This year, the salary of employees was increased by the regional component paid monthly in the amount of € 36.50, and the costs of a new employee and the costs of severance pay for two employees were incurred (Table 3). As the company has a high degree of stability, we cannot discuss rapid increases in HCCF costs. Increased costs are usually associated with loyalty rewards for employees who have worked in the company for at least one year or with an increase in the employees’ wages themselves. The HCCF indicator recorded a gradual increase in all financial years. Since this factor, by its construction, denies the very essence of HCM, which considers HC not as a cost but as wealth, we recommend using the HCCF metric only as a supplement.

Table 3 HCCF development (€).
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Effectiveness of using HC

Based on the assessment of the suitability of the construction of the presented indicators for measuring the HC effectiveness, we selected two metrics in the “Market”, namely HCVA and HCE (Table 4). These use output size data in various forms in the numerator, but to some extent, they also consider the cost of HC or the value of HC, which is not observed with the remaining metrics. The calculation of HCVA is given according to Meizary et al. (2023) and HCE according to Polcyn (2021).

Table 4 HC utilization efficiency metrics.
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In the metric of the efficiency of the use of HC, i.e., HCE, the denomination of HC should be used in the denominator. To determine the size of HC, we used HCCF data calculated in the previous section (Table 5).

Table 5 Development of HCE (€).
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The HCVA and HCE metrics decreased in 2018–2019. At that time, the company was affected by external factors, such as the departure of the tenant (butcher) from the operation, and the lack of fresh goods, which subsequently caused customer dissatisfaction. Increasing customer dissatisfaction greatly affected work performance, employee reluctance, and a bad atmosphere in the company. On the contrary, the financial year 2019–2020 brought the operation and increased HCVA and HCE by almost 11% compared to the previous financial year. A significant share increase was due to the overall refit of the store, the addition of a “fresh” department and the offer of new, high-quality types of goods, or the implementation of training courses for employees.

Because metrics of efficient use of HC use financial results in various forms, their development is very similar. However, there is a lack of more precise metrics targeting the critical process of the monitored company.

Effectiveness of investments in the HC

The effectiveness of investments into the HC, like physical capital, wears out, so it is necessary to invest in it. Investments in HC have three primary forms. These are investments in education, health and working conditions, including workplace safety and workplace ergonomics. In addition to assessing the effectiveness of investment projects in physical capital, companies should also monitor the effectiveness of investments in HC. The questionnaire survey in the Slovak Republic showed that most companies consider investments in HC only as costs associated with educational activities. Although some of the proposed HC efficiency metrics were published long ago, many managers still do not know any metrics to calculate this efficiency or even consider it unnecessary to measure it.

“Market” invests in HC of its employees through education and health improvement. For illustration, the article points to the possibility of using two metrics to calculate the effectiveness of investment in educational activities of the monitored company, namely human capital return of investment—HC ROI, net present value (NPV) (Table 6).

Table 6 Metrics of HC investment efficiency.
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Companies need to realize that investing in HC leads to an increase in the level of HC, which increases their overall performance. One of the most important areas of investment is investing in the training and development of its employees. The company focused on educating its employees about current trends in retail sales, thereby increasing sales efficiency. She conducted behavioural interviews to better place employees in individual positions. Employees have increased their skills in working with objections and arguments, loss prevention and safety through STORLINE training. The manager completed My job (Training Days), where he increased his qualifications in the field of people management. Employees also had the opportunity to study emotional intelligence, language courses and food technology (Table 7). The terms in Table 8 include trends (Consumer Retail Trends), training names (Loss Prevention and Safety Training, My Job, Storeline, Objection and Argument Work, EQ Certification, Food Technology Training, Language Training). The term “Behavioural interviews” in our case, which represent methods designed for employees and based on “observational behaviour”, i.e. employees learn by observing an older, more experienced colleague—e.g. mutual conversation, during which he observes the other’s behaviour, that is, how he reacts to a certain situation.

Table 7 Costs of investments in the educational activities (€).
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Table 8 Values for HC ROI calculation (€).
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Human capital return of investment—HC ROI

The effectiveness of investment in courses and training was calculated by using the HC ROI metric (Table 8).

If the value of the HC ROI indicator is positive, the investment will bring a profit, otherwise a loss. In deciding on these investments, in addition to the amount of investment and the expected return, it is necessary to consider the risk that arises from investing in HC.

Net present value (NPV)

NPV is a method that is often used in evaluating investments in physical capital. However, with the investment in HC, it is specific that while the costs of investing in HC are realized relatively short, the expected benefits may flow for a long time. Estimating these expected benefits when calculating the return on HC investments is challenging. For this reason, we recommend using the NPV method for individual educational activities or short-term educational programmes.

To evaluate the effectiveness of the investment (by using the NPV method), an investment in educational training is selected, the output of which is an EQ certificate valid in the countries of the European Union. “Market” anticipates that the returns on this investment will flow over the next five years and that the useful life has been determined. The cost of the investment during the financial year 2019/2020 was €118 per employee. Eight employees (€944) took part in the EQ certification. In Slovakia, training works in such a way that you have a training centre that determines the amount for the training, the company pays it, and the employees are trained—that is, the amount of €118/employee includes all the time of the trainer and the employee, the documents and the resulting certification (taking the exam, printing and handing over certificate). Therefore, we cannot specify the training costs in more detail—we only received the information from the company that we presented in the manuscript. The present value of cash inflows from investing in EQ training is the sum of the discounted cash flows over the years of the investment, and the required rate of return is set at 5%. The present value is calculated as the sum of discounted cash inflows from investments in individual years and considers a rate of return of 0.05. This year, employees used EQ certifications to learn to develop their emotional intelligence. Also, to successfully manage customer requirements and relationships with other people. The cash inflow from investing in the EQ certifications in the first year will increase the company’s sales by 2.5%, and the investment will generate the same cash inflow throughout its life (Table 9). The expected 2.5% increase in sales and consistent cash flow are based on the company’s actual data, the calculation of NPV and the determination of the increase in sales were also communicated with the owner of the company, who understands the issue and set the indicated percentages (however, detailed data cannot be shared because it would be possible to identify the company based on them).

Table 9 Present value of cash inflows from investing to the EQ certifications (€).
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The current value of cash inflows over 4 years is €14,375. The net present value is determined as the difference between the present value of cash inflows and investment costs (74,375−944), then NPV = €73,431. A positive NPV value is a prerequisite for excess income compared to investment costs. Investments in EQ certifications should bring the desired effect to the company, while the amount of NPV depends mainly on determining future cash income in the coming years. These can also be estimated by considering the following factors: managing one’s moods, perceiving what colleagues are experiencing, motivating oneself and others (Hitka et al. 2014), using initiative effectively, a hidden source of success, creatively working with one’s resources to work well, developing essential components of emotional intelligence.

Identification of problems in the field of HC effectiveness

In the company “Market”, there is a low turnover rate of employees working full time. The problem, however, is the higher rate of fluctuation of temporary workers, which negatively impacts the operation’s overall operation, achieving its profit, full-time employee performance, or customer satisfaction. The company must solve this problem in the future, for example, with the help of various motivational tools oriented towards temporary workers.

The HC effectiveness area consists of two components. It is the effectiveness of using HC and the effectiveness of investments in HC. Within this stage of the HCM process, evaluating both components of efficiency is necessary. The HCVA and HCE indicators cannot sufficiently express how the individual HC components are used in operation. It is necessary for the manager, based on his work experience, creativity and to assess the fundamental key performance indicators of the operation, t. j. sales or profit, or based on specific conditions of operation in retail, he proposed his metrics for the company. These metrics should best reflect the specifics of the retail company and be able to best assess the level of HC utilization so that operations continue to not waste HC’s human potential but also financial resources. The company “Market” invested in HC very carefully.

Although the results of the indicators are positive, it cannot be stated unequivocally that the operation has invested effectively. Investments went only to areas that, in most cases, represent the so-called “Compulsory driving” for retail consumer goods to achieve the highest possible performance. These were mainly investments in education, and only a few investments went into the health of employees or the ergonomics of the working environment. The company only made mandatory investments in occupational safety. Nevertheless, we used the HC ROI indicator to find that the return on investment in HC education is slowly increasing. At present, the operation’s priority is to improve employees’ communication skills in foreign languages and their overall communication skills with a focus on fulfilling their strategic goals. When proposing to increase the efficiency of HC and investment in HC in the company “Market”, it is necessary to consider the work motivation itself, which affects the work environment, quality of management, training opportunities, setting the remuneration system and others.

Design of metrics and measures to improve the situation

For the effective functioning of the company, it is not enough to identify problems in the field of work with HC employees; it is also necessary to take appropriate corrective measures. As part of this stage of the HCM process, we proposed in the article a demonstration of creating our simple metrics that best reflect the specifics of a company that deals with retail sales and can assess the level of use of HC. These metrics will consider key performance indicators, i.e., sales and specific operation conditions in the retail sale of consumer goods.

Metric A: Average sales per employee

The main indicator of the company's “Market” is the sales. Sales depend mainly on the employees who serve the customers, and it is the employees who are the bearers of HC. For this reason, it is very important to know what the share of sales per employee is—this way, we will find out the effectiveness of HC, i.e., whether it made sense (whether it was effective for the company) to spend money on investments in HC (education, working environment, health status). Efficiency is most often expressed by the ratio of output and input. Substituting the value of the average sale per entry point and the average number of employees (full-time employees + temporary employees) in one change per entry point, we get the indicator of the average sale per employee per work shift.

In this part (“Design of metrics and measures to improve the situation”), we work with formulas that include the sign “∅“. In the article, this sign can be interpreted as “average, average value”, i.e. the value obtained by averaging several values, e.g. per week, month, year.

\({\rm{sales}}\; {\rm{per}}\; {\rm{employee}}=\displaystyle\frac{{{\varnothing }}{\rm{sales}}\; {\rm{per}}\; {\rm{shift}}}{{{\varnothing }}{\rm{number}}\; {\rm{of}}\; {\rm{employees}}\; {\rm{per}}\; {\rm{shift}}}\)

Table 10 calculated the average monthly sales per employee (full-time employees + temporary employees) per work shift. As part of the operation, employees work on two changes per day. The lower average number of employees at full time is in the summer months and during the holidays when they take holidays or are unable to work. Then the company employs a higher number of temporary workers.

Table 10 Calculation of ∅ turnover per employee/monthly in the financial year 2019–2020 (€).
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Average monthly sales copy the number of full-time employees in one work shift. The higher the number of employees working full-time in one shift, the higher the average monthly sales per employee (Table 10). Full-time employees can make better use of their long-term acquired skills, knowledge, and abilities, which are necessary for the operation’s successful operation. With fewer full-time employees in one work shift, the “Market” employs a higher number of temporary workers to maintain average monthly sales. At present, this trend of employing a higher number of temporary workers does not positively affect the work performance of the company. With a higher number of part-time workers, operating sales are relatively lower, which is also due to the high turnover of part-time workers. Temporary workers do not have sufficient experience, information, and skills and thus reduce the overall work performance of employees.

Metric B: Average sales per customer per change

To assess the overall efficiency of the company “Market”, we can use an indicator expressing the average sales for customers per work shift. Employees’ effective use of knowledge, skills and abilities is reflected in increasing overall sales and competitiveness. The advantage of this indicator is higher objectivity, as it is converted to the number of customers. We get the indicator’s value as the share of average sales of the company per work shift and the average number of customers per work shift. The average number of customers per shift equals the average number of printed blocks per work shift recorded by the information system.

$${{\varnothing }}{\rm{sale}}\; {\rm{per}}\; {\rm{customer}}\; {\rm{per}}\; {\rm{shift}}=\frac{{{\varnothing }}{\rm{sale}}\; {\rm{per}}\; {\rm{shift}}}{{{\varnothing }}{\rm{number}}\; {\rm{of}}\; {\rm{customers}}\; {\rm{per}}\; {\rm{shift}}}$$

Currently, the company is visited by an average of 300 customers per shift. The average sale per customer for one shift is currently €3.24. This value is not high. Most customers buy only small quantities of goods at lower price levels.

$${{\varnothing }}{\rm{sale\; per\; customer\; per\; shift}}=\frac{972.22}{300}=3.24{\euro}$$

Of course, the higher the value of this indicator, the more efficient use of HC means. Increasing this indicator can bring more efficient and better communication of employees with each other, especially with customers, or the creation of an employee offer for customers. The higher the number of temporary workers than full-time employees in one shift, the lower the average sales per employee. The manager must address this issue. It is necessary to better monitor the situation in the workplace and increase investment in HC, which later led to increased company performance and HC efficiency.

Reporting on HC

Reporting the results achieved in the field of HC represents the final phase of the HCM process. It respects the principles and procedures for creating other important corporate reports and responds to the specific nature of HC as a corporate input. The reports created in the company can be oriented inward or toward the company’s external environment. In the internal orientation of reporting, a combination of analytical indicators (related to the management of the company’s costs) with indicators in kind, which are related to the quality of the performed activities or to the time intensity of these activities, is usually used. To better capture the actual situation, it is possible to use a breakdown separately in the reporting according to the types of services, work teams or customer groups. The reports then include the results of the individually selected indicators and explanatory comments and justifications. In this way, it is possible to use the created reports in the management of the company and for the communication of important facts, in this case, the facts related to HC and its use (Šoljaková and Fibírová, 2010) and with the use of IS (Koman et al. 2023).

Discussion and conclusion

HCM is an approach where people in a company are viewed as an intangible asset that forms part of the value of the company and not as a cost item (Koziol, 2018; Lubacha, 2023). Our ambition was to explain the essence of HCM and point out the possible approach to implementing HCM in company practice on the example of a concrete small trading company. The implementation of HCM is about finding a link between a key performance indicator of the company and its employees’ effective use of specific fundamental knowledge, skills, and abilities (Blaga et al. 2021; Wisawapaisarn and Yodmongkol, 2021; Bulinska-Stangrecka and Bagienska, 2021). It is also necessary to propose metrics within the HCM concept for measuring and evaluating the effective use of HC and the effectiveness of investments in this corporate input. For a company, it is beneficial to compare metrics in benchmarking with other companies and then take corrective action (Voronkova et al. 2020; Šikýř and Šafránková, 2018).

Due to its qualitative nature, human capital is very difficult to measure, which we already pointed out in the theoretical part of the manuscript. In order to give a practical example of the introduction of the concept of human capital in a real company (which previously did not have this concept in place), we modified the formulas used and proposed in the manuscript so that, based on the available data (number of employees, sales, labour costs, training costs, etc.) could quantify the value of a given company’s human capital. We are of the opinion that human capital must be monitored not only through wage costs, but e.g. also the amount of investment in human capital. However, the company did not have such data (they only collected common information, which we, as authors, had to examine in detail and divide into groups).

The quantification of human capital is an unexplored area, the authors cannot clearly agree on uniform terms and uniform metrics. Therefore, quantification is difficult. Quantification is also made more difficult by the fact that many companies talk about human resources and not human capital, so often companies do not even have the appropriate data collected. For this reason, there are situations in research practice where the authors adapt the metrics of human capital quantification to the conditions of their country.

The value of human capital is related to the number of employees, but it is not strictly limited to this number. Each employee has human capital, that is, the number of employees indicates how many employees the company works with, how many of them need to be retrained, or increase their expertise, which is related to human capital (this is investment in human capital).

Various items can be used for metrics to quantify the value of HC, such as sales, profit, number of completed educations, education costs, costs for adjusting the working environment or supporting the employee’s health. In Slovakia, business enterprises do not keep records of sales by employee, but overall, for a certain period (day, week, month, year). It is also necessary to consider employee turnover, which is why the average number of employees was used in the formulas. The number of employees can also be interpreted as full-time equivalent (FTE), which also includes part-time or part-time workers—i.e. the FTE indicator is identical to the number of employees. It is the FTE indicator that is used when calculating the return on investment in HC, the economic added value of HC (Fit-enz, 2009), or the added value of HC (Marr, 2012).

When implementing the concept of HCM and metrics to quantify HC, we identified key performance indicators in a small business, among which we included sales and profit. The reason was that it is a trading company, i.e., a company that sells products to end consumers. For this type of company, sales are the key indicator, based on which the amount of remuneration for employees is also determined.

The important elements that we analysed within the HCM concept were the number, structure, and movement of employees—both permanent and temporary. Based on the indicated indicators, we calculated the amount of fluctuation. We found that the turnover of permanent employees, i.e., those who work in the company on a permanent employment basis (on a contract), is in the range of 1–2%. This can be evaluated very positively, because the recommended level of fluctuation, which companies should not exceed, was set at the level of 5%. We negatively assess the turnover of part-time workers (especially students working on an agreement), which is at a level of more than 6%. This result indicates that the company does not have permanent part-timers who work in the company throughout the year, but rather seasonal part-timers who work in the company, especially during the summer holidays and the Christmas period. Because the company always hires new part-timers in the mentioned periods of the year, permanent employees spend their working time constantly training new part-timers, who often do not enjoy the work and do it only for the salary.

Based on selected elements from the company’s environment, we proposed the calculation of HCCF, HCVA, HCE, HC ROI and NPV metrics. All metrics have acquired positive values, based on which it can be argued that the company is increasing the value of HC, and the investments made in HC will bring excess income to the company in the future. We found out that, as part of the investment in HC, the company mainly uses training to handle different types of customers and their objections, the training aimed at preventing incidents, training to increase work safety, language courses, courses focused on emotional intelligence, or working with technologies in the retail sector. In addition to them, the company manager can also use training to improve skills in the field of employee management. We consider training focused on emotional intelligence to be very suitable for this sector of the company. It is the behaviour and actions of employees that affect the satisfaction and loyalty of customers who bring revenue to the company. If an employee can empathize with the customer’s feelings, behave pleasantly and willingly help the customer, this will contribute to customer satisfaction. It will also lead to an increase in their loyalty and an increase in average sales (currently at the level of €3.24 per month per customer). It is substantial to draw attention to the fact that the HCCF indicator considers HC as a cost (contrary to the HCM concept), therefore, we recommend using it only as a supporting additional indicator. The quantification of the value of HC, its efficiency and investments were also addressed by the authors of Da Silva and Jardon (2019), Dar and Mishra (2021), Veselinović et al. (2022), Dadd and Hinton (2022), Acar et al. (2022) and Meizary et al. (2023) who came to the same conclusions—measuring HC is very complex and often only an approximate expression of its value.

However, to implement the HCM concept associated with the requirement to increase not only the performance but also the competitiveness and sustainability of a company (Terán-Yépez, 2020; Vergara-Romero et al. 2021), it is necessary to adapt efficiency indicators to specific company conditions, in the context with the field of company and corporate strategy. Decision-making by managers is currently increasingly supported by IS/ICT and thus contributes to the financial and economic sustainability of the company (Koman et al. 2022). Given that no uniform metrics are adopted and used in this area, it is the role of HCM managers to use their knowledge, creativity, and analytical thinking and design HC efficiency metrics for their company conditions to guide care for HC towards increasing individual performance as well as the performance and competitiveness of the entire company. To this end, it is necessary to organize regular professional educational activities.

The article represents a contribution to the field of theory and the field of practice. Within the framework of the theory, the findings from the analysis of the theoretical background were systematized and linked to the HCM concept, which is still a not-so-familiar term for most managers. The proposal of concrete metrics for quantifying the value of HC and investments in HC is also a theoretical contribution because this is a very problematic area (the difficult process of quantifying HC), which is addressed by a few authors. Therefore, there was an expansion of existing theories and a deepening of the knowledge not only of scientists but also of the public.

From the point of view of practice (managerial implications), this is a practical example of the implementation of the HCM concept, including the quantification of the value of HC in a small business company. This example can inspire managers of other companies who decide to implement the HCM concept and pay attention to it. Through the implementation of the HCM concept, including the introduction of metrics to determine the size and efficiency of HC and investments in HC, managers maximize the potential of employees, connect the field of human resources with the strategic goals of the company, which can lead to an increase in the performance and competitiveness of the company and emphasizing sustainability (Hitka et al. 2021).

We see the consequences of the article for society and politics in the increase of customer satisfaction and loyalty for the retail sector of the company, which in Slovakia makes up the highest share of the total number of companies. However, since the HCM concept can be applied to any company, the situation in the employee–customer relationship can be improved in all industries. The concept of HCM and measuring the efficiency and value of HC has an impact on the strategic decisions of managers in all areas—finance, environment, marketing, production, and logistics. Therefore, even thanks to the introduction of the HCM concept, the sustainability of business in the country can be supported and more ecological methods of transport, production, or communication (marketing) can be used.

In the future, we would like to focus our research on the area of HC reporting (in the example of a specific large company) and the connection of the HCM concept with digital technologies (in the example of a specific small and large company and their comparison).