Human capital as a key component of intellectual capital in non-profit organisations

Abstract

[Abstract]: Intellectual capital (IC) is generally categorised into three primary interrelated components: human capital, structural capital, and relational capital. Each component is described as having equal influence on strategic decision-making processes in organisations. Non-profit organisations (NPOs) are, however, distinct from for-profit organisations as they invest in people rather than in profits. This paper argues that if NPOs are to gain maximum benefits from structural capital and relational capital, they should pay extra attention to their human capital as it is a source of innovation and strategic renewal. A modified IC model is introduced to reflect a new distribution of attention among the three IC components. The paper also details the shortcomings of the popular IC model – ‘value platform’ when applying it in NPOs. Consequently, value would be added to strategic decision-making processes as management, employees and volunteers would have a better understanding of the importance of human capital as a key component in IC for NPOs.