EVALUATION OF HUMAN CAPITAL DEVELOPMENT AS A STRATEGY FOR INCREASING PRODUCTIVITY IN PUBLIC ORGANIZATIONS IN NIGERIA

CHAPTER TWO

2.0 INTRODUCTION

This chapter focused on the review of related literature, books, journals and publications of various authors, scholars and researchers on the subject matter will be dealt with extensively such as what productivity itself means, factors that influence productivity in an organization, determination of human capital needs and appraisal by result etc.

2.1 DEFINITION OF HUMAN CAPITAL AND HUMAN CAPITAL DEVELOPMENT

The human capital of an organization consists of the people who work and on whom the success of the business depends. Personal and materials success is increasingly correlated with the possession of skills. Skilled individuals can command a premium salary in periods of high economic activity. Worldwide, unemployment level remain high while organizations have difficulty in filling vacancies that require specific expertise.

According to Sullivan and Steven (2003) Human capital development is about recruiting, supporting and investing in people through education, training, coaching, mentoring internships, organizational development and human resources management.

Human capital development recognizes that the development and growth of people in organizations and business are an important and essential asset to the organizations future success.

Healthfield (2011) defined human capital development as the framework for helping employees develop their personal and organizational skills, knowledge and ability. According to her, human capital development includes such opportunities as employee training, employee career development, performance management and development, coaching, mentoring, succession planning, key employees identification, tuition assistance and organization development.

The focus of all human capital development is on developing the most superior workforce, so that the organization and individual employees can accomplish their work goals in service to customers. Healthy organizations believe in human capital development and cover all of those bases.

More importantly, Heathfield (2011) suggests that the shortage of skilled people can act as a limiting factor on individualorganization and on the economy as a whole. It is in the interest of individual organization and the nation to maximize its human resource by investing in the skills of its work force, its human capital. Human capital is a crucial component of an organization’s overall competitiveness. It can be argued that economic growth, employment levels and the availability of a skilled workforce are interrelated. Economic growth creates employments, but economic growth partly depends on skilled human resources organizations”

Alan (2004) opined that the concept of human capital encompasses investment in the skill of labour force, including education and vocational training to develop specific skills.

According to Sulivan and Steven (2003) human capital represents the knowledge, skills and ability that make possible for people to do their jobs.

Schaltz (1993) defined the term human capital as a key element in improving a firm assets and employees in order to increase productivity as well as to sustain competitive advantage. Human capital development involves processes that relate to training, education and other inventions in order to increase the level of knowledge, skills, abilities, values, and social assets of an employees which will lead to the employees satisfaction performance and eventually on a firm performance.

Rustogi (2000) stated that human capital is an important input for organization especially for employees’ continuous improvement mainly on knowledge, skills and abilities. Thus, the definition of human capital as “the knowledge, skills, competences and attributes embodied in individuals that facilitate the creation of personal social and economic well being.

The rapid development of the human capital development has led to greater attention being paid to training. Human capital development is any activities which leads to the improvement in the quality (productivity) of the workers thus, training is an important component of human capital development. It refers to the training undergone by a person that increases his or her capabilities in performing activities which are of economic values.

Doucouliagos (1997) has noted human capital as a source to motivate workers, boost up their commitment and create expenditure in research and development (R & D) and eventually pave way for the generation of new knowledge for the economy and society in general.

2.2 PURPOSE OF HUMAN CAPITAL DEVELOPMENT

According to Asian Development Bank (1999), the significance of human capital development has to do with a concept called human capital or the education, skills levels, and problem solving abilities that will enable an individual to be a productive workers in the global economy of the twenty first century Thurow, (1992).

Human capital is the main resource that makes the difference and drives organizational performance. For people to work effectively, and behavior to be understood, organizations must adapt different systems that would create skilled and loyal employees. Organizations must also be knowledgeable in legal, technological, social and economical issues, in order to meet the needs of employees and assist them in achieving organizational goals.

The challenges facing human resources managers today include more flexible work force, managing changes, new technological and continuous development of employees. In addition, organizations are realizing that in order to adequately address human resources concerns in face of new and increased responsibilities and challenges, they must develop long-term as well as short term solutions.

Human capital development involves human resource planning recruitment, training/development and motivation.

2.3 DETERMINATION OF HUMAN CAPITAL DEVELOPMENT NEED

This has traditionally been used by organizations to ensure that the right person is in the right job at the right time. Increasing environmental instability, demographic shifts, changes in technology, and heightened international competition are changing the needs for and the nature of human resources planning in leading organizations.

Planning is increasing the product of the interaction between line management and planners. In addition, organizations are realizing that in order to adequately address human resources concerns, they must develop long term as well as short-term solutions. Vetter (1967) defined human resources planning as the process by which management determines how the organization should move from its current manpower position to its desired position. Through planning, management strives to have the right number and the right kinds of peoples at the right places at the right times, doing things which result in both the organization and the individual receiving maximum long-run benefits. Contemporary human resource planning occurs within the broad context of organizational and strategic business planning. It involves forecasting the organizations future human resource needs and how it will be met. It includes establishing objectives needs and then developing and implementing programmes (staffing, appraising, compensation and training) to ensure that people are available with the appropriate characteristic and skills when and where the organization needs them (mills 19856). It may also involve developing and implementing programs to improve employee performance or to increase employees satisfaction and involvement in order to boost organizational productivity, quality or innovation. For example, according to Kalhnyn Conners, Vice President of human resources at Liz Claibornem, human resources is part of the strategic (business) planning process. Its part of policy development, line extension planning and the merger and acquisition processes.

Little is done in a company that does not involve employees in the planning policy or finalization stages of any deal (cited in Lawrence, 1989, p 70) John O’Brien Vice President of human resources at Digital Equipment Corporation, describes an integrated linkage between business and human resources plans as one by which human resource and line managers work jointly to develop business plans and determine human resources needs, analyze the workforce profile in terms of future business strategies review emerging human resources issues and develop programs to address the issues and support the business plans.

According to O’brien, such joint efforts occur when human resources planners convince corporate business planners that human resource represents a major competitive advantage (Planning with People, 1984 P 7) that can increase profit when managed carefully.

Finally, human source planning includes gathering data that can be used to evaluate the effectiveness of on-going programs and inform planners when revisions in their forecasts and programmes are needed.

2.4 THE HUMAN CAPITAL DEVELOPMENT PLANNING PROCESS

Planning generally is characterized by three features. These are setting objectives, management decision and implementation. Based on this Sambrook (2001) contended that manpower planning process thus becomes the consequences of reconciling within the constraint imposed upon decision by the company’s circumstances i.e the outcome form the analysis of manpower resources, the forecast of the future demands or requirement and the forecasts of probably internal and external supply of manpower. The process of human resources planning must focus on a number of issues which according to Thompson (1981) include the following.

1. Consider expected performance of manpower with a view to enlightening the marginal increase or decrease in various periods to cope with productivity requirements.
2. Create systems for recruitment, promotion, transfer, training, discipline and discharge of employees in view of estimates and other consideration like legal constraints, lost corporate image and culture.
3. Incorporation of the role of training, development of both current workforce and the newly employed to the attainment of equilibrium between demand and supply.
4. The manpower planning policies should be strictly defined which would provide appropriate backup for those actions which will help the human resources plan.

Stainer (1997) recommended the following procedure for achieving effective human resources planning at the national, professional and organizational levels:

1. Development of criteria which will be employed in making judgments about the data.
2. Determination of what data is relevant to the decision required.
3. Collection and collation of this data in order that it may be transmitted to those who must decide.
4. Allocation of person to decision taking roles on the basis of assumed competence to interpret the data.
5. Taking of decisions about manpower, either unilaterally or in negotiations.
6. Controlled implementation of the decision thus taken, implying that the process of feeding back data will also be involved.

2.5 EFFECTIVE HUMAN CAPITAL DEVELOPMENT PLANNING MODEL

Based on the view of Gibb (2002) any where you go in the business world today, you are almost certain to hear the buzz about “human resources planning”. Its also likely there will be a sense of urgency surrounding the discussions, as phrases such as “knowledge drain companies and “gap analysis” are tossed about because it is not more like the past when human resource needs of the work place have largely been made in a reactive mode position by position, vacancy by vacancy.

It is therefore imperative that organizations take a strategic approach to workforce planning in the current dispensation. During this planning, the organization of human resource change. Many organizations public and private, have developed work force planning models. A review of those models reveals that while the terminology may vary and some models may consist of as many as nine steps and others consist of as few as four steps. They all contain the same basic processes and provide the same tools and considerations necessary for proactive comprehensive and strategic human resources planning.

This model, as all others, relies on analysis of present workforce staff staffing and competencies, an identification of staffing and competencies needed in the future, a comparison of the present workforce to future needs to identify gaps and surpluses, the preparation of plans for building the workforce needed in the future; and an evacuation process to assure that the workforce competency model remain valid and that objectives are met.

Below is the human resources planning model diagrammatically represented.

The above diagram was adapted from an integrated system for human resource planning model by Bruce Coleman (1970)

Figure 1: The Human Resource Planning Model, (2006). This human resource planning model as shown above consists of seven

Steps. There are:

Step 1 Review Strategic Plan: Review department strategic Plan, mission, vision and measurable goals and objectives and the frame for accomplishing them.

Step 2. Identify work function: identify the work functions that must be performed in order to accomplish the strategic plan.

Step 3. Identify staff requirements: identify the staffing both in number of staff and competencies required to accomplish the work functions.

Step 4: project workforce supply: project your workforce including numbers of staff as well as competencies taking into account attrition and assuming no management actions taken to replace staff lost through attrition.

Step 5: Analyze workforce Gaps: Compare the staffing requirement in steps 3 with the projected workforce supply in step 4, and determine the gap.

Step 6: develop priorities and solution: Analyze your workforce need (the gap) and establish priorities and solution for meeting those needs.

Step 7: Evaluate the plan: Assess what working and what not. Make adjustments as needed address new workforce and organizational issues.

2.5.1 EMPLOYEE RECRUITMENT PROCESS

According to Nwachukwu (2003) employee recruitment is one of the more critical aspects of running a successful organization. As the owner or manager of an organization, you need good employees to address critical organization needs by adopting a different philosophy about recruiting and hiring employees as this can provide the edge necessary to get the best employees faster and for less money.

An adequate employee recruitment process requires that the organization should anticipate vacancies as fast as possible in advance. Recruitment involves all prospective applicants for job position in the organization. A good recruitment process is one that is properly planned for and well operated. Employee recruitment process is a chain which commences with employment planning, recruitment selection and placement. The process is depicted diagrammatically below.

A model of employee recruitment process by Wendel French (1974)

Employment planning

It is a process by which an organization answers that it has the right number and kinds of people at the right place, at the right time capable of effectively and efficiently executing task that will help the organization achieve its overall objective.

Recruitment

It can be referred to as the process of searching for and obtaining sufficient number and quality of potential job seekers to enable organization to select the most appropriate candidate to fill its job needs.

Selection

Selection can be define as a process of gathering information for the purpose of evaluation and deciding who should be employed or hired for h short and long time interest of individual (applicant) and the organization.

Placement

Placement can be defined as a process of finding an appropriate job position for new employee in an organization.

2.6 ACHIEVING THE HUMAN CAPITAL DEVELOPMENT CHAIN IN AN ORGNAIZATION

Thomson and Maybe (1994) describes human capital development chain as the activities that take place in a business and relate them to an analysis of the competitive strength of the business. It helps organization to identify which activities are best undertaken to achieve an effective human capital development. This means that the human capital must be planned trained and educated in technology, transportation systems planning processes, and trade. This chain comprises of employment planning, recruitment, selection placement.

2.6.1SOURCE OF EMPLOYEE RECRUITMENT

Organizations have quite a number of sources from which the needed human capital can be recruited. This sources of recruitment can be divided into two;

1. Internal Sources
2. External Sources

Internal sources include present employees. It involves in-house search for potentially suitable candidates for available vacancies. This is closely linked with the polices of promotion from within through job posting, reshufflement and transfers which are mostly announced on notice boards or internal memos. Another internal source is employee recommendations or referrals which are either good source of obtaining recruits as older or existing employees recommended them. It is believed that time, cost and efforts could be saved using internal sources.

External sources on the other hand, include recruiting from the universities, polytechnics and other training institutions or employment from National Directorate of Employment National Youths Services Corps secretariat and labour employment officers. Others are advertisements in newspapers, trade journals, executive search, walk-ins and professional bodies.

2.6.2EMPLOYEE TRAINING

According to Sloman (1994), the wealth of any nation or economy is to a large extent determined by the human capacity. The place and value of manpower as a resource for economic development, nation building and organizational productivity. Cannot be over emphasized. Therefore, there is the need for effective planning for capacity building, development and maintenance of well trained, skilled experienced and quality human capacity that will assume the various functions of national building and organizational survival.

Similarly, Slomon (1994) see manpower training as a deliberate effort by an organization to change the work related behavior and attitude of employees. This is related to the believe that the successful performance of any organization depends largely on the competence of human capital. Training therefore aims at providing new knowledge, advancing skills and changing the attitude of workers.

Also Sloman (1994) suggest that if training is effectively done, should be able to improve efficiency and morale of employees, introducing new techniques, provide for succession enabling simplified replacement to be available and raise the standard of unskilled personnel, thus helping to over come labour shortage. Various training programmes are designed to enhance human capital development to assist employees and managers in preparing themselves for future responsibilities of a different nature or higher degree of proficiency in their present jobs. The different training and development types and option available to employees and managers include orientation, off the job training on the job training, full part time course at educational institutions, conference, workshops and seminars. Manpower training therefore reduces employee wastage and enhances productivity. More so, training therefore should aim at matching organizational objectives, corporate needs and employee need analysis.

2.7 EMPLOYEE PRODUCTIVITY

Healthfield (2003), sees productivity as output per unit of input, it is the fundamental determinant of the growth of an organization. The most commonly cited measures are output per worker and output per hour, measures of labour productivity. One cannot have sustained growth in output per person, the most general measure of an organization output without sustained growth in output per worker.

Mali (2008), also describe productivity as the measure of how well resources are brought together in organizations and utilized for accomplishing a set of results productivity is achieving the highest level of performance with the least expenditure or resources.

Productivity is often seen as total output/total input input, thus the productivity of an employee is seen as the relationship between units of labour input and units of output. The effectiveness of the use of the factors of production to produce goods and services is commonly referred to as productivity. The relationship of input to output is.

Value of output 1

Cost of input

An effective integration of resources, physical and human, will yield high output. Productivity includes three major elements

1. Output
2. Resources committed and
3. Time productivity is the output resulting from a given resources input at a given time

IMPROVING PRODUCTIVITY

Stevenson (1994) identified seven steps to be taken in order to ensure the improvement of productivity.

1. Development productivity measure for all operations, measurement is the first step and managing and controlling operations.
2. Analyze the system as a whole to decide which operations are most critical.
3. Develop methods for achieving productivity improvements, such as soliciting ideas from workers.
4. Establish reasonable goals for improvement
5. Make it clear that management supports and encourages productivity improvement consider incentives to reward workers for contribution.
6. Measure improvements and publicizes them
7. Do not confuse productivity with efficiency.

EMPLOYEE MOTIVATION

Employees were hitherto considered just another input into the production of goods and services but what has changed this ways of thinking about employee was the research referred to as the how home studies conducted by Elton may from 1924 to 1932 (Dickson, 1973). This study found that employees are not motivated solely by money and employees behaviors are linked to their attitudes (Dickson, 1973). The hawthorne studies began the human relations approach to management, whereby the needs and motivation of employees become the primary focus of managers (bedehai 1993). Understanding what motivated employees and how they were motivated was focus of many other researchers following the publication of the howthorne study results (frpstra, 1979). These resulted in motivation theories that have led to our understanding of motivation including Maslow’s need hierarchy theory, Herzberg’s two factors theory vrooms expectancy theory Adam’s equity theory and skinners reinforcement theory.

According to Manslow 1943 employees have five levels of needs physiological, safety, social, ego and self actualizing manslow argued that lower level needs had to be satisfied before the next higher level needs would motivate employees. Herzberg’s work categorized motivation in to two factors motivation such as achievement and recognition produce job satisfaction, hygiene or extrinsic factors such as pay and job security produce job dissatisfaction. Vroom’s theory is based on the belief that employee effort will lead to rewards (Vroom 1964). Rewards may be either positive or negative. The more positive the reward the more likely the employee will be highly motivated. Conversely, the more negative the less reward the less likely the employee will be highly motivated. Conversely, will be motivated. Adam’s theory state that employees strive for equity between themselves and other workers.

Equity is achieved when the ratio of employee out comes over inputs in equal to another employee outcomes over inputs (Adam’s 1965). Skinner’s theory simply states those employees behavior that lead to positive outcomes will be repeated and behavior that lead to negative outcomes will not be repeated (skinner, 1953). Managers should positively reinforce employee behaviors that lead to positive outcomes, manages should negatively reinforce employee behavior that leads to negative outcome.

Many contemporary authors have defined the concept of motivation as the psychological process that gives behavior, purpose and direction (kreitner, 1995) a predisposition to behave in a purposive manner to achieve specific unmet needs (Buford, bedeian and Lindner, 1995(an internal drive to satisfy an unsatisfied need (Bedeian 1993) operationally, motivation can be define as the inner force that drive individuals to accomplish personal and organizational goals. We need motivated employees in our rapidly changing workplaces to help organizations survive and productive. From the foregoing it is very important that managers need to understand what motivate employees within the context of the roles they perform for to enhanced productivity of all the functions a manager performs, motivating employees is arguably the most complex. This is due in part, to the fact what motivates employees changes constantly (Bowen and Badahakrishna, 1991(for example, research suggests that as employee’s income increases money become less of a motivation (Kovache 1987). Also as employees get older interesting work became more of motivator.