THE EFFECT OF HUMAN CAPITAL DEVELOPMENT ON ORGANIZATIONAL PERFORMANCE
The purpose of this research work is to highlight the impact of human capital management on organisational performance in the manufacturing firms. Today’s business environment is in the state of flux, where competition is the name of the game. Organizations that fail to change may be forced to change from existence to non-existence, hence survival is the panacea. To survive, companies must explore all available avenues that can bring about competitive advantage. To develop a competitive advantage, it is important that firms truly leverage on the workforce as a competitive weapon. Specifically, the study aimed to pursue the following objectives: to establish the relationship between Human capital management and organizational performance, to examine the extent to which training affects organizational performance, to ascertain the extent to which talent management impacts on organizational performance, to evaluate the extent to which incentive and compensation influence organizational productivity. The study had a population size of 1,210, out of which a sample size of 303 was realised using Taro Yamene formula at 5% error to tolerance and 95 % level of confidence. Instrument used for data collection was primarily questionnaire and interview. The total numbers of 303 copies of the questionnaire were distributed while 283 copies were returned. The descriptive research design was adopted for the study. Four hypotheses were tested using Pearson’s moment correlation coefficient, chi-square (x2) and Z- test statistical tools. The findings indicate that there was significant relationship between human capital management and organisational performance. Training positively affects organisational performance. Incentives and compensations positively influence organisational performance. The study concluded that theoretical and technological advance in human capital management has allowed manufacturing organizations to move beyond managing personnel by head count and billet, the managing their workforces. The study recommends that Firms should conduct a workforce assessment to determine the current human capital capacity based on the verified job requirements.
1 .1 BACKGROUND OF STUDY
Today’s business environment is in the state of flux, where competition is the name of the game. Organizations that fail to change may be forced to change from existence to non-existence, hence survival is the panacea. To survive, companies must explore all available avenues that can bring about competitive advantage. To develop a competitive advantage, it is important that firms truly leverage on the workforce as a competitive weapon. A strategy for improving workforce productivity to drive higher value for the firms has become an important focus. Firms seek to optimize their workforce through comprehensive human capital development programmes not only to achieve business goals but most important is for the long term survival and sustainability of the organization. To accomplish this, firms will need to invest resources to ensure that employees have the knowledge, skills, and competencies they need to work effectively in a rapidly changing and complex environment (Marimuthu, Arokiasamy, and Ismail, 2009).
In response to the changes, most firms have embraced the notion of human capital has a good competitive advantage that will enhance higher performance. Human capital development becomes a part of an overall effort to achieve cost-effective and firm performance. Hence, firms need to understand human capital that would enhance employee satisfaction and improve performance. Although there is a broad assumption that human capital has positive effects on firms’ performance, the notion of performance for human capital remains largely untested.
Human capital management can contain different aspect, such as personal cost, performance of employee turnover or demography .Human capital management is an attempt to place a financial figure on the knowledge and skill of an organisation employees or human capital (Bnet 2008) but also includes the planning, controlling and analysing of all personnel management related procedures as far as they are quantifiable. The growing number of articles shows the increasing relevance of human capital management theory take the view that employees can be regarded as assets (Ordiorne 1984) They even believe that value can be put on them and that employees can be managed much as a portfolio of stocks in managing and maintain or enhance their value to the firm (ordiorne 1984).
Human capital generally refers to a repertoire of knowledge, competency, attitude and behavior embedded in an individual (Youndt et al., 2004; Rastogi, 2002). It has gained increasing recognition among organization and management scholars because of its promise to deliver competitive advantage (Gratton, 2000; Pfeffer, 1994), create value (Rastogi, 2002; Mayo, 2001) and secure long-term economic growth (Tomer, 2003; Chuang, 1999). The growing emphasis on human capital in organizations reflects a view that market values depend less on tangible resources and more on intangible resources, particularly human resources (HR) (Edström and Lorange, 1984).
The development of the resource-based view of the firm (Barney, 1991; Penrose, 1959), together with influence work in strategy on organizational core competencies (Hamel and Prahalad, 1994), has placed the role of human capital centre stage within organizations. People and people processes, it is claimed, create competitive advantage chiefly through the characteristics of being (potentially) valuable, rare, hard-to-imitate and non-substitutable (Wright et al., 1994). This means that a link between HR practices and the firm-specific nature of particular organizations can foster uniqueness and create high barriers to imitation (Becker et al., 2001; Wright et al., 2001). In order to build a competitive advantage, organizations need to define what human capital really means and how to deliver effective human capital development.
As some scholars state:“…HR leaders [need] to know that the work they’re doing is among the most important work that anybody can do. Human capital is, and should be, the centre of any business.” (Rosner, 1999: 41) “[Human capital is] generally understood to consist of the individual’s capabilities, knowledge, skills and experience of the company’s employees and managers, as they are relevant to the task at hand, as well as the capacity to add to this reservoir of knowledge, skills, and experience through individual learning.” (Dess and Picken, 1999: 8) Such a philosophy requires, it is argued, a strategic approach to managing people, implementing solutions for evaluating workforce capability, identifying skill gaps areas and improving employees’ productivity, performance and well-being (Mayo, 2001). Strategic issues such as increasing firm’s performance (Maruping, 2002), designing competencies (Nordhaug, 1998), human capital measurement (Critten, 1994), returns on investment of human capital (Fitz-enz, 2000), benchmarking (Huang et al., 2002) and resource allocation (Lepak and Snell, 1999). Hence, this paper attempts to look into the connection between human capital and firm’s performance.
1.2 STATEMENT OF THE PROBLEM
The productivity of workers is falling resulting to poor and low performance of the organization. This is because most firms fail to send their employees on training due to lack of funds that is involved in embarking on employees training. Also most firms believes that workers are dubious in nature, after returning from training desert their firms to join other firms. For instance most Nigerian organization do not give their employee effective and efficient training, considering the cost implication of sending employees on quality training which result into low productivity. Nevertheless, the issues of human capital development are not taken seriously by many organizations, this is because of the failure to acknowledge the fact that business environment has become very dynamic and as such only those organizations with the right informational need in the business times can succeed with the right technological manpower to succeed in modern times. Failure to take training and development especially in modern organization will lead to stifling growth, lack of productivity and inability to compete favourably in the industry. Pertinent to the above the study seeks to investigate the effect of human capital development on organizational performance.
- OBJECTIVES OF THE STUDY
Given the statement of the problem above, this study aims to achieve the following objectives.
- To establish the relationship between Human capital management and organizational performance
- To examine the extent to which training affects organizational performance
- To ascertain the extent to which talent management impacts on organizational performance
- To evaluate the extent to which incentive and compensation influence organizational productivity.
1.4 RESEARCH QUESTIONS
1. What is the relationship between Human capital management and organizational performance?
2. To what extent does training affects organizational performance?
3. To what extent do talent management impacts on organizational performance?
4. To what extent do incentives and compensation influence organizational productivity?
- RESEARCH HYPOTHESES
The following hypotheses was formulate and will be tested in their null form.
1. Ho: There is no significant relationship between human capital and
H1: There is significant relationship between human capital and
2. Ho: Training does not positively affects organizational performance
H1: Training positively affects organizational performance
3. Ho: Talent management does not significantly positively impacts on
H1: Talent management significantly positively impacts on
4. H0: Incentive and compensation don’t positively influence
H1: Incentive and compensation positively influence organizational
1.6 SIGNIFICANCE OF THE STUDY
- It will show how organizations will maintain, develop workforce in other to enhance organizational productivity.
- The findings of this study would highlight the need for managers and trainers to design the content of their training and development programmes to reflect the needs of the employees and the organization
- It is significant in the sense that its findings will serve as a base and framework for future researchers to carry out further studies.
1.7 SCOPE OF THE STUDY
The scope of this study was limited to three manufacturing company in Enugu state, these include Nigeria Bottling Company, Nigerian Breweries Plc and ANAMCO. Basically the following concept was covered. Definition Human capital management, features and functions, human capital theory, and human capital and complementary capitals ,concept of performance, factors affecting performance, and performance management etc.
1.8 LIMITATIONS OF THE STUDY
As part of the research experience by researcher all over globe certain limitation hinder effective collection of materials.
- Time constraint: The time required for this project work was not enough, this was because the project work was done at same time of serious academic work was going on in the school.
- Financial constraint: The finance needed to carry out this work is too much and cannot be afforded by the student. This poses great limitation to the successful carrying out of this work.
- Scarcity of materials: There is generally non-availability and adequate literature on the research topic. Hence the researcher finds it cumbersome to finalized.
- Non-challant attitude of respondents: Another limitation in the course of carrying this study was the non- challant attitude of the respondents in supplying the necessary information. This was probably due to their ignorance of the main purpose of the study. Also many refused to great interviews or answer questions bordering on the activities of their organizations.
1.9 DEFINITION OF THE TERMS
- Human capital management: This is the abilities and know-how of men and women that have been acquired at some cost and that can command a price in the labour market because they are useful in the productive process (Parnes 1984:58).
- Human resource management: this is the process of accomplishing organizational objectives by acquiring, retaining, terminating, developing and properly using the human resource in an organization (Donnelly et al 1992:21).
- Talent management: This encompasses all the applications necessary for handling personnel-related tasks. For corporate manager and individual employees from the point of hire to the point of retire (Dickson 2003:47).
- Training: This focuses on teaching organizational members how to perform their current jobs and helping them acquire the knowledge and skills they need to be effective performers (Ezigbbo 2007:414).
- Organizational performance: This is the commonly referred to as financial performance where considerations of budgets and assets are crucial in determining the overall bottom-line of an organization (Yeo 2003:114).