human capital essay writing

What Is Human Capital? Definition and Examples

• U.S. Economy
• Supply & Demand
• Archaeology
• B.S., Texas A&M University

In its most basic sense, “human capital” refers to the group of people who work for or are qualified to work for an organization—the “workforce.” In a larger sense, the various elements needed to create an adequate supply of available labor form the basis of human capital theory and are critical to the economic and social health of the world’s nations.

Key Takeaways: Human Capital

• Human capital is the sum of knowledge, skills, experience and social qualities that contribute to a person’s ability to perform work in a manner that produces economic value
• Both employers and employees make substantial investments in the development of human capital
• Human capital theory is an effort to quantify the true value of an investment in human capital and is closely related to the field of human resources
• Education and health are key qualities that improve human capital and also directly contribute to economic growth
• The concept of human capital can be traced back to the 18th-century writings of Scottish economist and philosopher Adam Smith

Human Capital Definition

In economics, “capital” refers to all of the assets a business needs to produce the goods and services it sells. In this sense, capital includes equipment, land, buildings, money, and, of course, people—human capital.

In a deeper sense, however, human capital is more than simply the physical labor of the people who work for an organization. It is the entire set of intangible qualities those people bring to the organization that might help it succeed. A few of these include education, skill, experience, creativity, personality, good health, and moral character.

In the long run, when employers and employees make a shared investment in the development of human capital, not only do organizations, their employees, and clientele benefit, but so does society at large. For example, few undereducated societies thrive in the new global economy .

For employers, investing in human capital involves commitments like worker training, apprenticeship programs , educational bonuses and benefits, family assistance, and funding college scholarships. For employees, obtaining an education is the most obvious investment in human capital. Neither employers nor employees have any assurances that their investments in human capital will pay off. For example, even people with college degrees struggle to get jobs during an economic depression, and employers might train employees, only to see them hired away by another company.

Ultimately, the level of investment in human capital is directly related to both economic and societal health.

Human Capital Theory

Human capital theory holds that it is possible to quantify the value of these investments to employees, employers, and society as a whole. According to human capital theory, an adequate investment in people will result in a growing economy. For example, some countries offer their people a free college education out of a realization that a more highly educated populace tends to earn more and spend more, thus stimulating the economy. In the field of business administration, human capital theory is an extension of human resources management.

The idea of human capital theory is often credited to the “founding father of economics” Adam Smith , who in 1776, called it “the acquired and useful abilities of all the inhabitants or members of the society.” Smith suggested that differences in wages paid were based on the relative ease or difficulty of doing the jobs involved. 

Marxist Theory

In 1859, Prussian philosopher Karl Marx , calling it “labor power,” suggested the idea of human capital by asserting that in capitalist systems , people sell their labor power—human capital—in return for income. In contrast to Smith and other earlier economists, Marx pointed to “two disagreeably frustrating facts” about human capital theory:

• Workers must actually work—apply their minds and bodies—in order to earn income. The mere ability to do a job is not the same as actually doing it.
• Workers cannot “sell” their human capital as they might sell their homes or land. Instead, they enter into mutually beneficial contracts with employers to use their skills in return for wages, much in the same way farmers sell their crops.

Marx further argued that in order for this human capital contract to work, employers must realize a net profit. In other words, workers must do work at a level above-and-beyond that needed to simply maintain their potential labor power. When, for example, labor costs exceed revenue, the human capital contract is failing.

In addition, Marx explained the difference between human capital and enslavement. Unlike free workers, enslaved people—human capital—can be sold, although they do not earn incomes themselves.

Modern Theory

Today, human capital theory is often further dissected in order to quantify components known as “intangibles” such as cultural capital, social capital, and intellectual capital.

Cultural Capital

Cultural capital is the combination of knowledge and intellectual skills that enhance a person’s ability to achieve a higher social status or to do economically useful work. In an economic sense, advanced education, job-specific training, and innate talents are typical ways in which people build cultural capital in anticipation of earning higher wages.   

Social Capital

Social capital refers to beneficial social relationships developed over time such as a company’s goodwill and brand recognition, key elements of sensory psychological marketing . Social capital is distinct from human assets like fame or charisma, which cannot be taught or transferred to others in the way skills and knowledge can.

Intellectual Capital

Intellectual capital is the highly intangible value of the sum of everything everybody in a business knows that gives the business a competitive advantage. One common example is the intellectual property—creations of the workers’ minds, like inventions, and works of art and literature. Unlike the human capital assets of skill and education, intellectual capital remains with the company even after the workers have left, typically protected by patent and copyright laws and non-disclosure agreements signed by employees.

Human Capital in Today's World Economy

As history and experience have shown, economic progress is the key to raising the standard of living and dignity of people worldwide, especially for people living in impoverished and developing countries.

The qualities that contribute to human capital, particularly education and health—also directly contribute to economic growth. Countries that suffer from limited or unequal access to health or educational resources also suffer from depressed economies.

As in the United States, the countries with the most successful economies have continued to increase their investments in higher education, while still seeing a steady increase in the starting salary of college graduates. Indeed, the first step most developing countries take to advance is to improve the health and education of their people. Since the end of World War II, the Asian nations of Japan, South Korea, and China have used this strategy to eliminate poverty and become some of the world’s most powerful players in the global economy. 

Hoping to emphasize the importance of education and health resources, the World Bank publishes an annual Human Capital Index Map demonstrating how access to education and health resources affect the productivity, prosperity, and quality of life in nations worldwide.

In October 2018, Jim Yong Kim, president of the World Bank, warned, “In countries with the lowest human capital investments today, our analysis suggests that the workforce of the future will only be one-third to one-half as productive as it could be if people enjoyed full health and received a high-quality education.”

Sources and References

• Goldin, Claudia (2014). Human Capital , Department of Economics, Harvard University and National Bureau of Economic Research.
• Smith, Adam (1776). An Inquiry into the Nature and Causes of the Wealth of Nations . Copyright 2007 MetaLibre.
• Marx, Karl. The Buying and Selling of Labour-Power: Chapter 6 . marxists.org
• World Development Report 2019: The Changing Nature of Work . World Bank
• What Is Cultural Capital? Do I Have It?
• Socialism vs. Capitalism: What Is the Difference?
• What Is Social Insurance? Definition and Examples
• What Is a Traditional Economy? Definition and Examples
• Gig Economy: Definition and Pros and Cons
• The Critical View on Global Capitalism
• What Is Social Class, and Why Does it Matter?
• What Is Socialism? Definition and Examples
• What Is Capitalism?
• Command Economy Definition, Characteristics, Pros and Cons
• A Brief Look at the U.S. Department of Labor
• The Differences Between Communism and Socialism
• Should I Earn a Human Resources Degree?
• What Is Transnationalism? Definition, Pros, and Cons
• What Is Capital Deepening?
• McDonaldization: Definition and Overview of the Concept

Home — Essay Samples — Economics — Economy — The Meaning and Concept of Human Capital

The Meaning and Concept of Human Capital

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Published: Sep 19, 2019

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Introduction, the meaning of human capital, concept of human capital.

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Performance through people: Transforming human capital into competitive advantage

At a glance.

• When companies emphasize skill development, it pays off for workers. Skills learned on the job contribute 46 percent of the average person’s lifetime earnings, and companies that build human capital are more likely to propel their employees into higher earnings brackets over the course of a career.
• Building human capital also pays off for firms in the form of more consistent earnings and greater resilience during crisis. In addition to being more consistent than their sector peers, human capital builders are better at retaining talent, with attrition rates that are about 5 percentage points lower.
• Some firms (“People + Performance Winners”) prioritize developing their employees and manage to deliver top-tier profitability at the same time. These companies are more likely to become large-scale “superstars.” They exist in all sectors and average more than $1 billion in economic profit.
• People + Performance Winners have a distinctive organizational signature that challenges and empowers employees while fostering bottom-up innovation. This form of organizational capital contrasts with that of other top-performing firms, which tend to be more top-down and transactional. This management style seems to activate human capital and create a tangible competitive advantage.

MGI’s previous research has shown that human capital development pays off for workers , with skills learned on the job accounting for almost half of the average person’s lifetime earnings. But does investing in people actually benefit companies? Most business leaders agree that it’s the right thing to do. But they are less clear on how those efforts relate to the bottom line—and why some organizations are so much more effective than others at turning human capital into a real competitive advantage.

To explore these questions, we analyze 1,800 large companies across sectors in 15 countries, sorting them based on two factors: how much they focus on developing human capital and whether they financially outperform their sector peers.

One subset in particular stands out: People + Performance Winners (P+P Winners) excel at creating opportunities for their employees to build skills (which we measure by looking at internal mobility, training hours, and organizational health scores) while consistently clearing the highest bar for financial performance. Another group, Performance-Driven Companies, similarly achieve top-tier financial results but do not put the same kind of emphasis on skills development and the work environment. A third group, People-Focused Companies, put resources into developing employees but are unable to translate that into strong financials. Finally, the majority of firms are Typical Performers that stand out on neither dimension.

P+P Winners distinguish themselves from Performance-Driven Companies in two important ways. They achieve more consistent results and have greater earnings resilience, and they also have a superior ability to attract and retain talent (Exhibit 1). These are important advantages at a time when companies are facing economic headwinds and labor shortages.

While they closely tracked Performance-Driven Companies on profitability and shareholder returns over the prepandemic decade, P+P Winners were roughly 1.5 times more likely to remain in the top tier year after year, and they had about half the earnings volatility.

P+P Winners are not only consistent through the normal ups and downs of business cycles; they are also more resilient in times of crisis. When the pandemic struck, they were more likely to weather the crisis and avoid taking major hits. Only 54 percent of P+P Winners saw a reduction of more than 0.5 percentage point in return on invested capital from 2019 to 2020, compared to 65 percent of Performance-Driven Companies. In fact, 36 percent of P+P Winners saw an increase of more than 0.5 percentage point (versus 29 percent of Performance-Driven Companies). More P+P Winners found growth opportunities in the crisis years as well. From 2019 to 2021, they grew revenue twice as fast as Performance-Driven Companies (8 percent versus 4 percent). Organizations that had spent years building reserves of loyalty, goodwill, and innovative capacity by investing in people may have had more internal resources to draw on when the chips were down.

Investing in human capital is associated with consistency and resilience for other companies, too. In the two segments that are not top performers financially, People-Focused Companies demonstrated greater stability than Typical Performers. Typical Performers were 1.5 times more likely than an average firm in our sample to remain in the bottom quintile of profitability in nine out of ten years, while People-Focused Companies were only 1.1 to 1.3 times as likely. The latter also demonstrated greater resilience during the pandemic, growing their revenue twice as fast as Typical Performers (6 percent versus 3 percent) from 2019 to 2021.

A McKinsey event on "Performance through people: Transforming human capital into competitive advantage"

P+P Winners are also talent magnets, with attrition rates almost five percentage points lower than those of Performance-Driven Companies. Their employees report higher job satisfaction and are 1.3 times more likely to move into higher lifetime earnings brackets than employees of Performance-Driven Companies. People-Focused Companies have similarly high levels of employee satisfaction and even lower attrition than P+P Winners, although not with the same stellar financial performance.

How do P+P Winners manage to succeed on both fronts? While investing in people is important, our research shows that another ingredient is needed to bring out their best and channel their efforts into results: organizational capital—that is, the management practices, systems, and culture within each company. This concept encompasses everything from training programs to workflows, department and team structures, employee communications, norms, culture, and leadership. When these elements are effective, they can turn a collection of talented individuals into a cohesive team.

Organizational capital is the fabric that surrounds employees, and its pattern matters. We compare the practices of each group of companies using McKinsey’s Organizational Health Index diagnostic and other firm-level metrics. P+P Winners have a distinctive signature characterized by consultative and challenging leadership styles; bottom-up innovation and collaboration; positive and inclusive work environments; and rewards and advancement opportunities for employees (Exhibit 2). Performance-Driven Companies have similar leadership styles but are more externally oriented to customers and competitors, with less emphasis on engaging their people through company-wide innovation, motivation, work environment, and on-the-job coaching. People-Focused Companies have many practices in common with P+P Winners (such as motivating employees and creating positive work environments), but they are less results-oriented, and they do not emphasize bottom-up innovation.

On average, companies spend about one-third of their revenue on human and organizational capital (which we measure by using the proxy of compensation for the former and adjusted selling, general, and administrative spending for the latter). This is a significant investment, and companies need to make it as productive as possible. P+P Winners achieve roughly 30 percent higher revenue growth than both Performance-Driven and People-Focused Companies for every dollar they invest in human and organizational capital. By contrast, Performance-Driven Companies generate higher return on R&D and sales and marketing investment—but they have the potential to boost their overall results even further by making their investments in people and workplace systems more effective.

Corporate leaders need a deeper focus on the nuances of organizational capital. Human capital is not merely a labor input; people are any company’s core asset. The workplace should work for employees, with coaching to help them develop, structures for support, and workflows that remove frustrations. Employees know what works on the front lines, and their voices and viewpoints should inform any redesign. Beyond improving the day-to-day experience for workers at every level, these principles can enhance competitiveness and adaptability in a fast-moving world.

In some cases, altering company-wide policies and systems could spur positive change. In others, it will take behavior change from leaders. While C-suite executives can articulate the vision and set the example, frontline and middle managers are key actors since they set the tone for individual teams, have greater visibility into what’s working, and can be the biggest influence on the employee experience.

Not every company will choose to follow the P+P Winner template. Some are singularly driven by financial results; focusing on people may not be in their DNA. Remaking organizational culture is a difficult, ongoing commitment that requires energy, self-reflection, and a willingness to change familiar patterns.

But companies that adopt a more people-oriented focus along with a more challenging and empowering organizational culture have a lot to gain. In addition to boosting financial returns, they can improve their consistency, resilience, talent retention, employee loyalty, and reputation—and these are the hallmarks of companies that thrive over the long term.

Want to know more about Performance through People?

Download the full report

Anu Madgavkar is a McKinsey Global Institute partner in New Jersey; Bill Schaninger is a McKinsey senior partner in the Philadelphia office; Dana Maor is a senior partner in the Tel Aviv office; Olivia White is an MGI director in San Francisco; Sven Smit , MGI’s chair, is based in Amsterdam; Hamid Samandari is a McKinsey senior partner in the New York office; Lola Woetzel is an MGI director in Shanghai; Davis Carlin is a McKinsey partner in New York; and Kanmani Chockalingam is an MGI fellow in Bengaluru.

This article was edited by Lisa Renaud, an MGI executive editor in Los Angeles.

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Human capital definition: types, examples, and relationship to the economy.

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

Investopedia / Ellen Lindner

The term human capital refers to the economic value of a worker's experience and skills. Human capital includes assets like education, training, intelligence, skills, health, and other things employers value such as loyalty and punctuality.

As such, it is an intangible asset or quality that isn't (and can't be) listed on a company's balance sheet . Human capital is perceived to increase productivity and thus profitability. The more investment a company makes in its employees, the chances of its productivity and success become higher.

Key Takeaways

• Human capital is an intangible asset not listed on a company's balance sheet.
• Human capital is said to include qualities like an employee's experience and skills.
• Since all labor is not considered equal, employers can improve human capital by investing in the training, education, and benefits of their employees.
• Human capital is perceived to have a relationship with economic growth, productivity, and profitability.
• Like any other asset, human capital has the ability to depreciate through long periods of unemployment, and the inability to keep up with technology and innovation.

An organization is often said to only be as good as its people from the top down, which is why human capital is so important to a company. It is typically managed by an organization's human resources (HR) department, which oversees workforce acquisition, management, and optimization. Its other directives include workforce planning and strategy, recruitment , employee training and development, and reporting and analytics.

The concept of human capital recognizes that not all labor is equal. But employers can improve the quality of that capital by investing in employees. This can be done through the education, experience, and abilities of employees. All of this has great economic value for employers and for the economy as a whole.

Since human capital is based on the investment of employee skills and knowledge through education, these investments in human capital can be easily calculated. HR managers can calculate the total profits before and after any investments are made. Any return on investment (ROI) of human capital can be calculated by dividing the company’s total profits by its overall investments in human capital.

For example, if Company X invests $2 million into its human capital and has a total profit of $15 million, managers can compare the ROI of its human capital year-over-year (YOY) in order to track how profit is improving and whether it has a relationship to the human capital investments.

Human capital tends to migrate, especially in global economies. That's why there is often a shift from developing places or rural areas to more developed and urban areas. Some economists have dubbed this a brain drain or human capital flight. This describes the process that keeps certain areas underdeveloped while others become even more developed.

Human Capital and Economic Growth

There is a strong relationship between human capital and economic growth , which is why it can help boost the economy. That's because people come with a diverse set of skills and knowledge. This relationship can be measured by how much investment goes into people’s education.

Some governments recognize that this relationship between human capital and the economy exists, and so they provide higher education at little or no cost. People who participate in the workforce with higher education will often have larger salaries, which means they can spend more.

Does Human Capital Depreciate?

Like anything else, human capital is not immune to depreciation . This is often measured in wages or the ability to stay in the workforce. The most common ways human capital can depreciate are through unemployment, injury, mental decline, or the inability to keep up with innovation.

Consider an employee who has a specialized skill. If they go through a long period of unemployment , they may be unable to keep these levels of specialization. That's because their skills may no longer be in demand when they finally reenter the workforce.

An individual's human capital may depreciate if they can't or won't adopt new technology or techniques. Conversely, the human capital of someone who does adopt them will.

History of Human Capital

The idea of human capital can be traced back to the 18th century. Adam Smith referred to the concept in his book An Inquiry into the Nature and Causes of the Wealth of Nations, in which he explored the wealth , knowledge, training, talents, and experiences of a nation. Adams suggested that improving human capital through training and education leads to a more profitable enterprise, which adds to the collective wealth of society. According to Smith, that makes it a win for everyone.

In more recent times, the term was used to describe the labor required to produce manufactured goods. But the most modern theory was used by several different economists including Gary Becker and Theodore Schultz , who invented the term in the 1960s to reflect the value of human capacities.

Schultz believed human capital was like any other form of capital to improve the quality and level of production . This would require an investment in the education, training, and enhanced benefits of an organization's employees.

Criticism of Human Capital Theories

The theory of human capital has received a lot of criticism from many people who work in education and training. In the 1960s, the theory was attacked primarily because it legitimized bourgeois individualism, which was seen as selfish and exploitative. The bourgeois class of people included those of the middle class who were believed to exploit those of the working class. The theory was also believed to blame people for any defects that happened in the system and of making capitalists out of workers.

What Are Examples of Human Capital?

Examples of human capital include communication skills, education, technical skills, creativity, experience, problem-solving skills, mental health, and personal resilience.

What Is the Relationship Between Human Capital and the Economy?

Human capital allows an economy to grow. When human capital increases in areas such as science, education, and management, it leads to increases in innovation, social well-being, equality, increased productivity, improved rates of participation, all of which contribute to economic growth. Increases in economic growth tend to improve the quality of life for a population.

How Can I Increase My Human Capital?

Ways to increase your own human capital include more education, automating finances to improve efficiency, expanding your horizons outside of your social and workplaces, obtaining more experience, increasing participation in a multitude of activities or organizations, improving your communication skills, improving your health, and expanding your network.

What Is Human Capital Risk?

Human capital risk refers to the gap between the human capital requirements of a company or organization and the existing human capital of its workforce. This gap can lead a company towards inefficiencies, inability to achieve its goals, a poor reputation, fraud, financial loss, and eventual closure. To reduce and eliminate human capital risk, an organization should train, foster, and support its workforce.

Human capital refers to the economic value of a worker's abilities and skills. Companies can enhance their human capital through recruitment or training, as well as by implementing management techniques that optimize the productivity of their existing workers. Maintaining and improving the value of human capital is usually the role of a company's HR department.

World Bank. " Building Human Capital ."

Scholars at Harvard. " Human Capital ," Page 1.

Schultz, Theodore W. " Investment in Human Capital ." The American Economic Review, vol. 51, no. 1, 1961, pp. 1-17.

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Essay On Management Of Human Capital

Type of paper: Essay

Topic: Business , Leadership , Management , Workplace , Marketing , Human Resource Management , Organization , Behavior

Words: 3000

Published: 12/07/2019

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Management has been described as a process that involves the responsibility for an economical and effective planning and regulation of all the activities of an enterprise with a goal of fulfilling a given purpose. Its also defines as a dynamic process that consists of a number of elements and activities that are different from the operative functions such as finance, marketing etc. Different scholars have come up with different functions of management but our discussion will majorly rely on the work of Koontz and O’ Donnel who described the functions of management as Planning, Organizing, Staffing, Directing and Controlling (8). Planning is defined as a basic function of management that deals with determining a future course of action and deciding way in advance the particular course of action to be taken to attain a particular predetermined goal. According to Koontz and O’Donnell, planning involves deciding in advance the most appropriate course of action for the achievement of the organizations goals and objectives. The main role of staffing is to fit the right man on the right job at the right time. According to, Koontz and O’Donnell staffing involves manning the organizational structure through proper and effective selection, appraisal and development of personnel to fill the roles that have been designed in the organization (9). It involves, human resource planning, training and development, recruitment and selection, remuneration, performance appraisal and promotion and transfer. Directing is a managerial function that deals with influencing, guiding, motivation, supervising etc. It enables the organization to work in particular way since the people at the top influence the behavior of all the others in the organization. It has the following elements. Supervision- this is overseeing the job of the subordinates by superiors’. Motivation-it’s encouraging the subordinate with zeal to work; it ensures that people in an organization are ready to take responsibilities and re happy about their work. Leadership-As will be explained later, leadership is a process by which a manager will guide and influence the work of subordinates in a given direction, while controlling is the measurement of attainment of goals and objectives against a given standard and correction of any deviations from those standards. Control systems can either be concurrent feedback controls or feed forward controls. An effective control system should be able to predict a deviation before it actually occurs. With this background in mind, we can now explore how to manage people and organizations while emphasizing our focus on the best practice during this period of economic downturn. The period of economic downturn has seen many organizations go under and others still remain afloat despite all the challenges. While other factors may contribute to the continuity of an organization or otherwise, during this period, management is to play a great role in ensuring that an organization is sound, even with the current state of economic affairs. For the organization to survive the current trend of economic affairs, the attention of management must be drawn to five key areas of managing in their organizations. These key areas are the management of human capital, management of customers, clients and stakeholders, management of financial resources, management of competition and finally the management of the environment (Koontz, O’Donnell 25-30). These areas are explained as under: Human capital is probably the most important resource in any organization and thus its management is of critical importance. Employees are the ambassadors of an organization and will sell the policies of an organization to the outside world or even affect the organization and its efforts negatively. The role of an effective human resource policy should be to maximize return on investments in the organizational human resources and also effectively reduce the risks of financial losses. This is done by attempting to match the supply of skilled and qualified staff to the organizations demands for such work force. The human resource management should implement the organizations requirements effectively while taking into consideration the state, federal or even labor laws and regulations, while also practicing ethical business practices in a manner that maximizes the employee motivation, productivity and commitment. The management of human capital has a number of elements such as human resource planning, training and development, recruitment and selection, remuneration, performance appraisal and promotion and transfer. Human resource planning-this involves deciding the number and qualification of future staff. With the current economic trends, the need to conduct a proper human resource planning cannot be overlooked. In fact, just as failing to address a potential threat in advance can jeopardize a business, failing to anticipate personnel needs can easily impact on the overall success of a business. Its said that the success of a business depends on the success of those who are employed in that business. In these hard economic times, hiring the wrong people or even failing to anticipate the fluctuations in hiring needs can be very costly thus it’s imperative that human resource planning be emphasized. Recruitment and selection-after successfully predetermining the needs of the organizations in terms of human resources, its upon the management of human resources to select and recruit the right staff. This involves a thorough an rigorous selection process that involves advertisement of the vacant positions, receipt [of applications, processing of applications, interviews, selection of the right candidates and offering of the position to those right candidates. The organizations must make sure that they hire people with the right skills to cater for the organizations needs. Training and development- in order to make maximum benefits from the staff in the organization, all staff must be properly trained to be able to handle their particular jobs. Proper training of employees also increases their efficiency and productivity to the benefit of the organization. Remuneration, performance appraisal and promotion and transfer- this involves deciding on the salary that an employee shall get. The employee will be compensated according to their level of experience and contribution to the organization. Caution should be taken in this area since a poor remuneration policy may have irreparable impact on the organization. Performance appraisal is done to evaluate the performance of employees so as to identify the level of competence, the training needs of the employees, and for the purposes of promotions, salary increments etc. this should be done objectively and all staff should be given an opportunity to discuss the results of their appraisal. Management of customers-as has been said by many authors, customer is always be king in any business. All efforts in an organization must always be geared towards attraction and retention of customers; this is because the business exists because of the customers. Management of customers is the backbone of the operational function of marketing and involves among others, the following issues: Product-the company must produce and deliver a customer oriented product. In fact, the organization must conduct a thorough market research to understand the products that customers demand, in what quantities, what prices they want to pay etc.

In brief, the following elements must be considered in deciding the product

Brand name- the organization must have a brand name that is known amongst the other players in the industry. A famous brand name such as Coca-Cola actually sells the products of the company Packaging- packaging of the product also presents a unique opportune for the company to ensure that it markets its brand as appropriate. Warranty- a company that gives a warranty for its products is likely to win a customers confidence and loyalty to its products. Safety- safe products are a responsibility of any organization. It’s actually against the requirements of the regulatory bodies and business ethics for an organization to offer unsafe products.

Pricing- the prices that a company offers in the market will have a great impact on the response of the customers to that particular product. The organization may adopt different pricing strategies to sustain its products in the market such as volume/wholesale pricing, seasonal pricing, flexible pricing strategies etc. This always ensures that the customers are able to afford products in the market. Placing- this is the method of distribution that an organization used to reach its target customer groups. Management of these channels can result to great reduction in the costs of marketing and also increase the efficiency of the company. Promotion- in managing the customers, it’s important that the organization engages in aggressive marketing and promotion exercises to create awareness of the company’s products to its customers. Proper utilization of marketing and promotion media can easily lead to success of an organization. Promotion can be done through advertising media such as audio, visual or audiovisual channels or even print media. Other media for promotion can also be used where appropriate. Management of customers is important in ensuring that customer numbers are increased and sustained for the long-term survival of the business. In a financial downturn as is being experienced, an organization cannot afford to lose its most valued customers (Schein, 20).

Management of financial resources

A company always has limited resources to be utilized in ensuring that its goals and objectives are attained. It’s thus of critical importance that the organization does all within its means to ensure that these scarce resources are managed well to the benefit of its stakeholders. The organization can employ a number of measures to ensure prudent management of financial resources. This can be done through: i) Increasing efficiency- this requires the organization to use the available resources vey sparingly and to ensure that loses are minimized or eliminated. It can be done by ensuring proper accountability of all expenditures in the organization. An organization cannot afford to lose money when there is actually not enough money in the organization. Proper monitoring of all projects and expenditures to ensure that only eligible expenditure is undertaken will go a long way in ensuring that financial resources are properly managed. ii) Use of proper financial management tools such as budgets- the company must ensure that reasonable and realistic budgets are drawn for all aspects of incomes and expenditures. Efforts should also be put towards ensuring that such budgets are maintained and strictly followed. Any deviations from the budgets should be noted and corrective actions taken in reasonable time. The company must put in place adequate measures to ensure that very stringent financial management policies are put in place to increase efficiency of the company. For instance, the company may have a procurement policy manual and a procurement committee. This ensures that the company is able to source its purchases from the most cost effective suppliers.

Management of competition

Competition drives out enterprises from business if not well managed. To stay a head of competition, an organization must ensure that it has a superior product, service or a superior marketing network. The organization must also ensure that it understands the business, industry product or service and make improvements from the conventional products in the market so as to be able to beat competition and stay a head of the pack even as the economic times continue to deteriorate. Management of the environment- An organization doesn’t exist in a vacuum. It’s surrounded by an environment which is either directly or indirectly affected by the actions of the organization. The company can manage the environment by engaging in corporate social responsibility activities, creating employment, sustaining the environment among other. Such actions can almost guarantee the long term survival of the organization. Management of the environment is also key in ensuring that the organization is not on a collision course with the authorities and regulatory institutions (Davis, 20).

Organizational behavior is a broad area in management. It’s defined as the study of the behavior of humans in an organizational set up. It also explores how human beings interact with the organizations and also among themselves in that organization. In studying human behavior in an organization, it’s also important to understand the organization and its influences on the individual behavior otherwise such study will be one sided (Heinz, Koontz 50). For a comprehensive and detailed understanding of human behavior in organizations, one needs to ask some relevant questions and attempt to find answers to these questions so as to fully understand the concept and relevance of the study of organizational behavior.

Some of these questions are:

i) Why is the study of organizational behavior important to a manager? ii) What influences the behavior of people in an organization? iii) How can the management of an organization manage change and development in an organization? iv) How can conflicts in an organization be avoided, or rather used for the benefit of the organization? An attempt to answer these questions will lead a researcher to explore in depth, the concept of organizational behavior and get a proper understanding of the concepts explained above. The study of organizational behavior is important in the management of an organization and to the manager himself as explained below: The study of organizational behavior will help a manager to be able to understand their duties, functions and roles in an organization. This will enable managers to do their duties very diligently. It helps the management of the organization to understand the staff in place, to understand the needs and expectations of each and every person in the company, their roles and duties and the expectations of the company from each stakeholder. Management is also able to manage diversity and change in an organization. The study of this subject equips the management of an organization with the necessary skills and attitude to introduce and successfully manage change in an organization. Conflict resolution is also addressed in the study of organizational behavior and thus skills of conflict resolution as learnt will help the management to resolve conflicts in an organization Leadership and motivation- theories of leadership and motivation that are learnt in organizational behavior will help management in positively influencing the behavior of staff and also providing motivation and sound leadership in the organization.

The behavior of people in an organization is influenced by a multiple of factors. Key among them is the leadership. There are various leadership styles that may be adopted by a manager. According to Kurt Lewin, there are three leadership styles that may be adopted by a leader. These include authoritarian/autocratic leadership- these leaders provide clear expectations of whatever needs to be done when and how it should be done. There is usually a clear division between the leader and the follower and an authoritarian leader is likely to make a decision on his own.

Participative Leadership (Democratic)

In this type of leadership, people are free to make their own decisions and their input in the organization is considered. It’s generally the most effective leadership according to Kurt Lewin. Participative leaders will allow group members to participate in the decision making. Members feel engaged and part of the organization and the process as well (Heinz, Koontz 50). Laissez-faire- in this type of leadership, the leader provides little guidance to members and leaves them to do as they wish. This style of leadership is only effective among highly qualified, committed and disciplined employees. As explained above, the types of leadership affects the behavior of staff in an organization.

Other determinants of organizational behavior are the organizational structure, the organizational culture, and technology in an organization among others.

Change in an organization is inevitable. Management must ensure that change is effectively managed for the benefit of the organization otherwise it can be costly in the organization. Managers manage change by ensuring that the change is properly studied before implementation. It must also ensure that all parties are properly briefed of the imminent change and contingent measures put in place to counter the negative effects of this change (Koch, 55). Implementation of the change is supposed to be a very well managed process so as to ensure that it’s a smooth process and resistance to change is minimized or effectively eliminated. Conflict in an organization ha both negative and positive impacts on the organization in general, Whichever the impact on the organization, conflicts must be properly managed since poor management of conflicts may have a detrimental impact on the organization. Some of positive impacts of conflict in an organization include: increased performance in terms of utilizing scarce resources and achieving of organizational objectives. Conflicts also plays a role in ensuring decision making outcomes are better, especially those involving task related conflicts and increasing productivity through constructive criticism (John, Davis 55). Conflict also ensures exchange of ideas and enables better performance among group members. Answering of the above question gives a proper perspective of the subject of organizational behavior to both managers and non managers. It’s important for everyone involved in an organization clearly understands the principles underlying organizational behavior for the benefits of individuals and organizations.

Heinz Weihrich , Harold Koontz “Management: A global perspective”, McGraw Hill. The University of Wisconsin, 2008 Harold Koontz, Cyril O'Donnell. “Principles of management: an analysis of managerial functions”. McGraw Hill. The University of Wisconsin, 2008 Davis. “Organization Behavior: Human Behavior at Work”. New York: McGraw-Hill, 1993 Davis. “Human relations at work: The dynamics of organizational behavior” 9th ed., New York: McGraw-Hill ,2005 Koch. “The New Science of Change”. CIO Magazine, Sep 15, 2006 (pp 54-56). John, Davis, Keith “Organizational Behavior: Human Behavior at Work. New York: McGraw-Hill. 2007 Schein. “Organizational Socialization and the Profession of Management” Industrial Management Review, 1968 vol. 9 pp. 1-15

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Human Capital Management in Organizations Essay

Executive summary, introduction, staffing issues at british airways, recommendations.

Staffing problems encountered by British Airways have been a thorn in the flesh for the company for the longest time. In this regard, the company has experienced endless periods characterized by push and pull strategies, adopted by both the employees and the management (against each other).

In this regard, the company has had a difficult time trying to implement its future business strategies, but more specifically, its staffing strategies. This study recommends that implementing less traditional staffing plans and more pragmatic approaches can go a long way in relieving the company endless stressful periods of dealing with its staffing problems.

It is important to note that even though the company may not necessarily have to change its staffing strategies, it needs to change the way it implements the strategies. This study points out that the main objective for the company should be coming up with a different context for implementing its staffing strategies.

This study also recommends that the company should refrain from coming up with articulate and current solutions meant to tackle future problems (or come up with future strategic staffing solutions with certainty and surety), because unforeseen factors may cause such strategies to be ineffective in the long run.

These odds abound, the company should strive to review its staffing strategies to blend with its overall long term strategic vision through ridding the company of its staffing problems first.

In human resource management, staffing is one of the most important factors needed for the overall human resource strategy of a company to work. If staffing issues are well managed, human resource strategies function better, leading to the ultimate realization of organizational goals.

Human resource functions are basically defined by a number of factors, but the most important are the size of the organization, the general employment climate and the operational dynamics of the organization (depending on the functions of the organization which are in tandem with the human resource strategies of the company) (Kathy, 2011, p. 1).

Staffing is one of the most important facets of human resource management as explained by human resource professionals (cited in Kathy, 2011, p. 3) because it is in the same category with other equally important human resource facets such as employee training, employee education, employee benefits and employee remuneration.

From this analysis, Kathy (2011, p. 3) explains that “This indicates that HR is most likely to support an organization’s business strategy through human capital-related areas such as building, developing and maintaining the workforce”.

Most organizations actually comprehend the fact that a viable staffing plan can bring unprecedented benefits for an organization and therefore many strive to develop staffing strategies or workforce plans to enjoy these benefits.

Even though these efforts have been applauded by most experts, many have noted that most organizations are having a difficult time implementing staffing strategies because most are ineffective (considering their predicted advantages are not realized) (Bechet, 2010, p. 1).

With regards to this problem, Bechet (2010, p. 1) notes that “The answer to this problem lies not in trying to implement the traditional approach more effectively, but in implementing a completely different kind of process for strategic staffing”.

For purposes of this study, we will evaluate the human resource staffing strategies of British Airways, which has in the past few years constantly experienced staffing problems. British Airways used to be the state-run airline company for United Kingdom (UK) but it got privatized in 1986 and is currently the biggest airline in the UK (in terms size of fleet and global destination networks).

British Airways is also one of the initiator members of the one world grouping (which was founded by specific American and Canadian airline companies) and now one of the biggest airline company alliances in the world. Though the company recognizes the benefits of human resource staffing as part of its overall human resource strategies, it has continually experienced problems implementing its staffing strategies (Modlock, 2010, p. 2).

This study will analyze the shortcomings of the company (with regards to its human resource staffing strategies) and evaluate why the company has in the past had endless periods of employee strikes. This will be done in addition to evaluating why the company is not implementing workable human resource strategies which has ultimately caused it problems with its employee management function.

This analysis will therefore help in understanding the challenges faced by most companies in implementing their human resource strategies and from a general understanding, we will propose viable conclusions to staffing problems.

Staffing is the process of recognizing and dealing with the staffing implications of various business functions or changes, because it is important in complimenting the overall change of business strategies (in a changing business environment). This means that the consequences of staffing strategies should at least be factored into the overall business strategy of an organization when it is evaluating its business strategies (in light of the changing business environment).

In a general manner, staffing strategies incorporate the determination of staffing numbers and employee skills requirements so that the overall implementation of staffing strategies goes according to plan. In another context, the staffing plan can be used to define the bridge of staffing requirements and skill supply so that no wastages are experienced (instead, efficiencies should be evidenced in the organization).

In as much as any consultant would easily define the above steps as the most basic in any staffing plan, the devil in staffing strategies is not in the steps but in the details of implementation.

British Airways has in the past experienced a lot of problems with its staffing strategies. This has impacted the company’s long-term business strategy because employee strikes have resulted in unprecedented losses of up to 513 million pounds in the year 2010 (Modlock, 2010, p. 2). Modlock (2010, p. 3) reiterates that:

“It is estimated that strikes by cabin crew in March cost BA £43 million, a figure which will grow as industrial action extends. It remains to be seen whether BA can maintain its aim of running 60% of flights normally and show the ‘non-flying pickets’ what they’re up against”.

Employee strikes experienced in March 2010 and the preceding twelve months saw the company incur losses that were only experienced during the company’s privatization in 1986 (Modlock, 2010, p. 2). Moreover, the employee strike also saw the company’s share price also significantly fall to an all-time low in 2010 (Modlock, 2010, p. 2).

The strike was instigated by the company’s cost cutting strategy in the year 2008/2009 (due to rising costs of doing business and rising fuel costs) which later caused employee uproar; thereby leading to the current staffing problems experienced by the company.

Most observers note that the company used to cave in to employee demands (in the 80s) and therefore the same strategy (strikes) adopted by employees in the past is being used as a tool to make the managers cave in to employee demands today (Modlock, 2010, p. 2). This is the reason advanced by most researchers why British Airways employees are among the highest paid airline employees when compared to other employees in similar companies.

The company’s employee perks are also among the highest in the industry (Modlock, 2010, p. 2). Modlock (2010, p. 4) for example explains that “For instance, on a return trip to Tokyo, British Airways employees are said to earn more in allowances than Ryan Air cabin crew earn as basic pay in a month”.

However, it should be noted that the reason why BA has unique staffing problems is its history of employee treatment as will be explained in subsequent paragraphs of this study.

Ryan Air for example does not have a poor history of employee treatment and it has been consistent in the way it handles its employees (Civil Aviation Forum, 2011). It should also be noted that the reason why BA faces staffing strategies despite the fact that it pays good salary is the fact that it seeks to reduce its number of employees to reduce its operational costs.

In the past, (the 80s) British Airways did not have staffing problems because it used to enjoy airline monopoly and government cushioning (in terms of extra funding) (Modlock, 2010, p. 4). However, with the changes in the global airline market and increased competition, the company has had a hard time keeping up with staffing issues as an important facet of the company’s overall business strategy.

As a consequence to the drama that has happened at British Airways, customer confidence has tremendously waned over the months because there is nothing that puts off a customer more than the probability of flight cancellation.

The biggest problem experienced by the company is the fact that employees are fighting for their jobs while the employer is fighting for its very own existence in the increasingly competitive and turbulent market. This situation has increased concerns over the very existence of British Airways (especially among the UK’s nationals) as affirmed by Modlock (2010, p. 5)

The same concerns have been voiced by Brian Stewart (cited in Modlock 2010, p, 25) who states that:

“Britain was there, right at the start of the airline industry. It just does not seem right……this seems to be a low point for British Airways; surely this could be an opportunity to profit from a bounce here? I believe they still have significant cash reserves. Losses 200m better than expected. Recovery underway. If they can sort out the staffing problem, then this may be a good future bet. Or am I totally misguided?”

There is even more concern regarding whether the company will make a profit in the near future, considering it experiences deficits in terms of pension payment (in addition to having a staff that’s not willing to stick with the company in hard times) (Modlock, 2010, p. 20).

British Airways therefore needs to come up with a good staffing plan to enable it overcome its current staffing problems. Fombrun (1984) notes that the staffing plan must be an integral part of the overall business plan, otherwise business success would never be realized (considering employees play an important role in it). However, research affirms that it is impossible for a viable corporate staffing plan to stand by its own (Modlock, 2010, p. 21). In other words, it requires support form other business functional areas.

Staffing and other human resource issues must therefore be correctly integrated into the overall business plan, although they should be altered in a sound manner so that the organization is able to realize its human resource management goals (in terms of employee number, competencies, skills and the likes).

Researchers note that the overall staffing strategy for any organization is more dynamic than one would think and this is probably the reason why British Airways experiences more problems in its other business functional areas (from its staffing problem) (Modlock, 2010, p. 12).

This is true because the overall business environment is very difficult to forecast (both in internal and external ways) than most business managers would admit and so, chances of companies coming up with viable staffing strategies that encompass all the dynamics of the business environment, are minimal.

Some researchers note that since the staffing requirements for an organization are widespread and dynamic, there is a strong need for businesses to constantly review their staffing strategies over periods of at least six months or so (Fombrun, 1984).

However, considering British Airways employees are likely to be suspicious of any company changes in the staffing strategies, a year or so would do. Other organizations are known to review their staffing requirements quarterly or annually.

British Airways has had problems evaluating its staffing strategies because it is currently experiencing problems orienting its employees with current staffing demands observed in the competitive 21 st century business environment because its employees are still stuck with the 80s mentality where they could arm-twist the company into giving in to their demands whenever they so wished.

From the complexities experienced in the 21 st century business environment, Fombrun (1984) notes that implementing staffing requirements in a problematic business environment can be quite challenging. For this reason, Fombrun (1984) notes that it is important to completely evaluate the business environment before carrying out any strategic staffing actions.

Though many companies may not experience such technicalities in carrying out their staffing strategies, British Airways is sort of a in a tight fix because of the history of its staffing complexities. Specifically, the staff culture developed in the 80s is a major stumbling block, and therefore the company is susceptible to union reviews (also considering the high number of employees the company has under its wings).

British Airways should therefore change the way it relates to its staff as the key to overcoming barriers relating to union reviews and poor staff reception of its strategies.

Fombrun (1984) gives an example of how Penn Square company (a financial company operating in the banking industry facing immense staffing issues) overcame its human resource problems by taking endless months to investigate the company’s staffing problems before any action was taken (Fombrun, 1984).

Fombrun (1984) further explains that the company’s management gathered relevant facts, deliberated them and then took the necessary actions to solve the staffing problem. The lesson to be learnt in the company’s exercise was that the information obtained after gathering the relevant facts was invaluable to the formulation of the staffing strategies and therefore this case should act as a precedent to British Airways in the manner it handles its staffing strategies.

Fombrun (1984) explains that Penn Square deliberated on each personnel case in a day, communicated the decisions they arrived at (in the same day) and then implemented their actions the following day (Fombrun, 1984). From this action, he notes that the company never took their time to dribble out their recommendations and leave the employees wondering what actions management would take (whether they would be fired or not) (Fombrun, 1984).

Fombrun (1984) further notes that the company’s approach was very consistent and therefore dealing with staffing problems in a consistent manner is very important for human resource managers.

This lesson could be very useful for British airways because it has experienced problems implementing a consistent human resource solution over the past decades because it had adopted a flexible staffing strategy in the 80s and now it is implementing a rather inflexible approach (Modlock, 2010).

Staffing problems encountered by British Airways have been a thorn in the flesh for the company for a long time. However, implementing less traditional staffing plans and more pragmatic approaches can go a long way in relieving the company endless stressful periods regarding its staffing problems.

It is important that even though the company may not necessarily have to change its staffing strategies, it needs to change the way it implements these strategies. The main objective is to come up with a different context for implementing its staffing strategies.

The company should therefore refrain from coming up with specific current solutions to tackle future problems, or come up with future strategic staffing solutions (with certainty and surety), since unforeseen factors may cause such strategies to be ineffective in the long run.

With these odds in mind, the company should strive to implement staffing strategies as part of the overall long-term strategic vision of the company where short-term decisions can be made and implemented at the same time.

For instance, if the company documents that it requires five new project managers by the end of the 2011 fiscal year, the company has the option of sourcing the managers through hiring, redeployment, promotion, work assignment, use of contracts, and other similar sources. To adopt the best option (among the above options), the company ought to have a long-term vision of its strategic goals.

This means that the staffing requirements for the organization need to go beyond the current fiscal year; implying that a more current alternative is needed for the organization, say, through hiring or promotion.

However, if the urgency for the new project managers is “blip”, a less permanent solution is more appropriate for the organization. For instance, the organization may decide to delay future company projects or hire new contractors for the time being as they solve the staffing problem.

This will also ensure that new project managers are deployed to project facilities without any hurry and indeed, no surplus project managers will be experienced. Whichever way the company chooses to go about the situation, future-staffing requirements for the company need to be first established.

Fombrun (1984) notes that if a company is facing staffing problems, it is supposed to take specific consistent actions in solving the problem before it escalates into a fully blown disaster which the company would find difficult to dig itself out of..

This study will borrow from this analysis and recommend that British Airways should not waste any time solving its staffing problems; meaning that the company’s management shouldn’t shy away in dealing with the problem as it has in the past.

This also means that as soon as the company gets a strike notice (or employee actions of some sort), it ought to burn the midnight oil trying to solve the problem, instead of employing the “wait and see” tact.

In addition, the company should carry out effective discussions with relevant stakeholders, including the company shareholders, employee union and the likes before implementing any strategy. This will ensure that the company gets enough support in implementing its recommendations. Moreover, management will get enough support when dealing with any resistance to its strategic recommendations.

However, Fombrun (1984) notes that, it is important to instil an organizational culture in the organization which would be compatible with the overall goal of implementing the staffing goals. This is true because if the organization has a supportive culture, less resistance will be experienced from the employees.

Even as British Airways implements new staffing strategies, it ought to understand that staffing strategies which seem unfavorable to the employees should be handled carefully and with higher sensitivity than other strategies.

Fombrun (1984, p. 84) affirms that “transfers, outplacement, termination policies and practices must provide alternatives for the positive support that employees need under these circumstances”. This is also important in ensuring there is a smooth transition from initial staffing policies to new policies.

The new staffing policies ought to be formulated with the performance of the organization and the future business needs of the organization in mind. These policies should then be implemented with firmness and strictness but in a timely manner; such that, the employees feel more accommodated in the overall strategic goal of the organization and their strengths and interests well accommodated by the staffing strategies.

This strategy is in line with recommendations by Fombrun (1984, p. 86) who notes that:

“one of the greatest injustice that can be done to an individual or an organization is letting the person take a position which he/she is not qualified to hold since the likelihood of unproductiveness and unhappiness is likely to be experienced in the organization and the person’s life respectively”.

However, most importantly, British Airways should pay close attention to issues revolving around selection, placement, compensation, training and the company’s management culture because these are the factors that determine the overall success of the company’s staffing strategies.

There are also new tactics and strategies managers ought to understand as part of their management training objectives. To compliment this initiative, all the managers should be kept in a management awareness-training program where relevant skills and qualifications required before a manager takes up managerial responsibilities are imparted to the managers.

However, this implies that significant managerial culture issues need to be revisited because the company should look for ways in which it can improve managerial communication upwards or horizontally (as well adopt new strategies through which managers can better treat their subordinates).

These are some of the critical areas through which some lessons on staffing strategies can be learnt. More importance should therefore be made on the management of human resource strategies because human resource strategies which are poorly managed are bound to fail.

British Airways does not need to change much of its staffing strategy (which is to lay off its excess staff to reflect the current increased costs in doing business) because it experiences more problems in the implementation of its staffing requirements than approving the strategy anyway.

This is true because British Airway’s staffing strategies have been developed with regards to the current and future business demands of the 21 st century. It’s the implementation of these strategies that poses the biggest problem to the company. This problem is majorly manifested in the strike notices the company has been issued with in the past year.

This problem is however noted to affect most companies and not only British Airways. The company therefore needs to improve its overall implementation of the staffing strategies because this is the major problematic area for the company since it experiences more resistance from the employees in terms of employee strikes.

Creating more emphasis on the training, selection and development of performing specialists in the company is the most important staffing strategy the company can undertake because this employee population is quite critical for the overall success of the company. It has been proved that the best pool where the best human resource managers can be obtained is from highly performing company specialists (Fombrun, 1984).

This group of highly performing specialists often exhibits a track record of outstanding employee performance. These strategies if correctly applied can tremendously turn around British Airway’s staffing problems.

Bechet, B. (2010). Developing Staffing Strategies that Work . Web.

Civil Aviation Forum. (2011). Ryan Air and their treatment of Staff . Web.

Fombrun, C. (1984). Strategic Human Resource Management . London: John Wiley and Sons.

Kathy, G. (2008). Report: Staffing Issues Critical To Business . Web.

Modlock, S. (2010). Are British Airways’ Problems Terminal? Web.

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• The Staffing Problems at British Airways (BA)
• "Developing Staffing Strategy That Work" by Bechet
• Virgin Atlantic Airways and British Airways International Business
• Analysis of Jetstar Airways
• Market Entry Models: Etihad Airways & Emirates Airways
• Broad Differentiation Strategy in Staffing
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Essay on Human Capital: Top 5 Essays | Organisation | Management

Here is a compilation of essays on ‘Human Capital’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Human Capital’ especially written for school and college students.

Essay on Human Capital

Essay Contents:

• Essay on the Conventional Measurement Method of Human Capital

Essay # 1. Meaning of Human Capital:

Human capital is the intersection of an organization’s skills, the required roles, and the people available and it can be explained as:

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Skills includes hard skills, leadership, business skills and interpersonal skills.

Roles pertains to jobs, project roles and positions within the organization.

People are the key; finding people with the right skills, competencies, experience and education to fill the necessary roles.

Human capital is referred to as knowledge, education and competencies of individuals as well as health Sharpe, 2001; Business and Information 2013 – G3 – UNESCAP, n.d., and the aggregation of investments in such areas as education, health, training, and migration to improve skills and competencies with realizing about tasks and goals, that enhance an individual’s productivity.

It is quite difficult to find studies or scholarly propositions stating directly that human capital holds a relationship with, or can lead to sustainability of organizations. However, Hatch and Dyer suggested the believed that having elements of human capital allows organization to learn faster than competitors, which can lead to sustainable advantage. Nevertheless, jumping to the conclusion that human capital is the way to sustainability might not be solid enough to communicate to the field.

ADVERTISEMENTS: (adsbygoogle = window.adsbygoogle || []).push({}); Essay # 2. Concept of Human Capital :

The concept of human capital is semantically the mixture of human and capital. In the economic perspective, the capital refers to ‘factors of production used to create goods or services that are not themselves significantly consumed in the production process’.

Along with the meaning of capital in the economic perspective, the human is the subject to take charge of all economic activities such as production, consumption, and transaction. On the establishment of these concepts, it can be recognized that human capital means one of production elements which can generate added-values through inputting it.

The basic concept of human capital can be variously categorized by each perspective of academic fields and to explain the main concept of human capital three view-points can be mentioned as:

1. The first viewpoint is based on the individual aspects. Schultz (1961) recognized the human capital as ‘something akin to property’ against the concept of labor force in the classical perspective, and conceptualized ‘the productive capacity of human beings in now vastly larger than all other forms of wealth taken together’.

2. There is the second viewpoint on human capital itself and the accumulation process of it. This perspective stresses on knowledge and skills obtained throughout educational activities such as compulsory education, postsecondary education, and vocational education.

3. The third is closely linked to the production-oriented perspective of human capital. Romer (1990) refers to the human capital as ‘a fundamental source of economic productivity’. Rosen (1999) states the human capital as ‘an investment that people make in themselves to increase their productivity’.

More recently, Frank & Bemanke (2007) define that human capital is ‘an amalgam of factors such as education, experience, training, intelligence, energy, work habits, trustworthiness, and initiative that affect the value of a worker’s marginal product’.

ADVERTISEMENTS: (adsbygoogle = window.adsbygoogle || []).push({}); Essay # 3. Characteristics of Human Capital :

Characteristics of human capital can be mentioned as:

1. Expandable and Self-Generating Characteristics:

To begin with, the expandable and self-generating characteristics of human capital are closely linked to the possibility that the stock of knowledge increases individuals’ human capital. Furthermore, the increase of human capital can be expanded by either endogenous or exogenous factors.

It is possible that original knowledge can be continuously elaborated and developed through the relationship between external knowledge, information, skills, experiences, and other knowledge- based factors as well.

In the economic perspective, the characteristic of human capital focusing on knowledge can be a core element to solve ‘problem of scarcity’ which little materials is equivalently distributed to economic agents. Throughout expanding and self- generating the human capital, it is sufficiently possible that the portion of that capital as an economic agent is extended.

2. Transportable and Shareable Characteristic:

The transportable and shareable characteristics of human capital mean that the original holder of knowledge can distribute his/her knowledge to others. On the circumstance that the original knowledge- holder’s exclusive ownership is slightly acceptable, the equivalent distribution between the holders and the takers can be actualized. Consequently, the former two characteristics extend the ‘volume’ of human capital, and the latter two expand the ‘range’ of human capital.

ADVERTISEMENTS: (adsbygoogle = window.adsbygoogle || []).push({}); Essay # 4. Importance of Human Capital :

Importance of human capital can be explained as:

1. It is important because it is closely linked to core competences and competitiveness of organization.

2. It directly affects the productivity of the organization.

3. It is required for the purpose of maximizing organizational profits.

4. Human capital is important because it can increase social consciousness of constituents within community.

5. It is important because higher performance of employees directly leads to customer satisfaction, productivity, profit, employee turnover and safety at work.

6. It helps in building organization’s image in the market.

7. It is important because it is the most important pillar of an organization. An organization is nothing without employees.

8. Human capital is the backbone of Human Development and economic development in every nation.

9. Better use of capital goods- modern technology is becoming more and more complex. With the growth of science, machinery and equipment are becoming more sophisticated. Their efficient operation requires skill and technical knowledge. Therefore skilled human capital is very significant.

10. Better use of improved knowledge- knowledge about production and management of economies is expanding at a very fast rate and to move with that pace human capital helps a country a lot

11. It is important for the overall performance of an organization because if not taken care properly then the individual human capital can affect organizational human capital such as ‘collective competences, organizational routines, company culture and relational capital as well and that would cause a bad impact on the overall performance.

Essay # 5. Conventional Measurement Method of Human Capital :

The conventional standard to measure human capital stock has been largely categorized into various parts such as, Cost-, and Income-based approach etc.

They can be described as:

1. Cost-Based Approach:

Cost-based approach is based on measuring the stock of human capital through summing costs invested for one’s human capital. For the purpose of calculating the invested costs, Kendric (1976) utilized an individual’s investment costs considering depreciation, and Jorgenson & Fraumeni (1989) presented discounted income in the future. Considering that this approach is based on indirectly measuring stock of human capital, it is difficult to precisely classify boundary between investment and consumption in the perspective of costs for the human capital.

2. Income-Based Approach:

This approach is based on the returns which an individual obtains from a labor market throughout education investment. Mulligan & Sala-i-Martin (1995) defines that aggregate human capital is the sum of quality adjustment of each individual’s labor force, and presents the stock of human capital utilizing an individual’s income. Considering that ‘human-unrelated factors’ can more influence an individual’s income, this approach rarely presents a complete measurement for human capital.

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• Human Capital Management Essay Sample Singapore

Human Capital Management Essay

This essay sample of Human Capital Management for Singapore students. Here we will discuss What is human capital management? Why is human capital management Important? HCM capacities, HCM versus HRMS, Challenges, Human Capital Management tools, etc.

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Downloading this free Singapore essay example can help students to understand Human Capital Management. If you are a student and need custom-made essays, please contact our experts who will provide your school needs according to college or university requirements.

Introduction- Human Capital Management Essay In this sample essay, we shall be looking at the topic of Human capital management. It is quite an important concept for students of management. Thus, we shall be discussing this concept in great detail. So without further adieu: Main body- Human Capital Management Essay What is human capital management? Human capital management (HCM) is a rigid of practices related to humans help management. These practices are focused on the authoritative need to give remarkable capabilities and are executed in three classes: workforce obtaining, staff control, and faculty streamlining. Moving on, The applications that help to permit human capital control to comprise of: focus authoritative help: faculty management endowments organization Payroll Portal/representative self-transporter supplier focus Why is human capital management Important? HCM tends to most enterprises’ biggest subsidizing: human creatures. putting resources into human capital. Moreover,  It can help representative inventiveness and efficiency, and over the long haul, an organization’s benefit. Inability to rehearse HCM can achieve missed potential outcomes, lost deals, and better effort costs. In addition, HCM can help organizations live in front of significant labor force patterns, along with: Changing socioeconomics Since the assortment of laborers quite a while, new ages of laborers convey unmistakable examples and wishes. Gig economy The upsurge in nutshell occupations via Singaporean workers for hire and consultants confuses booking, agreements, and consistency with assessment and business laws. Complex law Laws and rules substitute quickly, and resistance can bring about powerful fines and lawful offense accusations. as an occurrence, inside the U.S. Moreover the more affordable Care Act, own family and clinical withdraw Act, and lewd behavior laws put included focus companies to keep up to date with rules. HR records bunches aggregate huge amounts of internal and outer data about their labor forces. HCM innovation can help oversee and dissect it. Moving on, we shall be discussing the capacitie4s of HCM in the next section of the sample essay. These are HCM capacities The highlights of HCM programming are normally coordinated into the ensuing classes: Center HR, including finance, favors singaporean  organization, onboarding (carrying workers into the company), consistency control, and support of representative records. Talent management, the way of selecting, developing, and keeping staff. Abilities control suites include marvelous however fused modules for enrollment, execution management, reimbursement control, dominating, and progression-making arrangements. Staff control, the arrangement of capacities for sending representatives with the significant abilities to remarkable locales, divisions, or errands. It comprises time and participation management, staff making arrangements, efforts booking, and planning. Provider delivering, which incorporates HR help work areas, intranet entryways, representative self-supplier, and director self-supplier. Moving on, The examination is the indispensable component in making HCM more noteworthy vital and adjusting it to the monetary achievement of the singapore organization. Thus, once in a while, the examination gear is confined to a specific HCM work. For instance, collection of laborers investigation can assist with the gathering of laborers advancement. Simultaneously as online media and joint effort stuff can work with the regular comments and correspondence needed for constant generally execution management. Furthermore, we shall be looking at the difference between HCM and HRMS in the next section. Therefore, these are, as mentioned below: Buy high-quality essays & assignment writing as per particular university, high school or college by Singapore Writers Get A Free Quote HCM versus HRMS HCM is one of a few HR terms that sound similar and are frequently haggard. Furthermore, HCM is both a bunch of HR strategies and the name of the class of programming. As such, an HRMS is fixed of fused programming applications and various innovations used to control HR techniques. Predominantly focus managerial ones like representative data, finance, and advantages. HR experts will regularly say they have set up “an HRMS,” and programming transporters now and again utilize the term for their suites. However, HCM is additional ordinary. Therefore, HRMS is practically inseparable from a more established, significantly less usually utilized term, human helpful asset measurements machine (HRIS). Thus, a few humans use HRIS to mean just the middle managerial contraption, and it’s far the ideal abbreviation for the IT positions in HR divisions. Moving on, HCM is a miles more extensive umbrella time span for all HR programming and the just frequently used by merchants. Challenges Human capital management to do their incredible is innately intense. However, certain districts are famously hard to oversee and improve, as per HR directors. Therefore, we shall be discussing the challenges of the same. These are, as mentioned below: Management improvement requires an extreme, supported endeavor to perceive workers’ capacity for administrative roles and offer viable tutoring. Compensation and favors. Singaporean organizations endeavor to get right, comparative data on big business charges and alter their projects to remain serious. Succession arranging requires a perspective on future authoritative trade this is difficult to peer in the midst of extra critical cravings. Numerous associations do a sufficient movement of making arrangements changes for senior government positions, yet there is creating notoriety that the mass retirement of kid boomers will name for progression making arrangements at different stages. Getting to realize management impacts severe HCM issues, anyway more established acquiring information on control frameworks are oftentimes incongruent with more up to date, web-based tutoring assets, and instructive substance is difficult to minister effectively and cost successfully. Singaporean Employee maintenance evades the different awful outcomes of representative turnover. Loss of institutional aptitude and higher enlistment charges, to name two enormous ones. However, a few enterprises think that it’s difficult to notable why faculty leave and boosting maintenance requires an HCM technique which is terminating all chambers. Human capital management software A human capital management system (HCM) is used in most companies to manage their whole organization. It’s important for you, as an HR professional and manager of employees that this software is used effectively because it will assist with everything from payroll processing all the way down to providing your team members training on new technology or safety protocols if necessary. As I show below there are many great HCM tools out there so don’t just take my word for it! Here’s a shortlist of the HCM platforms that made my top 10 list:

Eddy – Best for easily customized onboarding. Oracle HCM Cloud  – Best for AI and machine learning insights. Sage People – Best for employee engagement functionalities. SAP SuccessFactors – Best for scalability of add-ons. ADP WorkforceNow – Best for integration with existing HR software. Workday – Best for user experience and user interface design. Rippling – Best for small businesses and HR teams. Vibe HCM – Best for HR transaction automation. Ascentis – Best for medium and large enterprises. Viventium – Best for usability and user onboarding. eXo Platform  – Best for employee social networking Conclusion: The benefits of human capital management are it increases productivity, decreases costs, and reduces employee turnover. It also helps ensure that the workforce has appropriate skills to meet organizational needs now and in the future. However, this isn’t always easy because HR professionals are often required to make tough decisions on the limited information given by employees who may not be forthcoming with their current or potential problems. These challenges can be overcome if organizations invest time upfront for effective training programs which will help people perform better at work as well as develop new skillsets needed for future opportunities.

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