HUMAN CAPITAL PLANNING IN THE NIGERIAN PUBLIC SECTOR: PROSPECTS AND CHALLENGES

Abstract

Human capital is one of the most critical of all resources at the disposal of any organisation, whether, public or private. The right quality and quantity of human capital (employed) is a measure of an organisation’s strength, health, success and security. To remain strong, profitable and effective, organisations have to employ scientific methods of planning human capital. It is a pity that the human capital planning picture painted above is not common in the Nigerian public sector. Most public sector organisations perform below expectation with problems of inefficiency, redundancy and employee bloating. The main thrust of this thesis is to critically and empirically evaluate human capital planning (HCP) in the Nigerian public sector with a view to discovering prospects and challenges inherent therein. Hypotheses in line with these objectives were drawn and tested based on the data gathered through a questionnaire administered to five Nigerian Public sector organisations and filled by

349 respondents.  The findings indicated that adherence to human capital planning in Nigerian public sector organisations accounted for organisational effectiveness and reduction in personnel costs. Strict adherence to talent management processes also led to increases in employee productivity. The study found that the human capital forecasting system in the Nigerian public sector organisations is weak and could not be used for the precise determination of employee requirements in terms of number and quality. Also, the study found that a plethora of forces (environmental challenges) exert varying degrees of pressure and influence on the planning of human capital in public sector organisations. The study concluded that human capital planning significantly accounts for improvements in organizational effectiveness and employee behavior in Nigerian public organisations. Also, that human capital planning has positive impact on personnel cost reduction in  the public sector of Nigeria; that human capital forecasting does not lead to the accurate estimation of employee needs requirement and that environmental challenges positively impact on human capital planning. It is recommended that planners and managers of human capital in the public sector of Nigeria should be properly educated and trained in scientific human capital planning and talent management if organisational effectiveness and employee productivity must be increased. Advocacy should be adopted by public sector organisations to influence the enactment of detrimental laws and legislations that have direct bearing on the human capital planning processes of their organisations. The study has contributed to knowledge by designing a human capital supply forecasting model and the use of behavioural accounting to measure the economic consequences of certain employee behaviour.

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND OF THE STUDY

The workforce serving in the Nigerian public service at all tiers of government is mostly bloated, unwieldy and ineffective. The service, which is the engine room of progressive policy  formulation and  implementation and  the  sole provider of basic social amenities that sustained livelihood   and propelled

economic development of the country has since degenerated into a creaky apparatus of political patronage that ignores merit and puts round pegs in square holds (Abdullahi, et al, 2001:72).

The provision of basic infrastructure and socio-economic goods and services like power, water, railway, road construction and maintenance, security, agriculture, finance, education and many others have continually eluded the common man (Adeyemo et al, 2008:30). Power Holding Company of Nigeria, a   government   company  saddled   with   the   responsibility  of   electricity generation and distribution in the country had generation capacity of about

3,000 mega watts as at 31st  December, 2008. This is a far cry from the over

10,000 mega watts needed in the country (PHCN, 2009:3). Adeyemo, et al go further to lament that the story is even worst in the Nigerian Railway Corporation, the Nigerian Police Force, state and federal water works, and road construction and maintenance units.

As a result of the aforementioned, the Nigerian public service witnessed series of reforms between 1934 and to date. Ayida (1997:6) recalls that the major review exercises in the history of the Nigerian public service started with the Hunts Commission in 1934. Other reviews included the Gorsuch Commission (1957) which enquired “into the structure and remuneration of the public service  with  special  reference  to  problems  arising  from  changes  in  the Nigerian constitution”, the Mbanefo Commission (1959), the Morgan Commission (1963), the Elwood Grading Team (1966), The Adebo Commission  (1971)  and  the  Public  Service  Review  Commission  (Udoji Report, 1974). Yet others were the Philips Dotun Report of 1985 and, the Presidential Task Force on it (Koshoni Report) 1988, Ayida Review Panel (1994) and the Ernest Shonekan Committee (2005) which eventually gave birth to the monetization of fringe benefits in the Nigerian public service.

The  most  comprehensive of these  exercises according to  Ayida,  was the

Public  Service  Review  Commission  of  1974  referred  to  as  the  Udoji

Commission. This is because while earlier reviews were mainly concerned with salaries and wages, the Udoji Report, in addition to these, dealt with other areas such as the organisation structure of the civil service, new management techniques and positive attitudinal change. However, it was observed by Adebayo (2000:56) that in spite of the lofty recommendations by the Udoji commission that were accepted by government, only the wages and salaries aspects were faithfully and speedily implemented. The others were either not implemented at all or were only partially or haphazardly implemented by government.

Despite various interventions to revamp the public sector undertakings, the sector has remained in a tailspin. Confirming this, Ayida (1997:2) laments that in  spite  of  several  reviews  and  commissions of  investigation,  the  public service of today remains a shadow of what it should be. According to him, some of the lofty ideals of efficiency, professionalism and accountability have not been achieved. Corroborating on this unfortunate situation, Adeyemo, et al (2008: 401-418) stress that the superstructure has remained defective and the public service review exercises ended up with the civil service being put in a straight jacket.

Resultantly,  the  sector  operates  far  below  expectation  with  escalating personnel costs, problems of productivity and redundancy among its workers to the extent that some of the organizations have been shut down. Similarly, most public enterprises suffer from gross mismanagement which has consequently resulted into inefficiency in the use of resources, faulty recruitment of employees, inadequate training, lack of clear objectives, and absence of replacement charts/succession plans, massive purges, corruption and nepotism which have in turn weakened the ability of government to carry out its functions effectively (World Bank, 1991:23). The aforementioned factors cumulatively led  to  the  prevailing  high  rate of failed  government businesses which has in turn led to the closing down or privatization and

commercialization of over 70 public enterprises at the close of 2005 (Adeyemo, 2008: 401-418).

More worrisome is the fact that, in spite of the huge sums of money spent by the Nigerian government on the personnel that man public sector undertakings in  Nigeria,  such  government  organisations  have  continued  to  operate  far below capacity thus, unable to lay a solid foundation for positive economic development. In the 2005 fiscal year alone, government spent N737 billion to offset personnel and other recurrent costs; in 2006 and 2007 fiscal year, N950 billion and N1.05 trillion was spent  respectively to  cover personnel cost. (FRN, Appropriation Acts, National Assembly, 2005: 5-6, 2006: 8-10 and

2007: vi-vii).

As a result of this huge expenditure on personnel costs in the Nigerian public sector, a lot of thought provoking questions readily come to mind: Are these costs justifiable? If no, then can these costs be minimized and to what extent? Are these costs commensurate to the benefits derived from the human capital employed? Is the human capital level of Public Sector Organisations optimum in number and quality? If no, how can this be attained? Is the human capital as productive as required? Does the workload justify such huge spending?

These thought provoking questions prompted the researcher to go into this work so as to ascertain how the human capital within the sector is planned and managed and thereby find out how tested and trusted human capital planning prospects that are known to increase the overall efficiency of organisations at reduced costs elsewhere could be analysed and adopted.

Another big challenge to the public sector is the looming impact of the global economic meltdown. The biggest component of this global shock that has already hit the country is the drastic fall in international oil prices. Confirming the situation, the then President Yar’adua laments that:

Nigeria, like other nations, is going through difficult times because of the “global financial meltdown and unprecedented economic

crises, … and the critical evaluation of the impact of the crises on our domestic economy shows that oil sales and shrinking foreign direct investment flows are twin threats to our ambitious development programmes.

Consequently, budgetary allocations to public sector organizations have drastically reduced thus leaving such organisations with no other option than to downsize its human capital. How can downsizing be executed without proper human capital plans?

Furthermore, another serious challenge to the Nigeria public sector is the emergence of globalization. Within the last two decades, there has been an emergence of the global economy otherwise known as globalization. Thus today, the world economy is more closely integrated than ever before. Rajar & Shah (2008:1) observe that the planet is seemingly shrinking as barriers to trade  are  dismantled,  transport  and  communication costs  fall,  and  global production systems are formed and managed by giant multinational corporations.  Open  borders  have  allowed  new  ideas,  technology,  capital, goods and services, information, etc to flow freely around the globe.

Resultantly, international organisations, nations and business organizations (whether public or private) are passing through a critical phase by taking various steps and strategies to improve or moderate technology, upgrade quality and productivity  at  reasonably  reduced  costs.  All  these  programmes  will  have human implications in terms of skills required, deployment patterns and human capital productivity. Reich (1990:24-26) strongly believes that as economies become global, a nation’s most important competitive asset becomes the skills and cumulative learning of its workforce. Globalization almost by definition makes this true. Globalization leads to open borders which in turn lead to easy access to imported goods and services. The availability of imported goods and services means increased competition for Nigerian public businesses. How then can they favourably compete with these multinationals? Unless they produce qualitative goods and services and how can they produce qualitative goods and

services? Unless the public sector stations the right number and kinds of people in  the  right  places  at  the  right  time,  doing  things  for  which  they  are economically most useful. Now, this involves human capital planning at all levels and sections of the sector.

Another challenge to the Nigerian public sector is that of Vision 20:2020. The federal government of Nigeria currently desires to become one of the 20 largest economies in the world by the year 2020. Basically, Vision 2020 is the expectation  of  drastic  changes  in  improvements  of  the  lives  and  living conditions of people and the country’s standard in general. There is no better and ready instrument available to government to achieve this vision than an effective public service. Vision 20:2020 is largely a Nigerian government programme. It comes to reason then that the public service has a big role to play in  its  execution  and  attainment.  This  is  so  because  the  success  of  any government initiative is directly dependent on the ability and willingness of the public sector to execute. But it has been established that the public service is sick and barely performs its ordinary function of service delivery. The implication of this on the present public sector is that drastic measures must be taken to revitalize the human capital serving in this sector, re-engineer and reposition it for service delivery so as to be able to contain with the challenges that go with Vision 20: 2020.

It is on this premise, that the researcher is again moved into this work so as to ascertain how best the human capital that mans the public sector could be re- engineered and repositioned. This involves analysis and adaptation of human capital planning  prospects and  challenges  that  have  been  tested  and  found reliable elsewhere.

At the background of the aforementioned challenges of bloating, unwielding and ineffectiveness in the public service, high personnel cost, globalization, Vision 20:2020, global economic meltdown, and low productivity is the need for proper planning. This brings to the fore, the import of human capital planning and development in the Nigerian public sector that is geared towards

maximizing the gains of empirical studies on human capital planning developed elsewhere.

But what is human capital and human capital planning? Human capital is the stock of productive skills and technical knowledge embodied in labour. In other words, human capital comprises of expertise, dexterity, talent, craft, aptitudes and abilities, and understanding (Bontis et al, 1999:391-402).

To highlight the importance of human capital and its importance to a nation or organisation, Harbison(1973:3) states:

…  human resources – not capital, nor income, nor material resources – constitute the ultimate basis for the wealth of nations. Capital and natural resources are passive factors of production;   human   beings   are   the   active   agents   who accumulate capital, exploit natural resources, build social, economic   and   political   organisations   and   carry   forward national development. Clearly, a country which is unable to develop the skills and knowledge of its people and utilize them effectively in the national economy will be unable to develop anything else.

On the other hand, human capital planning is the process by which a firm ensures that it has the right numbers and kinds of people in the right places at the right time, doing things for which they are economically most useful (Handbook of Human Resources Administration, 1986:10).

Human capital planning in any organisation will depend largely on its context. One major aim of human capital planning is the reduction of personnel cost. Butteriss (2003:25), reports that a recent survey conducted by the Human Capital Consult  in  the  UK,  USA and  Japan reveals  that  one  of the  key successes recorded in the area of strategic human capital planning  is the reduction in the costs of personnel…The cost, coupled with the problems of recruiting certain types of staff has led to the induction of human capital planning.

However, in general terms, the typical aims of human capital planning according to Armstrong (2003:366), would be to attract and retain the number

of people required with the appropriate skills, expertise and competencies; to anticipate the problems of potential surpluses or deficits of people; develop a well trained and flexible workforce; to reduce dependence on external recruitment; and to improve the utilization of people by introducing more flexible systems of work which is also cost effective in the long term.

It is from this point of view that human capital planning in the public sector attracts increasing attention not only from the viewpoint of managing the human hand efficiently but also considering the reduction of personnel costs and the projection of manpower needs as an integral part of efforts of the enterprise towards striking an optimum.

Sen (2007: xiii-xiv), supporting this position, maintains that: “… what applies to the public sector enterprises is equally applicable to other enterprises, may be with additional emphasis but the benefits of human capital planning ramify more pointedly in a public enterprise than in other organisations in view of the latter being concerned with maximizing of profit in the short run. Moreover, as an objective exercise, human capital planning in a public enterprise has got greater poignancy because of the absence of the so-called ownership motivation.

1.2      PROFILES       OF       FIVE       SELECTED       PUBLIC       SECTOR ORGANISATIONS

The public sector consists of the Federal Civil Service, the thirty six (36)

autonomous State Civil Services, the Unified Local Government Service, and several federal and state government agencies, including Parastatals, Corporations and Boards, Institutes, Universities etc. At the federal level, there  are  about  24  Ministries  and  several  Commissions,  Directorates, Executive bodies, the Legislature, Judiciary, etc. (The Library of Congress Country Studies, CIA World Factbook, 1991: 1).

As a result of the aforementioned, the non- random judgemental sampling technique is used to select the following Ministry, Directorate and Boards, Corporation, and/or company whose profiles are presented hereunder:

1.2.1   National Directorate of Employment.

The Directorate was bestowed with legal status, as a Federal Government Agency on the 19th October 1989 when the Federal Government endorsed the enabling Decree – 24 (now Act CAP 250).

Major Objectives of the Directorate

The Federal Government in Decree 24 section two (2) now Act CAP 250 of

9th  October 1989 was very clear in spelling out the major objectives of the

Directorate. The objectives are to:

(a)       Design and implement programmes to combat mass unemployment;

(b)       Articulate policies aimed at developing work programmes with labour intensive potential;

(c)       Obtain and maintain a data bank on employment and vacancies in the country with a view to acting as a clearing house to link job seekers with vacancies in collaboration with other government agencies and;

(d)       Implement any other policy as may be laid down from time to time by the   board   established   under   section   3   of   this   decree   (FRN,

1989:A325).

Organisation Structure of the Directorate

At the helm of affairs of the Directorate is the NDE Board, which is made up of representatives of government and non-governmental agencies. The Board which is chaired by the Minister of Labour and Productivity is responsible for policy formulation and directives. The overall management of the Directorate is vested in the Director-General who is both a Board member and the Chief Executive.

The Directorate has basically four (4) core programmes which are run in four separate departments and each headed by a director. These departments are:

Rural Employment Promotion (REP); Small Scale Enterprises (SSE), Vocational Skills Development (VSD), and the Special Public Works (SPW). To complement the activities of the programme departments are service departments, branches, section and units. These are: Finance and Supplies, department, Inspectorate department, Personnel management department, Planning,   Research  and   statistics   department,   Information  and   Public Relations Branch, Loans and Properties, International collaboration branch, Women Employment branch and Internal Audit Section

The four departments, namely Finance and Supply, Inspectorate, Personnel Management, and Planning, Research and Statistics are headed by Directors. The four branches and one section are headed each by an Assistant Director and operate under the relevant Directors except for the Assistant Director, Internal Audit who reports directly to the office of the Director-General as shown  in  figure  1.1.  The  Headquarters  staff  includes  Post  graduates, Graduates, Professionals, Diploma Holders, Technicians, School leaves, etc.

State Offices

The Directorate has a branch office each in all the states of the federation including FCT, Abuja. At the head of affairs in each of the states is a State- Coordinator who is in charge of the overall management of activities in the

state.

NDE BOARD

DIRECTOR-GENERAL

D(REP)

D(SSE)

D(SPW)

D(VSD)

D(F&S)

D(INSPT)

D(PM)

D(PR&S)

UTILITY                                                          LIBRARY

WEB

JOB CENTRE

STATE COORDINATORS

LEGAL SERVICES

BOARD SECRETARIAT

INTERNAL AUDIT

Figure 1.1                  Organogram of the NDE

Source: NDE (2002), Employment Generation in Nigeria Series No. 7 202

Annual Report PRS Dept. P.4.

1.2.2   Power Holding Company of Nigeria (PHCN).

Company Overview

Power Holding Company of Nigeria (PHCN) formerly known as National Electric Power Authority (NEPA) is headquartered in Transformer House, Maitama, Abuja. It is the federal government organisation saddled with the production and distribution of electricity. This mandate according to PHCN

Private Company Information (2009:1) is carried out through its subsidiaries. The company’s subsidiaries are Generation Companies (GENCO), Transmission Company (TRANSYCO), and Distribution Companies (DISCOs). Services offered by PHCN include construction and engineering of power  generating units;  maintenance  and  servicing of power  grids,  dams operations and water management for power generation, flood control and navigations, resettlement; maintenance scheduling and security and post contingency analysis.

PHCN’s national staff strength comprises 37,235 permanent staff and 11,000 casual workers. According to the 2008 Management Retreat Manual (2009:3), PHCN had a generation capacity of 3,000 mega watts of electricity as at 31st December, 2008.

Organisation Structure of PHCN

At the helm of affairs at  Power Holding Company of Nigeria are an 11- member transitional board constituted in 2008 with a three-year mandate to prepare the company for commercialization and a Group Chief Executive Officer who delegates such powers to Executive Director- Finance and Administration, and Executive Director- Operations.

Others are General and Assistant General Managers who ensure that corporate policies are further implemented through Principal and Senior Managers. All the 18 Distribution Companies and the only Transmission Company are directly answerable to the Group Chief Executive Officer. Zonal offices exist across the country and they are in turn headed by Chief Executive Officers. The PHCN organogram as shown in figure 1:3 gives a clear picture of the organisational structure.

PHCN BOARD

GROUP CHIEF EXECUTIVE OFFICER

Executive Director

Finance & Admin.

Executive Director

Operations

General Manager

Finance

General Manager

Administration

General Manager

Operations

General Manager

Maintenance

ASSISTANT GENERAL MANAGERS

Figure 1.3  Organogram of Power Holding Company of Nigeria (PHCN)

Source: Field Survey, 2010.

1.2.3   Plateau State Water Board

The Plateau State Water Board came about by reason of Edict No. 4 of 1991 on the 18th day of April 1991 to provide portable drinking water to the people living in plateau state.

The organisation is headed by a Board which is to control and manage all water works vested, or to be vested in the board under the provisions of the Edict to establish, control, manage, extend and develop such new water works and to extend and develop such existing ones as the Board may consider necessary for the purpose of the general public, agriculture, trade and industry in the  state; to  ensure that  water is  supplied to the  customers thereof at reasonable charges and in portable quality and adequate quantity, etc. (Plateau State Water Board Edict No. 4, 1991: A23).

The Plateau State Water Board which currently has a workforce of 520 staff has a General Manager as its Chief Executive Officer. The Board is organized into five departments with an Assistant General Manager heading the Technical,  Operations,  Commercial  and  Finance  sections  each  while  thecompany Secretary heads the personnel department as shown in figure 1.4.

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