THE EFFECT OF HUMAN CAPITAL DEVELOPMENT ON ORGANISATIONAL PERFORMANCE

ABSTRACT

The purpose of this research work is to highlight  the impact of human  capital management on organisational performance  in the manufacturing firms.  Today’s business environment is in the state of flux, where competition is the name of the game. Organizations that fail to change may be forced to change from existence to non-existence, hence survival is the panacea. To survive, companies must explore all available  avenues that can bring about  competitive  advantage.  To develop a competitive advantage, it is important that firms truly leverage on the workforce as a  competitive  weapon.  Specifically,  the  study  aimed  to  pursue  the  following objectives: to establish  the relationship between  Human capital management and organizational  performance,  to  examine  the  extent  to  which  training  affects organizational  performance,  to ascertain the extent to which talent  management impacts on organizational performance, to evaluate the extent to which incentive and   compensation   influence   organizational   productivity.   The   study   had   a population size of 1,210, out of   which a sample size of 303 was realised using Taro  Yamene  formula  at 5% error  to tolerance  and  95 % level of confidence. Instrument used for data collection was primarily questionnaire and interview. The total numbers of 303 copies of the questionnaire were distributed while 283 copies were returned. The descriptive  research design was adopted  for the study. Four hypotheses were tested using Pearson’s moment correlation coefficient, chi-square (x2) and Z- test  statistical tools. The findings indicate that there was significant relationship between human capital management and organisational performance. Training    positively    affects    organisational    performance.    Incentives    and compensations   positively   influence   organisational   performance.   The   study concluded    that   theoretical   and   technological    advance   in   human    capital management has allowed manufacturing organizations to move beyond managing personnel  by head  count  and billet,  the managing  their  workforces.  The study recommends that Firms should conduct a workforce assessment to determine the current human capital capacity based on the verified job requirements.

CHAPTER ONE INTRODUCTION

1 .1        BACKGROUND OF STUDY

Today’s  business environment  is in the state of flux, where  competition  is  the name of the game. Organizations that fail to change may be forced to change from existence to non-existence, hence survival is the panacea. To survive, companies must explore all available avenues that can bring about competitive advantage. To develop a competitive advantage, it is important that firms truly leverage on the workforce   as  a  competitive   weapon.   A   strategy   for   improving   workforce productivity to drive higher value for the  firms has become an important focus. Firms  seek  to  optimize  their  workforce  through  comprehensive  human  capital development programmes not only to achieve business goals but most important is for the long term  survival and sustainability of the organization.  To accomplish this,  firms  will  need  to  invest  resources  to  ensure  that  employees  have  the knowledge,  skills, and competencies  they need to work effectively in a  rapidly changing and complex environment (Marimuthu, Arokiasamy, and Ismail, 2009).

In response to the changes, most firms have embraced the notion of human capital has a good competitive advantage that will enhance higher  performance. Human capital development becomes a part of an overall effort to achieve cost-effective and firm performance. Hence, firms need to understand human capital that would enhance  employee  satisfaction  and  improve  performance.  Although  there  is  a broad assumption that human capital has positive effects on firms’ performance, the notion of performance for human capital remains largely untested.

Human capital management  can contain different aspect, such as personal  cost, performance of employee turnover or demography .Human capital management is an attempt to place a financial figure on the knowledge and skill of an organisation employees or human capital (Bnet 2008) but also includes the planning, controlling and analysing of all personnel management related  procedures as far as they are quantifiable.  The growing number of articles  shows the increasing relevance of human capital management  theory take the view that employees can be regarded as assets (Ordiorne 1984) They even believe that value can be put on them and that

employees  can  be  managed  much  as  a  portfolio  of  stocks  in  managing  and maintain or enhance their value to the firm (ordiorne 1984).

Human capital generally refers to a repertoire of knowledge, competency, attitude and behavior embedded in an individual (Youndt et al., 2004; Rastogi, 2002). It has gained increasing recognition among organization and  management scholars because of its promise to deliver competitive advantage  (Gratton, 2000; Pfeffer,

1994), create value (Rastogi, 2002; Mayo, 2001) and secure long-term economic growth (Tomer, 2003; Chuang, 1999). The growing emphasis on human capital in organizations reflects a view that market values depend less on tangible resources and more on intangible  resources,  particularly  human  resources (HR) (Edström and Lorange, 1984).

The development of the resource-based view of the firm (Barney, 1991; Penrose,

1959),   together   with   influence   work   in   strategy   on   organizational   core competencies (Hamel and Prahalad, 1994), has placed the role of human capital centre stage within organizations. People and people processes, it is claimed, create competitive  advantage  chiefly through  the characteristics  of  being (potentially) valuable,  rare,  hard-to-imitate  and non-substitutable  (Wright  et al., 1994). This means that a link between HR practices and the firm-specific  nature of particular organizations can foster uniqueness and create high barriers to imitation (Becker et al.,  2001;  Wright  et  al.,  2001).  In  order  to  build  a  competitive  advantage, organizations need to define what human capital really means and how to deliver effective human capital development.

As some scholars state:“…HR leaders [need] to know that the work they’re doing is among the most important work that anybody can do. Human  capital is, and should be, the centre of any business.”  (Rosner, 1999: 41)  “[Human capital is] generally understood to consist of the individual’s capabilities, knowledge, skills and experience of the company’s employees and managers, as they are relevant to the task at hand, as well as the capacity to  add to this reservoir of knowledge, skills, and experience  through individual  learning.”  (Dess and Picken, 1999: 8) Such a philosophy requires, it is argued, a strategic approach to managing people, implementing solutions for evaluating workforce capability, identifying skill gaps areas and improving employees’ productivity, performance and well-being (Mayo,

2001). Strategic issues such as increasing firm’s performance (Maruping,  2002), designing competencies  (Nordhaug, 1998), human capital  measurement  (Critten,

1994),  returns  on investment  of human  capital  (Fitz-enz,  2000),  benchmarking

(Huang et al., 2002) and resource allocation (Lepak and Snell, 1999). Hence, this paper  attempts  to  look  into  the  connection  between  human  capital  and  firm’s performance.

1.2   STATEMENT OF   THE PROBLEM

The productivity of workers is falling resulting to poor and low performance of the organization. This is because most firms fail to send their employees on training due to lack of funds that is involved  in embarking on employees  training. Also most  firms  believes  that  workers  are  dubious  in  nature,  after  returning  from training  desert  their  firms  to  join  other  firms.  For   instance  most  Nigerian organization   do   not   give   their   employee   effective   and   efficient   training, considering the cost implication of sending employees on quality training which result into low productivity. Nevertheless, the issues of human capital development are not taken seriously by many organizations,  this is because of the failure to acknowledge the fact that business environment has become very dynamic and as such only those  organizations  with the right informational  need in the business times can succeed with the right technological  manpower to succeed in modern times. Failure to take training and development especially in modern organization will   lead  to  stifling  growth,  lack  of  productivity  and  inability  to   compete favourably in the industry. Pertinent to the above the study seeks to investigate the effect of human capital development on organizational performance.

1.4      OBJECTIVES OF THE STUDY

Given the statement of the problem above, this study aims to achieve the following objectives.

1.        To establish  the relationship between  Human capital management and

organizational performance

2.        To   examine   the   extent   to   which   training   affects   organizational performance

3.        To  ascertain  the  extent  to  which  talent  management   impacts   on organizational performance

4.        To evaluate the extent to which incentive and compensation influence

organizational productivity.

1.4      RESEARCH QUESTIONS

1.        What is the relationship between Human capital management  and organizational performance?

2.        To what extent does training affects  organizational performance?

3.        To what extent do talent  management  impacts  on  organizational performance?

4.        To   what   extent   do   incentives   and   compensation   influence organizational productivity?

1.6   RESEARCH HYPOTHESES

The following hypotheses was formulate and will be  tested in their null form.

1.	Ho:       H1:	There is no significant relationship between human capital  and organizational performance. There is significant relationship between human capital  and
		Organizational performance
2.	Ho:	Training does not positively affects  organizational performance
3.	H1:   Ho:	Training positively affects organizational performance   Talent management does not significantly positively impacts on
		Organizational performance
	H1:	Talent management significantly positively impacts  on   organizational Performance.
4.	H0:	Incentive and compensation don’t positively influence   organizational Productivity
	H1:	Incentive and compensation positively influence organizational   Productivity.

1.6      SIGNIFICANCE OF THE STUDY

1.   It will show how organizations will maintain, develop workforce in other to enhance organizational productivity.

2.   The  findings  of  this  study would  highlight  the  need  for  managers  and trainers   to   design   the   content   of   their   training   and   development programmes to reflect the needs of the employees and  the organization

3.   It  is significant  in the  sense  that  its findings  will  serve  as  a base  and framework for future researchers to carry out further studies.

1.7      SCOPE OF THE STUDY

The scope of this study was limited to three manufacturing  company in  Enugu state,  these  include  Nigeria  Bottling  Company,  Nigerian  Breweries  Plc  and ANAMCO.  Basically  the  following  concept  was  covered.  Definition  Human capital  management,  features  and  functions,  human  capital theory,  and  human capital  and  complementary  capitals  ,concept  of  performance,  factors  affecting performance, and performance management  etc.

1.8      LIMITATIONS OF THE STUDY

As part of the research experience  by researcher  all over  globe  certain limitation hinder effective collection of materials.

1.   Time constraint: The time required for this project work was not enough, this  was  because  the  project  work  was  done  at  same  time  of  serious academic work was going on in the school.

2.   Financial  constraint:  The finance  needed  to carry out this work is  too much and cannot be afforded by the student. This poses great limitation to the successful carrying out of this work.

3.   Scarcity  of materials:  There  is generally  non-availability  and  adequate literature on the research topic. Hence the researcher finds it cumbersome to finalized.

4.   Non-challant attitude of respondents: Another limitation in the course of carrying  this study was the non- challant  attitude  of the  respondents  in supplying  the  necessary  information.  This    was  probably  due  to  their ignorance of the main purpose of the study.  Also many refused to great interviews   or  answer   questions   bordering   on  the  activities   of  their organizations.

1.9      DEFINITION OF THE TERMS

1.   Human capital management: This is the abilities and know-how of men and women that have been acquired at some cost and that can command a price in the labour market because they are useful in the productive process (Parnes 1984:58).

2.   Human  resource  management:  this   is   the  process  of  accomplishing organizational  objectives by acquiring,  retaining,  terminating,  developing and properly using the human resource in an organization (Donnelly et al

1992:21).

3.   Talent management: This encompasses all the applications necessary for handling  personnel-related  tasks.  For  corporate  manager  and  individual employees from the point of hire to the point of retire (Dickson 2003:47).

4.   Training:  This  focuses  on  teaching  organizational  members  how   to perform their current jobs and helping them acquire  the  knowledge and skills they need to be effective performers (Ezigbbo 2007:414).

5.   Organizational   performance:   This  is  the  commonly  referred   to   as financial  performance  where  considerations  of  budgets  and  assets  are crucial  in  determining  the  overall  bottom-line  of  an  organization  (Yeo 2003:114).

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