Analysis: Human capital

Topics: Employment, Human resource management, Human resources Pages: 5 (1713 words) Published: April 2, 2013
Analysis and Reflection #3
Part one
Human capital can generally be defined as the set of skills which someone acquires on the job, through training and experience, and which increase that person’s value in the market place. Any activity that increases the productivity of labor may be considered an investment in human capital (McConnell, 2009). Company can spend not only on formal education for employees, but also can spend on informal training. In addition, providing them with health or other benefits could also improve employees’ productivity. According to Dereck Jones (2008), investment in human capital benefits both the employee and the employer. For instance, when a company invests in training, Jones posits that the company benefits through increased efficiency in the production process and thus experiences increased and quality production while the employee benefits from having an easier time at work. At the moment, there is a lot of discussion and theories raised in regard to human capital investment. As a human resource manager I would apply the insights from the discussion about human resource investment in the following ways. First of all, I would set up a structure whereby all new workers are given some company specific training. According to McConnell et al (2009) new workers take a considerably long amount of time adjusting to a company’s structure and processes. During this phase when new workers are being integrated into the system, they are not very much productive. To avoid prolonged periods of new workers adjusting to the company processes, I would invest in a company specific training program to ensure that all workers are integrated and they understand their duties and how they are supposed to achieve them. McConnell et al (2009) posits that a company that has invested in firm specific training loses the firm specific training when it loses an employee. However, firm specific training increases employee loyalty and helps an employee to identify with the firm. This kind of training also limits the employment options of an employee as they continue accumulating skills specific to a particular firm. Therefore, I would setup a training schedule that allows constant firm specific training to employees to reduce instances of labor turnover and hence the losses incurred through loss of experienced employees. I would also setup a constant performance evaluation system. This system would help to establish those workers who are underperforming and hence more training would be prescribed for such workers. Kalmi (2009) argues that, sacking underperforming workers keeps the remaining workers in fear and hence they retain a negative attitude to their employer. On the other hand, finding out why a certain worker is underperforming and attempting to help them solve the problem enhances company loyalty from the labor force and generally motivates them to be more productive. However, it is worth noting that investment in education and training is subject to the law of diminishing return. This means that the extra knowledge and skill learned by education become smaller as the amount of investment increases. As a human resources manager, I should realize the increasing cost and decreasing benefit for successive years of education or training. Thus, I could allocate the financial resources more appropriately rather than waste in unnecessary human capital investment. I would also setup a reward system where highly performing workers are appreciated. This form of investment is commonly used by company managers to motivate their labor force. I would also invest in team building and co-operation through company events whereby company staff come together and engage in social activities that boost relationships among workers. According Schone (2004), company events boost cooperation which in turn makes the company processes streamlined and hence they move faster. Part two: question three

In a firm setting, any training...

References: National Academy of Sciences. (2008). Future Skills Demand. Washington: The National Academies Press.
Hilton, M. (2008). Skills for Work in the 21st Century:. Retrieved february 17, 2013, from Academy of Management Perspectives.
Jones, D. (2008). The Effects of General and Firm-Specific Training on Wages and Performance. Retrieved February 17, 2013, from
Kalmi, P. (2012, January). The effects of general and firm-specific training on wages and performance: evidence from banking. Retrieved February 20, 2013, from
Mingat, A. (2003). Achieving Universal Primary Education by 2015 - A Chance for Every Child. Retrieved February 18, 2013, from Education: Human Development Network:,,contentMDK:20225533~menuPK:540090~pagePK:148956~piPK:216618~theSitePK:282386~isCURL:Y,00.html
Schone, P. (2004, December). Firm-financed training: Firm-specific or general skills? Retrieved February 19, 2013, from Springer link:
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