Unit 5 Seminar HR485: Strategic HR Management

Unit Five Objectives Assessing Human Capital Varying business conditions that require HR strategy How key stakeholders influence the development and implementation of an HR strategy

What is Human Capital and why is HR involvement critical?

Defining Human Capital Fitz-enz (2000), states that the term human capital originated with Theodore Shultz, an economist who won the Nobel Prize in 1979 interested in the plight of the world’s underdeveloped countries. Shultz claims that improving the welfare of poor people did not depend on land, equipment, or energy, but rather on knowledge. He called the qualitative aspect of economics “human capital” (p. xii). Furthermore, Shultz, as cited in Fitz-enz (2000) presented a review of a research conducted on the return-on-investment in human capital at an address to the American Economic Association and makes the relation of human capital to the branch of economics most applicable to human resource development. Fitz-enz, J. (2000). The ROI of human capital: Measuring the economic value of employee performance. New York, NY: AMACOM.

Defining Human Capital (Cont’d) It is an integral part of an organization’s potential to recruit and retain a talented workforce enabling a competitive edge domestically and globally. Human Capital refers to the knowledge, skills, and experience a workforce can contribute to the success of production and customer’s demands that have economic value (e.g., a quality, efficient, and cost effective product compared to it competitors). Training and education is a vital component for HR to ensure the success of its Human Capital practices within the organization (Swanson and Holton III, 2001). Before organizations continue to understand and support human capital as a valid theory, they must be convinced of its economic value. Swanson, R. A., & Holton III, E. F. (2001). Foundations of human resource development. San Francisco: Berrett-Koehler.

Defining Human Capital (Cont…) Weatherly, L. A. (2003, September). The value of people: The challenges and opportunities of human capital measurement and reporting SHRM Research Quarterly. Retrieved September 6, 2003, from Weatherly (2003, September) suggests that before we proceed to understand human capital certain basic definitions must be clarified. These are: Financial assets. Physical assets (tangible assets). Intangible assets (intangible capital): Intangible assets as it relates to human capital. (p. 5)

Defining Human Capital (Cont’d) What are some intangible assets?

Defining Human Capital (Cont’d) Intangible Assets (Intangible Capital): Customer capital. This measure evaluates customer interactions. It includes contracts, average response rates, customer satisfaction, repeat orders, and service awards. Human capital. A measure of the current know-how of people under an organization’s control, this area takes into account such factors as employee satisfaction, expert turnover, level and type of education, and number of employees. Intellectual capital. This area constitutes listings and perceived values of trade markets, secrets, patents, and branding. Relationship capital. Important strategic alliances and collaborative relationships such as cross-functional teamwork constitute relationship wealth. Systems performance. This area explores how systems benefit or generate improved know-how. Rylatt, A. (2003). Measuring know-how. T+D, 57(7),

What are some varying business conditions that require HR strategy?

Some varying business conditions that require HR strategy Demographics: age, gender, generational differences, geographic shifts in population, ethnicity, unskilled labor, nontraditional labor force Political Factors: taxes and the federal deficit, health benefits and health-care delivery, social security reform, domestic partner benefits, retirement funds, corporate governance, affirmative action, environmental issues. Economic: interest rates, gross domestic product, disposable income, inflation. International Factors: European Union, wage comparisons, trade agreements, international labor law, globalization. Technological Factors: advance in technology, technological skills, the “Digital Divide”, process changes.

Some varying business conditions that require HR strategy Social Factors: Changing definition of families, changes in practices and education spending, increasing rate on obesity and health care cost associated with it. Employment Factors: attitude toward careers, immigration, occupational and industry shift shifts, recruitment, unions, unemployment trends, turnover trends, relocation. Stakeholder in a business perspective is someone who has a shared or a vested interest in an organization. Stakeholders in an organization may include shareholders, directors, management, suppliers, government, employees, and the community, etc.

How can stakeholders influence the development and implementation of an HR strategy ?

Stakeholder Stakeholder in a business perspective is someone who has a shared or a vested interest in an organization. Stakeholders in an organization may include shareholders, directors, management, suppliers, government, employees, and the community, etc. IBM is a perfect example of how HR strategies linked to the organization’s business strategy affects stakeholders.

Questions?