An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage. Jack Welch.
Human Capital Theory (HCT) purports that peoples learning capacity when effectively utilised results in profitability for the individual, organisation and society at large. It underlines or seeks to explain why Human Resource Development (HRD) is beneficial not only for the individual, but for the firm and the macro-economy.
The extent to which firms undertake training is important in establishing the amount of support for human capital theory. During 2001 – 2002, the Australian Bureau of Statistics reported 81% of all Australian employers provided ...view middle of the document...
Research of various academic papers will be undertaken with a view to obtaining evidence that supports the view that training in isolation cannot achieve the human capital outcomes or returns. Lastly a review of the latest available research will be undertaken to ascertain current trends. For this paper HRD and training is viewed as a practice in its own right separate to other human resource factors.
Human Capital and its Origins
The early economists were the first to use the term Human Capital. Schultz (1961) defined Human Capital as the knowledge and skills that people acquire through education and training that yields returns. Denison (1962) further analysed its contribution to economic growth not explained by increases in other capital, labour and productive land.
Economists gave voice to the advantages human capital had on employees as individuals in their own right or as employees of an organisation. Becker (1964) was one of the first to associate human capital with both improved income to the individual and to society in general given the improved productivity as a result of the education. Blaug (1976) presented human capital as the idea the people spend on themselves in diverse ways by purchasing education and training for their own future pecuniary and non pecuniary gains.
Later papers were prepared in support of human capitals effect on society or the macro-economy. Becker et al (1990) defines human capital in the form or a fertility model and argues there is a correlation between family size and the decision to invest. Becker (1993) looked at the economic effects of investments in education on employment and earnings.
Support for Human Capital Theory in Isolation
The increasing level of competition at the macro-economic level has led manager’s searching for ways to improve performance of the business by seeing human resources as representing a source of sustainable competitive advantage (Barney, 1991).
The changing focus to improving Human Capital stems from the proliferation of organisational change programs introduced by enterprises in an attempt to improve their global competitiveness (Hilmer & Donaldson, 1996). HRT stresses the importance of raising individual productivity. Theories of human resource development view training as part of the strategy to increase employee commitment to the organisation (Smith & Hayton, 1999). Not only has this change led to an increase in the provision of training but it has changed the type of training from specific training to general training,raining is seen as a necessity, given general training more aligns with change programs. Specific training is skills which can only be used within the same organisation. This type of training lessens the risk of losing employees as the skills are not transferrable to other organisations. General training is learned skills that can easily be transferred to another organisation, for example interpersonal, team building and...