The Research of the Knowledge Worker Incentive Strategy
Based on Human Capital Characteristics
Nai-wen Li 1, Meng-hong Xu1
1
College of Business Administration, Liaoning Technical University, Huludao, China
(xumenghong@126.com)
Abstract - The labor and industry structure are
becoming increasingly "knowledge intensive" as the
proportion of the "knowledge labor" and the "knowledge
workers" is becoming bigger and bigger in modern
production. They possess more residual rights of controls. In
this case, the knowledge workers cannot be fully motivated
merely by mandatory supervision or material award. As the
new management philosophy is being accepted by an
increasing number of people, the revolution and
enhancement of the philosophy of human resources
management are making fundamental changes on its status
and functions. From the perspective of human capital, this
paper analyses the characteristics of human capital, and put
forward several human resource development strategies
with the new philosophy of human resource management
and the idea of human-oriented management about
employees’ participation in management, stock option
incentive mechanism, and career development which
provides a good reference to the modern enterprises.
Keywords -Knowledge Worker,
Incentive Strategy, innovative labor
Human
Capital,
I. INTRODUCTION
At the age of the steam engine, the ratio of
intellectual labor and physical labor was 10:90. At the age
of internal combustion engine, this ratio became 50:50
(50.2:49.8 for America in 1956). However, at the age of
knowledge economy represented by the development of
computer, the ratio of intellectual labor and physical labor
is 90:10 (95:5 for America in 1999). In the era of
knowledge economy which is dominated by innovations,
the system of intellectual property right including the
patent right is being built up powerfully and becoming
increasingly developed. It has become the dominant factor
and core competence of the economic development. In
this new historical period, the character of labor has some
changes. More attentions are drawn to the intellectual
labors. Thus, the value of innovative labors and
responsible labors has become the key element in the
development of knowledge economy. Knowledge workers
are now the core talents of enterprises. Thomas Davenport
says knowledge workers are the horse which pulls the
plow of the economic progress[1]. They are a special
group of workers with good personal qualities and good
educations. They have independent thoughts, judgments,
and values, and have strong desires on self-development
and self-actualization. Those workers are mainly engaged
in intellectual works and innovative works. Their working
process is not easy to monitor, and their achievements are
sometimes hard to assess.
Knowledge workers with intellectual capitals are the
key factors of the modern enterprises’ success. The most
valuable resource exists in the intellectual works of the
employees which is the core force of every enterprise. If
all the employees are loyal to the enterprise, and are
willing to work creatively, and dedicate all their
intellectualities to the enterprise, this invisible source of
competitiveness can be significantly improved. However,
in many enterprises, there still exist some problems of
incomplete ownership of the intellectual human capital,
impropriate access to the intellectual human capital,
imperfect disposal of the intellectual human capital, and
defective gains right of the intellectual human capital[2].
Therefore, how to effectively protect the rights of the
owners of intellectual capital and adequately motivate
them is a crucial problem in the field of human resource
managements.
This paper takes knowledge workers as a research
object, and puts forward a strategy on the motivation and
development of knowledge workers on the basis of human
capital characteristics and human resource management
and development philosophies. It provides enterprises
with some valuable references.
II. HUMAN CAPITAL AND ITS CHARACTERISTICS
The human capital is the ability, knowledge and skills
that enables a person to take part in activities with
economic values. It is a kind of initiative asset which
cannot be separated from its carrier, and is controlled by
the carrier to activate, develop, and utilize the capital[3].
According to the Marx’s Capital theory, capital can bring
value that exceeds itself, which is the surplus value.
Human capital has this characteristic too[4]. In addition,
human capital also has some other characteristics. It is
invisible, alive, private, initiative in utilization,
reproducible, and capable of increment. The development
of enterprises’ human capital should comply with those
characteristics. It is important for enterprises to develop
appropriate knowledge worker incentive strategies.
In modern enterprises, both surplus income and
economic growth depend on human capital. Thus, the
status of human capital is being improved gradually. The
components of human capital, like the knowledge, skill,
and attitude, have the general characteristics of capital.
The ownership of health, physical strength, experience,
knowledge, skills and other spirits' stock can only
inseparably belongs to the carrier, the carrier must be not
only people, but must be himself[5].The owner of human
capital has property right. The property right of human
capital, including ownership, right of dominion, right of
disposal, right of utilization, and right of income, is a kind
of incomplete and restricted right. It is a set of rights that
belongs to the investor under certain conditions. The basic
characteristics of property is private, limited, can be
traded and decomposable[6].Although the property right of
human capital is transferable and exchangeable, the owner
of human capital always has the gains right. This gains
right does not only include gains of salaries and bonus
from the individual transfer or exchange, but also include
the added value brought by the operation accumulation,
knowledge increase, skill improvement and attitude
amelioration.
Human is the owner of the human capital who has
the right to independently judge and analyze the control
power of the utilization, exchange, and disposal of the
human capital. When an enterprise fails to satisfy the
physical and psychological needs of the owner of the
human capital to some extent, the initiative of human
capital will start to bring some effects. To be more
specific, in the process of combining human capital with
nonhuman capital, if the carriers of human capital get
income that can only maintain their reproduction of labor
force without any surplus value created by them, they
would become lazy and “pick up free rides” or even shut
their human capital[7] .Thus, the specialty of the human
capital’s private ownership requires the managers think
highly of the human capital investment, pay more
attentions to the management of human capital utilization,
and respect the human capital property rights, so as to
provide the individual human capital with a better
development and maximize the output of the human
capital investment.
III. THE DEVELOPMENT OF NEW PHILOSOPHY OF
HUMAN CAPITAL MANAGEMENT
Enterprise as a human and non-human capital special
contracts, starting from view of the parties of the contract
all have equal property rights, they are eligible and may
have business ownership[8].According to Marx’s Labor
Theory of Value, the surplus of an enterprise comes from
the live labor of the workers. The private ownership of the
human capital determines that the carrier of human capital
should be motivated by the right of residual claim. The
essence of residual claim is residual control rights[9] [10]
.Therefore, in order to enhance the influence to the
innovative workers and responsible workers, enterprises
should provide incentives of respecting and sharing the
right of surplus division in exchange for the control of
surplus labors. However, the private ownership of the
human capital determines that the distribution of the
residual rights of control is uncertain, and there hardly be
a unified regulation. Efforts of operators and producers
have not oversight, just varying degrees of it[11]. The
effectiveness of the incentives cannot be guaranteed
solely by supervision, but by incentives like the
employees training programs, career development
management, compensation management, enterprise
culture, and by providing the employees with proper
guidance to serve the organization. Chinese Enterprises
Federation and Chinese Entrepreneurs Association
released a report including questionnaires of thousands of
managers in state-owned enterprises at the end of August
in 1999.The report shows that 82.64% of state-owned
enterprise managers believe that major factors affecting
the construction of contingent of enterprise managers in
China is "lack of incentive and constraint mechanism"[12].
Above all, in the era of knowledge economy, the role of
human resource management, which serves as restriction,
motivation, and guidance, is becoming increasingly
significant.
Human resource management is a management
activity to satisfy individual needs and realize
organizational goals by which human is effectively
developed, reasonably utilized, and scientifically
supervised. From the perspective of development, human
resource management includes not only the intellectual
development, training development, and career
development, but also the improvement of ideological and
educational levels and moral consciousness. It helps to
fully display existing capabilities and effectively release
potentials. From the perspective of utilization, human
resource management should involve the discovery,
identification,
selection,
distribution,
appropriate
utilization, and maintenance of human resource. It should
adequately inspire potentials and subjective initiatives so
as to match talent with proper positions and improve
productivity. From the perspective of supervision, all the
supervision measures are expected to fulfill employees’
needs, inspire their initiatives, and make them contribute
their intellectual capitals to the organization. How to
attract and retain competent staff and stimulate their
dedication spirit, become the mission of human resources
management[13].
IV. KNOWLEDGE WORKER INCENTIVE
STRATEGY
Being fully motivated, human capital can be strongly
adaptable and creative in the process of its utilizing and
consuming. Modern human resource management is
essentially a platform for transactions between enterprises
and employees. By satisfying the employees’ working and
living needs, this platform allows the employees to realize
their values to the greatest extent and to make
contributions to achieve the organizational goals, and
brings in the mutual development of enterprise and
employees.
A. Incentives Based on Job Redesign
When the condition of performance and profit is not
bad, most companies would rarely consider whether the
existing organizational structure and job design conform
to the changes in the external environment, nor do they
consider whether the employees has devoted great passion
to their works, and give full play the to the initiative to
promote their performance. Job redesign is a process of
redefining job duties, contents and working methods on
the basis of the original design to improve the employees’
working and living qualities.
Job redesign can solve the problem of inappropriate
human capital utilization. It creates positions and job
contents that inspire individual potentials, comfortable
working environment, and convenient working
procedures to stimulate the invisible human capital and
avoid the excessive use of the human capital.
Every work can be described with five core
dimensions, which is the skill variety, task identity, task
significance, work initiative, and feedback. Knowledge
workers have stronger independent abilities and values. In
order to realize their values, they prefer the works with
challenges and creativity. Thus, when designing works for
knowledge workers, the focus should be on the
characteristics of the work content, so as to improve the
employees’ satisfaction and loyalty.
a. Apply job designs of job rotation, job enlargement,
and job enrichment to change and enrich work contents,
and eliminate the lassitude towards a long-term single job.
In the process of job rotation and enrichment, employees
are motivated by new skills they have learned and by
strengthened autonomy and responsibilities. At the same
time, the cooperation and communication among
employees are also significantly promoted.
b. Carry out alternative works. In addition to
redesigning the characteristics of the job itself, changes in
work arrangements can also make the working
environment more stimulating. Flexible working hours,
job sharing and telecommuting works are three major
forms of alternative works. Since it is difficult to monitor
the working process of knowledge workers and is hard to
assess their performance, providing a more relaxed
psychological environment and working environment
ignoring the rigid working rules can inspire greater
enthusiasm for their works. Employees are able to choose
specific working time, working place and combinations of
works by themselves, provided that they can ensure the
completion of the established tasks within limited time. In
recent years, this flexible job design is being accepted by
a increasing number of enterprises both at home and
abroad.
B. Incentives Based on Employee Training
Warren Bennis, a master of American leadership
theory, developed Bennis theorem, said that training is
strategic investments with the least risk and the largest
return[14]. Training meets with the characteristics of
human capital’s reproducibility and capability of
increment. It helps to add value to the human capital, and
prolongs the “life time” of the human capital. Becker’s
study points out: Education and experience are the key
features of the concept of human capital. Education
increased the stock of individual’s information,
knowledge and skills; experience includes work
experience, on-the-job practical learning and training.
Thus having more and higher-quality human capital will
help enterprises get more ideal profit[15]. Knowledge
workers have strong thirst for frontier knowledge and
skills. Enterprise should provide knowledge workers with
more educations and training opportunities to arm their
heads with advanced concepts and ideas, and improve the
employees’ learning and innovation abilities. Therefore,
the employees’ needs for self-development are fulfilled,
and their “lifelong employability” is enhanced. When the
employees apply those knowledge and skills to practical
works and their dependence and loyalty to the
organization are enhanced, the enterprise competitiveness
will be greatly improved.
C. Incentives Based on Employee Career Management
Knowledge workers have the characteristic of strong
mobility. If they are not satisfied with the treatment or the
development opportunities in an enterprise, they often
have a strong intention to resign. Enterprises should
adequately understand the personal interests, talents,
abilities, and personal development goals of the
knowledge workers and then design, plan, implement,
evaluate, and feedback about their careers. It is important
for enterprises to help the workers achieve their personal
development aspirations according to systematic plans,
and to provide them with opportunities for their career
development. Enterprises must make it sure that the
individual career is aligned with organizational strategic
objectives. For the employees, they hope to receive the
organization’s recognitions and equal opportunities of
promotions or switching to better positions. Thus,
effective career management will boost the employees’
morale and strengthen the organization’s appeal to
employees.
D. Incentives Based on Compensation Management
Compensation management is an important
embodiment of human-oriented management in the
enterprises. The philosophy of the so called "humanoriented" management is to respect the needs of human
capital and to satisfy both their physical and mental needs.
In view of the special psychological features of the
knowledge workers, the enterprises can not only use
material incentives, but also establish a long-term
incentive mechanism which allows employees to share the
values created by their works. The enterprises should also
pay attention to the intrinsic forms of compensation which
are the job autonomy, opportunities of self-developments,
and the sense of self actualization. To some extent, the
intrinsic forms of compensation incentives are even more
effective. The enterprises should place equal emphasizes
on both spiritual incentives and material incentives, and
enhance the incentive mechanism as a whole. The
problem of defective gains right of human capital can be
solved by proper compensation management. However,
there must be a scientific performance assessment
standard to evaluate the values that the knowledge
workers contribute, so as to avoid the decrease of morale
brought by the misunderstandings in benefit distributions.
a. Lay stress on long-term incentives such as stock
options. According to the theory of property rights, in
order to effectively retain the core knowledge-workers,
enterprises must give them some "residual control rights"
or "residual claims". As to the practice, that is to take the
"stock option" as incentives to bundle the benefit of the
employees and the development of the enterprise together,
so as to share the profit and motivate the employees in a
long-term.
b. Pay attention to intrinsic compensation. The
psychological benefits brought by fair internal promotion
opportunities, self developments, the work content or the
working environment are also necessary supplementary
incentive measures.
E. Incentives Based on Enterprise Culture
Culture is invisible, but it can be the most durable
incentive to the people. Establishing a kind of humanoriented enterprise value can make the employees feel
that they are no longer tools employed by the enterprise,
but a new type of strategic partner of the enterprise. Under
the nurture of a human-oriented atmosphere which is
filled with mutual respect, trust, and fair competitions,
employees’ sense of ownership will also be enhanced.
They will actively contribute their power to the
development of the organization. The conduct of
motivation,
organizational
learning,
employee
participation in management, feedbacks, and guidance
will build up a bridge between the enterprises and
employees. Participating in management or being
authorized increases the employees’ sense of
achievement. As a result, they would work more actively
with the flexible techniques and the right teams. Thus, the
philosophy and core value of the enterprise will be kept
deep in the minds of the knowledge workers.
V.CONCLUSION
The core competition between modern enterprises is
the competition for talents. Human capital is a kind of
intangible asset that exists in the individual carriers. How
to develop and utilize the human capital is a crucial
problem to all the enterprises. This paper is based on the
characteristics of human capital, and introduces the
philosophy of human resource management. The paper
has proved that by human resource management on the
basis of respecting the private ownership of human
capital, the enterprise can fully activate the invisible
capital’s initiative, improve its capability of increment,
and prolong its working life. The core competitiveness of
an enterprise can be enhanced by both complying with the
characteristics of human capital and realizing individual
values of the knowledge workers. The result of this is a
win-win situation.
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