FEM 4204
HUMAN CAPITAL: THE FIRM
ZURONI MD JUSOH
RESOURCE MGT AND CONSUMER STUDIES,
FACULTY OF HUMAN ECOLOGY
1
REFERENCES
• Begg, D., Fischer, S., and Dornbusch, R. (1987)
Economics, McGraw Hill
• Bryant, W. K (1990) The Economic
Organization of the Household, Cambridge
Univ Press
• Rahmah Ismail (1996) Modal Manusia dan
Perolehan Buruh, Dewan Bahasa & Pustaka
2
OUTLINE
• Introduction
– Firm and Household: The circular flow
– Human Resource Management vs. Human Resource
Manager
– Human Resource Management Function
• Developing Human Resources
– The reasons
– The methods
• Experience as a Form of Human Capital
– General vs. specific training
• Application of Human Capital and OJT Theories
– Labor mobility
3
Introduction
• The circular flow
OUTPUT
MARKET
HOUSEHOLD
FIRM
LABOR
INPUT
MARKET
LABOR
4
Introduction
5
Introduction … cont
Human Resource Mgt (HRM)
• Def: The utilization of HR to
achieve organizational obj
• Thus, mgr at all level
concern themselves with
HRM
• Basically thru the effort of
others mgrs get things done
which require effective HRM
• E.g. mktg mgr works thru
sales rep to sell the firm’s
product
Human Resource Mgr
• Def: Indiv who normally
acts in an advisory or staff
capacity, working with
other mgrs to help them
deal with HR matters
• i.e. primarily responsible
for coordinating the mgt of
HR to help the org. achieve
its goal
• E.g. someone resign in mkt
dept, mktg mgr call HR mgr
to look for potential
6
candidate
Introduction … cont
•
Human Resource Mgt Functions:
1.
2.
3.
4.
5.
6.
HR Planning, Recruitment and Selection
Human Resource Development
Compensation and Benefits
Safety and Health
Employee and labor Relations
Human Resource Research
7
Introduction … cont
1. Human Resource Planning (HRP),
Recruitment, and Selection
–
–
–
HRP: The process of systematically
reviewing HR requirements to ensure the
required no of employees with the
required skills are available when needed
Recruitment: The process of attracting
indiv in sufficient no and encouraging them
to apply for jobs with the orgn
Selection: The process thru which the orgn
chooses from a group of applicants, those
indiv best suited both for open positions
and for the company
8
Introduction … cont
2. Human Resource Development (HRD)
– HRD helps individuals, groups, and the
entire organization become more
effective.
– The dev process shld begin when indiv join
the firm and continue throughout their
careers.
– Large-scale HRD program—organization
dev (OD) where its purpose is to alter the
environment within the firm to help
employees perform more productively
9
Introduction … cont
•
Other aspects of HRD include career planning and
performance appraisal
–
Career planning: Process of setting HR goals and
establishing the means to achieve them
•
•
–
Indiv careers and orgn need are not separate and distinct
Orgn shld assist employees in career planning so that the needs
of both can be satisfied
Performance appraisal: Evaluation of employees and
team performance to determine how well they are
performing their assigned tasks
•
It affords employees the opportunity to capitalize on their
strength and overcome identified deficiencies, thereby becoming
more satisfied and productive
10
Introduction … cont
3.
Compensation and benefit
–
–
A good compensation sys provides employees with adequate
and equitable rewards for their contribution in meeting organ
goals
Compensations incl all rewards received as a result of their
employment
•
Pay: The money a persons receive for performing a job
–
•
•
Family Economics: Earn Income
Benefits: Additional financial rewards other than base pay
include paid vacations, sick leave, holidays and medical
insurance
Non financial rewards: such as enjoyment of the work
performed or a pleasant working environment
–
Family Economics: Psychic income
11
Introduction … cont
4. Safety and health
– Safety: Protecting employees from injuries
caused by work-related accidents
– Health: Employees freedom from illness and
their general physical and mental wellbeing
– Impt aspects – employees who work in a safe
environment and enjoy good health are more
likely to be productive and yield long term
benefits to the orgn.
•
NIOSH, SOCSO
12
Introduction … cont
5. Employee and labor relations
– Developing effective employee relations
– Employees association and union
• E.g. KEPERTAMA, NUBE (Bank Employee)
• Why employees are joining union? – many: e.g. to
secure and improve the living std and econ status of
its members
– Collective bargaining
13
Introduction … cont
6. Human Resource Research
– An important key to developing the most
productive and satisfied workforce
– When it is done?
•
•
Proactive: to improve the current condition
Reactive: when problem occurs – e.g. excessive
absenteeism or grievances, work-related accidents
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Developing Human Resources/Capital
•
•
•
Def: HRD is a planned, continuous effort by mgt to
improve employee competency level and
organizational performance through training and
development program
Training: To permit learners to acquire knowledge
and skills needed for their present jobs
Development: Involves learning that looks beyond
today and today’s job ~ it has more long term focus
15
Developing Human Resources /Capital
…
cont
• Why training and dev are needed/impt:
1. People, jobs and organization are always changing
–
Changes in orgn ~ mergers, acquisitions, rapid growth,
downsizing
– Changes in technology and the way people work
resulting largely from IT and ICT
– Changes in human resources – a diverse workforce
consisting of many groups
Thus, developing HR is crucial to prepare employees to keep
pace with the organization as it changes and grow and
help them adapt to rapid environmental changes.
16
Developing Human Resources /Capital
… cont
2. Continuous improvement in processes is mandatory
for the firm to remain competitive
–
–
Training ~ to improve the quality of product and services
and productivity
To prevent obsolesces of skills at all level
3. A need to improve human relations within the firms
through HRD as jobs grows increasingly complex
and impersonal
17
Developing Human Resources /Capital
… cont
•
Types of Training and Development
program
1. Coaching and mentoring
– Coaching: on-the-job approach in which mgr is
given an opportunity to teach on a one-to-one
basis
•
Become an understudy to his/her boss
– Mentoring: on-the-job approach in which the
trainee is given the opportunity to learn on oneto-one basis from more experienced orgn
member
18
Developing Human Resources /Capital
… cont
2. Business Games
– Simulation (using computers) that represent actual
business situation
– The participants were assigned roles (e.g.
president, mktg mgr etc); have to make decisions;
see how their decision affect other grps etc (e.g.
loss/profit)
3. Case study
– Utilized simulated business problems for trainees
to solve
19
Developing Human Resources
/Capital … cont
4. Internship
–
–
–
University std divide their time bet attending classes
and working for an orgn
Employer: a means to view potential employee at work
Students: Integrate what they’ve learned in classroom
with the practice of mgt
5. Behavior modeling
–
–
Utilizes live demo or videotapes to illustrate effective
interpersonal skills and how mgr function in various
situations
Learning by observing others doing activities
20
Developing Human Resources
/Capital … cont
6. Role Playing
– Responding to a specific problem that they may
actually encounter in their jobs by doing it e.g
handling grievances, interviewing etc.
7. Job rotation
– Moving employees from one job to another to
broaden their experience
8. Computer-Based Training
– using computer for training, in the absence of
human facilitators
9. Classroom lecture
21
Developing Human Resources /Capital
… cont
•
On the job training
– i.e. training after one is in the workforce
•
Two types of training
– Formal training: Having a specific training
program
– Informal training: e.g. Performing tasks under the
supervision of more experienced colleagues
•
•
Most of investment in OJT occurs informally
More effective as employees deals with work that they
are currently attached to.
22
Experience as a Form of Human
Capital
• Neoclassical economic theory says:
– Employer pay employee a real wage
equal to their marginal productivity to the
employer
– i.e. w/p = MP
where MP is the MP of the employee’s
labor in the employer’s prod process
23
Experience as a Form of Human
Capital…cont
•
Education raise employee’s MP in market
employment, thus resulting in higher real wages
(This explains why highly educated people earn more than less
educated one)
•
The question is, once formal education has been
completed, WHY would 40 yr old with SPM
earn more than 20 yr old SPM holder???
– Its his “EXPERIENCE.”
– I.e. either through OJT or learning by doing, MP
continue to grow, that real wages (thus earning)
continue to rise
24
Experience as a Form of Human
Capital…cont
•
Thus, besides education, experience can augment
one’s HK
•
That’s why earning rise with age to late middle
age or beyond and then flatten out or decline to
retirement
Income
age
25
General vs Specific Training …cont
•
Education raise employee’s MP in market
employment, thus resulting in higher real wages
(This explains why highly educated people earn more than less
educated one)
•
The question is, once formal education has been
completed, WHY would 40 yr old with SPM
earn more than 20 yr old SPM holder???
– Its his “EXPERIENCE.”
– I.e. either through OJT or learning by doing, MP
continue to grow, that real wages (thus earning)
continue to rise
26
General vs Specific Training …cont
•
Types of experience gained through training: general
& specific
1. General
–
–
–
–
Examples: work habits, problem-solving skills, and general
skills of the trade or occupation that increase an indiv’s
productivity for ANY EMPLOYER
Thus, general experience increase the MP of an individuals in
ALL firms.
So, employer has no incentive to pay for the cost of general
exp, as Emp/e can leave after gaining the experience, taking
the Investment in HK with them
Thus, not reaping the benefit of gen exp, the cost of training is
borne by the Emp/e in the form of lower wages during the
periods gen experience is gained
27
General vs Specific Training …cont
1. Specific
–
–
–
–
–
Examples: Knowledge of one’s company’s admin and
accounting decision structure and personnel policies
It increase the MP of an individuals in the firm where the
experience is gained ONLY. So other emp/r will not pay them
higher wages because o such experience
So, emp/r reap the benefit of specific training.
Thus, Emp/e will not accept lower wages while they are
gaining specific exp , b’cos they will not reap the benefit in
the future
If Emp/r try to pay them less during the period of gaining
such exp, the emp/e cld respond by finding work elsewhere
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at higher wage rate
General vs Specific Training …cont
Generally, Individual reap benefit and pays
the cost of any general experience gained
on the job
BUT
How much experience will an individual
choose to gain?
29
General vs Specific Training …cont
•
THE ANSWER….
– Similar to that of investment in education.
– That is, more exp will be gained,
• until MB of added experience = MC of the
added experience
• OR, the rate of return on added exp = the rate
of return on alternative investment
30
General vs Specific Training …cont
• Human capital via experience accumulates
with the passage of time. Thus, earning will
increase with age.
• Formal schooling and experience ~ explain
much of the age-earning profiles of
individuals and the difference among
people in real wage rate
31
General vs Specific Training …cont
•
The effect of training is more difficult to
assessed for emp/r than emp/e. WHY?
– Firms normally do not record the training cost and
that it is sometime difficult to measure:
•
•
Direct cost: trainees wages, cost of equipment used, and
cost of hiring substitutes while training is on
Indirect cost: reduction in output and output produce by
new employees are not up to the std
– The training cost is normally borne by the
emp/e but the return on training occurs
throughout the duration of employment
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-End-
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