HUMAN CAPITAL

Human capital comprises of the collective expertise, creative and problem solving capability, leadership, entrepreneurial and managerial skills embodied by the employees of the organisation (Brooking, 1997:15). The human elements of the organisation are those that are capable of learning, changing, innovating and providing the creative thrust which if motivated can ensure a long lasting competitive advantage (Bontis et al, 1999:3). Edvinsson and Malone (1997:34-35) suggest that individual capabilities, knowledge, skills, and experience of an organisation‘s employees and managers, is included in the term human capital, as shown in Table 2.2). Bontis et al (1999:12), on the other hand, define human capital as the collection of intangible resources that are embedded in the members of the organisation. These resources can be of three types namely; competencies (including skills and know-how), attitude (motivation, leadership qualities of top management) and intellectual agility (the ability of the organisational members to be innovative. Brooking (1997:15) like Bontis et al (1999) define human capital as comprising of the collective expertise, creative and problem solving capability, leadership, entrepreneurial and managerial skills embodied by the employees of the organisation. The composition of human capital (competencies, organisational culture and incentives and reward systems) as shown in Figure 2.2 is discussed in the next section.

2.4.1.1 Competencies (Knowledge, Skills , and Abilities)

Competencies are knowledge, skills, abilities (KSA) and experiences that allow an organisation to perform better than another in a particular setting. Competencies are what yield competitive advantage. Such competencies must be difficult for competitors to imitate or obtain if competitive advantage is to be sustained (Louw and Venter 2006:24). Knowledge, skills and abilities include the requisite expertise and know-how necessary to run the organisation efficiently and effectively in order to retain a competitive edge (Louw and Venter 2006:428).

However, Edvinsson and Malone (1997:34-35) argue that human capital must be more than competencies (the knowledge, skills and abilities of employees) as shown in Figure 2.2, but rather, it also must capture the dynamics of an intelligent organisation in a changing competitive environment. For example: are employees and managers constantly upgrading their competencies? Are these new competencies recognised by the organisation and

incorporated into its operations? And are these new competencies, as well as the experiences of the organisation‘s veterans, being shared throughout the organisation? Likewise Brooking (1997:15) promotes a view point that human capital is not only looking at an individual and their ability to perform a particular job function, but to view the individual as a dynamic entity who may fit into a variety of jobs over time and suggest that it is the task of an effective manager to ensure that each human asset has access to opportunity and mechanisms which enable the employee to achieve their full potential within the organisation. Organisations need to know how vocational qualifications, work related knowledge and personality profiles come together and are used within the context of its own business. Work related competences can best be thought of as a merged set of skills, creative profiles, personality attributes and vocational qualifications (Brooking, 1997:56). By focusing on work related competences instead of jobs, teams of individuals can be pulled together or disbanded in order to suit a client need or an emerging market situation (Brooking, 1997:56).

2.4.1.2 Organisational culture

Culture constitutes the norms, values, beliefs and attitudes that are pervasive in the organisation and results in a language, symbols, and habits of behaviour and thought, binding organisational members together. As such, an organisation‘s culture serves to underscore the drivers of process, laying the foundation for the type of structure or system adopted (Louw and Venter, 2006:431). Organisations that have a culture that supports and encourages cooperative innovation understand what it is about their culture that gives them a competitive advantage and develop and nurture those cultural attributes. Increasingly an organisational culture is recognised as the conscious or unconscious product of the senior management‘s belief (Bontis, 2002:38).

Knowledge and skills in the absence of an organisational culture (attitudes and values) fall short in supporting the organisation in developing a competitive advantage. Attitudes capture the thoughts and feelings of organisational members about their specific jobs, while values describe what the organisation is trying to achieve through work and how organisational members think they should work (George and Jones, 2006: 50). George and Jones (2006:51), aver that values often lead to the formation of norms, or informal rules of conduct, for

behaviours considered important by most members of the organisation, such as behaving honestly or courteously.

Bontis (2002:38) further suggests that in most organisations that have pursued formalised intellectual capital management initiatives, the common component that drives the programme is value alignment. Values are the key to any successful organisational transformation because values are basically a quality information system that, when understood, tell about what drives human beings and organisations and causes them to be exceptional. The achievement of an organisation‘s strategy and the success of its operating level intellectual capital initiatives must therefore be enabled by a culture that values and rewards the creation and sharing of intellectual capital (Klein, 1998:5).

2.4.1.3 Incentive and reward systems

In the management of intellectual capital it should be realised that people are investors of their own human capital and that this provides the main source of competitive advantage for the organisation (Ingham, 2007: xvi). Therefore, how organisations reward employees is singularly important in the implementation of processes and ultimately, the achievement of strategic outcomes (Louw and Venter, 2006:424). Brooking (1997:15) suggests that the optimal position for the organisation is to be able to derive maximum benefit from individual employees which is balanced by way of compensating employees in monetary, professional, personal development and opportunity terms. Klein (1998:6) avers that in tandem with the cultivation of an appropriate organisational culture, management should incentivise employees to contribute to the organisation‘s base of intellectual capital by supporting such contributions with explicit transactions.

As a contemporary work-force is knowledge based, such a work-force is participatory, understands the goals of the organisation and receives satisfaction from knowing the part it plays in achieving the goals (Brooking, 1997:44). It has been asserted that organisations that are intellectual capital sensitive emphasise sharing, involving, empowering and showing an appreciation for individuals‘ contributions to the organisation (Brooking, 1997:44). The human elements of the organisation that are capable of learning, changing, innovating, and providing

the creative thrust, if properly motivated, can ensure a long-run competitive advantage of the organisation (Bontis, 2002:27-28).