human capital 1

7/31/2019 Human Capital 1

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Prepared and presented by:Farah KhoderOmar Al MallaSafaa El Ibrik


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is the stock of competencies,knowledge, social and personality attributes,including creativity, embodied in the ability toperform labor so as to produce economic

value. It is an aggregate economic view of thehuman being acting within economies, whichis an attempt to capture the social, biological,cultural and psychological complexity as theyinteract in explicit and/or economictransactions.
http://en.wikipedia.org/wiki/Knowledgehttp://en.wikipedia.org/wiki/Creativityhttp://en.wikipedia.org/wiki/Labour_(economics)http://en.wikipedia.org/wiki/Economic_valuehttp://en.wikipedia.org/wiki/Economic_valuehttp://en.wikipedia.org/wiki/Economic_valuehttp://en.wikipedia.org/wiki/Economic_valuehttp://en.wikipedia.org/wiki/Labour_(economics)http://en.wikipedia.org/wiki/Creativityhttp://en.wikipedia.org/wiki/Knowledge


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Adam Smith defined human capital as follows:Fourthly, of the acquired and useful abilities of all

the inhabitants or members of the society. Theacquisition of such talents, by the maintenanceof the acquirer during his education, study, orapprenticeship, always costs a real expense,

which is a capital fixed and realized, as it were, inhis person. Those talents, as they make a part ofhis fortune, so do they likewise that of thesociety to which he belongs. The improveddexterity of a workman may be considered in the

same light as a machine or instrument of tradewhich facilitates and abridges labor, and which,though it costs a certain expense, repays thatexpense with a profit.
http://en.wikipedia.org/wiki/Adam_Smithhttp://en.wikipedia.org/wiki/Adam_Smithhttp://en.wikipedia.org/wiki/Adam_Smithhttp://en.wikipedia.org/wiki/Adam_Smith


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Therefore, Smith argued, the productive

power of labor is both dependent on thedivision of labor:

"The greatest improvement in the productivepowers of labor, and the greater part of the

skill, dexterity, and judgment with which it isany where directed, or applied, seem to havebeen the effects of the division of labor".

There is a complex relationship between the

division of labor and human capital.


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The introduction is explained and justified by theunique characteristics of competence (often usedonly knowledge). Unlike physical labor (and the otherfactors of production), competence is:

Expandable and self generating with use: as doctors

get more experience; their competence base willincrease, as will their endowment of human capital.The economics of scarcity is replaced by theeconomics of self-generation.

Transportable and shareable: competence, especially

knowledge, can be moved and shared. This transferdoes not prevent its use by the original holder.However, the transfer of knowledge may reduce itsscarcity-value to its original possessor.


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Often the term "knowledge" is used."Competence" is broader and includesthinking ability ("intelligence") and furtherabilities like motoric and artistic abilities.

"Skill" stands for narrow, domain-specificability. The broader terms "competence" and"ability" are interchangeable.


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In some way, the idea of "human capital" issimilar to Karl Marx's concept oflabor power:he thought in capitalism workers sold theirlabor power in order to receive income

(wages and salaries). But long before Minceror Becker wrote, Marx pointed to "twodisagreeably frustrating facts" with theoriesthat equate wages or salaries with the intereston human capital.
http://en.wikipedia.org/wiki/Karl_Marxhttp://en.wikipedia.org/wiki/Labor_powerhttp://en.wikipedia.org/wiki/Capitalismhttp://en.wikipedia.org/wiki/Capitalismhttp://en.wikipedia.org/wiki/Labor_powerhttp://en.wikipedia.org/wiki/Karl_Marx


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1. The worker must actually work; exert his or hermind and body, to earn this "interest." Marxstrongly distinguished between one's capacity towork, Labor power, and the activity of working.

2. A free worker cannot sell his human capital in

one go; it is far from being a liquid asset, evenmore illiquid than shares and land. He does notsell his skills, but contracts to utilize thoseskills, in the same way that an industrialist sellshis produce, not his machinery. The exception

here is slaves, whose human capital can be sold,though the slave does not earn an incomehimself.
http://en.wikipedia.org/wiki/Labor_powerhttp://en.wikipedia.org/wiki/Labor_powerhttp://en.wikipedia.org/wiki/Labor_power


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The concept of Human capital has relativelymore importance in labor-surplus countries.These countries are naturally endowed withmore of labor due to high birth rate under the

given climatic conditions. The surplus laborin these countries is the human resourceavailable in more abundance than thetangible capital resource. This humanresource can be transformed into Humancapital with effective inputs of education,health and moral values.


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The intangible human capital, on the otherhand, is an instrument of promotingcomprehensive development of the nationbecause human capital is directly related to

human development, and when there ishuman development, the qualitative andquantitative progress of the nation isinevitable.


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United Nations publishes Human DevelopmentReport on human development in differentnations with the objective of evaluating therate of human capital formation in these

nations. The statistical indicator of estimatingHuman Development in each nation is HumanDevelopment Index (HDI). It is thecombination of "Life Expectancy Index","Education Index" and "Income Index".
http://en.wikipedia.org/wiki/Human_Development_Reporthttp://en.wikipedia.org/wiki/Human_Development_Reporthttp://en.wikipedia.org/wiki/Human_Development_Indexhttp://en.wikipedia.org/wiki/Human_Development_Indexhttp://en.wikipedia.org/wiki/Life_Expectancy_Indexhttp://en.wikipedia.org/wiki/Education_Indexhttp://en.wikipedia.org/wiki/Education_Indexhttp://en.wikipedia.org/wiki/Education_Indexhttp://en.wikipedia.org/wiki/Education_Indexhttp://en.wikipedia.org/wiki/Life_Expectancy_Indexhttp://en.wikipedia.org/wiki/Life_Expectancy_Indexhttp://en.wikipedia.org/wiki/Life_Expectancy_Indexhttp://en.wikipedia.org/wiki/Life_Expectancy_Indexhttp://en.wikipedia.org/wiki/Life_Expectancy_Indexhttp://en.wikipedia.org/wiki/Human_Development_Indexhttp://en.wikipedia.org/wiki/Human_Development_Indexhttp://en.wikipedia.org/wiki/Human_Development_Indexhttp://en.wikipedia.org/wiki/Human_Development_Indexhttp://en.wikipedia.org/wiki/Human_Development_Indexhttp://en.wikipedia.org/wiki/Human_Development_Reporthttp://en.wikipedia.org/wiki/Human_Development_Reporthttp://en.wikipedia.org/wiki/Human_Development_Reporthttp://en.wikipedia.org/wiki/Human_Development_Reporthttp://en.wikipedia.org/wiki/Human_Development_Report


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Human capital has uniformly rising rate ofgrowth over a long period of time becausethe foundation of this human capital is laiddown by the educational and health inputs.

The current generation is qualitativelydeveloped by the effective inputs ofeducation and health.


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Human capital is an intangible asset as it is notowned by the firm that employs it. Basically, humancapital arrives at 9am and leaves at 5pm. Humancapital when viewed from a time perspectiveconsumes time in one of key activities:

1. Knowledge (activities involving one employee)2. Collaboration (activities involving more than 1

employee)3. Processes (activities specifically focused on the

knowledge and collaborative activities generated byorganizational structure - such as silo impacts,internal politics, etc.)

4. Absence (annual leave, sick leave, holidays, etc.)


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1. identifying the underlying dimensions of humancapital.

2. conditions under which family businesses can

achieve and sustain over time an alignment ofinterests between individual human capital andorganizational goals.

3. the case heeds the call, shared by strategic

management scholars, to focus on the individuallevel as well as on the (predominant) group andorganizational level constructs.


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By Alexandra Dawson AssistantProfessor, Department of ManagementPhD (Bocconi University)


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It is widely recognized that family businessesplay a significant role in the global economyand are key for the entrepreneurial process.However, not all family businesses fit into this

description. Some of them primarily pursuevalue creation through non-economicbenefits, such as giving jobs to familymembers and preserving family ties.


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Family businesses are uniquely characterizedby a strong shared component deriving fromsocial relations such as obligations,expectations, and social norms among

individuals


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organizations are made up of individuals, andthere is no organization without individualsIn fact, to fully explicate organizationalanything whether identity, learning,

knowledge or capabilities one mustfundamentally begin with and understand theindividuals that compose the whole,specifically their underlying nature, choices,abilities, propensities, heterogeneity,purposes, expectations and motivations


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The development of human capital theory startedin the 1960s, when Theodore Schultz introducedthe idea that skills and knowledge are a form ofcapital Shultz was the first to argue formallyagainst the predominant values and beliefs,which had held scholars back from looking uponhuman beings as capital goods and as wealththat can be augmented by investment such aseducation and training Schultz also highlighted aconnection between human capital and economicgrowth, by associating investments aimed at

enhancing human capabilities to do productivework with an increase in their productivity


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Another instrumental figure for human capitaltheory was Gary Becker. Becker expanded thedefinition and theory of human capital andfocused on investments in human capital,

that is the activities that influence future realincome through the imbedding of resourcesin people. These included schooling, on-the-job training, medical care, vitamin

consumption, and acquiring informationabout the economic system


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According to the resource-based view, human

capital is the most valuable and most difficulttype of resource to imitate because it is, to alarge degree, the product of complex socialstructures that have been built over time

Thanks to their shared histories and close-knit relationships, spanning across twosubsystems (family and business), individualfamily members are, by their very

idiosyncratic nature, characterized by beingnot only valuable and rare but also difficult toimitate and non-substitutable


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Head and Hand: TheCapacity to Perform

Heart: The Willingness toPerform (Through InterestAlignment)


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A parallel distinction is betweentacit and explicit knowledge.Tacit knowledge (knowing how)

is characterized by itsincommunicability, whereasexplicit knowledge (knowingabout) is codified and abstracted.


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The former tacit knowledge has alsobeen referred to as automaticknowledge and can include several

different forms of implicit knowing,such as theoretical and practicalknowledge of people as well as

artistic, athletic, or technicalawareness.


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The latter, explicit orconscious knowledge,typically consists of facts,

concepts, and frameworks thatcan be stored and retrievedfrom memory or personalrecords


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family members have deeptacit knowledge thanks to

early and direct exposure tobusiness matters


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The human capital pool is oftenlimited to family members, which canmean hiring inferior employees if they

are not suitably qualified or capable. a result of the reduced number oftalented and/or skilled managers, a

family firms wealth creation may beconstrained


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At the same time, family human capital isalso credited with many positive attributes,including exceptional commitment anddedication.

This suggests that there is a furtherdimension in family human capital, whichhas to do with individuals heart.


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The SHRM literature suggests thatthe existing classification of familyhuman capital as knowledge, skills,

and abilities is incomplete. SHRM isdedicated to the study of the role ofthe human resource function in

supporting business strategy


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SHRM focuses on two key issues. First, itidentifies the key role of individualsknowledge, skills, and abilities. Second, itrecognizes the fact that individualsknowledge, skills, and abilities are notsufficient to create value for anorganization, unless they are utilized

through individual behavior


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Thus, a firm has a human resourceadvantage over another firm undertwo circumstances: first, their needs

to be a stock of human talent and,second, the organization needs tomanage an alignment of interest, in

order to create a committed workforce


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it becomes obvious that family humancapital is not just about head andhand, but there is also a third

dimension: heart. Human action is theresult not only of cognitive factors(knowledge, skills, and abilities) but

also of a willingness to undertakeproductive behavior .


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Thus, since family businesses often donot possess a superior pool of humancapital, in terms of knowledge, skills

and abilities, they are often able toachieve competitive advantage thanksto a better alignment between the

human capital pool and the strategicgoals of the firm .


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Now we made a study on 3 familymanaged supermarkets and 1minimarket concerning difference

between human capital in familybusinesses and non-familybusinesses.


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0%

20%

40%

60%

80%

The Capacity toPerform

The Willingness toPerform

25%

75%

answer


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0%

20%

40%

60%

80%

100%

higher externalrewards

more flexiblejob design

stronger socialsystem

100%

0% 0%

answers


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0%

20%

40%

60%

80%

100%

job comitment social system knowladgeretention

75%

0%

25%

answer


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0%

20%

40%

60%

80%

yes no

75%

25%

answer


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Its obvious that our discussion wasn't about ifhuman capital is important or not ,we allknow that its critical in both family and non-family business but what differs is the

dimensions so we concluded that familybusinesses rely on the alignment of interestsand the strategy followed.

human capital 1

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