Construction Project management and Innovation
The purpose of this study is to identify from the literature the effect of human capital development on growth, profitability and competitive success of organisations and to argue that the development of the Ghanaian construction industry, its capacity to remain pivotal to the nation’s economic growth and the ability to become globally competitive are directly linked to investment in the development of its human capital. This theoretical paper reviewed the literature to identify empirical evidences of the correlation between human capital development and organisational success and profitability. The findings reveal that investment in education has positive correlation with high performance of other industry categories. The research has also revealed some criticisms of the theory of human capital development and provided insights into the barriers to human capital development within the construction industry in developing countries such as Ghana. The paper presents empirical evidence of the benefits that accrue to organisations that invest in human capital development and provides a training and development model that could serve as a framework for training and developing employees within the Ghanaian construction industry.
Keywords: Human capital development, Ghanaian construction industry, Firm performance
The construction industry in Ghana, like in every other country, is pivotal to the economic welfare of the country. It is a major industry for generating or creating new wealth and value to meet other economic and social goals in the country (Ahiaga-Dagbui, et al., 2011). Compared with other industries, the Ghanaian Construction industry is low-tech and labour intensive. Consequently, the long term sustainability of the industry’s significant role in the socio-economic development of the country is contingent upon the development of its human capital bearing in mind some of the human-related problems that has bedeviled the industry over the years; low productivity, low quality workmanship, low level of technical and managerial competence, and time and cost overruns (Westring, G, 1977; Ofori, G. 2001; World Bank, 2003; Ahiaga-Dagbui, et al., 2011). Human capital has been generally accepted as the most valuable asset of nations and organisations. It is the core capability within firms and an important variable that determines an organisation’s competitive success and profitability in today’s market place. Fisher et al. (2003) state that organisations require a number of things to be effective but the factor that is most likely to provide potential competitive advantage is human resources and how these resources are managed. Besides its significance to a firm’s success, human capital is a key to an individual’s employability and earning capacity.
As already stated, the economic prosperity of the construction industry is closely tied to its human capital because it is labour-intensive. Thus, the effective delivery of construction projects depends on the quality of personnel at the professional, technical, supervisory and worker levels at all stages from project inception through design and implementation to completion. It is important therefore, to train, develop and retain quality work force capable of and committed to the success of the industry. Paradoxically, it is in this industry that there is a “wide spread of ignorance of good practice in this area” (Loosemore et al., 2003).
Globalisation, technological change, market complexity and the growing number of competitors in all industries have put high premium on human capital development because it is a critical part of organisation’s competitive capability. Marimuthu et al. 2009 and Fisher et al. 2003 emphasise that production technology, financing and marketing can all be copied by other competitors but the strategy that is harder to copy is the unique ways an organisation optimises its workforce through comprehensive human capital development towards the realisation of organisational goals, long term survival and sustainability. Pfeffer, (1998) also states that organisational success is not based on conventional factors such company size, a unique image, the right market niche, dominant market share, being in the right industry, and so forth, but on how employees are treated (cited in Fisher et al. 2003).
Indeed, in an environment of constant change and fierce competition, human capital development is a veritable and inevitable route to developing ideas for reconfiguration, innovation, quality and continuous improvement, as well as other critical variables necessary to succeed in the business world. The construction industry in the last two decades has seen tremendous changes in construction technology, procurement practices, IT, legislation and above all client demands (Loosemore et al., 2003). For that reason, it is important that effective policies and strategies are developed to promote superior human capacity development and management within the Ghanaian construction industry to cope with these changes and in order to remain relevant. This theoretical paper discusses issues of human capital development and advocates the potential positive association between human capital development and the growth of the construction industry by linking human capital development with high performance in other industry categories.
THE HUMAN CAPITAL THEORY
Bohlander et al. (2001) define human capital as “knowledge, skills, and capabilities of individuals that have economic value to an organization.” The Organisation for Economic Cooperation and Development (OECD, 2001) describes human capital as “the knowledge, skills, competencies, and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being.” Dess and Pickens (1999) also define human capital as “capabilities, knowledge, skills, and experience, all of them embodied in and inseparable from the individual.”
This paper focuses on human capital as the knowledge, skills, competencies, experience and attributes that individuals have which contribute to the achievement of organisational goals and enhance individual value in the market place. Thus, human capital development is any activity which increases the quality of the employee. Training is a primary mechanism by which human capital is developed. Marimuthu et al. (2009) describe it as the knowledge and training required and undergone by an employee that increases the individual’s capabilities in performing activities of economic values.
The theory of human capital was proposed by Schultz (1961) and developed by the Nobel prize-winning economist Gary S. Becker in his seminal work on the economics of employer- provided training (1962, 1964). Human capital theory advocates that education or training imparts useful knowledge and skills to workers which in turn increase their productivity and incomes (Becker, 1964). Becker distinguishes between specific human capital and general human capital. Specific human capital includes expertise acquired through education and training which is specific to a particular firm (firm-specific or context-specific skills). General human capital (general skills), on the other hand, is knowledge gained through education and training which is valuable across board (e.g., reading and writing).
Becker views human capital as similar to “physical means of production”, e.g., factories and machines: one can invest in human capital (via education, training, medical treatment) and one’s outputs depend partly on the rate of return on the human capital one owns. Thus, human capital is a means of production, into which additional investment yields additional output.
A number of authors have criticised the human capital theory for being too simplistic in its analysis of employee productivity and have argued that education alone cannot lead to organisational productivity but must be complemented by other variables. Levin and Kelley (1994) have pointed out that economists and other social scientists have overestimated the payoffs from increased education and ignored complimentary inputs such as, training, contract terms, and management practices which must exist for education to improve productivity. According to Thurow (1975), productivity is largely characteristic of jobs rather than of workers; employers use education credentials to select workers because better-educated workers can be trained for specific jobs more quickly and at a lower cost than their less-educated peers. Spence (1973) also posits that education may simply be a market signal of the potential productivity of a worker since there is hardly any other way for firms to determine the productive attributes of a worker. Notwithstanding these criticisms, “Becker’s human capital theory has been resilient and still remains the principal theoretical construct that is used for understanding human capital investment, both from the perspective of the individual and the firm” (Bassi & McMurrer, 2006).