HUMAN CAPITAL DEVELOPMENT AND ITS IMPACT ON EMPLOYEE PRODUCTIVITY AND SUSTAINED ORGANIZATIONAL PERFORMANCE IN THE BANKING INDUSTRY

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Keywords:HUMAN CAPITAL DEVELOPMENT AND ITS IMPACT ON EMPLOYEE PRODUCTIVITY AND SUSTAINED ORGANIZATIONAL PERFORMANCE IN THE BANKING INDUSTRY


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RESEARCH BODY

CHAPTER ONE

1.1       INTRODUCTION

In order to achieve and sustain enhanced productivity, Human, Financial, Information, Technology, Physical and a myriad of other resources are vital factors required to attain success in this present rapidly changing world. Human Resources which coordinates all other resources to yield productivity is the most critical of all these resources.

Human Capital Development (HCD), according to Walgenbach (2009)andAkinyi, (2014) is essentially concerned with enhancing employee performance at work as well as providing them with organizational commitment.  Essien (2000) views HCD as a product of coordinated thoughts and action directed towards developing and grooming of human beings to make  them fit and qualified for improved productivity. In related literature, Michael & Zaid (2014) argue that HCD is not only limited to employees or subordinates but extends to employers or entrepreneurs who also need to improve for efficiency and effectiveness. It is evident from the foregoing that HCD is a planned activity geared towards improving productivity, growth and development of individual, organisation and the economy at large.

The human capital concept, emerged in the 1950s and 60s, as labor economists discovered that investments in training and education increased the quality of workforce, resulting in improved productivity and earnings. According to businessdictionary.com, the term Human capital is defined in organizational context as, the collective value of an organization’s intellectual capital (competencies, knowledge and skills) a constantly renewable source of creativity and innovativeness (ability to change), not reflected in the financial statements (www.businessdictionary.com). Being an asset of great value with identified potentials for productivity, human capital requires effective coordination and development, in order to produce profitable output, thereby enhancing organizational performance (Bromund, 2012). In a related discourse, Berry (2007) postulates that Human Capital development results in better management, and provides successful organizations with competitive advantages.

Ironically, many organizations understand the importance of acquiring human capital, but also lack the understanding of the benefits of human capital development to both the individual employees and ultimately the organization, in order to enhance organizational performance. The recognition of the importance of human capital to organizational performance by organizations, influences their attitude towards the development of their employees/workers’ human capital, which will generate more productivity, thereby enhancing organizational performance. While some organizations are averse to developing human capital due to its high cost on the short run, other future thinking organizations take advantage of it, considering the higher dividend yields it will generate in the future (Seleim et. al, 2006; Adelakun, 2011; Baptise, 2001).This distinguishes organizations, as their outstanding performances are results of the efforts employed in the development of their human capital and not of their size (whether small, medium or large). Thus, a small organization, which concentrates on human capital development, will definitely perform better than a large organization, which does not. This reiterates the fact that, irrespective of size, human capital development enhances organizational performance, being the most crucial asset in any organization.

Marimuthuet. al (2009) and other scholars argue that, human capital development enhances employees’ loyalty, competencies, stability, and productivity, as well as their market value, as it enables the appropriate placement of employees in specific tasks/jobs where they are best suited for, invariably improving productivity and culminating in enhanced organizational performance.

Due to certain constraints including but not limited to the time available for this research and the many banks operating in the banking sector in Nigeria, my study is limited to First Bank of Nigeria, GTBank and Zenith Bank selected to represent the banking sector on the basis of their sector ranking,  ratings, size and global geographical spread.

The three selected banks are reputable organizations in the banking industry. The development of human capital within will enhance employees’ abilities to focus on their core competences, which invariably will improve employee productivity and contribute to increased organizational performance. Human capital development also has huge potentials to unleash synergy, leading to rising starts in the organization, inevitably reducing employee absenteeism, defection to competitors, as well as enable departments/units exceed their performance quotas (Chazin, 2009). This invariably will not only improve organizational performance, but will enable the actualization of organizational goals and objectives. This suggests that human capital should be treated as human values and not as pieces of impersonal economic tool (Haragnus, 2009). This study enlightens on the various benefits inherent in human capital development in the banking industry.

 

Human capital development establishes a learning structure of behavior/competencies required in employees which enhances the actualization of business objectives as stipulated in their corporate strategic intent. It also enhances the actualization of banks financial aspirations, as well as breeds employees loyalty and ingenuity. Harangus (2009) extends the debate by stating further that

human capital development is also required in banks for professional and diplomatic handling of clients/customers, who are not just interested in the quality of banks’ product/service being offered them, but also in the manner they are addressed/treated by bank officials, as there is need for them to feel secure, as well as have trust in the banks they choose to patronize. He argues that, performance whether short, medium or long term is very crucial to banks and the banking industry.

Organizations are defined by the outputs they produce – tangible (goods) or intangible products (services). While organizations that produce tangible goods employ more machines than human capital in the production process, organizations that produce intangible products (services) employ more human capital than machines in the production process. This underlies the need for banks which are service providing organizations to focus on the development of human capital for effective and improved service delivery that will attract increased and maintained patronage from clientele/customers, thereby increasing profitability as well as organizational performance, and growth of the organization on the long run.

Moreover, the intense competition in the technologically based service providing industry, has necessitated the need for them to constantly develop their human capital in order to be technologically advanced in their operations, suit current market trends and demands, compete favorably in the industry, thereby acquiring more market share and/or maintain existing one, as well as remaining relevant in the industry and the economy in particular and the economy as a whole.

The struggle of any economy (developed or developing) in the world today, has been sustainable development, which invariably breeds progress in the economy. However, a general consensus states that, development produces increased capacity in the management material assets, intellectual resources and ideology by people, and also enables the acquisition of the physical necessities of life, food, clothing, shelter, employment, overtime, etc. Thus, development aims at improving the lives of people by expanding their choices, freedom and dignity.

Human Capital Development is important to any economy, as it enables the sensible deployment of human assets in the various sectors of the economy, in order to avoid a defective incentive system, which can cause a waste of human capital/resources resulting in higher incidence of poverty and greater income distribution inequality.

However, Nigeria recognizing the importance of human capital development has adopted the National Economic Empowerment Development Strategy (NEEDS) programme, which advocates the importance of human capital development in the achievement of economic growth and development. NEEDS being a crucial transformational tool for effective human capital development equips people/citizens with relevant skills and knowledge, thereby empowering them for the labor market.

Any economy experiencing growth and development is indeed a successful economy. Nigeria, being blessed with a large population, needs to maximize its human capital by focusing more on the NEEDS programme, as well as adopting and implementing other programmes that enable the development of human capital, which will inevitably bring about economic growth and development. Thus, human capital development is very important to any economy, especially the Nigerian economy in its current ailing state.

This study is also important to Human Resource Consulting Agencies/organizations, which deal in human capital regularly. It underlies the need for not just acquiring human capital but also developing human capital, which invariably enhances employees’ skills, abilities and productivity. These human resources consulting agencies/organizations, which render recruitment, training and advisory services, etc to organizations, can guide organizations on maximizing their human capital for effective performance, profitability and success on the long run.

This study having discussed the importance of developing human capital, can also be relevant for future researches, however, certain grey areas about the subject matter that would not be covered by this study due to its scope, could form the basis of future researches.

1.2     Organizational Context and Rationale

Berry (2007) opines that human capital, otherwise referred to as human resource is pivotal to achieving goals of many organisations including banks. The importance of human capital is inherent in its indispensability towards growth and development at micro, meso and macro economic levels (Dosunmu, 2015; Akinyemi, 2014; Aliyu et al., 2014; Onwueme, 2008). According to Adewale et al. (2014), for an organisation to develop sustainably, it must necessarily invest in human capital. The importance of human capital has prompted age-long propositions by authors and scholars for human capital development (HCD) as a part of an overall effort to achieve cost-effectiveness of operation and improve organisational and as well as national economic performance (Marimuthu et al., 2009 ;Ugbam and Obi-Anike, 2016).  Ugbam and Obi-Anike (2016: 110) posited that HCD “is one of the core functions of human capital management and possibly the one aspect of human capital management that is most strongly linked with organizational performance and economic development”.

HCD in Nigeria banking industry is of utmost importance in view of the importance of the sector to the economy. Banks are crucial to development of national economies. They aggregate finance (money) by mopping it up from the surplus economic units and putting it to use by channelling it to deficit economic units.  By doing so, they act as development agents/intermediaries that ensure that idle funds (finance) are channelled mostly to productive use for the betterment of overall economy. Banks are key players in financial sector of any economy. The importance of the banking industry is not only limited to mobilization of funds. Banks, in Nigeria also employ a considerably large number of employees.

The high number of layoffs has reduced considerably the number of employees in the sector.  With reduced workforce resulting from downsizing in the industry, the employees in the sector are forced with more workload. Besides this, most have to carry out job functions earlier handled by sacked employees for which they were not trained. With the possibility of increased workload per employee in the sector as a result of the current financial crisis, motivation to work might be adversely affected. Reassessment of the workforce’ job responsibilities, tasks and reward system as well as performance appraisal is crucial. The employees’ resourcefulness, like never before, has to be increased.

It is evident from the foregoing that the banks have to improve productivity of their human capital in the face of recession, worsening liquidity position and tough challenges of competitiveness in the constantly evolving banking sector. In the face of shrinking workforce and highly competitive business environment, authors (Michael and Zaid, 2014; Morad et al., 2013; Mansor et al., 2016; Marimuthu et al., 2009) have recommended human capital development as a sustainable solution and practical way of survival.

The need for human capital development has been established, but the benefits of human capital development must, at least be perceived to offset the cost in order to make business sense to banks’ decision makers and encourage them to vigorously pursue the HCD option.  To fill this vacuum in knowledge, this study aims at examining the effect of human capital development on employee productivity and organizational performance in the Nigerian banking industry. The information could help managers of banks, particularly, to make informed decision and provide justification to intensify human capital development.

Studies reveal that human capital is an indispensable factor for organizational performance. Presently, majority of organizations are merely involved in engaging human resources, without having a good understanding of the importance of developing Human Capital, which is crucial to the enhancement of productivity, invariably increasing organizational performance. A number of organizations are not aware of the close relationship that exists between human capital development and organizational performance (Gilkey 2008; SON 2010; Olufemi, 2009).

Since Human capital development is very crucial to the success of any organization, it is adequate to investigate its effect on organizational performance through the effects that it has on employees’ morale in the organization (Kondalkar, 2006; Reyes, 2002; Gilkey, 2008). Many studies have explored the impact of human capital development generally, however, fewer of these studies, if any, have really attempted to explore the effects of human capital development on organizational performance. This intent of this research is to attempt to bridge the intellectual gap.

1.3     RESEARCH AIMS AND OBJECTIVES

Performance, which could be enhanced through the development of human capital, affects countries/economies, organizations, individuals, etc. However, this study examines the effect of human capital development as a determinant of productivity and performance in banking organizations only. Thus, the scope of the study is restricted solely to organizations in Nigeria, for which First Bank of Nigeria (FBN) Ltd, Zenith Bank and GTBank, reputable organizations in Nigeria are under-studied, to examine how the development of employees’ human capital (done mainly through trainings of various forms), enhances productivity level, culminating in increased performance of these organizations.

The central aim of this research is to find out the effect of Human Capital Development on Employee Productivity and Organisational Performance in selected banks in the banking industry.

To achieve the study aim, providing answers to the following questions becomes imperative:

What is the relationship between Human Capital Development and Organizational Performance, if any?

What is the effect of human Capital Training and Development on Employee Productivity and organizational performance?

1.4. SUMMARY AND REVIEW

Chapter 1 introduces the study and its significance.  The chapter defines the scope and provides a brief and accurate profile of the case study. The chapter states the research problem as well as the general and specific objectives of the research paper while raising pertinent questions which the study intends to investigate.

Chapter 2 reviews related literature on the subject matter and provides a detailed and in-depth knowledge about the study. It provides further enlightenment about Human Capital and its Development, as well as Organizational performance. It also states the various theories postulated about the subject matter, the current trend of thoughts in the field of study as well as summary of the whole chapter.

Chapter 3 discusses the research methods, techniques and procedures adopted in the conduct of the study. It states the research design, population, source of data and collection, sampling techniques, research instruments and design, validity and reliability of research instrument and a brief summary of the whole chapter.

Chapter 4 discusses how relevant data is collected, collated, presented, analyzed, given interpretation, in order to arrive at the findings of the study, on which inferences would be drawn and ends with a brief summary of the chapter.

Chapter 5 summarizes the various findings in the study, draws conclusions from such and also proffers solutions. Recommendations are made based on the findings in the study

Keywords: HUMAN CAPITAL DEVELOPMENT AND ITS IMPACT ON EMPLOYEE PRODUCTIVITY AND SUSTAINED ORGANIZATIONAL PERFORMANCE IN THE BANKING INDUSTRY


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Keywords: HUMAN CAPITAL DEVELOPMENT AND ITS IMPACT ON EMPLOYEE PRODUCTIVITY AND SUSTAINED ORGANIZATIONAL PERFORMANCE IN THE BANKING INDUSTRY