Holton, E. F. and Yamkovenko, B. (2008). Strategic Intellectual Capital Development: A Defining Paradigm for HRD?

Holton, E. F. and Yamkovenko, B. (2008).  Strategic Intellectual Capital Development: A Defining Paradigm for HRD?  Human Resource Development Review, 7(270).  Retrieved on April 27, 2010 from http://hrd.sagepub.com/cgi/content/abstract/7/3/270


Introduction
Holton and Yamkovenko state that a new paradigm in HRD is required for growth and evolution.  Performance is directly linked to relevance and current models are generally said to have achieved success.  The authors pose three questions:

1. What approaches to HRD practice will enable organisations to prosper in the decades after 2010?
2. What fundamental shifts will need to occur in order for HRD to be a strategic partner?
3. What paradigms enable HRD to drive good organisations to greatness?

As knowledge and expertise is seen as the key source to retaining the competitive advantage, organisations are demanding more from HRD professionals.  Holton and Yamkovenko argue current practice is inadequate in fulfilling these targets.  The authors highlight that performance based practice in HRD is a broad strategy that extends minimally past staff support.  Holton and Yamkovenko propose a new paradigmatic focus in Strategic Intellectual Capacity Development (SICD).


The Foundation: Human Capital Theory
Human capital has been defined as individual knowledge and skills acquired through formal and non-formal learning.  Deliberate investment yields returns.  Productivity increases incrementally supported by knowledge, skills and attitudes necessary for economic and social development.  This perspective highlights the shift to provide a more holistic view of human capital for modern business.  Studies indicate that benefits from investment in human capital range from improved health and nutrition to population control and better quality of life.  Enlightened society is able to participate in social and political processes.


Skills and ability result from education and apprenticeship.  Initial stages of HRD theory was conceptualised through a shared worldview of an era.  Disparity of income was equated to levels of knowledge and experience in an individual.  The environment was viewed as stable and opportunities were believed to be evenly distributed.  Schooling has been seen as a major source of investment in human capital.  Holton and Yamkovenko indicate that individuals with higher levels of education have more income.


If HRD uses the perspective of human capital and performance as a resource, Holton and Yamkovenko suggest attributes critical to understanding:

• human capital cannot be separated from the individual;
• investment in individuals results in human capital;
• human capital is related to economic growth.

While eduction levels are viewed as a source of productivity and growth, a distinction is made between general and specific knowledge.  Human capital is linked to task performance.  General human capital refers to overall education and experience; specific human capital refers said education to the scope of application limited to activity or context.  Specific human capital contributes to the core competence of an organisation.


Human Capital's Contribution to HRD
The Human Capital Planning (HCP) model takes the perspective of integrating and coordinating systems from the top down.  Sensitivity to rhetoric has been suggested as the reason for HRD's failure to encourage activity.  Holton and Yamkovenko indicate HRD would benefit from objectively aligning itself to help organisational purpose.


Key Concept #1: Intellectual Capacity
Three components for intellectual capital:

1. Human capital - individual skills and knowledge; created by changing individuals through provision of knowledge and skills.  HRD develop human capital through training systems that improve performance.  Identity negotiation is necessary to instill shared vision and improve climate.  Holton and Yamkovenko state that shared cultural beliefs increase employee retention;
2. Social capital - strength of relationship between individual members of the organisation.  Social networks are fundamental as a strategic resource to transfer and share knowledge.  Networking between organisation and environment endows an individual with the ability to accomplish more, Holton and Yamkovenko state.  Effective HRD practices result in strong group dynamics and team development; and
3. Structural capital - repository of information accessible from various sources.  Organisations change to adapt to external and internal influences.  Enhancing individual capacity to learn breaks down barriers to group learning.  HRD acts as a change manager to continuously improve critical processes.

Holton and Yamkovenko suggest human capital as a potent perspective of HRD's role.

• HRD is responsible for acquiring, developing and maintaining intellectual resources;
• individual training and development leads to organisational development;
• rhetoric should be amended to develop intellectual capital instead of human capital;
• clarity in understanding the processes of learning, expertise and performance;
• intellectual capital is inclusive and should stand any type of intervention; and
• dedicated resources (staff) may be needed to effectively maintain critical assets.

Holton and Yamkovenko suggest that likely objection to maintaining HRD as responsible for intellectual capital may stem from capacity to buy innovation to strengthen structural capital.  Limiting HRD to individual learning and development does not make full use of it's potential.


Key Concept #2: Strategic Focus of HRD
Criticisms of HR practice state that strategy has not been implemented.  HR professionals struggle to accept new self-image and organisations have not changed their perspective of human resource.  Holton and Yamkovenko state that organisations require HRD partnerships to increase intellectual capital  to remain competitive.  They indicate it is a choice HRD professionals can take to lead or leave to other professionals.


HRD has not thus far developed into a strategic partner.  More than facilitation of the process is required.  In developing intellectual capital, an organisation achieves strategic goals.  HRD professionals are required to understand goals and strategically align intellectual capital.


Strategic Human Resource Management Research
Accepted theory on approaches to human capital/resource indicates human resources operates at three levels: strategic, managerial and operational.  Strategic Human Resource Management (SHRM) has two fundamental assertions:

1. skills, behaviours and interactions of individuals create the means for strategy formulation and implementation; and
2. HRM practices develop the capabilities of the resource pool.

A review of academic literature presents several themes which have the following implications:

1. direct vertical links between HR practices and strategic management process must be adopted; and
2. HR practices must be coordinated to reflect patterns of actions that support organisational goals.

By developing the resource pool, organisations are provided with increased cohesion and flexibility.  HR practices add value and enhance intellectual capital, but competitive advantage is derived from the human resource capital Holton and Yamkovenko argue.  Influential models in practice are those that are adapted to suit the external environment.


Literature confirms that human resource practice contributes significantly to organisational performance.  HR practice is designed to achieve three states:

1. developing HR architecture from conception;
2. developing operational effectiveness; and
3. aligning HR practice with organisational goals.

Cross-functional learning and work management issues are areas for development.  Not all individuals use the same processes in practice owing to levels of hierarchy and responsibility.  The development of human capital strategically links to competitive advantage that benefits the organisation.  Employment modes dictate functional links to overall strategy and direct the approaches an organisation takes to add value to member knowledge and skill.


Strategic Human Capital Development
Holton and Yamkovenko argue that the focal point in this discussion is that expertise in individuals is an organisational asset.  Investment in human capital results in three main areas:

1. at individual level the investment results in increased knowledge, skills and abilities that lead to personal development and growth;
2. at organisational level investments result in higher levels of perfomance and productivity; and
3. at societal level higher levels of education and development result in cultural and economic growth.

Benefits are justified at every level and aggregate results yield result beyond returns.  Human capital cannot be owned which signifies it as different from other capital.  However, as organisations depend on human capital for survival it is imperative to harness it.


Training related to specific skills that affect organisational core competencies leads to organisation specific human capital.  Capital increases correlate positively with stability or increase in market share.  Research suggests the need for focus on intangible assets that include knowledge, skills and experience.


Managing human capital is a complex process and roles must be clearly analysed for objective links to core competencies.  HRM practices are conducted according to cost evaluation of the project.  Outcomes of such practices remain unknown Holton and Yamkovenko state.  Expenditure based on selection and training are supported but links are not made to increased productivity as a result of selection and training.


Viewing training and development as an expense leads to underinvestment in human capital that has a knock-on effect on performance, organisation and society inclusively.  Holton and Yamkovenko suggest that intellectual capacity is a key feature for future direction but is often lost in strategic discussions.


Summary
Holton and Yamkovenko indicate that literature on systematic approaches to strategically intergrating HRD in organisations is lacking.  The objective of organisations is to accomplish its goals.  Successful organisations achieve their objective.  Most organisations depend on intellectual capital to enable achieving their objective.  The authors wonder why a strategic approach has not been adopted.


Conclusion - Strategic Intellectual Capital Development
Holton and Yamkovenko link HRD to two key concepts:

1. intellectual capacity; and
2. strategic approach that result in Strategic Intellectual Capital Development.

Strategic Intellectual Capital Development offers systematic processes of leveraging knowledge and enables:

• organisations to prosper into the future;
• HRD to undertake strategic partnership; and
• HRD to lead organisations to innovative success and reputation.

As Strategic Intellectual Capital Development is under-represented in HRD literature, the authors suggest that research focus on a broader view of the organisation and a more in-depth study of developments in intellectual capital be undertaken.  The connection between growth and social process is considered valuable if it can be retained within the organisation.


Investment in training pay off in employee sales, morale
Jamin Arvig recounts how a frustrated customer-service representative quit because he didn't believe he had received the training he needed to provide knowledgeable service and succeed in his position. Arvig had worried that training would be expensive and would take reps away from sales, but implementing education programs has increased employee morale and boosted business, he found.