Human Capital Theory Based Management Approach

Abstract

The historical role of human resource management and its importance in effective organizational performance and continuous development is discussed. To understand the historical role of the human resource management, the article reviews the corresponding literature and analyzes management approach based on human capital theory in relation to effective performance of contemporary organizations. At an early stage of scientific research in economic development a human’s role was evaluated as a special resource (human resource) and as a subject of social development. At a later stage a human was considered as a subject of economic development. This gave origin to terms like an “individual” and a “person”. In this case a human is considered as a subject of social and labor relations. Currently, key elements of the social-economic reform, such as stabilization of social-economic and political environment, invention and establishment of new manufacturing and management technologies, rationalization of the finance and banking systems and improvement of social welfare and quality of lifestyle are still critical challenges facing our country. These challenges can only be addressed by implementation of consistent policy in social and labor relations. Establishment of social market economy in the country and its well-organized functioning is possible with integration into global production. This primarily refers to adaptation of domestic labor relations with the internationally recognized social and labor relation system. This goal can be achieved by continuous organizational development efforts. For this reason, it is essential for each organization to develop and periodically renew its human resource management strategy and action plan that will ensure alignment of its personnel conduct and behavior and entire progress with its organizational needs. For organizational development it is essential to develop and periodically renew employee performance evaluation, motivation, personnel development policy and procedures. Staff motivation policy shall define both monetary and non-monetary incentives and be targeted at maintaining best human capital crucial for the long-term success of any organization. Personnel development policy should reflect the correlation between the results of performance evaluation and personnel development plan. The policy should prescribe rules for developing an individual development plan and setting career development criteria. In addition, a personnel career development policy and procedures should prescribe organizational training needs identification methodology, priority trainings, training opportunities and respective actions. Knowledge gained at the trainings should be expanded throughout the organization. Concentrating on above processes will turn an organization into an attractive employer with desirable working environment and organizational culture.