Abstract
Human resource development is now considered to be an important factor in the efficient running of an organization. As a result many theories and schools of thought have emerged over the years. This paper examines two major theories (and the sub-theories) that are relevant to human resource development. The two theories are the economic theories and the systems theories. A brief mention and relevance of earlier economic theory and the psychological theory is also done. it can be seen that though economic theories are relevant, it is the systems theory that is most closely connected to human resource development.
Introduction
Human Resource Development is one of the most important topics of study in the organizational world today. The word organization was used because this area of study affects all types of organizations. They can be the government and government organizations, they can be organizations run for profit like corporations and companies and they can be run not-for profit. In each case, managing of the human capital is important for the efficient functioning of the organizations. The field is a very vast one with elements of psychology, anthropology, economics, etc being included in the study.
As with any area of study many theories related with the topic have evolved over the years. But in the case of human resource development, instead of applying theory directly, it is the practice to include three theories as a basis of this topic. They are the psychological theories, the systems theories and the economic theories. This paper attempts to analyze and compare two of the above theories namely the systems theory and the economic theories in relation to this topic. The paper will further analyze the important points of the above theories. After this an attempt will be made to judge the advantages and shortcomings of these theories. Finally an attempt will be made to bring out a new perspective from the theories.
Human Resources Development
It would be appropriate to write briefly on the topic before beginning the analysis of the theories. As mentioned earlier HRD is an important factor in success of organizations. From review of literature it can be seen theorists have disagreements over even a proper definition of the term. According to the book “Human Resource Development” the term HRD can be defined as “an integrated and holistic, conscious and proactive approach to changing work-related knowledge and behavior, using a range of learning strategies and techniques.” (Joy-Matthews, Megginson & Surtees, 2004 P. 6). Another related but bigger definition by Academy of Human Resources Development says about HRD in three steps. First is that it is a study of organizational development practices so that it may “achieve higher levels of individual and organizational effectiveness.” The second is that it trains individuals to for individual as well as skill development. The third is that it helps to manage change as well as maintain good relationships between different departments and groups in the organization. (Weir, 2002 P. 69). The same book also states that a definitive comparison of the term is not possible since it is field that will always develop and not remain static. Comparing with other areas of management study of human resources is a relatively young field. Experts say that it will take a long time for something more concrete to happen in this field since it involves the study of humans in the work place.
Theories on HRD
According to Professor Richard A Swanson, author of many bestselling books on the topic (especially Foundations of Human Resource Development co-authored by Elwood F. Holton) three broad theories in management and organizational literature form the basis or foundation of HRD. They are the Psychological theories, economic theories and systems theories. (Swanson, 2004, P. 2). A graphical representation of the three theories in relation to HRD is given below.
(Swanson, 2004, P. 2). As mentioned earlier it is proposed to analyze the economic theories and systems theories in this paper. A brief view of the psychological theories will also be attempted for completeness.
Psychological Theories
Since HRD is closely related with the study of human beings at work in an organization, the aspect of psychology is also relevant. According to Swanson, the three theories that are closely related to the study of HRD are the Gestalt Theory, Cognitive Theory and the Behavioral Theory.
Economic Theories
Among the three main theories that form the foundation of HRD, the oldest theories were probably the economic theories. A few of the economic theories are discussed briefly before the theories that have a deeper effect on HRD. Even though the names of John Maynard Keynes and Adam Smith comes to mind, economic theories started evolving even before their times. One of the earliest theories were the mercantile theories which originated during the 16th and 17th centuries. The mercantilists as they were known believed that the wealth of a nation can only be counted in the gold and silver in the country. Due to this the popular belief was that nations having rich mines of these metals could be wealthy. Countries without such resources had to see to it that they consistently sold more goods than they purchased. (Major schools of economic theory: Mercantilists). Another school of economic thought that originated in France during the second half of the 1700’s erroneously believed that only agriculture will have profitable surplus. The originators were known as the physiocrats. According to them, manufacturing did not yield any surplus as the inputs were almost equal to the outputs. (The Physiocrats). But it was not until the publication of the book “Wealth of Nations” did economic theories begin to be really accepted universally. Many theories followed in the same type and were usually labeled as the Classic School of theories. Adam Smith was of the opinion that the wealth of nations depended upon the land, labor and capital resources held by a country. He was a great critique of government regulations on trade and enterprise. He argued that ‘an invisible hand’ would guide the nation to prosperity if they and the resources mentioned above were not regulated and this would lead to the society being better as whole. (Dr Adam Smith (1723 – 1790), 2008). Many other classic economists like Malthus, David Ricardo, John Stuart Mill etc also brought for theories that were based on limited resources, inability of production to keep up with population, inability of markets to provide full employment etc. Other economic schools of thought include the Marginilists school and the Marxist school. A radical change from these lines of thought was brought forth by Keynes with the publication of General Theory of Employment Interest and Money in 1936. None of these theories really need mention with regard to HRD since hardly any human emotions were taken into consideration in these theories. The only exception was perhaps Marxism which took an extreme opposite view of a free market economy and wanted the assets of the land to be held by the government on behalf of the laborers.
According to Richard Swanson, three theories have a close connection with HRD and they are the Human Capital Theory, the Scarce Resource Theory and the Sustainable Resources Theory. These theories will be discussed in little more detail.
Human Capital Theory
This theory claims that the compensation received by workers is directly proportional to the education and skills that he owns. The theory, when it was put forth in the late 1940’s initially focused on the level of school training received to the value of compensation. So if a worker had high school education, he would earn substantially more than a person who did not have such education. But levels of high school learning increased without corresponding increase in pay. Modifications on the theory were suggested and one was that the quality of education was not enough to meet the skills. But this too was not proved to be correct. Another modification was that it was not high school training but life long learning, adult education, general training and skill- specific on the job training that got more wages. But studies in advanced economies have shown that in spite of people getting trained through any of the above methods, the level of compensation did not increase in relation to qualification. The theory also assumes that earning capacity is directly proportional to the learning capacity of the worker. The relevance of the theory on current HRD scenario will be discussed in the analysis section.
Scarce Resources Theory
Economics is all about managing scarce resources. There would be no doubt as to the fact that most of the capital assets like land, labor and resources are limited. “Economics is grounded on two basic facts: (a) Economic wants are virtually unlimited; (b) economic resources are scarce.” (McConnell & Brue, 2004 p.36). Hence it has been accepted that human beings as capital to a business are also limited in their number as well as skill. This is truer in the case of jobs that need high technical and administrative skills. But the scarce resource theory goes a step further. People who favor this theory believe that resources are scarce and that this situation will result in conflict. A stronger group, organization or country will attempt to control the scarce resources while others will be held under its control. More resourceful groups will also try to influence the controlling group or even attack it in order to have access or control to the resources. In other words there will be constant competition to have control and access to these scarce resources. (Mulder & Krahn, 2005 P.1). The net outcome is that those who control and use the resources, whether it is land, labor or capital should be responsible users and should utilize them carefully.
System theory
Another theory of Human Resources Development is systems theory. Ludwig von Bertalanffy, a biologist, first proposed this theory in the 1940’s. “Systems theory focuses on the arrangement of and relations between the parts which connect them into a whole.” (Heylighen & Joslyn, 1992).
Two types of the systems are there; open system and closed system. Open systems interact with the external environment and are considered to be the real systems. Most organizations that exist in the world are open systems. Open systems will obtain inputs from the external environment, analyze it and then also produce outputs which can be used by the external environment. Closed systems as the name suggests does not interact with its outside environment. But, all the factors inside the system may interact with each other. The factors that can be included in open systems are environment boundary of the system, the inputs from the environment, the system outputs, the information generated, the processes of the system and its goals. “Systems theory captures the complex and dynamic interactions of environments, organizations, work process, and group/individual variables operating at any point in time and over time.” (Swanson, 2003 P. 2 ).
The general system theory
This theory focuses on the system as a whole. The main aim is to bring together all the elements under a head. It describes those principles, laws and models which are common to system in general. System can be controlled or uncontrolled. In a controlled system information is sensed or analyzed and changes if required are made. The controlled system is the cybernetic system. “Cybernetics is the interdisciplinary study of the structure of complex systems, especially communication processes, control mechanisms and feedback principles. Cybernetics is closely related to control theory and systems theory.” (Edinformatics).
Chaos theory
In cases where a system is sensitive to outside conditions, any change in those conditions (especially initial conditions), results that are complex and even unpredictable may occur. According to the theory even initial conditions can be sensitive for systems. The important thing is that even small changes in these conditions can have a big impact on the system. This usually happens when these conditions are repeated constantly or is iterated. But some features are essential they are; “solution must be aperiodic, bounded and exponentially sensitive to initial conditions. The properties to be satisfied are; the rule must be nonlinear, in the case of maps, it must be nonconvertible if it is one dimensional and the odes must be three dimensional.” (Ramamohan, slide 5).
Analysis of Theories with respect to HRD
The earlier economic theories of Keynes, Taylor are not relevant with current human resource development practices since they focus only on efficient production and utilization of resources. Taylor only stressed that workers should be compensated well. The Marxist theory is at the other extreme where worker rights and comfort takes precedence and not production. The other theories reviewed above were done in a general sort of way and an analysis will be done with respect to human resources development. As mentioned earlier the classical school of economic theories and other earlier theories were more focused on efficient production and managing of scarce resources. It was only later that workers and other employees were considered to have emotions and hence only theories that have a focus on this aspect will be taken into consideration. From them, the human capital theory and the scarce resources theory which form part of the economic theories and the general systems theory and the chaos theory which form part of systems theory will be analyzed.
The human capital theory considers that human beings as workers are a part of capital and should be considered as such. This part of the theory holds well in the case of human resource development. But it is felt that the main point of the theory which says that qualification (whether it is school, college, life-long training, on the job training and adult education) does not apply fully with regard to HRD. It is true to a certain extent that a highly qualified person will get more wages than lesser qualified people. But it is also true that more and more people will try to get that particular qualification needed for the job. In such a case, there will be too many people available for that job which can freeze or bring down the wages. An article by Patrick Fitzsimons published in the Encyclopedia of Philosophy of Education give a rational and critical analysis of this theory. The author states that governments especially in the more advanced countries are focusing more and more on giving quality education. They are also investing heavily in this field. According to the Organization for Economic Co-operation and Development, “Employment in the knowledge-based economy is characterized by increasing demand for more highly-skilled workers.” (The knowledge based economy: Organisation for economic co-operation and development, 1996 P.7). The human capital theory is correct with regard to this point. The situation today demands that more knowledge in needed. In such a situation people with knowledge will definitely be in great demand and will get good wages. But this line of thought has two drawbacks. One is that it assumes that all human beings will act rationally and will naturally try to increase their income by increasing their knowledge. In other words, it does not take into account that human beings will also act irrationally. The second major drawback is that it does not take into consideration other factors like politics, society, human behavior complexity etc into consideration. It is common knowledge that all these factors will affect human resources policies and outcomes. (Fitzsimons, 1999). Moreover, there are other factors that influence income and even human behavior. In many cases, labor rates are fixed or at least influenced by trade unions. Wages vary from industry to industry and also on the type of organization. A government organization may pay less than a private corporation for the same qualification. Discrimination on the basis of sex, race etc is also factors that will not take qualification into consideration. It will also vary regionally with advanced economies paying more than developed or under-developed ones. Many other factors other than compensation will also determine employee behavior. The main ones are location of job, the type of job, reputation of employer, career development, security, organizational culture, the challenge in the job, the power the job provides, etc.
It can be strongly said that the Human Capital Theory with reference to HRD is relevant, but incomplete. It only takes one point of view that employees look for bigger incomes and that this is possible through acquisition of more knowledge. (Ramlall, 2003 P.66) There are also many theories that deal with this subject like Maslow’s hierarchy of needs, Herzberg’s Hygiene theory, Expectancy theory, Acquired Needs theory, Goal Setting theory etc. Here again the theories mentioned above sticks to the point that human beings act rationally or will act in a predetermined way as mentioned in those theories. It does not take into consideration the complex nature of human behavior or the other external factors that can influence human behavior.
The Scarce resource theory states that capital (land, labor and resources) are scarce and has to be managed efficiently. The main points raised by the theory are that if resources are scarce, there will be conflict and that organizations (countries, corporations etc) will try to gain control over its uses. Other groups will try to gain back control over these resources resulting in conflict. These views are quite relevant in HRD practices. It can be seen that when employers become scarce (due to required qualifications or otherwise) rival companies will try to lure them to join them offering better conditions and pay. The conflict that arises is not open in the case of warfare, but such actions do create an atmosphere of conflict. The one area that that differs from theory and practice is that in the case of HRD, organizations find it difficult to gain control of employees to keep them from leaving. In the US, lack of qualified labor has resulted in companies finding it a problem to find qualified persons. (Hawthorne, 2007). So, with regard to Scarce Resource Theory, it can be said that there is a shortage of human capital in many areas. But unlike what is said in the theory, organizations find it difficult to control or stop the employees from leaving (due to shortage) causing high labor turnover.
An analysis of systems theories show that concepts given here whether it is the general systems theory, chaos theory or any other systems theory has more relations with human resource development. Human beings are complex and hence the environment in which they work is also bound to be complex. Systems theories by their inherent nature agree that organizations are complex in nature and hence are ideal to model organizations based on them so that they may successfully operate and grow in complex environments. (Lee, 2003 P.26). This view is agreed on by author and expert on supply chain management, Peter A. Bolstorff. After exhaustive review of papers of various experts he says that “the general systems theory provides the most “logical and comprehensive underlying structure” and suggests that systems theory is the unifying theory for the profession.” (Bolstorff, 1998 P.3). So, the theory that is most relevant to academics and experts would be the general systems theory. Chaos theory which can be called as belonging to the systems theory is also relevant. The author states that there are three major elements in this theory namely the system, complexity and system analysis. The key elements found in complex systems are also given here. One is that individuals can make decisions based on existing rules. Change of behavior can occur when a colleague or peer changes his behavior. Interaction occurs between processes, individuals and the environment. Interaction among different factors in the organization can have both positive and negative effects. All this can cause un-predictive behavior of the whole system. So, it can be said that the general systems theory and the chaos theory which is an offshoot of general systems theory have practical applications in HRD.
With regard to how these theories apply to research and practice, Richard Swanson gives his own view on how it should be done. He brings in three words and the relation ship between them. The words are theory, research and practice. There have been debates which of these leads to which and which is the most important. The general belief is that research leads to practice and not vice versa. Swanson is of the view that a theory can only be called as such when it is developed through research, development and practice. (Swanson, 2007, P. 323. Theory connection to Research and Practice). So, in order to form the ultimate theory of human resources, detailed studies of existing human behavior studies should be done. The studies should be developed and put into practice. Only then can a definitive theory emerge.
There are detractors to the three legged model developed by Richard Swanson. It is of the opinion that human resources is too complex a field to include just the three theories (economic, psychological and systems). Gary McLean, one of the top experts in the field of Human Resources has written about his views in the article titled ‘HRD: A three legged stool, an octopus or a centipede’. He argues that HRD is not just a three legged stool but an octopus with eight tentacles. Bringing in the legs of a centipede was an exaggeration. He does not give what the eight factors are but suggests that anthropology, theories of communication, theories of team building, sociology etc are all part of this area. Just like the tentacles of an octopus can regenerate itself, HRD must constantly reform itself. Because it is dynamic, it is better to compare it with something animate like an octopus rather than an inanimate stool. But he agrees totally that the three theories discussed above are an integral part of HRD studies. (McLean, 1998 P. 375-357).
Suggestions and Conclusion
It can be seen that due to the complex nature of human behavior no definite theory of HRD has evolved. It could even be that no static theory can be developed regarding this area. So any one theory that may be developed will have to be dynamic in nature and it should be able to include new findings into its fold. It can be seen that only certain factors can be taken from economic theories. It is possible that qualification can lead to better income for the employee. It is also true that human capital can become a scarce resource at least in some fields. But it has been found that unlike what is said in scarce resource theory, it is difficult to gain control over its supply. It is also seen that HRD is more closely related to systems theories than economic theories. A model that could be developed from all this is given below. Qualification of employees is a factor for determining the level of income of the employee. But there are other important factors that determine income levels. Human capital can be scarce in some fields, but it is difficult to control its source. Apart from systems theories, other fields like mentioned by McLean should become a part of human resources research. It can be concluded that no static theory will be able to explain the complex world of human resources. If a theory is developed, it should be dynamic enough to incorporate the changes that will surely come in the future.
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