Topic > The importance of human capital in strategic management

The individual or collective approach to human capital is the first key issue discussed. There is a problem with combining individual behavior, skills, or experiences at the unit level. The process fails to provide an explanation of the mechanisms that drive performance. “An approach such that each incremental addition of human capital will increase performance fails to explain where the human capital resource originates, how it is created, and how it is transformed” (Wright, P. and McMahan, G., 2011). The specific versus general approach aligns the characteristics of human capital, along various dimensions, from the most general to the purely specific. The approach suggests that the organization's competitive advantages can be achieved through the development of firm-specific human capital. The general characteristics of human capital are widely used by many companies, for market-level compensation. Therefore, general human capital skills can be easily found and obtained. On the other hand, the specific characteristics approach has value only within the organization itself. Therefore, strategic human resource management should repay specific human capital in order to encourage and retain employees. However, general human capital can also represent a source of sustainable competitive advantage. Human capital sustainability emphasizes “better employee recruitment and retention, cost savings, improved corporate reputation and stakeholder relationships, and financial returns” (Zohreh, M; Napsiah, I; Zulkiflle, L; Norzima, Z., 2013). Competence versus motivation versus behavior theory focuses on building motivational bridges between human capital and behavior. Supporters of this theory argue that an employee's characteristics (skills, knowledge, education, etc.) provide only a basis but,