EFFECTS OF HUMAN CAPITAL MANAGEMENT ON PERFORMANCE OF SELECTED BUSINESS ORGANIZATIONS IN SOUTH EAST NIGERIA

ABSTRACT

The  Study  on  Effect  of Human  Capital  Management  on performance  of  Selected Business  Organizations  in South  East  Nigeria  was  motivated  by the  high  rate of business failures in Nigeria and the need to proffer solutions.  The study was guided by five objectives from which 5 research questions and hypotheses were formulated .The descriptive survey was adopted by the study.  The research instrument used were questionnaires and oral interviews.  The population of the study was  4298 employees from  ten (10) manufacturing business  organization selected from South East Nigeria comprising of five states, Abia, Anambra,   Ebonyi, Enugu and Imo State.  A sample size of 556 was determined from the population using Freund and William formula. Spearman  Correlation  was used to test the  validity and reliability of the research instruments.    The  result  was  0.92  indication  high  degree  of  relationship.    The hypotheses were tested using Pearson’s Correlation Statistic for hypotheses 1,2 and 4 while hypotheses 3 and 5 were tested using ANOVA (one way).  The result revealed that the Employees  recruitment practices in the selected organization  had positive effect on the share holder’s returns on investment(P<0.01 ) versatility as a skill in the selected  organizations was highly significant and contributed to increase in market share  of the organization  (P<0.01),  Quality health  care available  in the selected organization was significant and this contributed to their profitability the   (P<0.01); the motivation and financial incentives for the employees of the selected organization is not significant and do not influence their productivity it has a (P<0.000) and the retention strategies applied by he selected organization were not significant and such did not  have positive effect on profitability(P<0.000)   Based on the above result of the study, the following recommendations were made: Business organization should endeavour to apply the correct procedures in recruitment of employees by advertising vacancies, use aptitude tests to ascertain the intelligence of applicants, this will help. Business organizations should adopt various motivation and financial incentives for their  employees  to  boost  the  morale  of  their  employee  thereby  increase  their productivity.  Organizations  should have staff clinic managed  by qualified  medical personalities,  this will  reduce cost caused by inflated bill and reduce absenteeism. The strategies towards retention of quality employees should be adopted by business organization   because it is more economical for organization to retain high profile and talented  productive  employee  than allow him go while he is  replaced  with a novice.

CHAPTER ONE INTRODUCTION

1.1       Background to the Study

Human Capital Management has its historical development from nineteenth century. The criticisms of the free enterprise system and exploitation by factory owners gave rise to the intervention of the social reformers known as Lord Shaftebury and Robert Owen. Through these social reformers, new initiatives emerged and regulations were also  made  hence  the  nomenclature  personnel  management  Torrington,  Hall  and Taylor (2005). He defines personnel management as “a series of activities enabling working man and his employing organization to reach agreement about the nature and objectives  of  the  employment relationship  between  them  and  then  to  fulfil  those agreements”.  However  the  increase  in competition  in business  globally  generally brought  the  need for changes hence a shift from personnel management to Human Resource Management in the early 90’s which is a strategic and coherent approach to the management  of an organization’s  most  valuable  assets,  that  is the  employees Armstrong. (2006)

Through innovation, there is a shift from Human Resource Management to “Human Capital Management” this is as a result of persistence upsurge in the business world with the accompanying  increase  and  aggressive  competition.  Armstrong  describes Human Capital Management (HCM) as a paradigm shift from traditional approach to Human  Resource  Management.  Human  capital  is  the  sum  total  of  individual’s intelligence built on the acquisition of skill, training, education and experience over a lifetime.  Armstrong (2006) quoting Bontis, Dragonetti,  Jecobson,  And Roos (1999) explain  that  Human  Capital  represents  the  human  factor  in the  organization  that combines intelligence,  skills and expertise that give the organization  its distinctive character. Such organizations that appreciate the financial impact of their employees often refer  to  them as “Human Capital”, because the employees are recognized  as important   assets   who   contribute   to   organization   performance,    growth   and productivity.  Human capital is the nations most valuable resources, other capitals and natural resources are passive factors of production while human beings are the active agents  who  not  only  accumulate  capital  but  exploit  natural  resources  and  carry forward national development Ossai (2010).

In organizations,  the quality  of the employees  always  remain  the  most  important factor  that  determines   whether   an  organization   will  be   successful,  realize   a satisfactory  return on investment  and achieve  its set  objectives.     Human Capital Management  is  defined  by  Armstrong  (2004)  as  a  strategic  approach  to  people management that focuses on the knowledge, skills, abilities and capacity to develop and innovate possessed by people in an  organization.   Another definition says that Human Capital Management is the use of metrics to guide an approach to managing people and regard  them as  assets in organizations  Okoro( 2011).   Human Capital Management   is about treating employees as an asset rather than as mere-overhead and helping them understand the contributions of their own effectiveness on the job. Okoro also describes Human Capital as a means of production into which additional investment yield additional output.

Human capital management in organizations starts from the process of acquisition of employees.   It is also note worthy to mention that the quality of employees selected determines  the  quality  of  services  each  of  the  employees  will  render  to  the organization.   That is why it is important to have the interest and  objectives of the firm in mind, because businesses  today are challenged  with  ever changing market place where traditional inter-departmental boundaries no longer exist. The employees should be innovative and adaptable to suit the changes.    To achieve this adaptation, the individuals  performing  the  jobs in  organizations  need  to be trained  to  ensure versatility on the job. The  foundation  of all high performing organizations are the value which their workers possess and as such generate values to their organization in return, this is  in accordance with an aged long adage which says that a person can only afford to give out what he or she has.

“Training primarily focuses on teaching organization members how to perform their current  jobs and helps them  to acquire  the knowledge  and skills they  need to be effective performers” Ezigbo (2011). The training function therefore insinuates that the gap between the required and actual performance is the inadequacy of knowledge and skills.”   Human capital management  views skill  development  as important for promoting economic stability.   Human Capital Management is also interested in the health of the employees,  it recommends that  employers should promote employees

health by providing conducive safety working environment in the organization with good sanitary conditions, and take care of their employees’ medical treatments.

Summarily Human Capital Management insinuates that employees should be seen as assets to their organization and should not be treated as cost and such assets are to be preserved.   Okoro (2011) opines that current best practice looks at  quantifying the value of people in terms of their characteristics and the value  they produce in both financial  and  non  financial  terms.  “Human  capital   management   highlights  an approach which aligns the goals of the employees and the goals of the organization to meet specific measurable realistic business objectives “Codianco (2007) the  approach will really make the employees to be proactive.

Today,   many  young   graduates   may  not  know   that   companies   like   Nigerian Construction  and  Furniture  Company  (NCFC),  Niger  –  Gas  Company in Emene, Niger – Steel Company, Eastern Plastics Ltd, Sunrise Flower Mills Ltd Emene, Enugu and so on once existed in Enugu. This study is of the view that part of the problems that lead to the disappearance  of these profitable  companies may be as a result of inadequate human capital management. On the other hand, some few companies are flourishing within the same environment where many others have died.

Some of these companies are Innoson Technical Company Ltd, Emene, Enugu.   The company is involved in production of plastic household equipments and assembling of motorcycles and Juhel Nigeria ltd Enugu, others are Tonimas Nigeria Limited Aba. Abia State, Comestar Manufacturing company Aba Abia State, Afrik  Pharmaceutical Plc Owerri Imo State, Fuason Nigeria Limited  Owerri Imo State, Edon Aluminium Limited  Abakaliki  Ebonyi  State, Ibeto  Cement  Company  Limited  Nkalgu,  Ebonyi State, Hardis and Dromedas  Nigeria  Limited    Umunya  Anambra  State and  Kates Associates Industries Limited Ogbaru   Anambra State,   These companies are in the South East of Nigeria and  have been in existence for many years.  It is on this ground that the researcher has purposively chosen to assess the of human capital management and organizations performance.

1.2       Statement of the Problem

It is observed that business failures are rampant in our country because many business organizations  which emerged  in the past existed  for some  years and  subsequently

collapsed.  Those  organizations  that  are  still  in  operation  are  experiencing  untold hardships ranging from inability to generate profit as a result of obsolete practices, products and services, poor performance of their employees, lack of commitment to duties from employees, employee turnover and several others Baumback (1992).

However, there are other business organizations that are booming, generating profit and metamorphosing into chains of businesses.  There are other ones that manage to last as long as possible with very little profit margin.  The reasons for the differences in performance of these organizations need to be traced and tackled. The researcher is of the  opinion  that  the bulk of the challenges  lies on  inadequate  Human  Capital Management  since  both  performing  and  non-performing  ones  exist  in  the  same environment and the same economy.   People are often spoken of as assets, but are generally treated as costs, because we have no credible system of valuing them.

This absence of effective way of valuing employees subsequently led to  ineffective management  of  those  employees  and  consequently  lead  to  collapse  of  so  many business  organizations  in Nigeria  and  increase  unemployment      The high rate of unemployment  increases  social  ills  like  armed  robbery,  kidnapping,  prostitution, stealing  etc.  remains  very  high  as  a  result  of  unemployment.    It  is  against  this backdrop that this study is focused on finding out how Human Capital Management practices can be applied to the existing  business organizations  in Nigeria for their continuous  existence  to  solve  the  challenges  of  unemployment  and  subsequently reduce other social ills in the country.

1.3       The Objectives of the Study

The thrust of the study is Human Capital Management and performance in Nigerian business  organizations.  Specifically  this  Study  intends  to  achieve  the  following objectives:

i.     To  investigate  the  effect  of  the  employees  recruitment  practices  on  share holders’ return on investments.

ii.      To examine  the extent  at which versatility  as a skill influence  the  market share.

iii.      To assess the extent at which motivation  influence  productivity.

iv.      To determine the effect of employee healthcare programmes on their returns on investments.

v.      To ascertain  the extent  to which the employee  retention  strategies    affects profitability.

1.4       Research Questions

In order to guide the researcher towards conducting an effective study, the following research questions were formulated.

i.     What is the effect of employee recruitment practices on shareholders’ returns on investment?

ii.      To what extent does employee versatility as a skill influence the market share?

iii.      To what  extent  do  the motivation  and  financial  incentives  adopted  by  the selected organizations increase their productivity?

iv.      What is the effect of the health care programmes of the organizations on their returns of investment?

v.      To what extent do the retention strategies adopted affect the profitability of the organizations?

1.5       Research Hypotheses

In  order  to  guide  the  researcher  further  towards  an  effective  research  work,  the following research hypotheses were formulated.

i.     Quality employee recruitment practices adopted in the organizations increase shareholders’ returns on investment.

ii.      Versatility as a skill to a large extent  increases market share.

iii.      Motivation and financial incentives available for the employees  significantly increase their productivity.

iv.      Quality  health care programmes  increase  the returns  on investment  of  the organizations.

v.      Several  retention  strategies  applied  by the  organizations  to  a  large  extent enhance profitability.

1.6       Significance of the Study

This research will be significant to the following groups:

To  the  Researcher:  Sequel  to  the  successful  completion  of  this  research,  the researcher  will  be  exposed  to  effective  ways  of  managing  workforce  to  extract maximum efficiency from them.

Practitioners: The information gathered from the study would be used to generalize the  need  for  effective  Human  Capital  Management  in  business  organizations  for improved performance and survival of business organizations.

Policy Makers:  It will expose employers on ways of managing, training, developing, maintaining  and  retaining  talented  employees  in  their   organization  to  increase efficiency and increase revenue generations for sustainability.

General public: When the workforce of organizations are stable, their managements will be more focused, productivity will consequently increase,   enough revenue for survival will be generated to increase employment  opportunities for the public and consequently reduce social vices.

1.7       Scope of the Study

This research on Human Capital Management and performance of Nigerian business organizations is based on the study of 10 sampled business organizations in the south East Nigeria. This study covers the procedures for effective recruitment of employees, and  investigates  the  procedures  adopted  in  acquisition  of  employees,  system  of influencing    employees    for    high    productivity.    Moreover,    it    encompasses training/development of employees tracing the various ways of enhancing employees skills  for  greater  performance.     Furthermore,  the  research  surveys  motivational practices adopted in these organizations as well as healthcare programmes available for  employees  and  optimum  workforce  retention  strategies  in  the  organizations. Duration of the research is between 2011-2015.

1.8       Limitations of the Study

This  research  work  successfully  came  into  conclusion  but  not  without   some constraints. These constraints are:

The Attitude of the Study Organizations:   The research was carried out in privately owned limited liability companies and as such, the results may differ  from what is obtainable in public limited companies.   Similarly, for the fact that privately owned companies  were  used  for  this  research,  this  made  the  collection  of  certain  data impossible. For example, none of the sampled companies was willing to release their financial  statements  for  this research,  they also  refuse  to  release  their  production records.  Some of their management staff threatened to stop the research being carried out  in their  organizations  if the  research  is a  plot to  spy on  the  affairs  of their

companies.  As a result of these refusals this study was conducted without obtaining the raw data in respect of production records and financial statements of the sampled organizations.  In  place  of  these,  the  questionnaires  and  interview  to  obtain  the workers  perception  of  how  the  variables  under  study affects  their  organization’s performance.

1.9       Operational Definition of Terms

Assessment  Score: This is an observational  tool that provide a common lens  that focuses on effective teaching and helps teachers/trainers  to know the effect  of their interaction with trainees (http/www.google.com)

Employee  Growth:   This means an opportunity  that enable employees to  expand their knowledge, skill and abilities and apply the competencies they have gained to new situations. (Herman, 2013) http://www.apaexellence.org.res…

Employee Healthcare Programmes:  These are healthcare programmes designed by employers  to  carter  for  employees’  diagnosis,  treatment,  prevention  of  diseases, illnesses and mental impairment (http://www.nhis).

Knowledge  Workers:    Knowledge  workers  are employees  who  contribute  to  the company  through  creativity,  knowledge  of  vital  information  concerning  the  job, customers and adds real value to their field (Noe et al., 2000).

Tele-work:   It is a system that allows employees to conduct some or all their work out of the organization’s primary workplace Fulton-Calkin (2008).

Workplace   Bullying:   It   is   hostile   and   aggressive   behaviour   like   mobbing, victimization etc in a working environment Fulton-Calkin (2008).

1.10     Profile of Selected Business Organizations

Tonimas  Nigeria Limited Aba, Abia State

Tonimas Nig. Limited is a manufacturing company in Aba, the factory is at no    11, Port  Harcourt Road Aba Abia State.  The company was incorporated in 1982. They are involved in the manufacturing of lubricants like break fluid, low smoke fluid and semi-synthetic  oil,  primus  super  oil.  They  are  also  involved  in  marketing  and distribution  of  refined  petroleum  products  within  Nigeria,  but  this  research  will anchor on their manufacturing company only.

Comestar Manufacturing  Company Aba,  Abia State

Comester Manufacturing Company Limited is a manufacturing company located at no

75  Hospital  Road  Aba Abia State.  The  company  was  incorporated  in 2002  as a production company.  Their products are electric wires, cables, copper and  flexible cables and they conform to Nigeria Industrial  Standard (NIS).

Kates Associates Industries Limited, Ogbaru, Anambra State Kates   Associates Industries Ltd is a manufacturing  industry incorporated  in 1975. The  industry is at Plot  76  Niger  Bridge  Head  Ogbaru  Anambra  state.     Their   products  include deodorants,  perfumes,  body  sprays,  Cool  breeze  antiperspirant-deodorant   roll-on (shower fresh), ECB hair cream relaxer  (regular), Imperior Divine Eau de parfum, Amazon bar soap, lionail extra nail polish, Golden girl gentle cream, Fanol laundry soap, Olive herbal toothpaste,  Ambi pur odour neutralizer (green fields) and other beauty  products  and  are  registered  with  National  Agency  for  Food  and  Drugs Administration  and  Control (NAFDAC)  and the Standard  Organization  of Nigeria (SON)

Hardis and Dromedas Nig. Ltd, Umunya,  Anambra State

Hardis  and  Dromedas  Ltd  is  an  indigenous,  manufacturing  company,  with  its operational factory at Umunya Oyi Local Government Area of Anambra  state.  The company is registered under the corporate affairs decree of the Federal Republic of Nigeria  in  1993  and  fully  licensed  by  National  Agency  for  Food  and  Drugs Administration  and Control (NAFDAC)  and the  Standard  Organization  of Nigeria (SON). Their products are divitol disinfectants, germicides, insecticides, fumigation compounds, methylated spirits, detergents, Isol soaps, Royalux cleansing astringents and air fresheners.  Their  products  areapproved  by the National  Agency for Food, Drug    Administration    and    Control    (NAFDAC).Edon    Aluminium    Limited, Abakaliki, Ebonyi State.

Edon Aluminium Limited is a manufacturing company established in 2001 with the factory  situated  along  Enugu  Abakaliki  high  way.  They  manufacture  aluminium roofing sheets of different designs and are registered with the appropriate authorities.

Ibeto Cement Company Limited, Nkalagu, Ebonyi State

Ibeto Cement Company Ltd, Nkalagu  is a cement manufacturing company, they are

60% owner of Nigeria Cement Company   Nkalagu (Nigercem) established in 1997 but started production  in 2005.

Juhel Nigeria Ltd, Enugu, Enugu State

Juhel Nigeria Limited is a pharmaceutical company located at No. 35 Nkwubor Road Emene  in  Enugu,  the  capital  of  Enugu  State,  Nigeria.  It  is  a  100%  indigenous company incorporated  in 1987 with RC no 104648  as a wholesale  pharmaceutical company but later ventured  into  production and the factory was  commissioned  in

1989 as the first pharmaceutical tablet manufacturing company in old Anambra State. Their  products  are  drugs  like  antibiotic  and  anti-infective,   cardiovascular,   anti diabetics etc. and bottled water.

Innoson Technical and Industrial Company Ltd, Enugu, Enugu State

Innoson Technical and Industrial Ltd is a subsidiary of Innoson group. The company has a motorcycle manufacturing plant in Nnewi and plastic  manufacturing plant in Emene,  Enugu  along Enugu  Abakaliki Express  way.  They have received  national productivity award and belong to Manufacturers Association of Nigeria (MAN).

For  the  purpose  of  this  research,  the  researcher  will  concentrate  her  studies  on

Innoson  Technical and industrial Company  Emene Enugu.

Afrik Pharmaceuticals Plc, Owerri, Imo State

Afrik Pharmaceuticals Plc at No 1 Afrik Road Awomamma in Owerri Imo State and was  established  in  1992.     The  company  is  a  limited  Liability  Company  and manufactures varieties of pharmaceuticals products like drugs, Intravenous Solutions and other chemical products.

Fuason Industries Nigeria Ltd Owerri Imo State

Fuason Industries Nigeria Limited is a manufacturing industry and is located at no 8

Assumpta Avenue, Owerri, Imo State. They specialise in the production of galvanised roofing sheets and they are registered with the Manufacturers Association of Nigeria {MAN.)

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