Human Capital Development Role of HR during Mergers and Acqusitions

Abstract

IntroductionThe constantly changing global business environment requires firms to aim for competitive advantages through creative and innovative business strategies. This is essentially important for their long term sustainability. A study by Seleim, Ashour, and Bontis (2007) analysed the relationship between organizational performance of software companies and human capital. A positive association was found between human capital indicators and organizational performances. The indicators, such as training attended and team-work practices, tended to result in superstar performers which led to more productivity, which could be translated to organizational performances. A significant positive correlation was found by Dooley (2000) between the quality of developers and volume of market shares. It can be said that human capital indicators enhanced the firm performance directly or indirectly. A study by Bontis and Fitzenz (2002) established the relationship between human capital management and economic and business outcomes. Human capital development and enhancement in organizations contribute significantly to organizational competencies which in turn became a great boost for further enhancing innovativeness. Contemporary literature to a large extent supports the fact that firm performance is positively impacted by the presence of human capital practices (Noe et al., 2003; Youndt et al., 2004).Researchers have endorsed that human capital development is a prerequisite to good financial performance (Delaney & Huselid, 1996). The significance of organizational human capital with regard to firm performance was further supported by Hsu et al. (2007). It has been found in a survey (Schmidt, 2003) that there is a strong direct correlation between human resource involvement and 'success' in mergers and acquisitions. Since changing an organization ultimately comes down to changing the practices, attitudes, and behaviors of the people who compose it, human resources departments are an essential component of change management. This research paper aims to study the human capital development role of HR during mergers and acquisitions. Both quantitative as well as qualitative study has been carried out to capture a more complete portrayal of the subject.Literature ReviewDefining Human Capital DevelopmentAdam Smith defined four types of fixed capital (which is characterized as that which affords a revenue or profit without circulating or changing masters). The four types were: 1) useful machines, instruments of the trade; 2) buildings as the means of procuring revenue; 3) improvements of land and 4) human capital (Sullivan and Steven, 2003). 'Human capital represents the knowledge, skills and abilities that make it possible for people to do their jobs. Human capital development is about recruiting, supporting and investing in people through education, training, coaching, mentoring, internships, organizational development and human resource management (LISC, 2009). Human capital means a stock of skills and knowledge resulting in the ability to perform labor so as to produce economic value. It is the skills and knowledge gained by a worker through education and experience with different areas in that field (Wikipedia, 2009). Schultz (1993) defined the term 'human capital' as a key element in improving a firm assets and employees in order to increase productivity as well as to sustain competitive advantage. Human capitals involves processes that relate to training, education and other interventions in order to increase the levels of knowledge, skills, abilities, values, and social assets of an employee which will lead to the employee's satisfaction and performance, and eventually on a firm performance.Rastogi (2000) stated that human capital is an important input for organizations especially for employees' continuous improvement mainly on knowledge, skills, and abilities. Thus, the definition of human capital is referred to as 'the knowledge, skills, competencies, and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being' (OECD, 2001). …