LL5: Facilitating Human Capital : Lecture Discussion Paradigm Shift and Structural Capital

LL5: Facilitating Human Capital : Lecture Discussion Paradigm Shift and Structural Capital

Successful organizations evolve steadily. Following a cycle that starts with a policy or approach that is no longer relevant and effective, these organizations comes around over time to a new paradigm, or a new framework for acting and understanding.

Organizations have started realizing that in order to improve their productivity, a more skilled workforce is required (paradigm shift in Human Capital). If their workforce is educated and skilled they can bring in more for the company in every aspect. This has led to workforce being considered a capital that needs to be invested in, rather than just a resource that can be exploited.

Another reason for this shift could be the rise in competition in almost every industry. The rise of new industries has also posed threats to other industries. This rise in competition has led organizations to understand that the talent, which is required for the specific needs of the organization, has to be found, developed and retained within the organization.

Organizations have also started realizing that people are their most important asset, and if sustained in the right manner, with the proper care and nurture, this asset could be used to maximize profit and bring in the competitive edge that they require in this ever-dynamic business environment.

Organizations have realized that with a workforce that is committed, capable and clear about its strategies and objectives, the organization stands at a better position in the business environment. Employees who understand its vision and mission are crucial for survival as well as to make an impact.

Structural (SC) capital is part of the intellectual capital that is owned by an organisation and its efficient and dedicated management is essential for the creation of shareholder value, sustainable competitive advantage, and prolonged first-mover advantage. For me, structural capital allows sustainable competitiveness. Organizational capital consists of organizational culture, management philosophies etc. and has received a large amount of management attention. However, organizational capital is not as valuable towards the creation of sustainable competitiveness and first-mover advantage as innovation and process capital are.