Hrd in Development

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The Role of HRD in Economic Development
Suhail S. Zidan
Beyond its effects on individuals and organizations, HRD also carries with it the potential for economic development benefits at the societal level. The literature suggests six causes of economic development: (1) foreign trade, (2) technological transfer, (3) resource allocation, (4) structural transformation, (5) human capital formation, and (6) savings and investment (Hagen, 1986; Loehr and Powelson, 1981). The focus of this article is on the role of HRD on the last two causes of economic development: human capital formation and savings and investment. Specifically, I discuss the relationship between human capital and HRD, describe the research context that takes place at the encounter point between less-developed countries (LDCs) and a multinational enterprise (MNE), and propose a set of research questions to guide future research.

Human Capital and HRD
There is general agreement that human capital formation is one of the critical causes of economic development. Human capital is defined as the productive investments in humans, including their skills and health, that are the outcomes of education, health care, and on-the-job training (Todaro, 1994). The relationship between human capital theory and human resource development stems from their focus on the use of the labor force in the process of economic productivity, in the broader sense of the term. In his influential book on human competence, Gilbert (1996) states: “The purpose of performance engineering is to increase human capital, which is defined as the product of time and opportunity” (p. 11). Human capital theory is an economic theory that addresses the macroeconomics of production and economic development. It views human capabilities—their knowledge, skills, health, and efforts—as integral parts of the capital of a country, along with financial and natural resources. The premise of this theory is that investments made in educating the workforce and
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is a nonrefereed section inviting readers’ reactions and opinions.

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developing their skills (among other services such as providing them with nourishment and maintaining their health) would pay dividends for a country in its effort to develop economic viability and contribute to an increase in output per each unit of input (Hogendorn, 1996). The human capitalist approach studies the cost-benefit of such investment in terms of its efficiency in reaching equilibrium in the amount of investment in education, as opposed to investment in other factors of production, for the purpose of maximizing the return on investment. Similarly, HRD views humans as resources to be trained, educated, and developed within the system of an organization for the purpose of enhancing the productivity of the organization through the expertise of its workforce. Jacobs (1990) and Swanson (1995), among others, have characterized HRD as a multidisciplinary field of study. As shown in Figure 1, they identify economics as an important discipline that contributes to the theoretical basis of HRD. Economics and human capital theory have become important foundational ingredients for HRD theory and practice. Moreover, in his first editorial for the commencement of HRDQ, Swanson (1990) divided the contents of HRD into two components: (1) human development (psychology and education) and (2) human capital (economics and management). Carnevalle, Gainer, and Villet (1990), in taking a human capital approach, place HRD at the strategic level within the organization. They view employees as a resource that must be trained in order to maintain the competitive advantage of the corporation and increase its value. In this perspective, HRD activities (specifically, training) become utilitarian in the organizational strategy to keep up with economic and technological changes. Therefore linking training with specific job functions and performance requirements becomes the strategy for maximizing the return on investment. It is the economic potential and the economic rationale that provides the impetus for investing in workplace training. Training is an integral part of the economic system, whether we refer to it as being part of the organizational microsystem or a national macrosystem. Figure 2 shows the confluence of corporate strategy and governmental Figure 1. Role of Economics in HRD Intervention
Society: Developing Countries HRD

Psychology
Note: Adapted from Swanson, 1995

Economics: Economic Development

Systems

The Role of HRD in Economic Development Figure 2. Confluence of HRD and Economic Development
Six Causes of Economic Development

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Foreign Trade Resource Allocation

Technological Transfer Structural Transformation

Human Capital Formation

Savings and Investments

Education and Training HRD Individual Performer

Foreign Direct Investment Multinational Enterprise

economic development policy, where the decisions are both based in part on issues of efficiency and cost-effectiveness. Governments, in addition to their public education systems, may provide corporations and other private institutions with investment and tax incentives for developing their employees. Likewise, individual human beings join this confluence by considering the economic benefits of pursuing any educational or training endeavor. Members of the workforce take into account such factors as time, cost, effort, and opportunity cost when embarking on developing their skills in pursuit of employment or in maintaining employability. In sum, governments, companies, and individuals must—and do—consider the economic value of their investment in training before committing their own resources. Thus HRD professionals must consider the impact of their interventions, not only on individuals and organizations but on society at large.

Multinational Enterprises and Developing Countries
Throughout history, capitalism has made its advances in human productivity on the basis of the exploitation of human labor, technological innovation, and the appropriation of vast material wealth, rarely through the education

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and training of the large majority of the workforce (Ashton and Green, 1996). However, as the twenty-first century opens a new chapter in human history, there seems to be, according to Ashton and Green, “a consensus that the salience of a nation’s education and training system is becoming the key item in the struggle for competitive [economic] superiority” (p. 1). All the countries around the world, both developed and developing, seem to realize that the road to economic growth and development is tied to the skill formation of their human capital; they must improve the productivity of the labor force, thus raising the living standards of the population. Further, Thurow (1996) posits that countries wishing to develop and succeed in the future must begin to make long-term plans and commit major resources as investments in the education and the high skill formation of their society. Marshal and Tucker (1992) state:
The future now belongs to societies that organize themselves for learning. What we know and can do holds the key to economic progress just as command of natural resources once did. . . . The prize will go to those countries that are organized as national learning systems, and where all institutions are organized to learn and to act on what they learn. (p. xiii)

According to Thurow (1996), in the past two centuries the economic theory of comparative advantage directed companies to locate new business ventures in the world where natural resources and labor forces were abundant. Today and for the next century, however, the comparative advantage rests with the knowledge and skills of the workforce. In fact, Thurow (1996) asserts that the successful companies in the next century will be those who can create, organize, and capitalize on the brainpower of the global workforce. MNEs play a major role in the global human resource development area, both directly and indirectly (Dunning, 1993). Dunning further suggests that MNEs play an indirect role in the development of the workforce, in that the countries will attempt to develop their domestic human resources to meet the potential needs of MNEs who may be prospecting for a new foreign direct investment (FDI) location. MNEs, once established in a new country, become directly involved in further developing the skills of the foreign workforce they hire. This process involves various degrees of technological transfer that may in part affect an LDC’s ability to develop its own domestic economy. However, Dunning concludes that the effects of the MNE activity on the eventual skill mix and quality of the workforce in a particular country are not clear. The literature suggests that, in its strategy for economic development, any developing country will need to develop, educate, and train its human resources. Within LDCs interested in attracting private sector FDI, the preparation of a segment of these human resources will be targeted to meet the needs of prospective MNE investments. MNEs will also be searching the global

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market for new locations as prospects for their investment in production and service ventures. MNE decisions concerning their new venture locations will be affected, in part, by the availability of skilled human resources that will meet their needs (Bailey, Parisotto, and Renshaw, 1993). However, these LDCs can only guess at the skill needs of the potential MNE ventures that may be seeking to start operation within their borders. Therefore, to be more effective in their educational and training programs and to enhance their potential return on their investment in their human capital, LDCs interested in attracting MNE investments need to have better information about the criteria that MNEs use in determining the readiness of the labor force in a particular country in terms of their skill formation.

Proposed Research Questions
The literature suggests that the successful and dominant companies of the future will be those able to capitalize on the knowledge and skills of the global workforce (Ashton and Green, 1996; Thurow, 1996). Multinational enterprises will be competing among themselves, as well as between themselves and the domestic companies of any country, for the recruitment and retention of highly skilled employees. However, there is a need to develop additional knowledge about the attitudes of these MNEs toward the workforce in developing countries, the skill formation characteristics of the workforce that the MNEs are looking for, and the emphasis placed on workforce characteristics by the MNEs in determining their decision to initiate new ventures in any particular country. This research agenda attempts to identify these MNE attitudes, desired workforce characteristics, and emphasis placed on these characteristics in the process of selecting a particular country for possible investment in a new business venture. In addition, LDCs interested in attracting MNEs into their economies have to ensure that their workforce is skilled and ready to meet the job performance requirements of these companies. What kinds of programs should LDCs be designing and implementing for the purpose of developing the skills of the workforce to meet the employment challenges of the twenty-first century? The following are preliminary research questions: What are the assumptions, beliefs, and predispositions of MNEs when considering a workforce in developing countries? What workforce characteristics are most critical to LDCs and to MNEs? How much emphasis is placed on workforce characteristics within the MNE system when deciding on new investment ventures in a developing country? To what extent are LDCs planning and implementing high skill formation programs for developing their workforce? Which selection criteria are used by LDCs to choose a high skill formation approach as opposed to a low skill formation approach?

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How do LDCs address concerns of the nontraditional workforce such as women, older workers, and people with disabilities, among others? What is the impact of various government policies and corporate strategies on such societal outcomes as improving workforce performance, enhancing the quality of work life, and advancing the living standards of citizens?

Conclusion
The proposed research questions can be viewed as starting points for the HRD field. Human capital theory at the macro (societal) level complements HRD at the micro (organizational) level, and so on. The assumption here is that LDC governments must take a proactive approach toward creating educational systems that prepare the labor force for the global economy of the twenty-first century. This labor force then, in the systems view of the organization articulated by Rummler and Brache (1995), becomes one of the critical inputs for any organization (read economic entity) functioning within the boundaries of the respective LDC. At that point, HRD practitioners, in their focus on training and development, organization development, and career development, take the responsibility for enhancing the performance of the organization through the assessment of needs and the identification of gaps in performance at the organizational, workflow, and individual levels. Although I strongly believe in the viability of the aforementioned perspectives, my philosophical views, influenced in part by my personal values and professional experience, compel me to keep in mind that the workforce discussed here is not merely an abstract concept or simply a form of capital or a resource to be used for the planned and targeted ends of countries and corporations. This labor force comprises individual human beings who have their own goals, desires, and aspirations. Therefore, because human capital is different from physical or financial capital and is unique in that it has a will of its own, I believe that it becomes more difficult to determine the causal relationship between the actions of the HRD practitioners and the effects on the organizational outcomes, not to mention the ethical ramifications with regard to the individual human being. Gilbert (1996) said it best: “Ultimately, the institutions, private or public, that are least likely to be alienating are those that provide incentives for the accomplishments these institutions value, and supply the means for people to find their own best fit in those institutions” (p. 330). References
Ashton, D., & Green, F. (1996). Education, training and the global economy. Cheltenham, U.K.: Edward Elgar. Bailey, P., Parisotto, A. & Renshaw, G. (Eds.). (1993). Multinationals and employment: The global economy of the 1990s. Geneva: International Labour Office.

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Carnevalle, A., Gainer, L., & Villet, J. (1990). Training in America: The organization and strategic role of training. San Francisco: Jossey-Bass. Dunning, J. H. (1993). Multinational enterprises and the global economy. Wokingham, England: Addison-Wesley. Gilbert, T. F (1996). Human competence: Engineering worthy performance. Washington, DC: The . International Society for Performance Improvement. Hagen, E. E. (1986). The economics of development. Homewood, IL: Irwin. Hogendorn, J. S. (1996). Economic development (3rd ed.). New York: HarperCollins College Publishers. Jacobs, R. L. (1990). Human resource development as an interdisciplinary body of knowledge. Human Resource Development Quarterly, 1 (1), 67–71. Loehr, W., & Powelson, J. P. (1981). The economics of development and distribution. New York: Harcourt Brace. Marshal, R., & Tucker, M. (1992). Thinking for a living. New York: Basic Books. Rummler, G. A., & Brache, A. P. (1995). Improving performance: How to manage the white space on the organization chart (2nd ed.). San Francisco: Jossey-Bass. Swanson, R. A. (1990). Experience: A questionable teacher. Human Resource Development Quarterly, 1 (1), 1–4. Swanson, R. A. (1995). Human resource development: Performance is the key. Human Resource Development Quarterly, 6 (2), 207–213. Thurow, L. C. (1996). The future of capitalism: How today’s economic forces shape tomorrow’s world. New York: Morrow. Todaro, M. P. (1994). Economic development (5th ed.). New York: Longman.

Suhail S. Zidan is a doctoral candidate in workforce development and education with an emphasis on human resource development at the Ohio State University, Columbus, Ohio.

References: Ashton, D., & Green, F. (1996). Education, training and the global economy. Cheltenham, U.K.: Edward Elgar. Bailey, P., Parisotto, A. & Renshaw, G. (Eds.). (1993). Multinationals and employment: The global economy of the 1990s. Geneva: International Labour Office. The Role of HRD in Economic Development 443 Carnevalle, A., Gainer, L., & Villet, J. (1990). Training in America: The organization and strategic role of training. San Francisco: Jossey-Bass. Dunning, J. H. (1993). Multinational enterprises and the global economy. Wokingham, England: Addison-Wesley. Gilbert, T. F (1996). Human competence: Engineering worthy performance. Washington, DC: The . International Society for Performance Improvement. Hagen, E. E. (1986). The economics of development. Homewood, IL: Irwin. Hogendorn, J. S. (1996). Economic development (3rd ed.). New York: HarperCollins College Publishers. Jacobs, R. L. (1990). Human resource development as an interdisciplinary body of knowledge. Human Resource Development Quarterly, 1 (1), 67–71. Loehr, W., & Powelson, J. P. (1981). The economics of development and distribution. New York: Harcourt Brace. Marshal, R., & Tucker, M. (1992). Thinking for a living. New York: Basic Books. Rummler, G. A., & Brache, A. P. (1995). Improving performance: How to manage the white space on the organization chart (2nd ed.). San Francisco: Jossey-Bass. Swanson, R. A. (1990). Experience: A questionable teacher. Human Resource Development Quarterly, 1 (1), 1–4. Swanson, R. A. (1995). Human resource development: Performance is the key. Human Resource Development Quarterly, 6 (2), 207–213. Thurow, L. C. (1996). The future of capitalism: How today’s economic forces shape tomorrow’s world. New York: Morrow. Todaro, M. P. (1994). Economic development (5th ed.). New York: Longman. Suhail S. Zidan is a doctoral candidate in workforce development and education with an emphasis on human resource development at the Ohio State University, Columbus, Ohio.