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Tuesday, September 29, 2015

Investing in Firm Specific or General Human Capital Development

Learning new skills is an additive process that begets more complex skill. Organizations are faced with trying to develop either firm-specific or general human capital capacities to create competitive advantages. Knowing whether to invest training resources into firm specific or general skills helps to create stronger competitive advantages. Where to invest in training depends on the type business and its products.

The discussion should first start with understanding the nature of broad versus firm-specific skills. Broad skills as contained within a degree like engineering that can be applied across many different businesses and industries.  It is a general battery of knowledge that is necessary to create a foundation of specific knowledge. 

Firm-specific skills are more focused on that which directly benefits the firm and applies to the unique nature of that company. Specific skills, like using a proprietary tools,  are generally not seen as transferable to other businesses. They are often taught in job specific training and practice. 

It is believed that there is a current global underinvestment in firm-specific human capital that creates competitive abilities (Coff & Raffiee, 2015). This is because of the transient nature of employment, a long term recession that limited training dollars, and a general migration to relying on formal higher education. 

Investing in firm specific skills is beneficial when the firm has a unique service/product that requires specialized firm-specific knowledge to maintain. Such firms may hire for general knowledge but use that knowledge to create specific skills needed within their proprietary environment. At its core, all learning, even on the micro level, can be applied to other places due to the additive process of learning. Investing in firm-specific or general knowledge will depend on the competitive offerings of each firm to determine its return on investment value.

Coff, R. & Raffiee, J. (2015). Toward a theory of perceived firm-specific human capital. Academy of Management Perspectives, 29 (3). 

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