Attracting High Quality Human Capital by the Value of a Company Brand

Bachelor Thesis , 2010 , 102 Pages , Grade: 1,6

Business economics - Business Management, Corporate Governance

It is indisputable that brands influence operating results as well as the reputation of a firm. Some statements even consider a brand as one of the most valuable assets of a company.
The relation between the brand and the consumer can be considered as a pact. The customer is loyal and trustful while the brand guarantees a consistent quality and pricing. What is questionable is whether a brand has the same effect on current and potential employees. Hence the question is: Does a brand also influence the employer attractiveness?
Improving or even creating a brand’s value requires a variety of both expensive and risky actions. This is one of the reasons many companies may under invest in that area. From the business point of view, the threat of spending money on measures which do not have a relevant effect on the business bears no relation to the few benefits to be expected. Thus, especially for SMEs, it is essential to know if investments to increase the brand value can be beneficial for a company’s recruitment.
Practice shows that the market activity of a company does influence the image also as an employer. Good examples are BMW and Porsche whose employer brand also benefits from the success of their businesses.
The knowledge about a correlation between the brand value and the attractiveness as an employer can be of big advantage for companies that do not maintain a valuable brand. They would get a chance to change their mindset concerning the investments in creating brand value in order to attract high quality human capital and benefit from other advantages a known brand brings in.

Table of contents

1. Introduction
1.1 Problem Description
1.2 Objectives
1.3 Methodology
1.4 Research Relevance
1.5 Structure of the Work

2. The Capital Facet of Human Resources
2.1 Properties of Human Capital
2.2 Measuring Human Capital
2.2.1 Classical Methods
2.2.1.1 Market-Based Valuation
2.2.1.2 Result-based Valuation
2.2.1.3 Company Equity Valuation
2.2.2 Indicator-based Methods
2.2.2.1 Scandia Navigator
2.2.2.2 Human Capital Value Drivers
2.2.2.3 Balanced Scorecard

3. Parameters & Variables of Motivational Drivers
3.1 Intrinsic Motivation
3.2 Extrinsic Motivation
3.3 Content Theory
3.3.1 Maslow – Hierarchy of Human Needs
3.3.2 Alderfer – ERG Theory
3.3.3 Herzberg – Two-Factor Theory
3.3.4 McClelland – Achievement Motivation
3.4 Process Theory
3.4.1 Adams – Equity Theory
3.4.2 Vroom – VIE Theory

4. Assessing Brand Value
4.1 Properties of Brand Value
4.2 Measuring Brand Value
4.2.1 Financial Models
4.2.1.1 Economic-use approaches
4.2.1.2 Cost-based approaches.
4.2.1.3 Marked-based approach
4.2.2 Behavior-related Models.
4.2.3 Indicator Models.

5. Derivation of Framework for Practical Application
5.1 Criteria of Motivation and Value of Brands
5.1.1 Selecting Motivational Factors
5.1.2 Selecting Brand Value Approach
5.2 Correlation of Brand Value and Motivation Theories

6. Assessing Theoretical approach in Practice
6.1 Investigation of Correlation of Brand Value and Employer Attractiveness
6.2 Examination of the Brand as a Motivational Factor at Work
6.3 Interpretation of the Results

7. Conclusion and Future Research Direction
7.1 Target Achievement.
7.2 Prospects & Outlook

Bibliography

Appendix

List of Abbreviations

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List of Figures

Figure 1: Structure of the Work

Figure 2: Evolution of the Task of Managing People

Figure 3: Differentiating HRM and HCM

Figure 4: Overview about Classical HC Measurement Methods

Figure 5: A Selection of Indicator Based HC Measurement Methods

Figure 6: Hierarchy of Human Needs according to Maslow

Figure 7: Comparison of ERG Theory and Hiearachy of Human Needs

Figure 8: Herzberg's Motivators and Hygiene Factors

Figure 9: Comparison of Two-Factor-Theory and Hierarchy of Human Needs

Figure 10: Simplified VIE Theory

Figure 11: Exemplified Hierarchy of Types of Brands

Figure 12: Result of Bräutigam's Survey

Figure 13: Correlation of Brand Properties

Figure 14: Brand identity of McDonald's according to Aaker

Figure 15: Systematic Classification of the Term Brand Value

Figure 16: Brand Value Chain

Figure 17: Overview of Major Brand Valuation Occasions

Figure 18: Classification of Selected Brand Valuation Models

Figure 19: ICON Brand Iceberg

Figure 20: Brand Identity Enhanced by Employer Brand Attributes

Figure 21: Overview of Brand Value Influencing Employer Attractiveness

Figure 22: Combined view of Interbrand and Trendence – Sector: Business

Figure 23: Combined view of Interbrand and Trendence – Sector: Engineering

Figure 24: Combined view of Interbrand and Trendence – Sector: IT

Figure 25: Comparison of Common Employers in Trendence Rankings

Figure 26: Results of the Practical Application

List of Tables

Table 1: Selection of Types of Brands

Table 2: Brand Cases to Decide on in Bräutigam's Survey

Table 3: Factors Influencing the Interbrand Brand Index

Table 4: Top Ten Motives at Work Classified in Traditional Motivation Theories

Table 5: Comparison of Common Employers in Trendence Rankings

Table 6: Search Pattern for Data Analysis

Table 7: Result of Data Analysis Using English Pattern

Table 8: Result of Data Analysis Using German Pattern

1. Introduction

This work was drafted to attain the bachelor degree in international management at the FOM – Hochschule für Oekonomie und Management in Essen. During this work the nomenclature is to be considered as gender-free.

1.1 Problem Description

It is indisputable that brands influence operating results as well as the reputation of a firm.¹ Some statements even consider a brand as one of the most valuable assets of a company.²

The relation between the brand and the consumer can be considered as a pact. The customer is loyal and trustful while the brand guarantees a consistent quality and pricing.³ What is questionable is whether a brand has the same effect on current and potential employees. Hence the question is: Does a brand also influence the employer attractiveness?

Improving or even creating a brand’s value requires a variety of both expensive and risky actions. This is one of the reasons many companies may under invest in that area. From the business point of view, the threat of spending money on measures which do not have a relevant effect on the business bears no relation to the few benefits to be expected. Thus, especially for SMEs, it is essential to know if investments to increase the brand value can be beneficial for a company’s recruitment.

Practice shows that the market activity of a company does influence the image also as an employer. Good examples are BMW and Porsche whose employer brand also benefits from the success of their businesses.⁴

The knowledge about a correlation between the brand value and the attractiveness as an employer can be of big advantage for companies that do not maintain a valuable brand. They would get a chance to change their mindset concerning the investments in creating brand value in order to attract high quality human capital and benefit from other advantages a known brand brings in.

1.2 Objectives

The aim of this work is the investigation considering the following research question:

In what ways does the value of a company brand influence the attraction of human capital?

The first stage is to determine if there is any correlation of brand value and the employer attractiveness at all. If there is a significant correlation identified, the next level of research is to investigate in what ways both aspects are related. Otherwise the subsequent target would be to find out why there is no link between the two aspects.

This work provides an overview of the framework of employer attractiveness and the related topics from a macro perspective. The level of detail provided is deep enough to examine the following subordinate research question:

What are the main motives of an applicant when applying for a position?

The objective of this work is certainly not quantitative research to determine an absolute answer to the research questions. Rather a qualitative indicator which can be used as a basis for further research will be the outcome. Furthermore, it is not the aim to provide in-depth theoretical knowledge but sufficiently detailed information on the theoretical topics to follow the tide of this work. Additionally, the objectives do not include the stipulation of detailed recommended procedures in terms of human capital management and brand management.

1.3 Methodology

In order to achieve the above-mentioned objectives, this work will make use of different methodologies. The overall procedure is the combining of established theories about motivation, human capital and brand valuation with current data collected from different sources. During this procedure the following methods are applied:

- Descriptive method
- Deductions⁵
- Qualitative empirical research⁶

Descriptive method

To build a theoretical basis, a reproduction of theoretical literature was made to create a fundamental knowledge base, which is sufficiently detailed to support the purpose of the work. Theoretical information was collected, analyzed and classified. This was then linked taking into account sources from established literature that is worth citing. A differentiation of literature’s quality has been made based on relevance for practice, wide acceptance and the availability of verifications.

Deductions

When combining aspects of different theoretical areas, conclusions can be drawn. These deductions are made using parts from the descriptive method as well as using findings of the qualitative empirical research.

Qualitative empirical research

During this work different data from various sources is analyzed, using qualitative empirical research. Quantitative empirical research has not been carried out because the available data is too little to deploy quantitative methods to it. The results would not be representative as quantitative methods require a broad data basis to provide meaningful results. Since the resources of this work are limited after an estimation of effort additional measures for data acquisition have not been taken into account.

The qualitative empirical research was applied to secondary data in terms of published rankings regarding employer attractiveness and brand value. It was further used to analyze recruitment data provided by a global company. Here the analysis was made using pattern matching⁷ via MS Excel formulas.

1.4 Research Relevance

“Each era has been defined by the factor of production that has served as the foundation for wealth creation. Not surprisingly, in the agrarian era, land was the primary source of wealth. In the industrial era, the primary sources of wealth were machinery and, to a lesser extent, natural resources. In the knowledge era, human capital is the source of wealth.”⁸

This statement emphasizes the importance of employees as a major intangible asset which is increasingly accepted in today’s economy.⁹ Strategic factors such as human capital are more and more replacing the physical work of a firm as a major strategic success factor.¹⁰ Therefore, management should pay attention to the importance of the work force. Employees are no longer a resource but an asset or capital worth investing in.¹¹

Those companies still considering their workforce as costs rather than a sustainable investment, can partly be understood since the factors defining the value of human capital are mainly soft factors which are hard to measure.¹²

A study conducted in 1989 in the car manufacturing industry displayed a significantly higher efficiency of Japanese manufacturers compared to manufacturers in Germany. The most efficient system identified was the system of Toyota. A thorough analysis of the reasons for the competitive advantage led to the conclusion that besides other factors, human capital has a high influence on the efficiency demonstrated.¹³

A “variety of recent economic trends have combined to make selection of high-potential candidates even more important than it has been in the past”¹⁴. In the past, people got paid and guaranteed a secure job as long as they performed appropriately. The employee in turn was loyal and provided the performance requested. Today, employees tend to see the company as a stepping stone in their career while the personnel department is concerned with keeping the employees motivated.¹⁵

Values are changing. People’s motives are changing from materialistic to non-monetary - to self actualization and work-life-balance.¹⁶ Peter Drucker already stated that “Loyalty can no longer be obtained by the pay checks”¹⁷ but employees “want to be recognized for their efforts”¹⁸.

Some companies and also a variety of literature maintain the opinion that the main element in attracting human capital is the monetary compensation package.¹⁹ Such behavior can lead to a high employee turnover and costs of employee turnover can be considerably high. Different studies have found that the total severance and replacement costs can be about 1 - 2.5 times the annual salary of the employee that left the company. The majority of these costs never reach the attention of top management since they are not considered in the accounting procedures due to their nature as a soft-factor.²⁰

Moreover, employee fluctuation often leads to a considerable loss of knowledge in the company.²¹ This is emphasized via the frequent reaction of the stock market to just that.²² Stakeholders and investors often take their decisions based on information also about human capital.²³

To attract and keep workforce, a company has to know what the employees want. As soon as they know, they have to deliver to employees what they want in the most cost- effective way.²⁴ Increases in job satisfaction and opportunities for development have a proven positive influence on the employee fluctuation.²⁵

Demographic changes aggravate the problematic situation.²⁶ Experts from the Federal Statistical Office in Germany state that the population able to work in Germany is shrinking sharply. They expect a drop from today’s 50 million to 42 million in the year 2030.²⁷ Frequent warnings concerning a shortage of qualified specialists in different sectors have been stated for some years.²⁸

Rising business opportunities which may arise in the future lead to increasing requirements for qualified work force which have to be met.²⁹ The increasing competition and pressure for innovation boosts the requirement for of qualified and creative work force with in-depth knowledge also in economies and technology.³⁰ This will lead to a situation where human workforce is a scare good.³¹ It will become harder to find the right person for the right job.³² This situation has often been called a “war for talent”³³. This problem is not limited to high potentials but also increasingly affects blue-collar workers.³⁴

Personnel departments should not block but deal with the topic of changing environment and take appropriate actions.³⁵ Maintaining human capital is not only a task of the personnel department but a task of the whole management of a company.³⁶ Additionally, the marketing department of a company must be involved as they have the appropriate expertise on relevant topics concerning branding.³⁷

1.5 Structure of the Work

This work begins with the introductory part in which the problem that gave the idea for the topic is highlighted. The targets to be achieved are outlined and the methodology explained. Furthermore, the relevance of the research for practice is stated.

The next part creates a theoretical basis on the topics motivation theory, human capital, and brand value while mentioning different definitions and scientific approaches. After that, the following chapter prepares for the practical approaches while selecting relevant elements from the theoretical basis created before. The selection of factors from motivational theory is encouraged by the analysis of survey results on motivational factors at work. In a next step, a relation between the selected parts is created.

A validation of the theoretical parts is done via a practical application in the next part of the work. During this part rankings concerning employer attractiveness and brand value are compared with each other. Furthermore, data from the recruitment system belonging to a global player is analyzed to determine a correlation of the brand and applications arriving at this company.

In the conclusion, a review of the targets set is made. Based on that, a validation of the target achievement and an outlook for further research topics in this area is put forward. Figure 1 provides a diagram to get a clear picture on the main structure explained. Here elements which are displayed in parallel to each are naturally interlinked with each other.

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Figure 1: Structure of the Work ³⁸

2. The Capital Facet of Human Resources

The evolution of practices of managing people has travelled a long way through various trends and directions. Within this development, five main stages can be identified.³⁹ Figure 2 illustrates that it started in the first stage by keeping records and files on the employees and their work related matters. This was followed by a compliance stage wherein companies had to follow work-specific legislation to fulfill legal requirements. The third stage was characterized by service delivery thinking in order to be considered as a partner of the line management instead of only a record-keeping body. This stage was closely followed by the next which handled personnel management as a business partner and finally came to the point where the staff was referred to as a part of the capital.⁴⁰

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Figure 2: Evolution of the Task of Managing People ⁴¹

Until the early 1990s, the term personnel management described the work of those taking care for the employees and their matters. Then HR or HRM took over this role and was the timely appropriate description. This term did not change for about 20 years. Today the term HC as a replacement for HR is gaining more ground.⁴²

In conclusion this shows that employees “have moved from being a cost to becoming a resource and today they are considered to be an asset or a capital”⁴³.

What is questionable is only if the term has changed or if the fundamental approach behind is also changing. The differentiation between HR and HC can be made by two main issues. The combination of the given possibilities for measurement and the degree of the strategic focus shows the difference.⁴⁴

Figure 3 shows that HRM has a low strategic focus, which can also be seen as focusing on costs. HCM, on the other hand, has the target of creating and managing value. Hence the high strategic focus. Additionally, measurement within HRM is hardly taken into account. This emphasizes the focus on activities and transactional thinking. The HCM approach however has an emphasis on measurement which means a strong focus on performance.⁴⁵

illustration not visible in this excerpt

Figure 3: Differentiating HRM and HCM ⁴⁶

Thus, the conclusion is that HC is more than a new name for HR. There is rather a coexistence of HR and HC in which HR takes over the supporting transactional role whereas HC holds the strategic role of the business of managing people.⁴⁷

Furthermore, HC changes the role of people management from a cost center to an asset provider.⁴⁸

2.1 Properties of Human Capital

Scientific literature does not provide a consistent definition of human capital.⁴⁹ As a start it can be said that human capital is “the knowledge that individuals acquire during their life and use to produce goods services or ideas in market or non-market circumstances”⁵⁰. Another definition adds that “human capital is the embodiment of productive capacity within people. It is the sum of people’s skills, knowledge, attributes, motivations and fortitude”⁵¹. The Human Capital Club defines human capital while dividing it into three parts which are employee, processes and structures. The employee part, which has the focus within this work, is in line with the above- mentioned definition and enhances the attributes by breaking down the skills into leadership skills, team-mindedness, loyalty and willingness to cooperate.⁵² The OECD narrowed down the skills by adding the requirement of relevance to the economic activity.⁵³

The research question of this work focuses on high quality human capital. To identify the factors affecting the quality of human capital, the framework of human capital must be understood.

Human capital is one part of a company’s intellectual capital. Other elements of the intellectual capital are the customer capital and structural capital.⁵⁴ The customer capital is the sum of customer relationships, their loyalty and the knowledge about their needs, while structural capital includes amongst others the efficiency of processes and the organization in general.⁵⁵ HC as the third element creates the basis for the generation of the other two parts.⁵⁶ Following this approach, human capital is of a high quality if it can generate the other forms of capital.⁵⁷

The competencies of an employee can be valued separately while taking into consideration the breadth and the depth of expertise. This view on the staff provides another indicator for the quality of human capital. The broader and deeper the expertise, the higher the quality that can be considered.⁵⁸

Besides these basic perceptions of human capital, quality literature offers also the possibility to quantify human capital in a more scientific way.

2.2 Measuring Human Capital

Due to its complexity and the related soft factors, the valuation of human capital has been ignored by the industry for a long time.⁵⁹ However, academic research deals with that topic as there still is a clear need for verifiable and arbitrary approaches.⁶⁰ Valuating human capital is a necessity in order to be prepared for future needs resulting from economic developments.⁶¹

Currently, companies only measure the costs related with people regardless of the benefit they bring.⁶² Measuring human capital, and publishing the results, can bring advantages to the company that spends the effort. Investors as well as the customers will be fully aware of the company’s human assets.⁶³ This decreases the uncertainty if the company can serve the customer needs appropriately. Another positive aspect is that the employees feel more comfortable when they are a company asset rather than being a cost factor. Last but not least, measurement of human capital provides a better possibility for performance appraisal and manpower assessment.⁶⁴ This follows the basic principle “you can only manage what you can measure”⁶⁵.

In the end, a company must identify the individual benefits of human capital valuation on its own.⁶⁶

Due to the fact that human capital is not standardized and based on many individual factors, there is not one single approach for measurement to be named to bring a correct result.⁶⁷ One of the influencing factors that make human capital individual is the fact that human capital is embodied in people.⁶⁸

Research provides different theories and methods to observe the value of human capital.⁶⁹ All theories and methods have its weaknesses due to assumptions that have to be made. Hence there is no generic method existing.⁷⁰

These theories and methods can be classified into classical methods and indicator based methods.⁷¹ In the following, a selection of these approaches is expressed in a level of detail which is appropriate to the scope of this work.

2.2.1 Classical Methods

Literature provides diverse classifications of measurement methods. For the purposes of this work different research opinions were combined to give a clear picture. Figure 4 provides a simplified overview of classical valuation methods without making a claim to be complete.

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Figure 4: Overview about Classical HC Measurement Methods ⁷²

Classical methods can be clustered into three main categories.⁷³

2.2.1.1 Market-Based Valuation

The market based valuation assumes that the value of human capital is equal to the deviation of market value of the company from the value of a company’s actual private equity.⁷⁴ That implies that the market mechanism valuates the human capital of a company.⁷⁵

2.2.1.2 Result-based Valuation

Result-based valuation identifies the value of human capital as the net value added of a company in total.⁷⁶ The best known variant of a result-based valuation is the approach of the Boston Consulting Group which is called workonomics^TM.⁷⁷

2.2.1.3 Company Equity Valuation

The company equity valuation can be specified further into input-oriented and output- oriented approaches.⁷⁸

The input-oriented approaches are also called human cost accounting and try to identify the value of the employees using the costs which are caused by them.⁷⁹ This can be done either by considering actual costs or future costs.⁸⁰ According to Flamholtz, the actual costs can be separated in historical costs and costs which might incur if there is a need to replace the employee.⁸¹ The future costs can be estimated by considering future earnings for the next five years and discounting it with the average cost of capital.⁸² Following Lev and Schwartz, the estimation can be strengthened by taking into account also the average retention period of the employees.⁸³ When using the opportunity costs as a base for valuation, the approach is to determine the value of the employee by simulating a market mechanism inside the company. In this case, different departments give the employees a value while bidding for them.⁸⁴ Following this theory, a staff member only has a value if there is an alternative usage for the employee within a company.⁸⁵

All input-oriented approaches are based on past determinants such as expenses incurred and costs in general.⁸⁶ The output-oriented methods on the other hand are future oriented as these approaches are mainly based on performance and economic benefit of the workforce.⁸⁷ Literature refers to the output-oriented methods also as “human value accounting”.⁸⁸

The valuation based on company value was coined by Roger Hermanson.⁸⁹ From his point of view, a company’s assets can be separated into owned assets and operational assets.⁹⁰ Owned assets are resources “legally or constructively owned by the entity, that have a separate determinable market value and therefore could conceivably be directly used or converted for the payment of its debts“⁹¹. Operational assets, on the other hand, are not owned by the entity, e.g. a highly trained workforce.⁹² Hermanson defined that market average profits can be achieved only using the owned assets. That implies that the deviation of a company’s profits from the market average embodies the operational assets that per Hermanson’s definition stand for human capital.⁹³

In the 1920s the General Motors Corp. acquired the Adam OPEL AG at a higher price than the book value and justified this decision with the highly skilled workforce.⁹⁴

The weakness of this method becomes visible when a company’s profits are lower than the market average. In this case, the method provides no or even a negative value for the human capital.⁹⁵

One of Flamholtz’s approaches is based on future performance of the workforce.⁹⁶ This approach depends on a combination of the attributes which the employee contributes and the characteristics of an organization. It considers the expected service life, the service levels and the service groups of an employee.⁹⁷

The service life stands for the expected retention time, while the service levels mean the different positions an employee holds. The service groups represent the performance level of the employee which can be determined using either the price-quantity or the income method.⁹⁸ If the work units are clearly identifiable, quantifiable and a price can be allocated, the price-quantity method can be used. Apart from that, the income method has to be employed. This in turn requires the availability of determinable revenues of an organizational unit which can be allocated to single individuals using a distribution key.⁹⁹ The actual value of the human capital is calculated by discounting the identified values with an appropriate rate.¹⁰⁰

The main weakness lies in the assumption that the variables such as the retention risk do not change with time.¹⁰¹ Another negative aspect is the infeasibility of benchmarks using this method because the variables like e.g. the discount factor provide a large wiggle room.¹⁰² On the other hand, this method has a strong future orientation and focuses on the development of the workforce while assuming that an employee holds different position during his service life.¹⁰³

Likert and Bowers developed the model of behavioral variables.¹⁰⁴ They classified the influencing factors in causal variables, intervening variables and end-result variables.¹⁰⁵ Causal variables can be directly influenced by the management of a company. Organizational structure, strategic decisions and management style are elements of this type of variables. They affect the developments within a company and have a huge effect on the efficiency of the workforce. Furthermore, causal variables influence the intervening variables. Intervening variables embody the motivation, working atmosphere, loyalty and the ability to work together towards a common target. The end- result variables represent a company’s financial targets.¹⁰⁶

This approach rather underlines the qualitative value of workforce instead of targeting a monetary valuation of the human capital.¹⁰⁷ According to, Flamholtz this characteristic is “the model’s most important contribution is to the nonmonetary measurement of human resource value”¹⁰⁸.

The Saarbrücker Formel is a result of research work done by Christian Scholz, Volker Stein and Roman Bechtel.¹⁰⁹ It is a synthesis of different approaches.¹¹⁰ The approach consists of four components:¹¹¹

- HC Value Base
- HC Value Loss
- HC Value Compensation
- HC Values Change

The HC Value Base (HC-Wertbasis) is calculated using an indicator for grouping the employees and multiplying the FTE with the average salary in the business sector. The indicator could be the educational degree of a person or the seniority. The HC Value Loss (HC-Wertverlust) stands for the decreased usefulness of an employee’s knowledge to the company. The usefulness of the knowledge of an IT consultant, for example, decreases faster than the knowledge of a shoemaker. The HC Value Compensation (HC- Wertkompensation) is the costs of the personnel development measures which are raised to counteract the HC Value Loss. The employee’s motivation is represented by the HC Values Change (HC-Wertveränderung) which is a motivational-index. The values calculated above are multiplied with this index to come to a result.¹¹²

This result can be understood as an indicator or an approximation rather than a reliable absolute amount.¹¹³

2.2.2 Indicator-based Methods

In contrast to the classical methods, the indicator-based methods do not intend to rate the human capital in a general monetary way. They rather focus on the quality of single aspects concerning human capital.¹¹⁴

Figure 5 depicts only a selection of indicator based methods. Expert’s opinions differ also here in terms of sub-classification and classification in general.¹¹⁵

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Figure 5: A Selection of Indicator Based HC Measurement Methods ¹¹⁶

Scientific theories as well as consultancy practice provide a broad portfolio of approaches in this area.¹¹⁷ The aim of this section is only to give a basic understanding and to provide an overview about the status-quo. Therefore in the following there are only selective methods outlined from a macro perspective.

2.2.2.1 Scandia Navigator

Leif Edvinsson was one of the first using the term intellectual capital.¹¹⁸ Following his definition, human capital is the most important part of the intellectual capital of a company.¹¹⁹ In the early 1990s, he started the development of an instrument to make intellectual capital measurable and comparable. His intention was to allow benchmarks between companies concerning intangible assets like human capital.¹²⁰

The method got its name from the Swedish insurance company Scandia wherein Edvinsson conducted his research. During his analysis he defined five perspectives the model can be used from:¹²¹

- Financial Focus
- Customer Focus
- Process Focus
- Renewal and Development Focus
- Human Focus

The indicators of the individual perspectives have to be created from the company’s strategic goals.¹²² Within the human focus the indicators could be employee turnover or training time.

One weakness of this instrument is the arbitrary selection of indicators. Each company has different goals and therefore has a need for different indicators.¹²³

2.2.2.2 Human Capital Value Drivers

Uwe D. Wucknitz designed a model which considers different drivers for the value of human capital.¹²⁴ This approach proposes different evaluation procedure dependent on the given occasion.¹²⁵ One basic assumption is that human capital consists of three elements which are individual HC, dynamic HC and structural HC.¹²⁶

The individual HC contains personal factors like quality and characteristics of management, their employees and the capability. Dynamic HC covers process dependent aspects like company culture or personnel management systems. The structural HC includes aspects like employee behavior, employee turnover or number of staff ill.¹²⁷

Wucknitz defined ten value drivers which are represented in at least one of the HC elements:¹²⁸

- Company Environment
- Company Structure
- Team Processes
- Leadership
- Personnel Management
- HR Labor Law Policies and Procedures
- Personnel Costs
- Personnel Structure
- Key Personnel
- Company Culture

These value drivers can be influences by 36 different factors.¹²⁹ Out of the different factors Wucknitz created a more than 1.000 indicators companies can select from.¹³⁰ Due to the high wiggle room the model provides it is doubtful if the model can allow a comparison between different companies.¹³¹ However Wucknitz states that there is no absolute value of human capital. It is a relative value to the company dependent on the achievable benefit.¹³²

2.2.2.3 Balanced Scorecard

In the 1990s Robert S. Kaplan and David P. Norton developed a controlling tool to combine strategic and operative planning.¹³³ The Balanced Scorecard tries to enhance the given monetary ratios by adding the non-monetary indicators.¹³⁴ These indicators are formed from four different perspectives:¹³⁵

- Financial
- Customer
- Internal processes
- Training and Development

The BSC can be considered as a collection of relevant ratios within these perspectives.¹³⁶ The determination of the human capital value takes place in the area of training and development while considering employee motivation, satisfaction and productivity.¹³⁷

Amongst others, the employee turnover, innovation capability and surveys provide other operands for the calculation.¹³⁸

The model treats employees as cost factors.¹³⁹ However it has significant similarities to models of Wucknitz and Edvinsson. Wucknitz’s value drivers for example can be mapped according to the four perspectives defined by Kaplan and Norton.¹⁴⁰ As the aim of the BSC is also to obtain absolute target values this goes one step further than the value drivers model.¹⁴¹

Even though the basic idea of combining the strategic and the operational planning is well structured in the BSC, it does not sufficiently point out the causes for the result.¹⁴² Hence there is no proper recommendation for actions the management could take.

3. Parameters & Variables of Motivational Drivers

In the 1930s, the first humanistic theories in the area of research on motivation were published. Prior to these publications, humans and their attitude to work were assessed following the assumptions of Taylor who defined mechanical human thinking.¹⁴³ Following the humanistic approach, every person is led by different motives. A motive is a constant and situationally-dependent behavioral tendency that disposes humans to show, or specifically not to show, a specific behavior.¹⁴⁴ Harvey Carr stated that “a motive is defined as a relatively permanent stimulus that dominates the behavior of an organism until it responds in such a manner that it is no longer affected by it.”¹⁴⁵ Literature differentiates motives by primary and secondary motives. Primary motives are natural. They are congenital, whereas secondary motives are created during the lifetime of a human being. They are learnt and affected by experiences.¹⁴⁶

The term motivation is used in many areas. Thus there are various definitions existing. Even within one area there are different understandings of motivation. When talking about motivation in the area of humanistic theories, motivation is “a state that directs an organism in certain ways to seek particular goals”¹⁴⁷. A definition dealing with motivation especially in terms of employment states that motivation “refers to the individual forces that account for the direction, level, and persistence of a person’s effort expended at work”¹⁴⁸.

Within this work, the term motivation will be used from a humanistic theory point of view. It will be considered as the habit of striving towards one’s own motives and goals. The different aspects affecting motivation can be either intrinsic or extrinsic. Intrinsic motives are “positively valued work outcomes that the individual receives directly as a result of task performance”¹⁴⁹. Extrinsic motives are “positively valued work outcomes given to the individual by some other person”¹⁵⁰.

Theoretical approaches in the area of motivation within humanistic theories can be separated into content theories and process theories. Content theories explain why human needs change with time, whereas process theories explain how human needs change.¹⁵¹ Content theories always need elements from process theories and the other way around. But that does not imply that both approaches are linked.¹⁵²

None of the existing motivation theories provides a full picture of the human motivation. All approaches are based on different assumptions and focus on different aspects of motivation.¹⁵³ Nonetheless, research on motivation theories supports management in understanding human behavior and decision taking.¹⁵⁴

3.1 Intrinsic Motivation

Motives which are fulfilled as a result of the work or the work itself are known as intrinsic motives.¹⁵⁵ Important motives in this area are the achievement motive, competency motive and the sociality motive.¹⁵⁶

The achievement motive (Leistungsmotiv) focuses on the achievement of own goals and the wish to influence something with the own work. Aspiring to responsibility and creative independent deployment on the job are the main points of the competency motive (Kompetenzmotiv). The pursuits of belonging to a group and being accepted as well as protected are aspects of the sociality motive (Geselligkeitsmotiv).¹⁵⁷

3.2 Extrinsic Motivation

A motive which can be fulfilled by external factors is of an extrinsic nature.¹⁵⁸ Literature knows three main extrinsic motives.¹⁵⁹ The compensation motive (Geldmotiv) is the most obvious motive a person can strive for.¹⁶⁰ It definitely is an extrinsic motive but it has also an emotional aspect. The effect of this emotional part can differ from one person to another. But it has potential to catalyze intrinsic motives like achievement and power. The security and safety motive (Sicherheitsmotiv) represents a basic need every person has. The wish for a safe job and health is only a part of this motive. People who want to pursue a career particularly strive for the prestige and status motive (Prestige- or Statusmotiv). That motive is often closely related to the compensation motive.¹⁶¹

3.3 Content Theory

The focus of content theories lies on the motives of a human being.¹⁶² They cope with the questions about kind, content and effect of the needs of individuals.¹⁶³

The different approaches of the content theory “help to explain how poor performance, undesirable behaviors, low satisfaction, and the like can be caused by blocked need or need that are not satisfied on the job”¹⁶⁴.

Typical approaches are the hierarchy of human needs of Maslow, the ERG Theory after Alderfer, the Two-Factor Theory according to Herzberg and McClelland’s achievement motivation.

[...]

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¹ Acc. to Esch F.-R. (2008), p.XI.

² Acc. to Keller, K. L. (2003), p.9.

³ Acc. to Keller, K. L. (2003), p.3.

⁴ Acc. to Steinle, M., Thies, A. (2008), p.24.

⁵ Detailed description can be found in Deiffert, H. (2003), p.140.

⁶ Detailed description can be found in Bernard, H. R. (2000), p.418.

⁷ A definition can be found in Alpar, P. (2000), p.214.

⁸ Bhutoria, N. (2003), p.2.

⁹ Acc. to Scholz, C., et al. (2003), p.50.

¹⁰ Acc. to Schütte, M. (2004), p.99.

¹¹ Acc. to Bhutoria, N. (2003), p.16.

¹² Acc. to Jerrentrup, R., Terhorst, S. (2008), p.7.

¹³ Acc. to Becker, M. (2008), p. 24f.

¹⁴ Trank, C. Q., et al. (2002), p.332.

¹⁵ Acc. to Scholz, C., et al. (2006), p.17f.

¹⁶ Acc. to Scholz, C. (2000), p.18f.

¹⁷ Drucker, P. F. (1992), p.101.

¹⁸ Avalos, A. (2008), p.50.

¹⁹ Acc. to Armstong, M., (1988), p.150.

²⁰ Acc. to Cascio, W. F., Boudreau, J. W. (2010), p.48f.

²¹ Acc. to Streich, D. (2006), p.7.

²² Acc. to Streich, D. (2006), p.7.

²³ Acc. to Jerrentrup, R., Terhorst, S. (2008), foreword.

²⁴ Acc. to Bhutoria, N. (2003), p.5.

²⁵ Acc. to Bhutoria, N. (2003), p.11.

²⁶ Acc. to Hanke, B., Hübner, K. (2010); p.44f; Steffen, E., Ollechowitz, W. (2010), p.25.

²⁷ Acc. to Steffen, E., Ollechowitz, W. (2010), p.25.

²⁸ Acc. to Hartge, T. (2010), p.1.

²⁹ Acc. to Bhutoria, N. (2003), p.19.

³⁰ Acc. to Jerrentrup, R., Terhorst, S. (2008), p.1.

³¹ Acc. to Streich, D. (2006), p.8.

³² Acc. to Grbavac, M. (2009), p.4; Steffen, E., Ollechowitz, W. (2010), p.25.

³³ Avalos, A. (2008), p.50; Grbavac, M. (2009), p.51; Hanke, B., Hübner, K. (2010), p.44.

³⁴ Acc. to Wagner, S., Deppe, J. (2010), p.34.

³⁵ Acc. to Scholz, C., et al. (2006), p.18.

³⁶ Acc. to Jerrentrup, R., Terhorst, S. (2008), p.5.

³⁷ Acc. to Steffen, E., Ollechowitz, W. (2010), p.28.

³⁸ Source: Own illustration.

³⁹ Acc. to Meyer, M. Chrysler-Fox, P., Roodt, G. (2009), p.1.

⁴⁰ Acc. to Meyer, M. Chrysler-Fox, P., Roodt, G. (2009), p.1.

⁴¹ Source: Own illustration based on Meyer, M. Chrysler-Fox, P., Roodt, G. (2009), p.1.

⁴² Acc. to Meyer, M. Chrysler-Fox, P., Roodt, G. (2009), p.1; Schmid, M., Kuhnle, H., Sonnabend, M. (2005), p.188.

⁴³ Bhutoria, N. (2003), p.16; analogue Wucknitz, U. D. (2002), p.7.

⁴⁴ Acc. to Meyer, M. Chrysler-Fox, P., Roodt, G. (2009), p.4.

⁴⁵ Acc. to Meyer, M. Chrysler-Fox, P., Roodt, G. (2009), p.4.

⁴⁶ Source: Own illustration based on Meyer, M. Chrysler-Fox, P., Roodt, G. (2009), p.4.

⁴⁷ Acc. to Meyer, M. Chrysler-Fox, P., Roodt, G. (2009), p.5.

⁴⁸ Acc. to Bhutoria, N. (2003), p.14.

⁴⁹ Acc. to Streich, D. (2006), p.42.

⁵⁰ Bhutoria, N. (2003), p.1.

⁵¹ Bhutoria, N. (2003), p.2; similar Friederichs, P., Labes, M. (2006), p.18.

⁵² Acc. to Schmid, M., Kuhnle, H., Sonnabend, M. (2005), p.189; Schütte, M. (2005), p.18ff; Friederichs, P., Labes, M. (2006), p.21ff.

⁵³ Acc. to OECD (1998), p.9.

⁵⁴ Acc. to Bhutoria, N. (2003), p.7; Edvinsson, L., Brünig, G. (2000) p.16ff.

⁵⁵ Acc. to Bhutoria, N. (2003), p.7f..

⁵⁶ Acc. to Fitz-Enz, J. (2003), p.12.

⁵⁷ Acc. to Bhutoria, N. (2003), p.7f.

⁵⁸ Acc. to Bhutoria, N. (2003), p.9f.

⁵⁹ Acc. to Bhutoria, N. (2003), p.12; HRMagazine (2008), Schütte, M. (2005), p.21f.

⁶⁰ Acc. to Bhutoria, N. (2003), p.12; Jerrentrup, R., Terhorst, S. (2008), foreword.

⁶¹ Acc. to Bhutoria, N. (2003), p.12.

⁶² Acc. to Bhutoria, N. (2003), p.12.

⁶³ Acc. to Acc. to Aschoff, C. (1978), p.II; Bhutoria, N. (2003), p.20; HRMagazine (2008).

⁶⁴ Bhutoria, N. (2003), p.20.

⁶⁵ A cite of Peter F. Drucker in Cohen, W. A. (2008), p.53.

⁶⁶ Acc. to Scholz, C., Stein, V., Müller, S. (2007), p.5.

⁶⁷ Acc. to Bhutoria, N. (2003), p.12; Persch, P.-R. (2003), p.1, Pietsch, G. (2007), p.254; Schütte, M. (2005), p.21f.

⁶⁸ Acc. to Bhutoria, N. (2003), p.12.

⁶⁹ Acc. to Jerrentrup, R., Terhorst, S. (2008), p.8, Schütte, M. (2005), p.22f.

⁷⁰ Acc. to Jerrentrup, R., Terhorst, S. (2008), p.1; Schütte, M. (2005), p.21f.

⁷¹ Opinions about classification differ. E.g. Jerrentrup, R., Terhorst, S. (2008), p.8ff; Scholz, C., Stein, V., Bechtel, R. (2006), p.51; Schütte, M. (2005) and Persch, P.-R.(2003)

⁷² Source: Own illustration based on Hentze, J., Kammel, A. (1993), p.166; Wunderer, R., Schlagenhaufer, P. (1994), p.80; Streich, D. (2006), p.66.

⁷³ Acc. to Nestler, A., (2003), p.72; Schütte, M. (2005), p.22f, Smith, G. V., Parr, R. L. (2000), p163ff.

⁷⁴ Acc. to Schütte, M. (2005), p.22f.

⁷⁵ Acc. to Lindenmayer, P., Schäfer, H. (2004), p.58; Persch, P.-R.(2003), p.60.

⁷⁶ Acc. to Schütte, M. (2005), p.22f.

⁷⁷ Acc. to Schütte, M. (2005), p.23.

⁷⁸ Acc. to Jerrentrup, R., Terhorst, S. (2008), p.8; Streich, D. (2006), p.66.

⁷⁹ Acc. to Hentze, J., Kammel, A. (1993), p.165; Wunderer, R., Schlagenhaufer, P. (1994), p.78f; Streich, D. (2006), p.66.

⁸⁰ Acc. to Streich, D. (2006), p.69.

⁸¹ Acc. to Flamholtz, E. G. (1999), p.55; Jerrentrup, R., Terhorst, S. (2008), p.9; Streich, D. (2006), p.69.

⁸² Acc. to Aschoff, C. (1978), p.184ff; Persch, P.-R.(2003), p.129ff.

⁸³ Acc. to Lev, B., Schwartz, A. (1971), p.103.

⁸⁴ Acc. to Bhutoria, N. (2003), p.22; Hentze, J., Kammel, A. (1993), p.167; Streich, D. (2006), p.69f.

⁸⁵ Acc. to Hekimian, J. S., Jones, C. (1967), p.104f; Streich, D. (2006), p.85.

⁸⁶ Acc. to Wunderer, R., Schlagenhaufer, P. (1994), p.79.

⁸⁷ Acc. to Hentze, J., Kammel, A. (1993), p.166; Wunderer, R., Schlagenhaufer, P. (1994), p.79; Streich, D. (2006), p.66.

⁸⁸ Acc. to Wunderer, R., Schlagenhaufer, P. (1994), p.79.

⁸⁹ Acc. to Persch, P.-R.(2003), p.123.

⁹⁰ Acc. to Hermanson, R. H. (1964), p.5, Persch, P.-R.(2003), p.123.

⁹¹ Hermanson, R. H. (1964), p.5.

⁹² Acc. to Hermanson, R. H. (1964), p.5.

⁹³ Acc. to Hermanson, R. H. (1964), p.14; Persch, P.-R.(2003), p.123.

⁹⁴ Acc. to Streich, D. (2006), p.66.

⁹⁵ Acc. to Lindenmayer, P., Schäfer, H. (2004), p.69; Persch, P.-R.(2003), p.128.

⁹⁶ Acc. to Flamholtz, E. G. (1974), p.167f; Persch, P.-R.(2003), p.156; Streich, D. (2006), p.100.

⁹⁷ Acc. to Jerrentrup, R., Terhorst, S. (2008), p.11; Streich, D. (2006), p.100.

⁹⁸ Acc. to Streich, D. (2006), p.100.

⁹⁹ Acc. to Persch, P.-R.(2003), p.172; Streich, D. (2006), p.100.

¹⁰⁰ Acc. to Persch, P.-R.(2003), p.172; Streich, D. (2006), p.101.

¹⁰¹ Acc. to Streich, D. (2006), p.105.

¹⁰² Acc. to Persch, P.-R.(2003), p.173; Streich, D. (2006), p.105.

¹⁰³ Acc. to Bhutoria, N. (2003), p.23; Streich, D. (2006), p.105.

¹⁰⁴ Acc. to Jerrentrup, R., Terhorst, S. (2008), p.11.

¹⁰⁵ Acc. to Flamholtz, E. G. (1999), p.173f; Persch, P.-R.(2003), p.166.

¹⁰⁶ Acc. to Persch, P.-R.(2003), p.166.

¹⁰⁷ Acc. to Persch, P.-R.(2003), p.166.

¹⁰⁸ Flamholtz, E. G. (1999), p.177.

¹⁰⁹ Acc. to Jerrentrup, R., Terhorst, S. (2008), p.22; Streich, D. (2006), p.117.

¹¹⁰ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.221ff; Jerrentrup, R., Terhorst, S. (2008), p.22; Scholz, C. (2006), p.3.

¹¹¹ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.226; DGFP (2007), p.85f; Jerrentrup, R., Terhorst, S. (2008), p.22.

¹¹² Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.226ff; Jerrentrup, R., Terhorst, S. (2008), p.22ff; Streich, D. (2006), p.117ff.

¹¹³ Acc. to Schütte, M. (2005), p.25.

¹¹⁴ Acc. to Friederichs, P., Labes, M. (2006), p.20; Schütte, M. (2005), p.23.

¹¹⁵ E.g. Scholz, C., Stein, V., Bechtel, R. (2006); Schütte, M. (2005) and Persch, P.-R.(2003) go for different classifications

¹¹⁶ Source: Own illustration.

¹¹⁷ Acc. to Jerrentrup, R., Terhorst, S. (2008), p.13.

¹¹⁸ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.111.

¹¹⁹ Acc. to Becker, M. (2008), p.317.

¹²⁰ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.111.

¹²¹ Acc. to Becker, M. (2008), p.317; Bodrow, W., Bergmann, P. (2003); Scholz, C., Stein, V., Bechtel, R. (2006), p.112.

¹²² Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.112.

¹²³ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), pp.113,117; Becker, M. (2008), p.319.

¹²⁴ Acc. to Becker, M. (2008), p.340.

¹²⁵ Acc. to Wucknitz, U. D. (2002), p.23.

¹²⁶ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.140; Wucknitz, U. D. (2002), p.34, (This segmentation is also used by PwC, see Schmeisser, W. (2008), p.187).

¹²⁷ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.141; Wucknitz, U. D. (2002), p.35ff.

¹²⁸ Acc. to Wucknitz, U. D. (2002), p.31, (in detail p.41ff).

¹²⁹ A complete list of the factors is enclosed in appendix 5.

¹³⁰ Acc. to Becker, M. (2008), p.341; Scholz, C., Stein, V., Bechtel, R. (2006), p.143.

¹³¹ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.144.

¹³² Acc. to Wucknitz, U. D. (2002), pp.23, 203ff.

¹³³ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.124.

¹³⁴ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.124.

¹³⁵ Acc. to Becker, M. (2008), p.320f; Scholz, C., Stein, V., Bechtel, R. (2006), p.124f; Wucknitz, U. D. (2002), p.318f; Wunderer, R., Jaritz, A. (1999), p.334.

¹³⁶ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.125.

¹³⁷ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.125.

¹³⁸ Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.126.

¹³⁹ Acc. to Bodrow, W., Bergmann, P. (2003), p.94.

¹⁴⁰ Acc. to Wucknitz, U. D. (2002), p.320.

¹⁴¹ Acc. to Wucknitz, U. D. (2002), p.320.

¹⁴² Acc. to Scholz, C., Stein, V., Bechtel, R. (2006), p.128.

¹⁴³ Acc. to Bonazzi, G. (2007), p.79.

¹⁴⁴ Acc. to Keller, J. A. (1981), p.22.

¹⁴⁵ Carr, H. A. (1925), p.1.

¹⁴⁶ Acc. to Baucom, D. (1996), p.78f.

¹⁴⁷ Cotman, C. W., McGaugh, J. L. (1980), p.633.

¹⁴⁸ Hunt, J. G., Osborn, R. N., Schermerhorn, J. R. (2004), p.102.

¹⁴⁹ Hunt, J. G., Osborn, R. N., Schermerhorn, J. R. (2004), p.145.

¹⁵⁰ Hunt, J. G., Osborn, R. N., Schermerhorn, J. R. (2004), p.105.

¹⁵¹ Acc. to Drumm, H. J. (2008), p.391; Hungenberg, H., Wulf, T. (2007), p.277; Weinert, A. B. (2004), p.190.

¹⁵² Acc. to Drumm, H. J. (2008), p.391.

¹⁵³ Acc. to Acc. to Drumm, H. J. (2008), p.391; Hungenberg, H., Wulf, T. (2007), p.277.

¹⁵⁴ Drumm, H. J. (2008), p.391.

¹⁵⁵ Acc. to Arora, R. (2000), p.187; Heckhausen, J., Heckhausen, H. (2006), p.5.

¹⁵⁶ Acc. to Hungenberg, H., Wulf, T. (2007), p.274ff.

¹⁵⁷ Acc. to Hungenberg, H., Wulf, T. (2007), p.275ff.

¹⁵⁸ Acc. to Heckhausen, J., Heckhausen, H. (2006), p.5.

¹⁵⁹ Acc. to Hungenberg, H., Wulf, T. (2007), p.275ff.

¹⁶⁰ Acc. to Arora, R. (2000), p.187.

¹⁶¹ Acc. to Hungenberg, H., Wulf, T. (2007), p.275ff.

¹⁶² Acc. to Oechsler, W. A. (2006), p.340.

¹⁶³ Acc. to Drumm, H. J. (2008), p.391

¹⁶⁴ Hunt, J. G., Osborn, R. N., Schermerhorn, J. R. (2004), p.103.

• College: University of Applied Sciences Essen
• Grade: 1,6
• Author: Sebastian Theis (Author)
• Publication Year: 2010
• Pages: 102
• Catalog Number: V154020
• ISBN (eBook): 9783640664788
• ISBN (Book): 9783640664313
• Language: English
• Tags: HR, Human Resource, Human, Resource, HC, HCM, Human Capital, Human Capital Management, Brand Value, Brand, Brand Equity, Employer Brand, Brand Value Ranking, Interbrand, Brand Valuation, Motivation Theory, Motivation, Motive, Intellectual Capital, Indicator, Brand Identity, Brand Image, Employer Attractiveness, Employer, Attractiveness