Human capital plays a prime role in every organization, no firm can think of anything without skilled, competent, efficient and capable human resource. And when it comes to small and medium enterprises where majority of the activities are performed through human capital, it is not at all possible to run the business smoothly. But, besides having human capital in required quantity still the performance of SMEs in not as expected. Several initiatives have been taken up by the government but their performance is deteriorating day by day. Hence, with the help of this study an attempt has been made by the author to first, assess the level or existence of proper human capital in an organization and secondly, to examine the causal relationship among “human capital” and “SMEs performance”.
Human Capital
Laing and Weir (1999) coined the term “human capital as the investment undertaken by individuals in the form of education and training in skills”. Goldin (2014) defined human capital as “the stock of habits, knowledge, social and personality attributes (including creativity) embodied in the ability to perform labour so as to produce economic value”. Davenport (1999) said that “human capital is composed of intangible assets that individuals use in the process of work and consist of knowledge, skills, and working behaviour”. Stewart (1997), stated that human capital is “the place where all the ladders start: the wellspring of innovation, the home page of insight” (p. 86). Further, Bontis et. al. (2002) defined HC as “human capital is individual knowledge stock of organization represented by its employees”. Bontis (1998) defined the “human capital as the firm’s collective expertise to extract the best solutions from the knowledge of its individuals”. Further, Bontis (1999) defined HC as “an intangible asset that rests in a member of a particular organization, consisting of the ability, attitude, and capability of organizational members to adapt to change”. Murale and Ashrafli (2010) coined the HC as “human capital as a combination of highly skilled, creative, motivated, collaborative and knowledgeable people who understand the dynamic business environmental context and the competitive logic of their enterprise and the critical requirements thereof they understand and realize their own broad role and responsibility for the vision, values and competitive viability of their organization. For this purpose, they continually learn, develop, share, integrate and use their knowledge both individually and collaboratively to cultivate enterprise competencies, capabilities, innovation, expertise and speedy business processes in a proactive manner. They are focused on the success of their enterprise in facing the challenges of both today and tomorrow”. According to Kaplan and Norton (1996), human capital is “the sum of employee satisfaction, employee productivity, employee sustainability, and employee capability”. Further, Flamholtz and Lacey (1981), said that “employee-skills as the human capital”. Halim (2010, p.63), HC is “what a single employee brings into the value adding processes, consisting of four indicators, i.e., professional competence, social competence, employee motivation, and leadership ability”.