Human Capital Theory

It is one of the fundamental theories for the field of human resource management. The theory presents various benefits of investing in training and development in order to increase the human capital of the individuals. However, the benefits are not limited to the individuals but also include the employer as the potential productivity and human resource pool expands massively. The theory suggests that the employees become more flexible when they acquire more skills and knowledge and this leads to transfers in the positions of employment based on the demand and supply in the market.

Employers cannot afford to train the employees in multiple disciplines as they have to compromise on the corporate productivity. Thus, employers, as well as employees, must evaluate the pros and cons of the training types such as general and specific based on the requirements of the jobs and goals of the organization. In case of training the employee on general skills, it is easier to apply the same knowledge to the other organization. However, this also intensifies the labor market as many people have the same skills and thus competition for corresponding jobs increases.

Social Exchange Theory

The HRM practices influence the employee’s outcomes based on the social exchange concept. According to this concept, social exchange is the process of repaying to the obligations given the contract is unspecified. Thus, under the contract, individuals expect the future repayment in the form of assistance or support when another individual does a favor. The individuals tend to adopt this theory at work with the pattern of reciprocity determining the perceived balance in exchanges over time.

Due to this exchange principle, there can be a loyal and trusting relationship of the norm of reciprocity is satisfied between the employer and employee. Thus, HRM practices can lead to the favorable treatment of the employees as the exchange of which employer gets a positive attitude towards the organization. Thus, perceived training is beneficial for the employees as it increases their commitment towards the organization and they respond with positive and favorable attitude in case of genuine management’s intention and concern for their needs. Thus, employees should have a set of transferable skills through various training and development programs that additionally keep them motivated because of the opportunities that they get after training and development programs in the form of higher employment positions within and outside the organization. Although the norm of reciprocity is accepted widely the perceptions of the employees and employers towards the principle vary considerably.