Table of Contents
A Strategy for Enhancing Enterprise's Human Capital: A
System Dynamics Model for Resources Allocating
--A Case of a High Technology Enterprise
Shen Shouging,
Director and Senior Accountant
Financial department of Zhejiang University
Hangzhou, P. R. China, 310027
E-mail: sbaxugr@ dial.zju.edu.cn;
Wang Yong
Doctoral candidate
Research Center for Managerial Science and Strategy,
School of Management, Zhejiang University,
Hangzhou, P. R. China, 310027
E-mial: wysoar@ sohu.com
Xu Qingrui
Professor, the membership of SD Society
School of Management, Zhejiang University
Hangzhou, P. R. China, 310027
E-mail: sbaxuqr@ dial.zju.edu.cn
A Strategy for Enhancing Enterprise's Human Capital: A
System Dynamics Model for Resources Allocating
--A Case of a High Technology Enterprise
Shen Shouging Wang Yong Xu Qingrui
Financial department School of Management
Zhejiang University, Zhejiang University,
P.R. China, 310027 P. R. China, 310027
Tel(Fax):86571-8799 3120 Tel(Fax):86571-8795 1886
E-mail: sbaxuqr@ dial.zju.edu.cn E-mail: wysoar@ sohu.com
ABSTRACT
It is the critical task for decision makers of enterprises that how to develop enterprise’s
human capital and make the valuable decision of investment on human capital by fully
utilizing the limited resources. This article deals with two investment decisions of
human capital by the approach of system dynamics modeling: the resource allocation
between different types of human capital and the suitable investment intensity which
may be in the terms of the ratio of the training expenditure to sales. In this article,
human capital of organization is divided into two types: general human capital and
firm-specific human capital, and the employees be divided into two groups: Key
employees and general employees. The system employed here consists of four
sub-systems: workforce system, resource allocation system, operating & performance
evaluating systems and competencies development system.. Through the analysis of
interaction between these sub-systems and simulation results using the actual data, the
suggestion for decision makers on the resource allocation on human capital investment
will be given out.
KEYWORDS: competencies development; resource allocation; policy analysis
Introduction
Organizational human resource development, as a complicated system activity, involves
not only how to implement various development activities, but also the resources
allocation strategy. Resource is needed for workforce’s competencies development. In
this article, the input of competencies development refers to the expenditure on the
activities of workforce competencies development and upgrading, including training
expenditure, and other expenditure spending on formal or informal competencies
development activities, such as seminars and conferences. Due to the timely delay of
competencies development’s benefits, we can’t allocate competencies development
resource on a short-term basis and in static perspective. Allocating competencies
development resource involves three fundamental decision issues: 1) the intensity of
input for competencies development, that is, the ratio of input to sales; 2) the internal
allocation proportion between special competencies development and general
competencies development of workforce; 3) the workforce structure that is the ratio of
general employee quantity to key employee quantity. As key employees and general
employees vary in their competencies level, competencies structure, and employing
costs, a reasonable ratio is needed for enterprise. The relationship of these three
fundamental issues above between enterprise’s performances is non-linier, dynamic,
thus the system dynamics is the most appropriate tool used in these kind decision issues.
This article deals with these decisions using system dynamics model based on the data
of a actual of enterprise.
The Analysis of Resource Allocation System and Model Building
In resource allocation system, the intensity of resource input in competencies
development activities determines the growth of organizational competences which in
tum determines the enterprise performance in market, that is, the movement of
enterprise sales. This sales movement will affect the quantity of competencies
development resource available on the one hand and the movement of enterprise profits
on the other hand. Meanwhile, the movement of the quantity and structure of workforce
can affect the input intensity of competencies development per person and
organizational profits whereby the change of salaries. Based on this theoretical analysis,
four sub-systems, namely, workforce sub-system, resource allocation sub-system,
competencies development sub-system and performance sub-system are formulated, and
their interactive relationship and structure is as follows:
Performance
Intellectual —_ capital
sub-system
available for use employees number
Workforce Change
structure
Human capital Workforce
sub-system
Competencies
development sub-system
Resource available
per person.
Resources Resource
Available
for CD
Resource
Demands available
Resource allocation Employees Number
subsystem
Figure 1: System Relationship and their Structure
The following is the system’s operational mechanism:
q@) Input intensity of competencies development determines the degree of
growth in workforce competencies;
(2) The movement of competencies determines the movement of enterprise
performance( its sales and profits);
(3) The movement of sales and profits in tum determines the total input of
competencies development attainable, and the change of workforce number;
(4) The change of workforce number also affects the resource input per person
for competencies development and the change of organization profits.
Based on the above system analysis, a cause loop of competencies resource allocation
system is represented as Figure 2.
oe NGL Profits
Sales <Movement of
Expected Quantity Salaries>
of Employees
Total Expenditure
The Number of
ofHRD
Employees Left Actual Quantity of salary List and
NetCh : Employees Structure >
Em ig eeciNath are Expenditure on
The Number of New oy: Movement of General Human
Recriutted Employees Salaries Capital per Employee
The Degree of Match between The Change of Investment Propotion
beteween General and
General Human Capital and Workforce Structure Special Human Capital
Special Human Capital
Movement of General Expenditure on Special
The Movement of <The Change of Human Capital Hana Copia: per
Effective Intellecture Wace ce mployee
Cepia = Decay Rate of
Human Capital
<Actual Quantity of
Movement of Employees>
Organization Special
Human Capital
Figure 2: The Cause Loop of Resource Allocation
This cause chain illustrates the interactive relationship among these factors. Based on
the cause loop, a flow chart of resource allocation system for competencies
development is formulated and further model equations is made by using actual data to
determine the model parameters. A fter the validation of this model, an actual enterprise
system will be simulated, and the results from this simulation can be used for
decision-making in enterprise resource allocation.
This model is based a large-scaled high-tech enterprise. The enterprise is specialized in
research and production of all sorts of auto-operation equipment and delicate devices,
and the majority of 1000 total workers are knowledge workers (Here this enterprise is
just short for WHLG, as they required). The enterprise’s development highly depends
on its workforce, esp. knowledgeable workers, so it attaches much importance to the
cultivation and development of workers’ competencies and training expenditure is very
high every year. The enterprise has been working on a reasonable resource input ratio so
that they can avoid investing wastefully or insufficiently. Too high investment may lead
to cost increase and insufficient investment may hinder sustainable development and
dampen competitiveness. According to th
Figure 3.
—_—
Planned workforce structure
e analysis, system flow chart is formulated as
Degradation rate of
E Pe. Crmployee number hey employee
<Degradation rate of eee eda a Degradation coefficient
key employee> Sle as
Adjust time Expected general Tecan
loyee number ona amie
peven wth rate Increase rate of key employee decrease rate
oe
General onl _f >r
‘New employee recruit rale = ™ General
camployes Turnover rate
decrease rate of key employee turnover of key employee
Tevel coefficient 1 <General employee
Salary convert coefficient decrease rate>
‘New empoyee's Turnover of Level coefficient 2
‘human capital level
general employee
Turnover rate of
<Degradation rate of general employee
organizational special
human capital> Natural degradation
coefficient
Geral man itl
Increase rate of
general human capital
general
jective intel
capital stor
‘urnover rate of
key employee>
Table function 2 ratio of storage
<General human
capital investment per
employee> capital decrease ra
Special human caopital
level
Lose quantity of
general human capital
1
Decrease rate of
Average salary ORinge of ned
<New employee"
recruit rate>
<Increase rate of
key employee>
Lose quantity of
Level coefficient 3
general human capital <<
<Tumover rate of
key employee>
Seen —— <Key employee number>
ae
rage
Table function of
convert coefficient
Level coefficient 4
\ b- <Key employee number>
Special Huan
factor of markert 1
a Increase rate of sales Sales
natural degradation
coefficence 2
Table function of
production increase
Investment intensity of HRD Hache ofinaibet3
Increase rate of Degradation rate of rate
special busta capitis organizational special
hhuman capital
Adjust coefficient table of
Table function 3 Level coeffcient 5 Gforce REUSE.
lose rate of special a olka wana production
; <Planned workforce
Allocation ee fnmen capital pane
. . <Tumover of
Na spc human capital general employee> “Effective Movement of sales
investment per intellecture capital
7. layes storage>
ney Increase of HRD expenditure
Total ree seneuthbap! <Change of total salary> Table 1
SS employee number>
HRD expenditure Fes
ut Decrease rate of profits Increase rate of profits
HRD expenditure per “ISS
General human capital
<Sales>
investment per employee
Figure 3: The Flow Chart of Competencies Development System
Model validation
The premise for using simulation result as decision information is validity of the model.
Therefore, model should be validated. The validity of system dynamic model chiefly
lies in the consistency between model parameter and the actual system, and this
consistency lies in two facets: whether the model's structure can represent the structure
of the actual system; the degree of consistency between the simulation result and actual
data.
Applying system dynamic model simulating organization structure and system in order
to provide information for enterprise decision-making, a lot of research has been carried
out, e.g. the organizational capital increase system model constructed by Xiaojun
Xu(2000), the system model of enterprise technical competencies increase by Xiaoging
Zhao(2002), and the system model of knowledge production and resource allocation by
Sveiby, Keith Linard & Lubomir Dvorsky(2002). These findings are just the first step in
applying system dynamics to the decision making concerning the enterprise “soft”
issues, and clearly illustrate the internal structure and their interactive relation in
enterprise system. All of these provide valuable inspiration for the very formulation of
the resource allocation system in this article. Because in the model formulation, the
internal logical structure of this system is taken carefully into consideration, and the
actual structure of this system is supposed to be faithfully represented; the focus in the
model validation is on the consistency between the model performance and actual
system data.
With the history data used as the data for the validation of the simulating consistency, a
comparison between simulation value and actual value is made to determine the quality
and validity of this model. In this comparison, sales, profitss, total workforce and
human resource development expenditure are used as validation indication, and the
history data from 1997 to 2002 of this enterprise as the benchmark, the results are as
follows:
Table 1: Comparison between actual data and simulation value for 1997 to 2002
year 1997 1998 1999 2000 2001 2002
Simulation value 14751.1 14904.9 | 153184 | 15902.9 16517.5 17179.2
Sales =
(10,000RMB y Actual value 14250.2 14695.4 | 15490.5 | 16510.1 16020.4 17578.6
Emorr 3.52% 1.43% 1.11% -3.68% 3.10% -2.27%
Simulation value 1616.25 1835.96 | 2068.51 2301.51 2512.89 | 2724.7
Profits
(10,000RMB ) Actual value 1590.31 1810.03 | 2069.01 2304.32 | 2513.5 2723.82
Erorr 1.63% 1.43% -0.02% -0.12% -0.02% 0.03%
Simulation value 949.333 | 925.451 924.066 | 938.7 965.232 | 995.746
Number of total =
employees Actual value 919 915 910 940 950 1010
Emorr 444% 1.14% 1.55% 0.14% 1.60% -1.41%
Expenditure on | Simulation value 147.511 149.049 | 153.184 | 159.029 165.175 171.792
HRD =
(10,000RMB ) Actual value 145 150.23 155.26 155.5 165.2 170
Erorr 1.73% -0.79% 1.34% 2.27% -0.02% 1.05%
According to the results of the value of every indication, the simulation value and actual
value are well consistent, with a majority of error at 1 % and a minority of 3%, and
there is no systematic error. Therefore, from the results it can be concluded that the
model can represent the structure of actual system, and the model is valid, the
simulation results can be referred to for decision making.
Modeling policy analysis
Resource allocation in enterprise is a complicated activity as the enterprise resource is
limited and demands for resources are unlimited. Thus the issues as to the priority of
utilization and allocation of limited resource arise. Further how the resource is allocated
will affect not only the enterprise present performance, but also the future development
in the long run. Therefore, three kinds of policy are analyzed fully: the reasonable input
intensity of competencies development resource, the reasonable proportion for the
intemal allocation of competencies development resource, and the reasonable structure
of workforce.
Effect of the input intensity of competencies development resource on enterprise
performance and policy analysis for reasonable input ratio
In knowledge economics, enterprises attach increasing importance to the input for
competencies development and training. Competencies development and training is
used not only for improving workforce competencies but also for maintaining
workforce and reducing tumover rate. The focus of investment in some enterprises in
some westem countries is “intellectual investment”. The professional training input in
members of OECD accounts for approximately 2.5% of GDP. Motorola has an annual
intellectual investment of 1 billion with great financial retumn( Yier, 2003), a United
States-based education institution estimates that the ratio between input and benefits is
1:3 (Zhongxing Zhou, 2002). However, this investment effective lies within a certain
scope; it is not always the-more-the-better matter from a cost-benefit perspective. As far
as the input for competencies development is concemed, the low input can reduce costs,
but it will further degrade the of workforce competencies, dampen enterprise long term
development; at the same time too highly input will overburden enterprise, decreasing
profit ratio sharply, due to the diminishing marginal retum of competencies
development investment.
Our investigation indicates that most enterprises input insufficiently for workforce
competencies development in China, mostly below 0.5% (inputs to sales). Based on the
above model, the future situation of the enterprise is simulated under different resource
input intensities (resource input /total sales). This simulation is based the workforce
structure parameter (key workers: general workers) and internal resource allocation
proportion parameter ( general competencies development input/ organization special
competencies development input) at the fixed level of 2: 8 and 4:6 respectively. The
following are simulating results as shown in Table 2.
According to the simulation, the enterprise’s performance will be on the decrease, and
its size shrinks when input intensity below 0.5%. This is because insufficient input
results in insufficient renewal and recruiting of workforce, workforce competencies
degraded, and in turn affects enterprise performance in the market with a decrease in
sales, and further affect the resource attainable for competencies development. These
form a vicious circle. If the input ratio is not increased, the enterprise will be doomed to
bankruptcy ultimately.
When input intensity between 1% and 1.5%, enterprise is on the increase in total sales
and profits, with their sizes expanding; and such a benefit circle promises a prosperous
development pattem.
With an input intensity above 2%, total sales are on the increase. Profits are also on the
increase initially, but will be on the decrease later on, and the higher the input intensity,
the more sharp the decrease. In response to the increase in total sales, enterprises expand
in size with the increase of workforce, e.g. at the intensity of 2.5%, up to 2010,
workforce will be totaled 5375 in number. In this case of high resource input,
enterprises are run by extensive-operation pattern, the increase in total sales highly rely
on high resource input and expansion of enterprise scale. Under such circumstances, due
to low efficiency in cost-benefit and growth in workforce, these enterprises are at loss,
in spite of sales increase. In this way, it is concluded that too high resource input for
competencies development violates the economic laws, thus not acceptable.
Table 2: The Simulation Results at Different Input Intensity
Input ratio Year 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 2010
Sales (10,000RMB) 3381 | 2468 | 1802 1315 | 960 701 512 374
0 Profits (10,000RMB) 805 747 693 641 592 546 502 462
Input per person(RMB) | 0 0 0 0 0 0 0 0
Total employee 612 561 514 471 432 395 362 332
Sales (10,000RMB) 8959 =| 7164 | 5515 | 4126 | 3016 | 2202 | 1607 | 1173
ne Profits (10,000RMB) 957 879 815 757 702 649 598 551
‘ Input per person (RMB) | 622 543 456 373 297 237 189 150
Total employee 720 660 604 554 507 465 426 391
Sales (10,000RMB) 17874 | 18575 | 19326 | 20143 | 21038 | 22022 | 23120 | 24410
1.0% Profits (10,000RMB) 2939 | 3156 | 3393 | 3656 | 3950 | 4281 | 4659 | 5112
° Input per person(RMB) | 1733 | 1736 | 1741 1745 | 1750 | 1756 | 1763 | 1774
Total employee 1031 1070 | 1110 | 1154 | 1202 | 1254 | 1312 1376
Sales (10,000RMB) 20496 | 22165 | 24096 | 26389 | 29199 | 32646 | 36986 | 42522
1.5% Profits (10,000RMB) 3268 | 3592 | 3955 | 4377 | 4883 | 5440 | 6027 | 6615
. Input per person(RMB) | 2717 | 2739 | 2762 | 2790 | 2825 | 2862 | 2909 | 2961
Total employee 1132 | 1214 | 1309 | 1419 | 1550 | 1711 1907 | 2154
Sales (10,000RMB) 22356 | 25265 | 29069 | 34054 | 40538 | 49040 | 60542 | 75865
20% Profits (10,000RMB) 3438 | 3806 | 4150 | 4430 | 4580 | 4508 | 4070 | 3006
° Input per person(RMB) | 3757 | 3840 | 3933 | 4027 | 4114 | 4201 | 4306 | 4389
Total employee 1190 [1316 | 1478 | 1691 | 1971 | 2335 | 2812 | 3457
Sales (10,000RMB) 25132 | 29803 | 36158 | 45025 | 56791 | 73123 | 95259 | 125557
a 5% Profits (10,000RMB) 3456 | 3650 | 3681 | 3424 | 2001 | 1136 | -1037 | -0285
Input per person(RMB) | 4932 | 5080 | 5239 | 5414 | 5517 | 5662 | 5751 | 5840
Total employee 1274 | 1467 | 1725 | 2079 =| 2573 | 3229 =| 4141 | 5375
To make a easy job for readers, simulation result of each item in the case of resource
input intensity are represented in Figure 4.
Competencies development input/Sales=0
s
Sales Profits
20,000 2,000
15,000 |-—— 1,500
10,000 1,000
5,000 500
lO
0 E+} J 0
1996 1998 2000 2002 2008 2006 2008 +2010 1996 1998 2000 2002 2008 2005 2008 2010
Time (Year) ‘Time (Year)
Sales : Current, Profits: Current oo
saleCompetencies development input/Sales=0.5% profits
20,000 2,000
1500 |} 1,500
10000 1,000
5,000 oat 500
ae
0 am 0
1996 196830002002 ood 3006 2008-2010 19951968 20002002 2007 2006 2008 2010
Time (Yeas) Time (Year)
Sales : Current —________________ no Profits: Curent np
Sales Competencies development input/Sales=1% Profits
40,000 6000
22,500 4,500
25,000 3,000
a oP
gat” mi
17,500 zi 1,500 |_—T
10,000 o
1995 1908 2000 20022008 2006 2008 2010 19951968 200020022007 2006 2008 2010
Time (Yeas) Time (Yeas)
Sales : Current ——________________ ng Profits: Curent np
SaleCompetencies development input/Sales=1.5% Profits
60,000 8000
45,000 6000
4,000
° 0
1995 1908 200020022008 2006 2008 2010 1995 1968 200020022007 2006 2008 2010
Time (Year) Time (Year)
Seles: Current ——_______________ ng Profits: Curent a0
Competencies development input/Sales=2%
Sales Profits
0,000 6,000
60,000 4,500 TN
40,000 3000
1500 |
° o
1996 196830002002 _—ood 30068 20082010 1995 1968 20002002 007-2006 20087010
Time (Year) Time (Yeas)
Sales : Current —__________________ ng Profits: Curent —____________ np
Figure 4: The enterprise’s performances at different input ratio
From the tendency of the change of enterprise’s total sales and profits, resource input
ratio for competencies development is supposed to be at 1.5%. Such being the case,
total sales and profits are all on the increase in figure. A benign development witnesses
moderate expansion in enterprise scale, e.g. with registered workforce totaled 1000 in
1996 and up to 2154 in 2010.
Policy Analysis of Resource Internal Allocation Proportion for CD
Enterprise performance is not only determined by the amount of resource input for
employees’ competencies development, but also by internal allocation proportion of this
resource. In terms of competencies’ type of enterprise, human capital can be classified
as organizational special human capital and general human capital (GHC). Special
human capital (SHC) refers to the human capital that can not be transferred among
different organizations, and is key competencies special to organization; this sort of
capital is the organizational competence foundation for sustainable competitiveness
advantage, and is also the focus which organization develops. As for general human
capital, it is transferable between different organizations and available in the market.
For an individual, his competencies can also be classified as organizational special
competencies and general competencies. Conceptual classification for human capital
and competencies does not mean both of them can function separately. To fulfill a
certain task requires workers holding not only organizational special competencies but
also general competencies. General competencies is the base of special competencies to
exert their function, and the level of general competencies can restrict the degree of
special competencies be used. In addition, in changing environment, moderate input for
general competencies development can enhance the flexibility and responsiveness to the
external environment. According to classical economics, resource inputting for
organizational special human capital is sufficient, developing for general competencies
is the responsibility of employees themselves. In consideration of inseparability
between general competencies and special competencies, input for general human
capital for a person with certain organization special competencies is necessary. If not,
the special competencies will be greatly hindered in terms of its benefits as it has no
corresponding new general competencies to work along. If enterprises recruit new
employees from job market with ready new general competencies, the special
competencies acquired by former workers are subjected to loss. In this way special
human capital and general human capital together constitute the competitiveness for an
enterprise, and these two forces should be at a proper proportion. As the retums of
investment on general competencies and special competencies are different, an optimal
investment proportion between general human capital and special human capital is to be
sought in the resource allocation for competencies development. Based on the system
dynamic model, the operations or this enterprise at various proportions (investment for
general human capital /investment for special human capital) are simulated. The
findings are as in Table 3 and Figure 5.
Investment on SHC/GHC
Sales Te
200,000 eta
150,000 Ber
100,000 ai
50,000 5000
oC 6,000
106 ieee 2000 2002, 2008 2006; 2008: 2010. 1996 1998 2000 2002 2004 2006 2008 2010
Time (Year) MEER
Sales : Current oo Profits: Current oo
Sales Investment on SHC/GHC=2:8
Profits
100,000 e000
75,000 4,500 os
50,000 3,000
25,000 1500 |
o 0
106 a 2) 22: ae; 2008) 2019 1996 1998 2000 2002 2004 2006 2008 2010
Time (Yea) T
ime (Year)
Sos cures on Profits : Current ao
Investment on SHC/GHC=3:7
Sales Profits
60,000 6,000
45,000 4500
3,000
1.500
0 °
199519983000 2o0r 200k 30062008010 1995 1968 2000 20022007 20062008 2010
Time (Year) Time (Yeas)
Sales : Current oo Profits : Current ao
Sales Investment on SHC/GHC =4:6
Profits
60,000 Rios
45,000 Es
30,000 ‘eis
15,000 Le]
‘ 2,000 je“
=F
g 0
128) 86) Oe ee 1995 1998 20002002 2008 2006 2008 2010
ime (Year) a0
ime (Year)
Sle :ourent ao Profits : Current oo
sales Investment on SHC/GHC=5:5 Pioeité
40,000 8,000
30,000 6,000
20,000 4000
10,000 2,000
0 °
1996 1908 700020022009 2006 20082010 19951958 2000 20022008 2006 2008 2010
Time (Year) Time (Year)
Sales : Current oo Profits : Current oo
Figure 5: The Enterprise’s performance at different allocation proportion
Table 3: Simulation Results at Different Allocation Proportion
proportion | year 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010
Sales (10,000RMB) 25269 | 30543 | 38036 | 48082 | 62149 | 81294 | 107326 | 142771
oo Profits (10,000RMB) 3550 | 3792 | 3862 | 3592 | 2806 | 1126 | -1911 | -7014
Input per person (RMB) | 2997 | 3112 | 3235 | 3310 | 3407 | 3464 | 3511 | 3547
Total employee 1265 | 1472 | 1763 | 2179 | 2736 | 3521 | 4586 | 6037
Sales (10,000RMB) 23922 | 28258 | 34198 | 42475 | 53519 | 68778 | 89119 | 116456
Lo Profits (10,000RMB) 3544 | 3858 | 4064 | 4070 | 3697 | 2746 | 822 +2537
: Input per person (RMB) | 2929 | 3029 | 3129 | 3235 | 3304 | 3388 | 3431 | 3472
Total employee 1225 | 1399 | 1639 | 1969 | 2430 | 3045 | 3897 | 5031
Sales (10,000RMB) 22579 | 25982 | 30533 | 36557 | 44523 | 55186 | 69171 | 87323
Profits (10,000RMB) 3508 | 3888 | 4220 | 4451 | 4497 | 4231 | 3442 | 1860
28 Input per person (RMB) | 2851 | 2937 | 3021 | 3099 | 3172 | 3244 | 3296 | 3332
Total employee 1188 | 1327 | 1516 | 1769 | 2106 | 2551 | 3148 | 3931
Sales (10,000RMB) 21370 | 23668 | 26559 | 30277 | 35083 | 41206 | 49002 | 59161
5 Profits (10,000RMB) 3376 | 3782 | 4211 | 4647 | 5057 | 5392 | 5588 | 5551
. Input per person (RMB) | 2765 | 2814 | 2864 | 2923 | 2984 | 3039 | 3090 | 3149
Total employee 1159 | 1262 | 1391 | 1554 | 1763 | 2034 | 2379 | 2818
Sales (10,000RMB) 20496 | 22165 | 24096 | 26389 | 29199 | 32646 | 36986 | 42522
Le Profits (10,000RMB) 3268 | 3592 | 3955 | 4377 | 4883 | 5440 | 6027 | 6615
. Input per person (RMB) | 2717 | 2739 | 2762 | 2790 | 2825 | 2862 | 2909 | 2961
Total employee 1132 | 1214 | 1309 | 1419 | 1550 | 1711 | 1907 | 2154
Sales (10,000RMB) 19541 | 20811 | 22219 | 23784 | 25526 | 27537 | 29860 | 32546
55 Profits (10,000RMB) 3155 | 3439 | 3751 | 4096 | 4481 | 4927 | 5442 | 6036
: Input per person (RMB) | 2672 | 2687 | 2701 | 2713 | 2724 | 2741 | 2759 | 2778
Total employee 1097 | 1162 | 1234 | 1315 | 1406 | 1507 | 1623 | 1758
Sales (10,000RMB) 17500 | 17968 | 18435 | 18918 | 19489 | 20166 | 20964 | 21900
Ka Profits (10,000RMB) — | 2837 | 3001 | 3169 | 3351 | 3584 | 3854 | 4169 | 4533
: Input per person (RMB) | 2565 | 2566 | 2565 | 2566 | 2576 | 2589 | 2603 | 2620
Total employee 1024 | 1050 | 1078 | 1106 | 1135 | 1168 | 1208 | 1254
According to the simulation results, the profits indication show that the reasonable
allocation proportion for general human capital and special human capital should be at
4:6.
Policy Analysis of Reasonable Employees’ Structure
Maintaining the stability and flexibility of workforce is a challenge in management. On
one hand, the turbulent nature of environment requires flexibility to keep adaptability
and responsiveness to the environment. Meanwhile, business management also requires
stability in order to keep operation continually. If workforce are classified as general
workers and key workers and managed accordingly; the flexibility, continuality of the
enterprise can be achieved through the flexibility of general workers, the stability of key
workers. This should be a new approach under these new circumstances, and a
reasonable structure is needed for an enterprise. Otherwise, an enterprise can not
coordinate flexibility and stability as too many or too few key workers all lead to failure
in balancing flexibility and stability. This is because too many key workers will not
satisfy the requirement of flexibility and too many general workers will not satisfy the
requirement of stability and cannot form the core competence of enterprise. Another,
there are different in training and employing cost, human capital level and human
capital structure of key worker and general worker. The following is the simulation
result of the enterprises with different workforce structure, as shown in Table 4 and
Figure 6:
Table 4: Simulation Results in Different Employee Structure
Structure of ] year 2003 7 2004 ] 2005 | 2006 | 2007 | 2008 | 2009 J 2010
employee
Sales (10,000RMB) 6692 | 5129 | 3763 | 2662 [1838 [1261 [909 | 722
Profits (10,000RMB) Ti2t_ [933 [781 [ess [556 |471 | 401 | 342
0 Total employee o43—«(489~« 441~—C«d397~=C*«( 357 ~=«d[322—=« 289 «S| «T
Input per person (RMB) | 1847 | 1572 | 1281 [1006 [772 [588 [471 | 416
Sales (10,000RMB) 12326 | 11606 | 10803 [9928 [9013 | 8093 | 7180 | 6287
Profits (10,000RMB) ssl [13i4 [1123 fo7l [858 [774 | 701 | 632
uy Total employee 74 [68 | 647 | 603 | 555 | 505 | 459 | 417
Input per person (RMB) | 2552 | 2531 | 2504 | 2470 [2437 | 2404 | 2348 | 2264
Sales (10,000RMB) 20496 [22165 [24096 | 26389 | 29199 [32646 | 36986 | 42522
Profits (10,000RMB) 3268 [3592 [3955 [4377 | 4883 [5440 | 6027 | 6615
28 Total employee 1132 [1214 | 1309 [1419 [1550 [1711 [1907 | 2154
Input per person (RMB) | 2717 | 2739 [2762 | 2790 | 2825 | 2862 | 2909 | 2961
Sales (10,000RMB) 17273 | 17832 | 18431 [19076 | 19773 | 20534 [21381 | 22325
Profits (10,000RMB) 1207 [1192 [1169 [1137 [1092 [1032 [955 | 855
37 Total employee 113 [1147-7 1183 [1222 =| 1264 [1309 | 1358 | 1412
Input per person (RMB) | 2328 | 2332 [2337 | 2342 [2347 | 2354 | 2362 | 2372
Sales (10,000RMB) 16308 | 16501 | 16677 | 16855 | 17045 | 17246 | 17461 | 17691
Profits (10,000RMB) ~686 | -849 | -1002 |-1151 [-1299 |-1453 |-1615 | -1789
a8 Total employee 1210 [1232 | 1251 [1269 | 1285 [1301 | 1317 | 1334
Input per person (RMB) | 2022 | 2009 | 1999 | 1993 1990 | 1989 | 1989 | 1990
Sales (10,000RMB) T5691 | 15607 | 15448 | 15211 | 14894 | 14456 | 13849 | 13098
. Profits (10,000RMB) “271 | -2794 | -2773 | -2641 [-2415 | -2077 | -1625 | -1121
ia Total employee 1362 | 1383 | 1390 [1391 | 1383 | 1368 | 1343 | 1306
Input per person (RMB) | 1728 | 1693 [1667 [1640 [1615 [1585 | 1547 | i504
Key worker : general worker=1:9
Sales Profits
20,000 4000
3,000
3,000 TTP RRELE
5,000 1,000 Blass
° °
19961998 20002002 2008 200682008 2010 19951998 2000 2002 2008 2005 2008 2010
Time (Year) Time (Year)
Sales: Curent — Profits: Current oo
sales Key worker: general worker=2:8 Profits
60,000 8,000
45,000 6,000
4000
2,000 abate y
° °
1995 1998 2000 20022008 2006 2008 2010 1995 1865 20002002 2008 2005 2008 2010
Time (Yea) Time (Yea)
SE Site) £7] Profits : Current oo
Key worker : general worker=3:7
Sales Profits
40,000 2,000
22,500 1700
25,000 a PLT
17,500 1,100 al a
10,000 800
199519982000 2002 _z008 2006 2008 2010 1995 1968 2000 2002 2008 2005 2008 2010
Time (Year) Time (Year)
Sales : Current 9 Profits: Current oo
Key worker : general worker=4:6
Sales Profits
20,000 2,000
17,500 1,000
15,000 0
12,500 1,000 Pak
ie
10.000 2,000
19961808 7000 20022009 2005 2082010 199519982000 2007200 2006 2008 2010
Time (Year) Time (Year)
Sales: Current — np Profits: Curent a0
Figure 6: The Enterprise’s performance under different structure of employee
From the simulation we can see that too few key workers (at a ratio of below 1:9) would
result in sales and profits reduced sharply after certain time point. This is because
enterprise core competences can not be maintained and developed, leading to enterprise
loses sustainable competitiveness. With key workers at the ratio of over 3:7, the large
number of key workers adds cost to human capital investment and salary expenditure,
ultimately lead to high management cost. The large number of key workers also results
in enterprise’s management rigidity, and the decrease in sales and profits. As far as the
enterprise concerned, the optimal ratio between key workers and general workers should
be 2:8.
Conclusion
The above research on human resource development system is based on a certain
enterprise, the initial parameters are from the enterprise, thus the simulation results can
be used for its decision making. Owing to the variation in different enterprises, some
initial parameters and table functions for modeling also vary, so the optimal ratio and
proportion gained from simulation may not be the optimal ratio of all enterprises, even
though the modeling can represent some basic rules in human resource management. It
is highly recommended that the model built above should be used based on
corresponding parameters inferred from the real situation in a certain enterprise so that
helpful information can be obtained for decision making.
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