MAXIMIZING THE HUMAN CAPITAL EQUATION IN LOGISTICS: EDUCATION, EXPERIENCE, AND SKILLS

Firms make investments in human capital, i.e., people, in order to improve their market competitiveness (Elsdon 1999). The skills and knowledge of individual employees can be leveraged to increase the ability to efficiently and/or effectively produce market offerings and enhance firm performance (Hunt 2000). The "people dimension" is especially critical to achieving most supply chain objectives (van Hoek, Chatham, and Wilding 2002). The challenge is to hire the best employees.

The current research was undertaken to address the crucial issue of developing human capital, specifically developing valuable logistics managers. What can firms do to help build competencies in the form of logistics manager human capital? What should they be looking for? Specifically, how do education, experience, and job skills influence manager performance? And, subsequently, how does logistics manager performance impact the perceived worth of an employee, i.e., do employers place more value on managers with higher performance? In the following sections, relevant background literature is reviewed and the research project and results are detailed.

Note: This manuscript was handled by the Systems Editor and was subject to the standard blind-review process. The authors would like to thank the Systems Editor and the reviewers for their constructive comments and suggestions.

BACKGROUND AND RESEARCH HYPOTHESES

In a keynote address to the 1999 Transportation and Logistics Educators Conference, William Copacino of Andersen Consulting predicted that the development of human capital will be an increasingly important success factor in the new millennium. He noted that companies are experiencing unprecedented stress on their skilled labor resources including: lack of skilled knowledge workers in the right locations, rapidly shrinking "half life" of critical knowledge within the enterprise driven by human capital turnover, increased competition for the best and the brightest, and a general talent shortage encompassing both hard and soft skills.

The logistics process is human centric. While pressures to secure adequate logistics staffing are evident at all levels from unskilled laborers through the management ranks and to the very top people within organizations, the focus of the current research is on entry to mid-level logistics managers. Even with vast improvements in technology and communications, substantial numbers of employees at the entry and mid-levels are needed to keep supply chains operating smoothly. Therefore, firms must focus on selecting the most qualified, best-suited managers to work in what frequently involves somewhat unique and isolated environments. The following quotation from Bowersox, Closs, and Stank (2000) describes the typical logistics dynamics involved.

"Effective management of the logistics process ... is complicated by the fact that over 90% of all logistical work takes place outside of the vision of any supervisor. No other employees within the typical business enterprise are expected to do so much critical work without direct supervision as those that make logistics happen." (p. 12)

Given such obstacles, what can increase the chance of logistics employees/managers succeeding in their jobs? There are obviously differences among potential employees in the candidate pool. For example, differences involving levels of formal education, type and duration of work experience, and specific skills possessed result in heterogeneous workforces. Such variation in experience, education, and skills are likely to influence employees' competencies/performance and, therefore, the worth employers place on the employees. These relationships, discussed in formal hypotheses below, are presented in Figure 1.

The selection of the three constructs is consistent with the Human Resources (HR) literature. Selection and hiring decisions are often made based upon different KSAs (knowledge, skills, and abilities) required for a specific job (Gatewood and Field 1994). Knowledge, skills, and abilities are assumed to be predictors of success on the job. Personnel decisions are also frequently based upon T&E (training and experience) evaluations (McDaniel, Schmidt, and Hunter 1988). When using T&E, applicants are "given points" for each year of pertinent job experience as well as for education. Researchers have examined the rationale for using a T&E approach (Mosier 1946). Mosel (1952) made the argument that past experience and training provide evidence that job-related knowledge, skills, and abilities (KSAs) have been acquired or are already possessed. Thus, previous HR research provides rationale for using education and experience - along with the skills identified through extensive interviews with experts - to frame the current research project.

Experience

Work experience, usually operationalized as length of service in a given occupation (McDaniel, Schmidt, and Hunter 1988), is the most frequently used criterion for assessing job applicants (Levine and Flory 1975) primarily because work experience and job performance have been found to be related. For example, Schmidt, Hunter, and Outerbridge (1986) found that work experience has a causal effect on job performance, primarily through indirect impact on job knowledge and job performance capabilities.