Empowerment refers to the delegation of some authority and responsibility to employees and involving them in the decision-making process, not in mere job activities, but rather at all the levels of management.
In other words, empowerment implies freedom, power, authority, motivation and encouragement given to the employees to take decisions related to a specific organizational task. It is also called as Participative Management, as employees are involved in the decision making. The purpose of empowerment is to facilitate decision-making at lower levels of the organization where the employees can offer a unique idea and suggestion about the problem being faced by the organization at a certain level.
The most common ways of empowerment are participation in boards, stock options, collective bargaining, job enrichment and enlargement, quality circles, suggestion schemes, total quality management, self-managed teams, etc.
Empowerment offers several benefits; It brings a sense of ownership to the employee due to which he personalizes the goals and objectives of the organization and associate his success with his own abilities. Also, the performance of the employee improves as he attaches self-induced rewards with his performance by making decisions pertaining to the problem and sees the results (success) that follow.
Empowerment increases the organization’s responsiveness towards the problems or issues. Also, there is an increase in the productivity of an employee as he is completely engaged with the firm and take decisions for the betterment of the organization as a whole.
Empowerment suffers from serious limitations. First, the decisions made might not be in line with the organizational goals. Second, there could be a lack of coordination among the different levels of the organization. Third, the superior-subordinate relation might get tensed due to the violation of authority. Fourth, sometimes it can be counterproductive as the superior might keep a close watch on the employee to check if the authority is misused. This might increase the dissatisfaction among the employees.
Human capital is the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value. Human capital theory is closely associated with the study of human resources management as found in the practice of business administration and macroeconomics. The original idea of human capital can be traced back at least to Adam Smith in the 18th century. The modern theory was popularized by Gary Becker, an economist and Nobel Laureate from the University of Chicago, Jacob Mincer, and Theodore Schultz. As a result of his conceptualization and modeling work using Human Capital as a key factor, the Nobel Prize for Economics, 2018, was awarded (jointly) to Paul Romer who founded the modern innovation-driven approach to understanding economic growth.
In the recent literature, the new concept of task-specific human capital was coined in 2004 by Robert Gibbon, an economist at MIT, and Michael Waldman, an economist at Cornell. The concept emphasizes that in many cases, human capital is accumulated specific to the nature of the task (or, skills required for the task), and the human capital accumulated for the task are valuable to many firms requiring the transferable skills. This concept can be applied to job-assignment, wage dynamics, tournament, promotion.