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The shift in the U.S. economy from a manufacturing powerhouse to a service- driven economy has placed a great emphasis on human capital planning within organizations in order to remain competitive in a new global economy. The link between critical business strategy and the successful implementation of strategy has been well documented in the literature. This article examines the literature surrounding human capital, human capital planning, and the implications for human resource development (HRD). The results of the review and synthesis of the literature are provided, and the implications for HRD scholars and practitioners are reported in detail. The research reports an in-depth justification and rationale for the incorporation of human capital planning into practice and research to determine the impact on HRD interventions and organizational per- formance through the use of a model and process for human capital planning. Keywords: human resource development; intellectual capital; human capital; knowledge assets; strategic planning; strategic management Although once considered an insubstantial variable, today human capital is rec- ognized as an important factor affecting the success of organizations. As the U.S. economy continues to move from a manufacturing powerhouse to one of service delivery, it is becoming increasingly more important to study the effects of human capital return on investments (Becker, 1993). In addition, it is important to examine the human capital planning process (Brush & Ruse, 2005), the align- ment of human capital to business objectives (Kaplan & Norton, 1992, 1993), the alignment of human resources to business initiatives (Becker, Huselid, & Ulrich, 2001), and the metrics and measurements associated with human capital and the allocation of resources to ensure the alignment with strategic business direction (Brush & Ruse, 2005; Weiss & Finn, 2005). According to Huselid and Bames (2002), "little academic work has been completed regarding human capital management systems, Practitioners are relatively light years ahead of the academic work in progress or already com- pleted" (p. 10). Human resource development (HRD) practitioners have recognized the need to align intangible assets to organizational strategy and objectives, and have previously conducted haphazard human resource place ments without empirical research to determine the success and failures of these allocations. HRD academicians have virtually ignored human capital theory and intangible assets allocation in view of the fact that human capital theory originated in economics and was thrust upon education and human resource development. Thus, the purpose of this article is to review literature and determine the need for HRD scholars and practitioners to plan for human capital development Purpose of the Article and Research Questions The purpose of this article is to provide a comprehensive review of human capital planning. The concept of human capital planning moves the idea of human expertise as an element of competitive advantage (de Geus, 1989) into the realm of organizational planning. In particular, this approach to planning is in line with Becker, Huselid, and Ulrich's (2001) Human Resource Scorecard approach to strategy and this article will outline the ways in which these and other approaches to planning that attempt to account for human cap- ital differ. Given this purpose, the research questions that served as the basis of this article were: 1. What is the historical foundation of human capital and its incorporation into strategic planning? 2. What are the implications of human capital planning for HRD professionals? Methodology The methodology for this study was a comprehensive review, analysis, and synthesis of human capital, planning, and related literature. In order to com- plete a comprehensive and integrative review of the literature surrounding human capital theory and human capital planning, the researchers completed an exhaustive review of referred and nonreferred publications as outlined by Torraco (2005). An extensive database search (ABI/INFORMGlobal, ERIC, and PsychINFO) for the keywords human capital, human capital theory, planning, strategic planning, scenario planning, strategic human resource development, and strategic human resource management revealed 93 articles were published between January 1993 and June 2006. Only articles with the key terms included in the abstract were utilized for full review by the authors, which resulted in 21 final articles for review and inclusive in the research for this article. The emergence of human capital thought began in 1776 when Adam Smith wrote The Wealth of Nations. His initial thoughts would later be formulated into the science of human capital (Fitzsimons, 1999). Smith postulated two primary foundations in The Wealth of Nations, which would become the prin- ciples for all later human capital frameworks (Sweetland, 1996). These two principle components are: 1. Labor inputs are not merely quantitative. They quantitatively include the acquired and useful abilities of all inhabitants or members of the society as well as the state of the skill, dexterity, and judgment with which labor is applied. 2. Ability acquired through education, study, and apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in person. (Sweetland, p. 343) The growth of human capital and accounting for wealth through acquired knowledge from formal education, on-the-job training, and other informal means continued throughout the 1950s and 1960s. The analysis of training and development as investments in human capital was pioneered through the works of leading economic scholars such as Becker, Denison. Fabricant. Mincer, and Schultz (Nafukho, Hairston, & Brooks, 2004: Sweetland, 1996). These scholars ventured away from the four main factors of the aggregate pro- duction model of physical capital, labor, land, and management instead to focus their attention on a residual factor called human capital. These four main factors of production-called the economy growth accounting equations- never balanced (Nafukho et al., 2004). There existed an unexamined variance in income levels, which Schultz in 1967 referred to as the residual factor. "It was the Nobel prize winner, Theodore Schultz, who identified this residual factor as human capital" (Nafukho et al., 2004, p. 6). Schultz defined human capital theory as "the knowledge and skills that people acquire through education and training as being a form of capital, and this capital is a product of deliberate investment that yields returns" (Nafukho et al., 2004, p. 11). In 1961, Schultz wrote, Although it is obvious that people acquire useful skills and knowledge, it is not so obvious that these skills and knowledge are a form of capital, or that this capital is in substantial part a product of deliberate investment" (Nafukho et al., 2004, p. 1). Schultz called the body of knowledge that sought to describe, explain, and validate this phenomenon human capital theory (as cited in Baptiste, 2001). Early on theorists emphasized that investments in human capital were major contributors to economic growth (Becker, 1992). According to Becker (1992). human capital analysis starts with the assumption that individuals decide their education, training, medical care, and other additions to knowl- edge and health by weighing the benefits and costs. "Benefits include cultural and other non-monetary gains along with improvement in earings and occupations, while costs usually depend mainly on the foregone value of time spent on these investments" (Becker, 1992. p. 43). Gary S. Becker began his inquiry into human capital in the 1950s with his study that tried to determine the differences in income of college graduates in the United States. According to Becker (1993), schooling, training courses, medical care, and lectures on personal improvement are all capital too because these "improve health, raise earnings, or add to a person's appreciation of lit- erature over his or her lifetime" (p. 16). Thus, Becker argued that these are investments in capital-human capital. Becker notes that the idea of human capital was very controversial in early years, as he noted, "It may seem odd now, but I hesitated a while before I decided to call my book Human Capital- and even hedged the risk by using a long subtitle" (p. 16). The term human capital was and remains controversial because it addressed people more like simple laborers owned by the company or inanimate objects. Becker's (1992) initial work on human capital began with an effort to cal- culate both private and social rates of return to men, women, blacks, and other groups from investments in different levels of education. Becker defines the theory of human capital as a form of investment by individuals in education up to the point where the returns in extra income are equal to the costs of par- ticipating in education. Returns are both private to the individual in the form of additional income and to the general society in the form of greater produc- tivity provided by the educated" (Nafukho et al., 2004, p. 11). "Education and training are the most important investments in human capital" (Becker, 1993. p. 17). The earnings of the more educated and highly trained are almost always well above average (Becker, 1993). In a study by Murphy and Welch, the monetary gains from a college edu- cation rose sharply to the highest level during the 1980s as in the past 50 years. Earnings of high school graduates over high school dropouts also increased drastically (as cited in Becker, 1993). The negativism previously associated with human capital theory has disappeared and been replaced with a concem for the education and training system in the United States. Becker (1993) notes. "talk about overeducated Americans has vanished, and it has been replaced by concern once more about whether the United States provides adequate quality and quantity of education and other training" (p. 17). The original aim of the Becker study was to calculate the return on invest- ment (ROI) on college and high school education in the U.S. economy; how- ever, Becker quickly realized that much more needed to be studied to fully calculate the ROI. Becker (1993) expanded his typical definition of education beyond high school and college to include on-the-job training, formal and spe- cific training, general schooling, and other knowledge. These types of educa- tion and training required a full explanation before the ROI could be properly calculated since all individuals benefited from education and training with higher income (Becker, 1993). According to Becker (1993), there are three types of training or knowledge, which are directly related to rate of return and human capital. Becker specified these trainings or knowledge as investments in human capital. These three types of training or knowledge (Becker, 1993) are: (1) on-the-job training- "learning new skills and perfecting old ones while on the job (p. 31). Broken down into two types of training: (la) general training--those skills which are "useful in many firms besides those providing it" (p. 33); (1b) specific training-"training that has no effect on the productivity of trainees that would be useful in other firms" (p. 40); (2) schooling"an institution specializing in the production of training, as distinct from a firm that offers training in con- junction with the production of goods" (p. 51); and (3) other knowledgeany other information that a person obtains to increase their command of their economic situation. Becker (1992) claims, "One of the most influential theoretical concepts in human capital analysis is the distinction between general and specific training or knowledge" (p. 44). The distinction helps explain why workers with highly specific skills are less likely to quit their jobs and are the last to be laid off dur- ing business downturns. It also explains why most promotions are made from within a firm rather than through hiring (Becker, p. 44). Becker has established the rationale for firms to provide highly specific training to their workers. This type of training reaps benefits for the firm through higher productivity and for the worker through higher wages. The Theory of Human Capital "The economics of education certainly has a long and distinguished history" (Machin & Vignoles, 2004, p. 3). The original work and initial thoughts of human capital began with British economists William Petty and Adam Smith, however, American economist Gary S. Becker (1993) is credited with completing extensive work and formulating the theory of human capital (HCT) through the publication of his work. "It is Gary Becker who is gener- ally considered the founding father of the economics of education as a distinct research field" (Machin & Vignoles, 2004, p. 3). Human capital theory suggests that education, training, and development, and other knowledge have a positive impact on productivity and wages. The theory further distinguishes between on-the-job training to include general and firm-specific training. These suggestions have direct implications for HRD. It is the responsibility of HRD practitioners to provide these investments in people (employees) and to determine the impact of these education and train- ing interventions. HRD has the ability to determine ROI on the education and training provided employees. "Human capital theory suggests that individuals and society derive economic benefits from investments in people" (Sweetland, 1996, p. 341). The theory of human capital has created a uniform and generally applicable analytical framework for studying not only the return on education but also on calculating a ROI for on-the-job training, schooling, and other knowledge" (Becker, 1992, para. 5). The determination of ROI continues to be the respon- sibility of HRD scholars and practitioners. According to Fitzsimons (1999), the reformulation of human capital theory can be correlated to significant stress on education and training as a key to participation in the new global economy. Organizational leadership is being able to realize that in order to yield above average returns on strategic direction, investments must include providing education and training to human capital. The definitions of human capital theory all encompass similar important themes and embody the following: investing in acquired education/schooling, on-the-job training and development, and other knowledge, which have a posi- tive impact on productivity and wages. There are numerous methods to improve human capital, which range from formal education to on-the-job learning or firm-provided training (Machin & Vignoles, 2004, p. 4). Human capital theory can be used to explain investments in schooling, firm-provided training, voca- tional and technical education and qualifications, and the benefits of informal on-the-job learning (Machin & Vignoles, 2004). Human capital theory can be capsulated into a model to describe the investments or inputs in relation to the output. The model of human capital theory is shown in Figure 1. The economics of education and the theory of human capital have been monumental developments in the field of economics; however, their impact has not been limited to the study of economics or education. Human capital theory has been applied to many strategic management techniques including by Kaplan and Norton (1992) in the balanced scorecard (BSC) approach to management. Becker, Huselid, and Ulrich (2001) have borrowed from Kaplan and Norton applying the same approach to the human resource scorecard (HRSC). The far-reaching effects of the study of human capital have also greatly impacted strategic planning resulting in the identified need to plan for the deve- lopment and alignment of human capital to sustain a competitive advantage and earn above average ROI including investment in intangible assets. Strategic Approaches to Management and Measurement Human capital and intangible asset alignment to organizational mission, vision, goals, and objectives begins with the strategic planning process. Further, the validation of the alignment can be assured with the BSC approach (Kaplan & Norton, 1992, 1993, 2005), and the HRSC (Becker, Huselid, & Ulrich, 2001). The scorecard approach to strategy management and measure- ment many times includes the utilization of human capital planning (Brush & Ruse, 2005). According to Hitt, Ireland, and Hoskisson (2005), strategy is an integrated and coordinated set of commitments and actions designed to exploit core competen- cies and gain competitive advantage (p. 7). Competitive advantage is achieved through the exploitation of the firm core competency. In a service and manufac- turing setting, the people of the firm develop the most core competency. The intent of a firm to capitalize on its core competency is to achieve competitive advantage in the market and to earn above average ROI (Hitt et al., 2005). The identification of a strategy to capitalize on the firms' core competency and to earn above average returns is many times achieved through strategic planning. According to Gunn (2001), strategic planning defines long-range goals and objectives that further the organizations mission and vision, provid- ing a solid framework for identifying needed resources in equipment, capital, and personnel. The strategic plan is a set of management decisions about what the organization will do to be successful (Gunn, 2001, para. 3)