Makalah Seminar 07102006

The Challenge of Transforming HRM into
Human Capital Management Approach

Presented to The AMA DKI Seminar
By
Alex Denni
M. Soekmono
Introduction
Customer and Mission Vision
Indonesia within ASEAN Nation

Other Stakeholder Values Strategy
Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
TheCountry
World Competitiveness
1999 2000 Score Board
2001 2002 2003
Malaysia 9 9 10 6 4
Thailand 16 13 14 13 10
Philippines 12 17 18 18 22
Indonesia 25 24 24 25 28
Source: IMD rating of 30 Nations population greater than 20 million, factor
measured: economic performance, government efficiency, business
efficiency and infrastructure
September 2006 / Page 2

© 2006 DUNAMIS ORGANIZATION SERVICES All rights reserved

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
Economic Performance
Country 1999 2000 2001 2002 2003
Malaysia 6 2 2 8 8
Thailand 13 6 7 9 7
Indonesia 26 19 17 19 24

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
Government Efficiency
Country 1999 2000 2001 2002 2003
Malaysia 6 7 9 4 3
Thailand 9 10 10 7 5
Indonesia 25 21 24 23 27

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
Business Efficiency
Country 1999 2000 2001 2002 2003
Malaysia 9 14 16 7 5
Thailand 20 19 20 14 9
Indonesia 26 24 22 26 30

Human Development Index
1995 1996 1997 1998 2000 2001 2002 2003 2004 2005 Level
1. Norway
1. Canada 1. Canada 1. Canada 1. Canada 1. Canada 1 Norway 1 Norway 1. Norway 1. Norway
2.Iceland
2. France 2. USA 2. France 2. USA 2. Norway 2 Australia 2 Sweden 2. Iceland 2. Sweden
3. Australia
3. Norway 3. Japan 3. Norway 3. Japan 3. USA 3 Canada 3 Canada 3. Sweden 3. Australia
4. Luxemburg
4. USA 4.Netherland 4. USA 4. Australia 4. Australia 4 Sweden 4 Belgium 4. Australia 4. Canada
5. Canada High Human
5. Iceland 5. Norway 5. Iceland 5. Norway 5. Iceland 5 Belgium 5 Australia 5. Netherlands 5. Netherlands
6. Sweden Development
6. Finland 6. Netherlands 6. Sweden 6 USA 6 USA 6. Belgium 6.Belgium
7. Switzerland
7. Netherlands 7. Japan 7. Belgium 7 Iceland 7 Iceland 7. USA 7. Iceland
8. Ireland
8. Japan 8. Netherlands 8 Netherlands 8 Netherlands 8. Canada 8. USA
9. Belgium
9. Japan 9 Japan 9 Japan 9. Japan 9. Japan
10 USA
25. Hong 22. Hong 22. Hong Kong 22. Singapore 23.Israel 22. Israel 22. Israel 22. Israel
Kong Kong 26. Singapore 24. Hong 24. Singapore 24. Hong Kong 23. Hong Kong 23. Portugal 23. Hong Kong 23. Israel
High Human
28. Singapore 34. Singapore 38. Brunei Kong 25. Greece 26. Singapore 25. Singapore 26. Hong Kong 25. Singapore 25. Singapore
Development
35. Brunei 36. Brunei 25. Brunei 26. Hongkong 27. Korea, Rep 27. Korea, Rep 28. Singapore 33. Brunei 33. Brunei
34. Brunai 32. Brunei 32. Brunei 31. Brunei
59. Thailand 52. Thailand 59. Thailand 56. Malaysia High Human
60. Malaysia 53. Malaysia 60. Malaysia 67. Thailand Development
98. Philippines 76. Philippines 61. Malaysia 56 Malaysia 59 Malaysia 58. Malaysia 61. Malaysia
96. INA 95. PHIL 59. Malaysia
73. Thailand
Medium
98. PHIL 99. INA 98. China 76 Thailand 66 Thailand 70. Thailand 74. Thailand 76. Thailand
84. Philippines
Human
77. Philippines 70 Philippines 77. Philippines 85. Philippines 83. Philippines Development
85 China
99. China 87 China 96 China 104. China 94. China 108 Vietnam Medium
102. INA 105. INA 109. Vietnam
110. Vietnam 108. Vietnam 101 Vietnam 109 Vietnam 111. INA 110. INA Human
109. INA 102. INA 110 INA 112. INA 112. Vietnam Development
106. China 108. China 108. China 125. Myanmar 115 India 124 India 127. India 127. India
128. India 118 Myanmar 127 Myanmar 130 Cambodia 127. India Medium
130. Cambodia
136. Cambodia 121 Cambodia 130 Cambodia 131. Myanmar 129. Myanmar Human
132. Myanmar
138. Sudan 130. Cambodia Development
122. Viet Nam 121. Viet Nam 121. Viet Nam 139. Sudan
131. Myanmar 133. Myanmar 131. Myanmar 128. Myanmar 143. Sudan 129 Nepal 139 Sudan 143 Nepal 142. Pakistan 140. Timor
138. Pakistan 134. Pakistan 138. India 132. India 144. Nepal 138 Sudan 142 Nepal Leste Low Human
139. India 135. India 139. Pakistan 146. Bangladesh 158. Timor- 141. Sudan Development
140. Cambodia Leste
156. 153.Cambodia 137. 171. Ethiopia 158 Ethiopia 168 Ethiopia 169. Ethiopia 170. Ethiopia
170. Ethiopia Low Human
Cambo Cambo 162 Sierra 173 Sierra 175. Sierra 177. Sierra
177. Niger Development
dia dia Leone Leone Leone Leone
Source : UNDP
…even worst!
Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• The output resulted in average 8 hours by

Indonesian worker :
– Can be done in 2 hours and 45 minutes
by Thai worker
– Can be done in 1 hour and 5 minutes by
Malaysian worker
– Can be done in 11 minutes by
Singaporean worker
(Source: ILO presentation December 2003. Includes both capital and people productivity)

Indonesian Wages among Others

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
Wage Levels Relative Wage

Country (USD) Levels
2003 2002 2003 2002
Indonesia 0.33 0.35 1.00 1.00

China 0.66 0.59 2.00 1.69
Thailand 0.92 0.92 2.79 2.63
Singapore 7.48 7.78 22.67 22.23
Malaysia 2.90 2.78 8.79 7.94
Sources : World Competitiveness Yearbook,IMD

Est: Total Hrly compensation for Manufacturing workers(wages+supplementary benefits),USD

The Question is ..
Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
Are
AreIndonesian
Indonesianpeople
people
liabilities
liabilitiesor
orassets
assets??

People Management Movement
The Evolution of People Management Approach

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Labor Approach
• Legal Approach
• Personnel Administration
• Human Resource Development
• Human Resource Management
• Human Capital Management

Organizational Effectiveness Cycle

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
Stakeholder Mission
Needs Vision
Values Strategy
People
Performance People
Paradigms
Paradigms
Structure,
Results Systems &
Processes
Culture
(Behaviors) People Management
Transforming HRM into HCM
Transforming HRM into HCM Approach

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
Stakeholder Mission
Needs Vision
Values Strategy
People
Performance People
Paradigms
Paradigms
Structure,
Results Systems &
Processes
Culture
(Behaviors) Re-alignment
The Paradigm Shift from HRM to HCM

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
1. People should not presumed as ‘resources’

which are usually used and consumed along
the process. They should be presumed as
assets which their increased value become the
ultimate goal of every organization and the
depletion of them should be avoided.
2. Any initiatives on people management should
be measured and finally translated into financial
terms.

Which attribute considered as The Capital?

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
1. The weight of the people?

2. The height of the people?
3. The age of the people?
4. The skin the people?
5. The eye of the people?
The Competency of People !

The Competency Defined

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
Underlying characteristics of people that is

causally related to criterion-referenced
effective and/or superior performance

The Iceberg of Competency Characteristics
Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
Relatively Visible &

Centered on
Ability Skill Likely to be
Threshold
Effective Performance
Competency
Knowledge
Self
Self Concept
Concept
Relatively Hidden Likely to be
& Centered on Differentiating Superior Performance
Personality Competency
Character/
Character/ Trait
Trait
Motive

Needs
Results
People
Paradigms
Processes,
Structure, and
Systems
Human Capital Management System Alignment
Culture
(Behaviors)
MVV
Corporate Strategy
Critical
Business Process Core Values
Organization Structure
Expected Behavior
(Single Reference Document)
Distinct Job Profile
HR Planning,
Recruitment,
Selection & Corporate
Placement Performance
Performance Score Card
Management
Orientation, System
Training & Payroll &
Development Employee
Employee
Satisfaction
Reward Services
System
Career,
Succession Enabler
& Termination
CORPORATE CULTURE
Human Capital Information System

What is The Biggest Challenge?

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)

Needs
Results
People
Paradigms
Processes,
Structure, and
Systems
Aligning Reward System !
Culture
(Behaviors)
MVV
Corporate Strategy
Critical
Business Process Core Values
Organization Structure
Expected Behavior
(Single Reference Document)
Distinct Job Profile
HR Planning,
Recruitment,
Selection & Corporate
Placement Performance
Performance Score Card
Management
Orientation, System
Training & Payroll &
Development Employee
Employee
Satisfaction
Reward Services
System
Career,
Succession Enabler
& Termination
CORPORATE CULTURE
Human Capital Information System

5 Major Issues on Reward System Development

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Reward Philosophy
• Reward Plan Design
• Reward Assessment
• Reward Form
• Reward Delivery

1. Reward Philosophy
Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Fundamental beliefs about goals of all

components of the reward system
relative to the business strategy
• The Major Issues are :
• Internal vs External Equity
• Lead vs Lag Market
• Attraction vs Retention

2. Reward Plan Design

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Determining the Plan Design of

Reward System
• The Issues are :
• Participative vs Non participative
• Centralized vs Decentralized
• Static vs Dynamic
• Lead vs Lag

3. Reward Assessment
Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Determining the amount to pay each

employee based on valuable factor
• Job vs Person
• Results vs Behavior
• Seniority vs Performance
• Education vs Skills

4. Reward Form
Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Determining the variance in pay form

• Monetary vs Non monetary
• Fixed vs Variable
• Individual vs Team

5. Reward Delivery
Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Determining the delivery technique of

Reward System
• Narrow vs Broad Pay Bands
• Small vs Large Pay Band Overlap
• Open vs Closed Pay Communication

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
Aligning Reward System

on Human Capital Strategy

Reward Philosophy on Human Capital Strategy

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Internal Equity vs External Equity?

– Internal Equity : Keep the atmosphere balance!
• Lead Market vs Lag Market?
– Lead Market !
• Attraction vs Retention?
– Balance between two!

Reward Plan Design on Human Capital Strategy

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Participative vs Non Participative Reward Plan Design?

– Participative!
• Centralized and Decentralized Reward Plan?
– Could be both!
• Static vs Dynamic Reward Plan ?
– Static and Dynamic!
• Lag vs Lead Strategy?
– Lag!

Reward Assessment on Human Capital Strategy

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Job Emphasis vs Person Emphasis ?

– Person Emphasis !
• Education vs Competency?
– Education, Experience & Competency!

Reward Form on Human Capital Strategy

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Monetary vs Non-monetary Rewards?

– Both!
• Fix vs Variable Reward?
– Variable!
• Individual vs Team Reward?
– Individual!

Reward Delivery on Human Capital Strategy

Needs
People
Paradigms
Processes,
Structure, and
Results Systems
Culture
(Behaviors)
• Narrow vs Broad Bands?

– Broad Bands!
• Small vs Broad Band Overlap?
– Small Band Overlap!
• Open vs Closed Communication System?
– Open!

Thank You

Makalah Seminar 07102006

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The Challenge of Transforming HRM into

Human Capital Management Approach

Indonesia within ASEAN Nation

September 2006 / Page 2

Indonesia within ASEAN Nation

September 2006 / Page 3

September 2006 / Page 4

September 2006 / Page 5

• The output resulted in average 8 hours by

September 2006 / Page 7

Indonesian Wages among Others

Wage Levels Relative Wage

Indonesia 0.33 0.35 1.00 1.00

Sources : World Competitiveness Yearbook,IMD

September 2006 / Page 8

September 2006 / Page 9

The Evolution of People Management Approach

September 2006 / Page 11

Organizational Effectiveness Cycle

Transforming HRM into HCM Approach

The Paradigm Shift from HRM to HCM

1. People should not presumed as ‘resources’

September 2006 / Page 15

Which attribute considered as The Capital?

1. The weight of the people?

The Competency of People !

The Competency Defined

Underlying characteristics of people that is

September 2006 / Page 17

Relatively Visible &

September 2006 / Page 18

Human Capital Information System

September 2006 / Page 19

What is The Biggest Challenge?

September 2006 / Page 20

Human Capital Information System

September 2006 / Page 21

5 Major Issues on Reward System Development

September 2006 / Page 22

• Fundamental beliefs about goals of all

September 2006 / Page 23

2. Reward Plan Design

• Determining the Plan Design of

September 2006 / Page 24

• Determining the amount to pay each

September 2006 / Page 25

• Determining the variance in pay form

September 2006 / Page 26

• Determining the delivery technique of

September 2006 / Page 27

Aligning Reward System

September 2006 / Page 28

Reward Philosophy on Human Capital Strategy

• Internal Equity vs External Equity?

September 2006 / Page 29

Reward Plan Design on Human Capital Strategy

• Participative vs Non Participative Reward Plan Design?

September 2006 / Page 30

Reward Assessment on Human Capital Strategy

• Job Emphasis vs Person Emphasis ?

September 2006 / Page 31

Reward Form on Human Capital Strategy

• Monetary vs Non-monetary Rewards?