HR VIEWS

Aug-Dec 04, Issue 7 e-zine edited by Vinod Bidwaik

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Editor & Publisher

Vinod Bidwaik

Aligning Business through Human Capital Management & Best HR Practices

{This article was published in THE HUMAN FACTOR, October 2004, Volume I Issue 2, an
official Journal of IIPM, New Delhi.}
Globalization and competition
After the globalization and WTO regime, the
whole dimension of economy has changed.
The survival of the Industry has become a
vital issue. Productivity, Quality, Delivery and
Customer Satisfaction, these four words have
become key words to sustain the shocks given
by the globalized competition. Focus of
production has been changed towards market
and customer. Rapid growth has become
necessary and Change Management has
become the ‘Mantra’ for survival. Return on
Investment (ROI), Return on Capital
Employed (ROCE), Economic Value Added
(EVA), these words are determining the
performance of industries. Instead of speaking
-Vinod Bidwaik
about only profit, now Indians are speaking
about world class manufacturing processes.
Above indications are positive. The
globalization has widened the area of
competition and given the opportunities to
Indian Companies. But the main issue is how
we are going to encash the opportunity. Some
of the facts published in the recent UTI
report, (published in April 2004), says, “A
number of Tier-I & Tier-II suppliers in
Europe are going bankrupt. This provides an
unprecedented window of opportunity to
companies from developing nations. OEM’s
abroad are under pressure to reduce costs and
are consequently on the look out for low cost
suppliers from Indians & China. Indian is the

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Aug-Dec 04, Issue 7
largest producer of qualified engineers in the
world, thereby ensuring easy availability of
skilled power. Global auto majors and OEM’s
typically look at minimum double digit cost
reduction before they consider replacing an
existing supplier.”
Above facts, mentioned in the report
enlightens the scope to Indians and if we take
it positively we can generate the huge
employment. BPO and call-centers are basic
examples of these and if administration,
political parties and government take it
positively the India has a chance to become a
strong economy. After collapsing the South
Asian Economy in 1995, Indian has the
opportunity to achieve economic growth in
Industry.
Deployment of Human Capital Management
The resource like Material, Machinery will
not only contribute in the success. Stronger
Human Capital Management is required to
run the successful show. It is proved that
integrated, aligned Human Capital
Management systems have provided
significant economic benefits to campier that
have embraced them as ongoing process
instead of one-time events.
For becoming world class, what we need to
do?
We need to –
Increase revenue
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Improve fund flow
Increase returns of Investment
Improve Quality
Increase productivity
Reduce cost
Reduce cycle time
Increase market capitalization.
To achieve above objects, the participation of
HR is necessary. The competitive workforce
creation is necessary. The Talent Management
has to be practiced, Learning Organizations
and the organization which will adopt the
change very rapidly will survive only. One
research on successful companies was
conducted by ‘Watson Wyatt’. It says that the
companies that make more money were
associated with better talent management
producers. In these companies 15% profit
performance was driven by –
Management participation
Open management style and effective
communication
Taking calculated risks
Customer orientation by top brass
Training & development
Performance bases incentive schemes
Career & succession planning etc. etc.
Thus aligning the human resource towards
business goal is the prime need for success,
Competences and the competitive edge,
showed that when an organization identifies
and communicates the core competencies that
it needs to be successful in the present and the
future, it has developed a powerful tool to
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Aug-Dec 04, Issue 7
helps meet its goals. Competencies define and
communicate an organization’s strategy and
help employers to understand that strategy
and achieve to goals. The role that
competences can play is an organization
include –
Articulating what the organization
values
Providing a common language for
employers and managers to describe value
creation.
Establishing a new paradigm for
Human Capital Management Programme.
Focusing on the development of the
individual linking pay, promotion
and growth directly to what the
organization values to be successful.
Companies should adopt the view that
contributions are role related and not position
related. The competences have to be
developed and stress to be given on the
development aspect.
We, Indians, are far away from quality and
productivity. Productivity may be calculated
as net sales per employee using Gross Rate of
Return on Assets (GRATE) or input output
ratio in case of production personnel. The
company should devise the proper system to
calculate the productivity of Human Capital
from top to bottom. China is the dominant
over India on productivity issue. We have the
different mindset. The Chinese work like
robots, we Indians work, when we get the
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time to work from other matters. The attitude
has to be changed productivity of man,
machine, plant utilities have to be improved.
The same is about quality. Quality is
customer satisfaction, which is fit for use
product, cost effective, service, delivery etc.
Prudent use of resources is necessary.
Last but not least aspect in the success, is
process and cycle time.
Processes & Human Capital
Each process must be created based on
measuring, managing and building the current
capacity and future promise of employees.
The objectives of the processes should be:
It should align the strategic objectives,
Ensure the responsibilities and
accountabilities of each individual,
Build the capacity and competencies,
Placement of right people at right job at right
time,
We should not deny the following facts in
success of companies and employees.
Following are the effective factors, which play
important role in individual success.
Technical knowledge, skill
Professional experience in the respective area
Interpersonal behavioral traits
Learning attitude and capacity
Interest and attitude in the work
We should adopt the new initiatives in
Human Resource and Capital development.
Human Capital Ideas
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Before deployment of any Human Capital
initiatives one should not forget the Principal
behind Human Capital deployment.
1. People are assets whose value can be
enhanced through investment.
2. Human capital approaches should be
designed, implemented, and assessed
by how well they help
organization achieve strategic results
and pursue its mission.
Management concepts are changing and
taking various modes as per the requirement
of business and competition. The challenges
are totally different as compare to mid 90s.
We have adopted the financial management as
a tool of performance measurement.
Information technology as a tool
improvement in quality and productivity, and
result oriented approaches for survival, but
still we do less care about human capital
development.
Key Factors for Effective Management
People, process and technology are the key
factors for effective management. The most
important of the three is people-an group of
human capital. People are the most significant
organizational asset. This is the only reason
why the software and other modern
companies are targeting the
management issue. It is said that other costs
reductions are very easy as compare to cost
cutting on staff. This is the only cost which
increases every year. To become viable
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companies then have to declare VRS and
downsizing. This often constitutes largest
budgetary expenses.
Effective human capital management
approaches serve the cornerstone of any
serious change management initiatives. It
reduces the hierarchical, process orientated
the approach and shifts towards more flat, result
oriented, integrated and externally focused.
But it only requires the full commitment to
value the people as a strategic asset.
When the initiatives of cost cutting are
implemented, first area targeted is Human
Resource. This results skill imbalances,
workload imbalances for remaining workers,
of inadequate accountability for performance,
training and development cost reduction and
hence performance and morale of the existing
workforce is affected.
We have various challenges before us. Is HR
required in the organization, is a debatable
question. Most of the activities, which HR is
performing, can be outsourced. The issue is
related to strategic HR management and
Human Capital Development is a part of this.
The HR Managers need to concentrate on
developmental aspects instead of
administrative aspects. The best practices can
talent be benchmarked. The organizations should
think about following practices.
1. Knowledge Management: The
employee should be able to convert
the data available into information,
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knowledge and then into wisdom. It
is basically wisdom management.
2. Learning Organization: An
organization, which facilitates the
learning of all its members and
continuously transforms itself. Peter
Senge has given the Model of learning
organization with five disciplines.
A) System Thinking, B)
Personal Mastery, C) Mental
Models, D) Shared Vision,
E) Team Learning
3. Talent Management: Attracting and
retaining the talented people.
4. Work Culture and people
development: Foster the new
conducive work culture and people
capabilities & development.
5. Performance management:
Establishing performance indicators
and effective measurement systems.
6. Communication systems: Effective
communication systems which would
help to communicate the policies,
goals and vision of the organization.
7. Rewards and Recognizations: Right
& perfect performance rewards and
recognizations policies and methods.
8. Strategic Change management: To
identify, face, adopt and sustain the
change rapidly. Selection of effective
tool to implement this.
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Model of effective Human Capital
Management
Technology & People
There are many documented cases where
companies tried to install new technologies or
systems of working without considering the
impact on social systems (the way people work
and interact with each other), or without
giving thought to how the people who
actually do the work feel about the changes.
The result is usually an expensive failure, with
employee reactions ranging from simple
misunderstandings (resulting in lost
productivity or damage) to outright sabotage
and organized labor actions.
Because of this, the best way to bring about
change is to first gain the support of the
people who will be affected by it, and the
people whose support you need to implement
it. No matter how good a change seems on
paper, if nobody will support it, it's probably
not a good idea.
Most of them worked very well when they
were first applied, and have tremendous
success stories. The early literature for these
initiatives - process re-engineering, quality
circles, organizational development, team
building, and all the rest - are full of
incredible deeds and stories of companies that
turned on a dime to achieve amazing things.
The stories are true. Each system worked
effectively. Each one also failed miserably
when applied in other organizations. Each is
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probably still being applied today, with and
without success, in different places. Many are
rediscovered each year and assigned different
names to be the specialty of a different
consulting firm. There's a simple reason for it:
each has certain requirements, which, if they
are filled, will bring success. When those
requirements are not met, failure is likely.
However the common factor in all systems
was as under:
• Power. Each system pushes power
downwards, so people who do the
work can make decisions. Some, like
job enrichment and empowerment,
made this almost the sole focus.
Others, such as balanced scorecards
and re-engineering, imply it or make
it part of the process. Research shows
that pushing power downwards in an
organization to the lowest possible
level greatly increases innovation,
motivation, quality, and productivity.
It also, paradoxically, increases the
power of executives and managers, by
freeing them from much of the day-
to-day "fire fighting" and trivial
decisions, and by providing them
with a capable workforce than can
carry out their strategic decisions.
• Communication. Again, each system
relies on increased communication. It
takes many forms, but in essence,
communication is spreading
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information up and down the
hierarchy, and across departments;
sharing it with customers, suppliers,
and partners; and even creating
information, as in data mining and
market research.
• Direction. Choosing and leading
people in a clear direction is the
central thrust of leadership initiatives,
mission statements, balanced
scorecards, and similar systems.
People prefer to work with a clear
direction in mind; and, when people
are aligned, decisions are faster and
easier, and there is far less waste.
• Culture. A shared set of values,
beliefs, and norms - in short, a shared
language and perspective which helps
diverse people to work together in
harmony. The same people working
under different cultures - even in the
same organization - can act in very
different ways. Change culture, and
you change the way people act.
Above indicates leadership and cultural
transformation. The stress on following ideas
have to be given
a) Leadership: Commitment to Human
Capital Management
People are viewed as a key enabler of
organization performance. Here Managers
are held responsible to handle the human
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Aug-Dec 04, Issue 7 e-zine edited by Vinod Bidwaik
capital, the leaders support efforts & goals. Innovation and problem solving is
monitor the effectiveness. encouraged. The Human Capital is
b) Strategic Human Capital Planning: treated fairly and supported at every level.
Integration and Alignment Last but not least is to develop the people to
Approaches supports organizational face and adopt the change effectively. The
performance, designed for supporting the organization is always benefited by these
organizational goals. approaches.
c) Acquiring, Developing and retaining Conclusion:
talent: Targeted investment in people Organizational excellence is possible through
Human capital expenditures are regarded the people initiatives. They are the best assets
as investments in people. This investment of the organization. Human Resource should
is evaluated and monitored. be treated as the important Capital of the
d) Result oriented organizational organization. The investment on the people
cultures: Empowerment & does mean to enrich them and develop them
inclusiveness for performing excellently. All the initiatives
Employees at all level are given the and change management are possible if the
authority and resources to attain the Human Capital is developed.
Bibliography:
UTI Report, April 07, 2004,
McClelland D, “Identifying competencies with behaviour-Event Interventions” Vol-9,
Pfeffer, J (1998) Human Capital Equation Bosten MA: Harward Business School Press,
The Human Side of Organizations, Eight Edition, Michael Drafke, Stan Kossen,
http://www.watsonwyatt.com

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