People as an Organisations Most Valued Asset - Essay Example

?Critically examine the claim that people are an organisation’s most valued asset. How this claim would be translated into practice in developing organisation strategy. 1. Introduction The continuous increase of competition in all industrial sectors has led firms to develop a series of strategic measures in order to protect their position in the local or the international market. The specific efforts are appropriately supported by various organizational elements, for instance each firm’s IT systems, its PR sector and so on. The common characteristic of these activities is the fact that all of them are planned and established by people. Different approaches have been developed in the literature regarding the role of people within modern organizations. In accordance with a common view, people are the most valued asset of each organization. The specific issue is examined in this paper. Reference is made to the potential translation of the above statement in practice, especially regarding the development of organizational strategies. The research on the particular subject has revealed that people are, indeed, the most valued assets in modern organizations; however, their contribution in the development of the organizational practices is not always appreciated, an issue highlighted in the study of Lawler et al. (2008). The common statement that employees are key assets of an organization does not always reflect the actual thoughts of organizational leaders – a problem mostly related to the different perceptions of organizational leaders on the role of employees within organizations. The literature published in the specific field is presented – followed by a critical analysis of the finding, at the level that such activity would help to understand the role of employees as part of the organization. 2. People as an organization’s most valued asset – theoretical and practical framework 2.1 People as the organization’s most valued asset – critical analysis People have a key role in modern organizations. In fact, it is through people that organizational strategies are developed, implemented and monitored. Moreover, the performance of people in various organizational departments defines the level of organizational profits. The above aspects of people in modern organizations are quite common. In the literature, additional perceptions on the role of people within organizations have been developed. In accordance with Sveiby (1997) the role of people within organizations could be explained as follows: the balance sheet of each organization has a series of invisible assets: ‘employee competence, internal structure and external structure’ (Sveiby 1997, p.10). It is made clear that employee competence refers to the ability of employees to develop the various organizational tasks, i.e. to respond to the organizational needs, no matter even if these needs are related to tangible or intangible assets (Sveiby 1997, p.10). The above explanation of the role of people within modern organizations is based on the perception that people are indispensable part of organizations, since no organization would exist and operate without the employees who manage its various activities. A similar approach of employees as assets is presented in the study of Storey (2009, p.140); in the specific study emphasis is given on the role of employees as intangible assets of organizations. On the other hand, Holbeche (1998) notes that employees are a valuable asset of each organization; however, the specific asset is different from the other organizational assets at the level that it is extremely ‘volatile and easily damaged’ (Holbeche 1998, p.10); it is explained that the organization that has not secured the position of its employees is likely to face severe organizational failures. It is also mentioned that the organizational leaders are likely to develop different views on the value of employees in their organization. Moreover, if employees within the particular organization are highly motivated, then their value in the organization is expected to be high (Holbeche 1998, p.10). In other words, Holbeche (1998) supports the view that the value of people within modern organizations is depended on the willingness of employees to participate in the realization of organizational plans; if the employee motivation is law within a specific organization, then the value of its employees would be also expected to be low. However, the above perception cannot be standardized since the relation between employee motivation and value of people within the organization is not guaranteed, taking into consideration the fact that each employee is expected to act differently when having to face different market or organizational challenges. In any case, the value of people within modern organizations cannot be equalized to their ability to respond to various organizational problems, since in this way their role within the organization is limited to the development of specific activities, a perspective that is not justifiable. It should be noted that the perception of people as their organization’s asset is closely related to the human capital theory – a theory based on the view that employee skills and the organizational culture can interact for improving organizational performance, under a scheme known as intellectual capital (Martin 2006, p.297). Additionally, it seems that the perception on employees as the organization’s most valued performance is also related to the traditional ‘high commitment’ HR policies, as developed in 1980s and which were used in order to urge employees to keep their performance at high levels (Guest 2011, p.2). Holbeche (2009) notes that different interpretations can be made on the perception of people as the most valued assets of their organization; these perceptions will be depended on the context of the term value, as used in the particular case. The term ‘value’ as part of the term ‘value added’ usually refers to the person’s talent (Holbeche 2009, p.4). In other words, the term does not directly refer to the organizational performance but rather to the performance of employees, a view however that could be interpreted using different criteria. A similar approach for explaining the ‘value added’ role of employees in modern organizations is used by Cook (2008); the above researcher notes that the value of employees for organizations is of critical importance for the success of the organization, but the above relationship should ‘be made visible and available to all shareholders’ (Cook 2008, p.23), otherwise, the value (the talent) of employees could not support the increase of the organizational performance. The use of the term ‘asset’ to characterize people in modern organizations is not fully accepted in the literature; reference can be made, for example to the study of Mayo (2001); the above researcher noted that the term ‘asset’ cannot be used for describing the role of people within organizations. The above view is based on the thought that this term can be acceptable only when referring to goods that can be the basis of a transaction or those the value of which can be measured by using appropriate financial management techniques (Mayo 2001, p.2). However, the above explanation focuses on the term’s grammatical use and not its actual use in the organizational environment. Indeed, through the studies presented above it has been made clear that the term asset is commonly used when referring to people in various organizational departments; the term ‘asset’ in this case is not related to finance but is used for emphasizing on the value of people for the existence and the growth of organizations in all industries. Even if the term ‘asset’ is not quite appropriate for characterizing an activity related to a person’s cognitive abilities, still the term ‘value’ is important in order to understand the contribution of employees in organizations worldwide. Actually, the term value highlights the importance of the persons involved – in terms of their background/ education, leading to the assumption that the involvement of the people in a particular organization can only have benefits. The term ‘value’, as mentioned above, refer to ‘the value of people as individuals but also as groups of persons that have specific collective capability’ (Thompson et al. 2010, p.580). Another perspective for considering people as the organization’s most valued asset is the following one: knowledge management, a key organizational tool, highly invests on people, due to their involvement in various organizational activities. In this context, knowledge management aligns its strategies with the needs and the skills of employees at different levels of the organizational hierarchy (Van Geenhuizen 2009, p.270). From this point of view also, people can be considered as the organization’s most valued asset setting the rules for the operation of knowledge management systems, which provide a critical support to the organizational activities. From a different point of view, the perception of people as the organization’s most valued asset is closely related to the organizational strategy under the following terms: each business is developed with the participation of 2 or more persons – there are also firms with just one partner (Pennings et al. 2007, p.25); the above view is based on the fact that the business is a people-based union for the achievement of targets set in the articles of incorporation. It could be stated here that business is not only a union of persons but also cooperation for the achievement of a specific business target. In other words, people form the basis for the creation of a business unit; therefore, their role in the development of this unit is normally expected to be high; thus the assumption that people are the organization’s most valued assets can be considered as fully justified taking into consideration the fact that without people no organization can continue to exist in the market. Griffin et al. (2009) also support the view that the value of employees is related to the organizational productivity – meaning that, if employees are offered the necessary support so that their talent is developed, then, the performance of the organization will be improved, a fact that could positively influence the organizational productivity (Griffin et al. 2009, p.478). At the same time, the responsibility of each firm to support the personal development of its employees is established. Firms need to provide to their employees the necessary support so that the skills of the latter are further developed, supporting one or more organizational activities. On the other hand, reference should be made to the following fact: by accepting the perception of people as a valued-asset of the organization, the following implication resulted: inequality is established in the workplace; this inequality can be explained using the social exchange theory (Homans 1961, in Pierce, 2011, 273); in this way, ‘people who have less value asset are expected to place higher value on each unit of this asset’ (Pierce 2011, p.273). At the same time,’ people with a high value asset could show higher resistance to the organizational pressures’ (Pierce 2011, p.273), i.e. to face any organizational or market crisis more effectively. In the same way, people who are at lower levels of the organizational level, are more likely to be negatively affected by the organizational structure compared to the people at higher level of the hierarchy (Pierce 2011, p.273). 2.2 The relation between the claim that people are the organization’s most valued asset and the organization strategy The perception of people as an organization’s most valued assets has a series of implications for the organizational strategy: a) when having to develop the organization’s vision, managers need to take into consideration the level at which this vision will be understood by people across the organization; the ability of employees to capture the scope of organizational vision is necessary in order for the organizational targets – based on this vision – to be achieved (Storey 2009, p.140), b) regarding the HR policies implementing in a particular organization, emphasis should be given on these policies that will be mostly promote employee commitment; such practice could be used in organizations of all characteristics and trends, even in those organizations where the contribution of employees in the organizational performance is not highly recognized (Storey 2009, p.140), c) another important implication of the claim that people are the organization’s most valued asset is the following one: when having to choose the leader of a particular organization, those participating in the relevant process should use the following criterion: the leader chosen needs to have well developed communication skills, being able ‘to generate ideas from people’ (Storey 2009, p.140); in this context, employees are considered as indirectly affecting their firm’s strategic decisions, influencing the views of the organizational leader on one or more critical organizational issues; d) the claim that people are the organization’s most valued asset should also have the following implication on the firm’s strategy: the HR policies introduced in regard to each organizational activity, should be appropriately aligned, meaning that these policies should not be standardized; rather they should be customized to each employee’s talents. The above effort would face the following barrier: the management team in each organization tends to behave differently to employees of lower levels of the organizational hierarchy; this differentiation in behaviour could also lead to the failure in introducing measures for supporting the talents of employees at lower levels of the organizational hierarchy (Boxall p.63). From this point of view, the recognition of the value of employees within the organization would be delayed, a fact that would also resulted to the decrease of the organizational performance. It should be noted that the level at which leaders in organizations communicate/ coordinate with employees is rather low, despite the support provided towards this direction. In this case, the achievement of organizational goals, a key requirement of the firm’s HR policies may face in significant delay (Jackson et al. 2007, p.4). . 3. Conclusion The examination of the various perceptions on people as the organization’s most valued asset has led to the assumption that such a perspective is possible; however, the terms under which this perspective is supported and expanded across a particular organization are not standardized. Most commonly, the organizational culture defines the level at which the role of people within a specific organization is recognized. At the same time it has been proved that the perception of people as a key organization’s asset can affect the organizational strategies at the following points: a) the strategies promoted within each particular organization are based on the skills and the needs of employees, b) particular emphasis is given on the potentials of employees for further development, c) the style of leadership chosen in each particular organization is such that the communication with employees is highly promoted. One of the key findings of this study is the following fact: the theories referring to the role of employees as their organization’s most valuable asset are likely to be based on different criteria – referring to the criteria used by theorists in order to decide whether employees can have a critical impact on their organization’s performance or not. This fact indicates the lack of an integrate framework for explaining organizational performance; it also shows a trend for changing traditional perceptions on organizational strategic planning, a phenomenon probably related to the increase of complexity of business operations worldwide. References Boxall, P. (Strategic human resource manaqement: beoinnings of a new theoretical sophistication? HUMAN RESOURCE MANAGEMENT JOURNAL VOL 2 NO 3, pp. 60-79 Cook, S. (2008) The Essential Guide to Employee Engagement: Better Business Performance Through Staff Satisfaction. London: Kogan Page Publishers Guest, D. (2011) Human resource management and performance: still searching for some answers. Human Resource Management Journal, Vol 21, no 1, 2011, pp. 3–13 Griffin, R., Moorhead, G. (2009) Organizational Behavior: Managing People and Organizations. Belmont: Cengage Learning Holbeche, L. (2009) Aligning human resources and business strategy. Oxford: Butterworth-Heinemann Holbeche, L. (1998) Motivating people in lean organizations. Oxford: Butterworth-Heinemann Jackson, J., Mathis, R. (2007) Human resource management. Belmont: Cengage Learning Lawler, E., Ulrich, D. (2008) Talent: Making People Your Competitive Advantage. Hoboken: John Wiley and Sons Martin, G. (2006) Managing people and organizations in changing contexts. Oxford: Butterworth-Heinemann Mayo, A. (2001) The human value of the enterprise: valuing people as assets: monitoring, measuring, managing. London: Nicholas Brealey Publishing Pearce, J. (2011) Status in Management and Organizations. Cambridge: Cambridge University Press Pennings, J., Wezel, F. (2007) Human capital, inter-firm mobility and organizational evolution. Cheltenham: Edward Elgar Publishing Storey, J. (2009) The Routledge companion to strategic human resource management. Oxon: Taylor & Francis Sveiby, K. (1997) The new organizational wealth: managing & measuring knowledge-based assets. Emeryville, CA: Berrett-Koehler Publishers Thompson, J., Martin, F. (2010) Strategic Management. Belmont: Cengage Learning Van Geenhuizen, M. (2009) Value-added partnering and innovation in a changing world. Purdue University Press Read More