Human Capital as the Source of Innovation in International Business Machines - Case Study Example

Human capital is an important component of the intellectual construct. Frequent turnover of staff leads to drain of organizational knowledge and increases costs of recruitment. For the benefit of both the organization and the employees, long-term commitment is essential. Unlike the traditional concept, compensation and monetary incentives are no more the most important factors to stick on to a job. To maintain continuity in an organization it is very essential that turnover of staff is reduced. Today's world is knowledge-based with dynamic changes taking place by the hour. In the current scenario, people are the differentiators of a business enterprise; human capital is the profit lever of the knowledge economy. Human capital is the combination of genetic inheritance, education, experience and attitude towards life and business (Bontis & Fitz-enz, 2002). Human capital is the source of innovation and strategy. Sustained competitive advantage can accrue from a pool of human capital. Human capital adds value and is not substitutable. With these factors in mind, IBM, world's leading IT hardware, software and services company has devised its own strategy for recruitment and selection. Gordon (2002), states that organizations encounter difficulties in recruiting and retaining top talent because they have yet to deal with today's most critical human resources issues. It is essential to create a talent powered company consisting of highly motivated, skilled and loyal employees because such companies not only recruit the best but also retain the best through employee-centered strategies. In toady's world compensation packages do not matter. What is important is for the managers to take responsibility for retaining the best people. Managers need to meet their employees to discuss workplace concerns and possible solutions. If the managers are able to identify what the employees value, then they have the key to retention strategy that does not rely solely on financial benefits. Person-Organization (P-O) fit is the new approach that attempts to understand the selection process as this is directly related to talent retention within the organization (Westerman & Cyr, 2004). Research suggests that the recruiters' perception of fit is often inaccurate as they are more predictive of hiring decisions than the actual fit between an applicant and the organization. High employee turnover is a consequence of poor P-O fit. IBM however follows a different system of recruitment and selection and is able to retain talent. They believe in equal opportunity, in work force diversity, they believe in promoting women and also re-employing the older staff. While HR practices were traditionally performed internally, companies have increasingly started outsourcing such activities. Recruiting and selection (R&S) has gradually become one of the most outsourced HR functions (Ordanini & Silvestri, 2008). According to the transaction cost principle if the cost of using the market is lower than that of internal production, it should be outsourced. The resource based view suggests that internal resources should be utilized for core competencies otherwise the activity should be externalized to preserve the internal resources for core functions. Based on these theories it has been considered profitable to outsource R&S functions and IBM too has taken such steps. In order for organizations to develop an image of 'employer of choice', they have to tread carefully in outsourcing recruitment (Thite, 2004). Mills (2002) says it is impossible to run the recruitment process single-handedly while simultaneously developing the core business. It is advisable to outsource the primary candidate selection and the first round of interviews while keeping the final selection decision with the company. Outsourcing recruitment process alleviates the administrative burden of sourcing and screening candidates with the right skills but Fish and Macklin (2004) caution the HRM professionals must ensure that the service providers have knowledge, integrity, conscientiousness, and effectiveness. IBM has 350,000 staff worldwide across different disciplines ranging from technical IT areas to the non-technical disciplines of Sales, Finance, HR and Legal (Monster, 2008). IBM has one of the most professional workforces in the world that is responsive to the market requirements. They have the reputation of being the most progressive employer because they encourage contribution and reward talent. They have the skill and expertise to deliver value to clients. They are resilient to market forces and deliver strong leadership. IBM is the employer of choice because of the three-fold initiatives that IBM has for its employees - capability, climate and culture. They develop these in their employees who have been recruited after rigorous selection process. According to Nambiar (2007) IBM strives to maintain a positive work environment to attract, retain and motivate its work force. They continue to develop their employees to maintain their current and future needs. The advancement of the employees is based on their skills, interests and business opportunities. Traditionally the search process differed for senior executives and for the middle level executives. This process involved posting advertisements in newspapers or messages on bulletin boards. For senior positions firms relied on networking of industry contacts. While many companies have included employment openings on their website, there are many other websites like Monster.com, careerpath.com and careerbuilder.com that enable candidates to search for job openings and post resumes (Kumar, 2003). Email is increasingly being used instead of paper based hiring related communication. IBM's recruitment strategy too has evolved to include the internet now. This does not replace other forms of recruitment - it only complements and supplements them. IBM receives over 70% of its applications online or via email and for majority of roles it no more accepts paper based CVs (Monster). It is estimated that online recruitment procedure has reduced the time spent on recruitment and selection process by as much as 25 percent (Kumar). Even job hunters find they spend less time through this path and are able to extract more information about the company and more options which career to pursue. IBM has an inclusive work environment where every employee is valued for their contribution. It is also a place where women would want to work. IBM fosters a spirit of innovation, a culture of collaboration and inclusion and the values are embedded at the core (Graduate Jobs, 2008). The corporate mission is to maintain diversity and this corporate goal is regularly communicated to all via electronic communication, meetings and training. They have Diversity Councils that are located at IBM based multiple locations worldwide (VAULTS, n.d.). Their diversity policy is core to their business and in alignment withy their goals they are building a workforce in keeping with the global, diverse marketplace, to better serve the customers and capture a greater share of the on demand opportunity. IBM has an award winning recruitment program where they recruit Black, Hispanic/Latino, Native American, Asian, Women, and people with disabilities. This recruitment program is called Project View and in this program travel, meals and lodging are provided for one and half day of this program. Selection is based on work experience, skills and overall academic achievements. IBM fosters a culture of innovation and according to Sanford (2005) this is necessary to succeed in the next era of business. They strongly believe that innovation in products and services is possible with a renewed focus on people. Innovation is again dependent on corporate cultures where people are empowered to collaborate in new ways. Increased life expectancy and lower fertility rates have brought about a change in the employment of the older people. Mature employees have a positive role in the cultural transmission of corporate values and knowledge management. It also assists in buffering against losses of corporate memory through downsizing and shedding of its workforce. IBM Italy re-employs older workers or retired skilled staff which is offered as consultancy services (Brooke, 2003). IBM is hence able to retain a high level of professional skills and enlarge the range of services offered by IBM culture and achieve greater cost flexibility by contracting out services. IBM has a policy of providing the same opportunities to the disable as the non-disabled. In doing so, they respect the principle of non-discrimination in the search process. During the search process they omit any requirements that are not job specific in the description of the ideal candidate (ASPHI ONLUS, 2007). They also ensure that documentation regarding the recruitment transmits the correct message with respect to the organization's positive approach towards the disabled people. When they place ads on the internet they ensure it is easily accessible to everyone. They have also laid down codes of conduct to be followed by the interviewer when the disabled are called for interview. This is to provide maximum comfort and ease and to take care of special needs of the disabled when they come for the interview. They should be able to compete with the non-disabled in recruitment tests on equal terms. This personal attention and initiative taken by IBM demonstrates its corporate social responsibility and their principle of providing equal opportunities for all. It also shows their receptivity to an individual's need for personal and professional development. To ensure that they source candidates with disability, IBM works closely with Disability Works Australia. It also communicates its diversity focus to universities for proactive hiring of graduates with disabilities (IBM, 2007). It also communicates this to its Panel Recruitment Supplier agencies for professional hires. The Recruitment Specialists and Hiring Managers are provided training in recruitment of the disabled. To recruit more and more young women IBM started the EXITE (EXploring Interests in Technology and Engineering) camp where they recruit women and disabled youth (Ability Magazine, n.d.). In this week-long camp IBM encourages women to explore careers in math, science and technology. This is an effort by IBM to reach groups that are unrepresented in the technical work force and to train and recruit such workforce. Through this camp they are able to identify 12 or 13 year olds who have an inclination for technical studies and encourage them to pursue a career in this line. After the conclusion of the camps, IBM also has a mentoring program through which mentors at IBM keep in touch with such students that have the potential and have shown inclination. This helps the young girls to look up to young women as role models and perhaps pursue a career in this line. IBM believes in having a diverse workforce and they are confident that with globalization and with the movement of people across cultural and geographical boundaries, no company can escape being diverse (Thomas, 2004). They see diversity as a part of the visions that they want to build. They use diversity as a resource both for individual learning and development and for business performance and effectiveness. They use diversity as the bridge between the workplace and the market place. By maintaining internal diversity they are in a position to the diversity in the customer base and the labor pool. They also try to bridge the digital divide between people and communities of color. Even their senior executives talk about EXITE camps and education recruiting. All this has led to a culture change within the organization. IBM also recruits through suppliers like Delphi's Span job agency that locates and trains the recruits and employs them on fixed-term contracts (Kavanagh, 1998). Before starting under mentors at IBM, these recruits get five weeks of training in COBOL or PL/I training. This is a recruitment deal with Delphi under which agreement if IBM takes on these employees after two years, they do not have to pay a recruitment fee to the agency. IBM prefers trainees because they come cheaper and easier to train new people. Through this sort of partnership they are able to bridge the skills gap. As part of their diversity program, IBM tied up with Inroads - an organization that helps US corporations find and place minority students in internship jobs (Martinez, 1996). This enables these students to be on the fast track to management. They give preference to Hispanic, African American and Native American high school and college students with grades of 3.0 and above. Inroads pre-screen the students to match the skills required by the company and sends 3-4 students for every post required. Another innovative recruitment program followed by IBM is the employee referral program as it has been found to be the most effective and efficient way to hire new people (Daw, 2008). This has been found to be 20% more effective than the job portals. Rewarding employees costs less than paying the headhunters and they are able to attract better people. They give lot of flexibility for women who would like to work with them. Women can even work from home and they are rewarded for their contribution and not for the time they spending the office (Womenintechnology, 2007). Flexible working options include job-sharing, term-time working, compressed hours and sabbaticals. Because of such strategy they are able to attract a sizeable number of women in their workforce. It can thus be seen that the recruitment and selection process at IBM is unique and is alignment with its corporate goals and mission. They believe in diversity, they would like to give equal opportunity to all including women and they also believe that they can benefit by the skills of the older employees. Most corporations outsource their recruitment and selection process but IBM does not outsource all of their recruitments. They also have a referral program that is beneficial for the company because this ensures the right candidate and they do not have to go into background verification of the employee. This saves them time as well as the expenses that they would incur in outsourcing or in advertising in the local media for personnel. Further, they also discharge their corporate social responsibility by way of employing the disabled and the minority communities. For the disabled, they take into account all the special services that would be required for them. This motivates the candidate before, during and after the selection process. They have different strategies for recruitment and selection of different people and in the process they demonstrate their focus on people. They recognize that people are the greatest assets and this is what makes IBM unique. They are able to bring out the best in the employees and they encourage every employee to make contribution. IBM recognizes and rewards these contributions. In doing so, they are able to project an image of innovation and a healthy culture. This too is essential in being able to attract the right talent to the company. Hence, their strategy to have diversity or more women in their work force is all meant to emit the right signals of a healthy culture and be an 'employer of choice'. Besides, being globally dispersed, diversity is an essential prerequisite for success. They have offices all over the world and they need to keep shifting people from one location to another. This requires them to have cross-cultural and cross-functional employees. This they are able to manage because of diversity. IBM is able to gain out of the talent and skills of the older employees by re-employing them thereby also discharging their CSR. In additions, they are able to take care of the manpower shortage as the baby boomers retire and the workforce globally reduces. References: Ability Magazine (n.d.). Youth Tech Camps: An IBM Initiative. Available from: http://www.abilitymagazine.com/Youth_Tech_Camps.html [accessed 18 July 2008] ASPHI ONLUS, (2007). Guidelines for integrating people with disabilities into workplace. IBM ITALIA FOUNDATION. Available from: http://www.asphi.it/DisabilitaOggi/Guidelines_2007.pdf [accesed 18 July 2008] Bontis, N., & Fitz-enz, J., (2002), Intellectual Capital ROI: a causal map of human capital antecedents and consequents, Journal of Intellectual Capital, Vol. 3 No. 3 pp. 223-247 Brooke, L. (2003). Human resource costs and benefits of maintaining a mature-age workforce. International Journal of Manpower Vol. 24 No. 3, 2003 pp. 260-283 Fish, A., & Macklin, R., (2004), Perceptions of executive search and advertised recruitment attributes and service quality, Personnel Review Vol. 33 No. 1, 2004 pp. 30-54 Gordon, J., (2002), Retention Strategies And Worker Values, 04 Feb 2007 Graduate Jobs (2008). IBM. Available from: http://www.graduate-jobs.com/gj/training_scheme/IBM_graduate-jobs/index.jsp [accessed 18 July 2008] IBM (2007). Recruitment & pipeline, retention & capability. Available from: http://www-07.ibm.com/au/diversity/recruitment_&_pipeline_retention_&_capability.html [accessed 19 July 2008] Kavanagh, J. (1998). IBM and Delphi aim to bridge skills gap.(Company Business and Marketing). Computer Weekly (Sept 24, 1998): p.70(1). (265 words) From Business & Management Journals. Gale. Ashridge Business School - Custom. 20 July 2008 Read More