Evolution of Human Resource Management and the Contemporary Approach to Human Capital Management - Essay Example

The Evolution of Human Resource Management and the Contemporary Approach to Human Capital Management Introduction Human capital is defined as the set of skills, which an employee acquires on the job either by training or experience. These skills increase the employee’s value in the labor market. It is, therefore, a measure of an employee’s economic value based on the employee’s skill set. The concept of human capital appreciates the fact that labor is not equal, and human capital can be improved through investment in training and development. The quality and level of education, experience and skills of an employee have economic value to employers and the whole economy (Skelton and Anderson 2008). Human resource management (HRM) is the process of hiring and developing employees in order to make them more valuable to the organization. Formerly known as personnel management, HRM evolves into a broader profession engaging more actively in employee management to include tasks such as, conducting job analysis, recruiting the right people, orientation and training, dispute resolution and communicating with employees at all levels. HR professionals must possess extensive knowledge of the industry and demonstrate leadership qualities and effective negotiation skills (Skelton and Anderson 2008). Overview of human resource management The Society for Human Resource Management (SHRM), in 2005, found that 54.8% of HR professionals worldwide encountered bureaucratic obstacles and marginalization in their careers, in the organizations they worked with (Lundy and Cowling 1996). In light with the terms used to define HR professionals today, for example, ‘strategic partner’, HR has adopted a more strategic role in management unlike the previous functional role. For example, in 2005, Mercer, on his global study on HR found that half of the companies were restructuring to give HR a more strategic role. HR managers have shifted from the more traditional approach of role reporting that was mainly transaction based where they had to report to an administrative manager. They are now currently members of the senior management. Unlike other professions like insurance and banking that have a more identifiable consistencies and an almost linear evolution path, HR’s role within an organization can almost be described as scatter gram characterized by a series of disjointed activities(Lundy and Cowling 1996). Borrowing from the first principles of evolution, HR has gone through an inter-generational process of variation, selection and retention of the best practices. Variation implies acquisition of new kinds of skills sets, motivations and expectations, and triggered by various internal and external environmental changes among HR professionals. These forces selectively eliminate certain variations and promote other variations to be favoured by the selection process. While variation is personal, selection impacts the structure of workforce of an organization. Studies have documented that, organizations deliberately preserve, duplicate or reproduce the selected variations as has been confirmed by the spreading of strategic HR practices through geographical regions and organizations (Lundy and Cowling 1996). Where technological innovations such as software applications have made functional tasks for HR professionals obsolete, HR professionals have had enough time to articulate on strategic goals instead of routine administrative tasks. For example, payroll software automated previously labour intensive tasks for HR professionals, leaving them with ample time for higher strategic thinking required by the knowledge economy. More sophisticated technologies like the 360-degrees performance appraisal programme emphasizes strategic management skills, and the accompanying software requires HR professionals to upgrade their skill set to levels required in using and developing these technologies. Virtual offices have eliminated the ability to monitor employees manually, necessitating use of engagement strategies to maximize productivity (Lundy and Cowling 1996). With the increasing trend of staff retrenchment among companies aiming at minimizing costs, employees are taking more responsibility of their affairs. Consequently, HR staffs have to be more strategic in attracting and retaining top talent. More companies are reforming their candidate attraction strategies especially adopting a more holistic approach to recruitment advertising. HR professionals invest more time, thought, creativity and expertise in selecting media channels to communicate with the target audience, thus participating more in company strategy (Skelton and Anderson 2008). The generational differences in the work place have increased pressure on HR to be more focused on retaining and attracting staff. Psychological contracts have changed with employees constantly changing jobs and opting to carve their own career paths, thus it is critical that HR selects the right candidates. With the current trends in the information revolution, more emphasis is put on the value of human assets and with the increasing need for intellectual effort, an employee is required to have the right psyche and mind set for gaining performance knowledge, this demands more innovative HR management techniques (Skelton and Anderson 2008).   Following recurrent recessions in the USA in the 1990s, many companies under took productivity initiatives such as downsizing, re-engineering, and consolidation requiring HR professionals to focus on infrastructure and their roles as administrative experts, reducing their roles as intermediaries between management and unions. The growth of legal regulations on employee relations requires HR professionals to ensure company compliance with these initiatives. For example, the Race Discrimination Ordinance in Hong Kong required HR directors to be informed of the intricacies of the police and to liaise with legal departments to facilitate education of line managers and organization associates. The self awareness and advocacy within the industry and the need to define the profession has resulted in the creation of many professional HR bodies, and publicity through media channels has attempted to define the role of HR to the public and even corporate (Tsui and Lai 2009). Contemporary approach to human capital management Stock market and share holder pressure for short term profits often penalizes investment in human capital development as the market tends to regard investment in human capital as a diversion of profit. It fails to reward development of staff for future growth and success. Sustainable profitability especially for high cost developed nations requires a strong focus on human capital as a reliable means of wealth creation in the knowledge era. Achieving this, requires superior strategies of employee development and management, focus on both individual and organizational capacity, evaluation of people, both as assets and costs and ability to resist short-term pressures that cause chronic under the investment in human capital. McBassi & Company explored the correlation between human capital investment and overall business performance and concluded that, those companies that show the greatest commitment to human capital development leap the greatest financial return (Gennard and Judge 2005). Often, corporate malfunction is caused by failure by executives to integrate diverse activities that combine to make the company function, opting to consider critical factors in isolation rather than reviewing them in alignment with an overall perspective that is intent on the overall business efficiency. A key element of efficient human capital management is involvement of HR in strategic business affairs. HR professionals in leading organizations tend to look beyond execution of HR transactions to a more value addition and strategic focus by aligning human resources and work force planning functions with overall business strategy (Gennard and Judge 2005). To address human capital challenges, HR staff employs varied tactics. Using the best practices and technology, they optimize the efficiency of transactional processes by standardizing, automation and integration of business processes. With the transaction process optimized, HR organizations are able to invest more time in strategic function to increase employee productivity. Centralizing and consolidation of HR operations in a shared services system increases efficiency. Outsourcing where appropriate and employing IT to integrate systems, data and processes across the enterprise (Heisig, Mertins and Vorbeck 2003). Bench marking helps achieve balance between efficiency and value-added services to support corporate strategic goals through self assessment and comparing results with peers, HR achieves optimal efficiency and effectiveness. Some HR best practices include engaging both internal and external talent in recruitment drives, automated recruiting system analysis and reporting, and an integrated applicant tracking system. Online access to direct deposit and payroll data and use of single point of contact for pay roll queries and benefits and retirement planning self-service (Heisig, Mertins and Vorbeck 2003). Successful organizations leverage skills and competencies of their employees by encouraging individual and organizational learning through a creation of a conducive environment for knowledge creation, sharing and application. While recruitment of exceptionally talented individuals is important for an organization, individuals must demonstrate a desire to express their skill and expertise in the organization at their different capacities (Heisig, Mertins and Vorbeck 2003). Talent management While most business strategies employed by organizations to increase market share can be replicated by competitors, it is nearly impossible to replicate a high-quality, engaged workforce. Organizations must, therefore, effectively and efficiently hire, deploy, engage and retain talent in all levels of the system to gain competitive advantage. Talent management is the selection, development, performance management and smooth transition of the workforce to guarantee a constant supply of quantity and quality of people to accomplish current and future business priorities. The talent management process should be conversant with current and future business strategies. Gaps in talent should be identified, and a plan designed to close those gaps, ensuring accurate hiring decisions, clear connection between individual and team goals to corporate goals, readiness of talent for transition to the next level and focus on strategy execution, and the business impact and workforce effectiveness should be measured during and after implementation (Latham 2007). Business decisions and talent decisions should correlate. Matching talent to business needs is critical as business success hinges on its ensuring that not only is the right talent effectively working in place, but also that it is doing so at the right time. Talent managers have to own the process and serve as partners, guides and trusted advisers when addressing talent needs at corporate executive meetings. Top corporate leaders like former general electric CEO jack welch spend up to 50% of their time with the staff. They participate in talent recruitment, grooming high potentials and reviewing talent pools. HR and the senior management must work together for talent management to be wired into the operations of the organizations most essential functions (Latham 2007). The more successful companies use competencies as the basis for succession management, external hiring and inside promotions. Associated with competency models are success profiles. These are designed to manage talent in relation to business objectives. They reflect key plans and priorities and change with new strategies. They highlight competencies, personal attributes, knowledge and experience in a detailed definition of the requirements in exceptional top quality in a certain role or job (Latham 2007). Talent management must encompass a broader portion of the employee population. The ability of an organization to compete depends on the performances of all its key talents and its ability to develop and promote that talent. The Aberdeen group in a 2008 report found that, 40% of the top performers focus on development of a leadership pipeline across all levels of the organization. Talent management also encompasses proactive management of career transitions. Talent should be developed in readiness for the next transition, for example, candidates considered for front-line leadership positions must learn to link their own to the performance of the team they manage (Branham 2005). Talent development should focus on the best talent; the best returns are realized when promising individuals receive differential focus in development expenditure. Focus should be on high-potential leaders and individuals who create value for the organization. Several organizations mine mid-level ranks for leaders with potential to advance to strategic or senior roles. Others focus on value creators such as engineers or sales associates with the most beneficial results for their employers (Branham 2005). Priority should be given to improving the selection and hiring process rather than talent development. This is because not every skill can be developed and training people to improve judgement, learning agility and adaptability is difficult. Lack of motivation or poor fit between the employee’s values and those of the organization leads to poor performance. Hiring the right skills is more efficient than developing those skills on the job while assessing for competency in areas that are develop-able during the hiring process. This approach is generally found to be more cost effective than developing them later (Branham 2005). Performance management Performance management entails assessing employee performance and aligning individual goals to overall organizational goals and keeping employees satisfied so that you can retain them. The line managers should be given enough guidelines on how to assess performance while employees should be able to perceive the process as equitable and fair. Strategic performance planning ensures employee retention. Technology should be used to establish consistent performance management processes (Gennard and Judge 2005). Goal management ensures that everybody is working on the right goals and organizations should set strategic goals to be accomplished. Goals should define the results that the employees aim to achieve and form the basis for the best practice performance planning, appraisals and reward processes. Individual goals are defined and aligned through a chain of command back to the overall organization goals in a continuous process (Gennard and Judge 2005). Performance reviews should be automated and integrated with individual and organizational goals. Automation makes the process proactive and employees feel valued, managers have a clear sight of the objectives and executives are updated on the performance. Standardized performance reviews ensure fair and equitable review and mitigates against employee litigation. All information should be secure and confidential (Gennard and Judge 2005). Employees, line managers and executives should be able to retrieve information on performance and the process should have the best practice work flows that guide everyone through each step. Employees should have access to relevant websites so that they can access, receive and submit information. With accessible feedback to stakeholders, candidates for open positions can be identified (Skelton and Anderson 2008).   With performance data available, managers can assign compensation cycles that fit the budget and meet guidelines for merit and bonus allocation. Compensation can be distributed to employees and plans for approval submitted in an efficient timely manner. A pay for performance strategy for rewarding employees for meeting key objectives while sustaining competitive advantage and reducing turnover and costs can then be formulated. It is critical to reward and celebrate high performance as when it is recognized and the achiever is satisfied and properly motivated they continue to deliver on set goals and show royalty (Skelton and Anderson 2008). Conclusion While discussing the changes in management’s perspective of employees from old days to the present day, it is important to highlight the evolution of the HR profession from a vague, trivial department generating negative sentiments to the current status of the HR as a highly respected and vital department of any organization. Employee appreciation and HR empowerment are inextricably intertwined. It is also important to outline the changes in human capital management, as a result of the recognition of the critical role of talent development and mentoring in achieving organizational goals. Bibliography: Blyton, P. and Turnbull, P., 1992. Human Resource Management: Conflicts and Contradictions.Newbury Park, Califonia: Sage Pubns. Branham, L. 2005. The 7 hidden reasons employees leave: how to recognize the subtle signs and act before its too late. New York: AMACOM. Gennard, J. and Judge, G., 2005. Employee relations. London: Chartered institute of personnel and development. Heisig, P., Mertins, K. and Vorbeck, J., 2003. Knowledge management: concepts and best practices. Berlin [u.a.]: Springer. Latham, P. 2007. Work motivation: history, theory, research, and practice.Thousand Oaks: Sage Publications. Lundy, O. and Cowling, A., 1996. Strategic Human Resource Management. New York: Routledge. Skelton, N. and Anderson, J., 2008. Human resource procedures for employee management: the professionals ready-to-use guide to create HR policies and promote a productive workforce. St. Louis, MO: Bizmanualz, Inc. Tsui, P., Y. and Lai, K., 2009. Professional practices of human resource management in Hong Kong: linking HRM to organizational success. Aberdeen, Hong Kong: Hong Kong University Press; London: Eurospan [distributor]. Read More