Human Capital and the Greatest Assets of a Company - Essay Example

Human resources are considered as human capital and the greatest assets of a company. It has become essential to recognize this fact in the face of globalization and intense competition. The rise in the status of knowledge workers has emphasized the focus on human resources for key to organizational productivity (Sheehan, 2005). Within the resource-based view of the firm, human capital has become the key to sustainable competitive advantage. Based on the resource-based view, Koch and McGrath (1996) contend that a highly productive workforce is likely to have attributes that make it a highly valuable strategic asset. This enhances the commitment to human capital development and this also necessitates the transition from personnel management to HRM practices. The HRM policies within an organization have to be coherent and fully integrated. To retain employees, employee-commitment has become essential and this is possible through several HRM functions, all of which have to be integrated. These functions include recruitment and selection, training and development, performance appraisal, remuneration and diversity management. This paper will explore how an organization can increase employee commitment through the right recruitment and selection procedure. Teo and Crawford (2005) found that a strategic approach to HRM helps to break out of the personnel management mould. In the public sector in Australia, HRM was not given a strategic approach and they were not aligned with the corporate missions and goals. It is being recognized that top management team has to engage in business partnership with the line managers. However people management roles have become strategic. The line managers are the ones that interact most with the employees and they need training in the functional and operational aspects of people management. Unless the line managers can be involved in the different HR functions, the recruitment and selection of people may not be as the firm requires. If the people and job do not fit together it leads to lack of commitment and motivation. Even firms that have strategic decision making and strategic thinking do not have an integrated HR strategy. This was found by Torrington and Hall (1996) through a study of 214 different organizations. Personnel management functions were found to be ad hoc, reactive and without sufficient planning. HRM used planning and was pro active while personnel was reactive and downstream. Personnel mangers were found to be less effective and not as strategic as they should be. The importance of line managers has been emphasized stating that they are the drivers and deliverers of HR policies. Organizational practice may vary but strategic involvement has to increase. The Personnel specialists have to be trained in different functions because it is a combination of skills and knowledge that provides the specialist with authority The personnel functions does not mean only to do things right but it also means to do them the right way (Torrington & Holden, 1992). Training has to coordinate with recruitment and recruitment has to be coordinated with remuneration. HRM can impact the company performance only when all the functions are coordinated in a single program – career management, recruitment and selection, customized pay benefits, performance appraisal, training and development and involvement. Many sources of applicants should be tapped that include referrals from current employees, newspaper advertisements, private and public employment agencies, and educational institutions (Lin & Kleiner, 1999). Chang and Chen (2002) evaluated the link between HRM practices and firm performance through a study of high tech firms in China. They found that these practices have an impact on employee performance and productivity and help to keep the people coherent. Such practices are also negatively related to employee turnover. Managing work force diversity is an integral part of HR practices as MNCs employ labour across borders. Workforce diversity has become a necessity and this can be managed through effective integration of diversity management principles in the key human resource functions including recruitment and selection. Workforce diversity is essential for an organization and hence they must create an environment that they are able to attract people from diverse labour markets. By recruiting people from diverse backgrounds, irrespective of age, ethnicity, gender or other individual characteristics, a firm can gain competitive edge (D’Netto & Sohal, 1999). Recruiting diverse workforce at critical entry points can be another strategic decision so that instead of internal promotions, they have the choice of diverse workforce for promotions. This requires that the recruitment and selection process must be based on organizational and job-relevant criteria. People from different backgrounds can bring new ideas into the company and the company benefits from a diverse talent pool. The managers too need to be skilled in assessing the criteria. They should be able to develop a job description and the selection process should cover the job relevant duties, qualifications and experience and comply with anti-discrimination legislation. Advertisements should be placed in ethnic language press in addition to daily newspapers. Diverse managers should be kept on the selection committee and techniques should be employed that allow diverse people to answer the question to the best of their ability. It is widely accepted that if organizations and their mangers have to be more effective, certain underlying issues must be addressed such as the process of selection. Success in managerial work, according to Mintzberg, depends on the possession a range of social skills and innate personal qualities (Garavan, Barnicle, O’Suilleabhain, 1999). Strategic selection is a critical level for acquiring specialist skills necessary to support the delivery of high quality service (Millmore, 2003). Changes in business environment require restructuring internationalization and total quality management which emphasizes that employees must meet these skill requirements. Recruitment and selection process should be used as a strategy to bring about a more flexible workforce. It should not be an integrated, key task but a separate, marginal task, according to Millmore. Koch and McGrath (1996) suggest that firms follow routines or repetitive behaviours in several functions. These routines are imitable and leave no scope for differentiation. The HRM strategy of a firm should be to develop strategies that are exclusive to the firm. One such area should be investments in hiring. The firm must first have a clear knowledge of what sort of workforce is required and then how to go about acquiring it. The uncertainty of selecting the right inputs manifests itself in the difficulty of knowing in advance, how well an individual will perform if hired. Since no prior information is available, the managers have to rely on the recruitment and selection process. They must follow the process of extensive margin and intensive search. To reduce the uncertainties, the managers must know the labour market in terms of worker supply and skills distribution. Extensive margin requires having a variety of recruiting sources to reach a larger number of potential workers. They should also increase the number of candidates screened per hire. Intensive search refers to the information that can be gathered about a potential candidate before hiring. Selection and screening tests help to identify the desirable and undesirable characteristics. Such tests results allow matching the individuals with the jobs which enhances performance, keeps the employees committed and does not include those with undesirable characteristics. To know more about the candidate, Lin and Kleiner (1999) suggest the critical incident technique in which the candidates are asked to describe actual behaviours that led to the success or failure on the job. These help to produce a behavioural description of a good performer and a bad performer and also help to distinguish between high and low performers. During the interview the candidate should also be asked to describe how and why key projects were completed in past assignments. Reference checks should be duly conducted about the candidate before hiring. Human resources have to meet the demands of the changing environment. The HRM practices have to be integrated and recruitment and selection should be at the centre of the HR practices in an organization. Even though some authors feel it should be a separate task but the emphasis is on the fact the recruitment and selections process should be unique and be able to draw the maximum information about the abilities of the candidate. The purpose is to find the right candidate for the job and hence the candidate description should match the job requirements. This then places emphasis on the job description before the search process. Hence the process of finding the right candidate starts at the level of identifying the job requirements. This again emphasizes the importance of managers being equipped to understand the requirement as well as be competent to conduct the recruitment and selection process in the right way. To recruit from a diverse talent pool, recruitment advertisements should be placed in a variety of sources. Various techniques have been suggested to understand the potential of the candidates which can then help to match the candidate with the job. All these efforts are ultimately to enhance the employee commitment to the organization. A committed workforce enhances productivity, remains loyal, and reduces the frequent recruitment and training costs for the organization. References Chang, P., & Chen, W. (2002). The effect of human resource management practices on firm performance: Empirical Evidence from High Tech firms in China. International Journal of Management, 19 (4), 622-631. D’Netto, B., & Sohal, A. (1999). Human resource practices and workforce diversity: an empirical assessment. International Journal of Manpower, 20 (8), 530-547. Garavan, T. N., Barnicle, B., O’Suilleabhain, F. (1999). Management development: contemporary trends, issues and strategies. Journal of European Industrial Training, 23 (4/5), 191-207. Koch, J. M., & McGrath, R. G. (1996). IMPROVING LABOR PRODUCTIVITY: HUMAN RESOURCE MANAGEMENT POLICIES DO MATTER. Strategic Management Journal, 17 (5), 335-354. Lin, Y., & Kleiner, B. H. (1999). How to hire employees effectively. Management Research News, 22 (9), 18-25. Millmore, M. (2003). Just how extensive is the practice of strategic recruitment and selection? Irish Journal of Management, 24 (1), 87-108 Sheehan, C. (2005). A model for HRM strategic integration. Personnel Review, 34 (2), 192-209. Teo, T. T. S., & Crawford, J. (2005). Indicators of Strategic HRM Effectiveness: A Case Study of an Australian Public Sector Agency during Commercialization. Public Personnel Management, 34 (1), 1-16. Torrington, D., & Hall, L. (1996). Chasing the rainbow: how seeking status through strategy misses the point for the personnel function. Employee Relations, 18 (6), 81-97. Torrington, D., & Holden, L. (1992). Human Resource Management and the International Challenge of Change. Personnel Review, 21 (2), 1-19. Read More