Capital and Financial Accounts of the Company - Essay Example

Human Resource Management: Strategic Approach 2007 “People are our most important asset.” What can the human resources department do to ensure that this statement is more than an "empty phrase?" “People are our most important asset” is an oft-repeated phrase in the corporate circles around the world. Particularly, in the knowledge-driven world of globalization, employees are the most valuable resource or asset that adds value to the company. Yet, unlike physical assets that are measurable in terms of physical or monetary units, people assets difficult to value and enhance. As a result, people assets, or human resources, are usually under-valued, under-trained, under-utilized, poorly motivated and able to perform less than their capability (Accel Team). To begin with, the human resource department needs to identify the human resource assets, or what may be termed as “human capital assets” since people too add value to the circumstances of our lives (Thomas). Human capital assets are able to enhance value by the ability to create, gather and retain knowledge, form social relationships and utilize the knowledge and relationships to grow, evolve, learn, develop and educate others. The HR department should concentrate on improving the quality of the processes of work so that the stages of knowledge management and utilization, relationship building and the processes of creation and value addition. For this, the HR department needs to understand the motives of the employees and the ways that they may be inspired as well as their capacity to improve their capabilities, competencies, performances and knowledge. It is a common practice to undertake and publish capital and financial accounts of the company but in a knowledge-driven economy, there is also the need to calculate the human resource accounting. The HR department needs to measure and report the cost and value of the organizational resources, that is, the liabilities and assets in terms of human resources. Like return on investment in physical capital, IT companies are increasingly reporting “return on knowledge” (Jasrotia). This involves accounting for investment in people, replacement costs and the economic value of people in the organization. What approaches can be utilized to ensure that a company's productivity levels and the performance of its workers actually support strategic corporate objectives? According to Michael Porter, organizational strategy involves a series of activities in which it decides to excel (Phadnis, 2002). Since the strategy typically involves selection and execution of hundreds of activities, it cannot be implemented by only the top management but needs the incorporation of all employees down the chain. For example, the strategy of Dell Computers Inc. was to capture market share through the direct selling and build-to-order mechanisms (Govindarajan and Lang, 2002). For this, the company decided to sell directly through order-taking on telephone or internet, without involving dealers and to place orders to for assembling of computers only after it booked the order from the customer. This requires a high level of productivity, time management and alertness of all employees at all levels, from the marketing to assembling and production of each part of the computer. Hence, it is essential that Dell employees and the HR managers design the measurement of productivity and work patterns in accordance with the strategy of the company. In many companies, skills of employees are measured on a case-to-case basis for each employee and by each trainer. However, these measurements become ineffective when the company aims to drive productivity in accordance with the strategy. On the other hand, the company should design the enterprise metrics depending upon the best practices. This would enable the company to undertake assessment of employees before and after each promotion, develop a skill inventory and ultimately achieve business results in terms of cost reduction and best performance. This would eliminate redundant training and education, optimize assignments, facilitate successful change management, improve hiring and human capital management (Brain Bench, 2003). Employee rights and employer responsibilities are major topics of concern in today's workforce. Discuss some of the primary strategies that companies can employ to ensure that the health, safety and general welfare of employees is adequately protected. The primary objective of a corporate organization is to maximize profits by maximizing revenues and minimizing costs. However, in order to minimize costs, companies may lose focus on the employees and do not compensate them with adequate salaries, benefits and other welfare facilities. For example, Wal-Mart is the largest retailer worldwide but the company is known for its inequitable labor relations. Wal-Mart’s wage practices are not uniform as its organization structure is largely decentralized. Adjusting for Wal-Mart’s distribution of stores across the United States, the average wage rate is in fact 2.6 percent lower in the low-paying states (Dube and Wertheim, 2005). Several studies have reported that Wal-Mart provides less healthcare coverage than other retailers. According to its own company report, 24 percent of its workforce and 46 percent of their dependent children were uninsured or enrolled in healthcare programs in 2005 (Dube and Wertheim, 2005). The family healthcare coverage for Wal-Mart employees is much lower than its competitors that earn less in revenues. Particularly, large retailers that employed 1,000 employees or more paid 16 percent more in health coverage and hourly wages than Wal-Mart did in 2005. A company of Wal-Mart’s size has grown so fast basically on the basis of low wage and product costs. However, this has put the management in an ethical dilemma over its management practices, whether to pay its workers fairly or maintain the company profits by paying low wages. Employers must make sure that employees are adequately compensated and provided with safe and secure working conditions. In order to ensure safety in the workplace, the organization should pay particular attention to the number of hours worked and health and insurance benefits. International Labor Organization (ILO) and World Trade Organization (WTO), in the first session in 1950, defined occupational safety as “the promotion and maintenance of the highest degree of physical, mental and social well-being of workers in all occupations; the prevention amongst workers of departures from health caused by their working conditions; the protection of workers in their employment from risks resulting from factors adverse to health; the placing and maintenance of the worker in an occupational environment adapted to his physiological and psychological capabilities; and, to summarize, the adaptation of work to man and of each man to his job" (wikipedia). In the United States, Occupational Safety and Health Association (OSHA), the regulator that monitors occupational safety sets guidelines for the industry (New York Times, 2007). Just because a corporate strategy has been successful in the past, doesn't mean that it will continue to be competitive in the future. What does a corporation need to consider before it begins a restructuring, reengineering, or redesign process? Before restructuring, reengineering or redesigning processes, the company must examine the competitive scenario and the competitive strengths of the company. According to Porter’s (1980) theory, the level of competition in an industry is defined by the five forces: 1) the threat of entry of new competitors (new entrants), 2) the threat of substitutes, 3) the bargaining power of buyers, 4) the bargaining power of suppliers and 5) the degree of rivalry between existing competitors. The business environment depends on the level of industry competition and the intensity of rivalry, which in turn depend on the threat of new entrants into the business and that of substitutes as well as how well the company can manage its buyers and suppliers. The intensity of rivalry between players also depends on the number and size of players, cost structure of the industry, level of product differentiation, customer-switching costs, level of aggression exhibited by players and exit barriers. The threat of new entrants raises the level of competition in the industry. The intensity of competition to a large extent depends on the threat of substitutes. The number of buyers for the product increases the opportunities for the company while its competitiveness vis-à-vis the suppliers of products determine the margins. The value chain of a company, the concept introduced by Porter (1985) is its entire product flow from the suppliers to the customers and managing the information flow seamlessly such that the customer derives maximum satisfaction while the company maximizes its profits. The firm’s infrastructure, human resource department, technology development and procurements comprise the tertiary activities that support the main lines of activities. It is the role of the HR department to ensure that the restructuring process is designed in accordance in alignment with the competitive strengths of the company down the value chain. According to Thompson, Stickland and Gambler (2007), a winning strategy may be executed by uniting the entire organization towards the strategy, generate commitment and enthusiasm and fit the organization towards the strategy. While the top managers take the lead role in designing and executing the winning strategy, all managers and workers need to take up roles in the process. Works Cited Accel Team, Human Resource Management, http://www.accel-team.com/human_resources/hrm_00.html Thomas, Bill, 5 Human Capital Enrichment Strategies for Leaders, http://www.icbs.com/KB/inspiration/kb_inspiration-5-human-capital-asset.htm Jasrotia, Punita, The need for human resource accounting, http://www.expressitpeople.com/20021216/cover.shtml Govindarajan, Vijay and Julie B Lang (2002). Dell Computer Corporation, Tuck School of Business at Dartmouth Case Study, No 2-0014, http://mba.tuck.dartmouth.edu/pdf/2002-2-0014.pdf Phadnis, Shree (2002). The Balanced Score Card, Quality and Productivity Journal, March 2002, http://www.symphonytech.com/articles/pdfs/bscard.pdf Brain Bench (2003). Addressing Business Issues: Skill Measurement Report, December. http://www.brainbench.com/pdf/STG_BusinessIssues.pdf Dube, Arindrajit and Wertheim, Steve, Wal-Mart and Job Quality – What Do We Know and Why Should We Care? Paper presented at Center for American Progress, retrieved from http://laborcenter.berkeley.edu/lowwage/walmart_jobquality.pdf Porter, M.F. (1980) "Competitive Strategy", The Free Press, New York, 1980 Porter, Michael(1985) Competitive Advantage: Creating and Sustaining Superior Performance, New York, Free Press Thompson, A., Strickland, A., Gamble, J (2007) Crafting and executing strategy: text and readings 15th ed. New York, NY: McGraw-Hill Irwin http://en.wikipedia.org/wiki/Occupational_safety_and_health New York Times, OSHA Leaves Occupational Safety in the Hands of the Industry, www.nytimes.com/.../25osha.html?ex=1335153600&en=5f7c1bed6bc00179&ei=5088&partner=rssny Read More