The changing nature of human capital

In an age obsessed with measurement, it is not surprising to note that organisations find it increasingly difficult to justify investment in people. However, the economy is becoming knowledge-intensive. We have been used to a world where the intangible contribution of employees was accounted as goodwill in one corner of the balance sheet. However, all that has started changing. There have been attempts to develop metrics to measure employee value, so that it would become easier for measurement-led management systems to get to grips with it. In reality, all these attempts have proved futile and irrelevant.

Organisations and managers have to come to terms with the idea that knowledge resident in people’s heads is far more valuable than the physical, tangible assets of the company. A mechanistic approach to managing people like assets is not the way forward. Human resources (HR) departments or personnel departments have to rise from the ashes and help organisations manage these knowledge resources. The challenges these departments and people face are twofold – internal and external.

The internal challenge they face is accepting the gravity of their role, as they are not used to this attention. Traditionally, HR departments never had a say in recruitment and were there to take care of the paperwork that followed recruitment. Knowledge-intensive economies have revealed the importance of HR professionals and, more importantly, their ability to evaluate people strategies with business strategies. There is, therefore, a strategic element involved. While some organisations have made huge inroads into this area, lot of work still needs to be done.

At the external level, other business units have always complained that HR is out of synchronisation with business needs and that HR professionals lack commercial experience. It is the responsibility of senior managers and leaders to ensure that HR professionals obtain a rounded exposure through secondments.

This book looks at the talent pool and advocates the need to view employees in a different light. It explains why employees do not fit the traditional definition of assets. It then moves on to explore how the nature of work has changed and how employees have started viewing work. ‘Work’ in the current context is seen as a means to an end and not the end itself. This then moves the discussion on to the nature of engagement that employees have with the organisation and with their work. The impact of technology and the nature of the connected workforce help the reader to understand how the talent pool has evolved over a period of time.

The discussion then moves to explore the role of organisations and leaders in managing human capital. The challenges that this new generation of talent poses and the limitations of HR processes to manage this workforce, and the inability of HR professionals to manage this talent pool are then revealed. It shows why they are ill-equipped and unprepared. The need for organisations to include talent management at the top of the strategic agenda at the board level is then discussed. To create an impact, HR professionals have to be taken seriously. To achieve that, HR professionals have to demonstrate their understanding of the business and develop the human capital management strategy to embrace what business needs.

Having understood the nature of the workforce and the role that organisations and HR professionals play, attention is then given to two aspects of human capital management: the practical and the strategic aspects. At the practical level, the question of value or employee value is discussed first. The concept of value protection and generation is introduced to demonstrate the value of tangible output to generate supporting functions.

The techniques discussed under the practical aspect provide a simple approach to outsourcing within HR, managing stress and negative (toxic) behaviours in the workplace. The book then introduces a three-dimensional approach to measuring employee behaviour and the value it adds as a result. Readers are introduced to an approach to developing a training framework. Then a cognitive mapping technique is discussed to identify and monitor intangible constructs that need to be groomed as part of training interventions. The book then introduces readers to brain-based epistemology and its impact on talent management.

At the strategic level, the book explains the concept of employee relationship management (ERM), which looks at employees as micro-businesses that sell their skills in return for cash. It demonstrates how traditional customer management tools and policies can be used by HR professionals to develop ERM interventions. The concept of knowledge creators and amplifiers and some practical techniques to capture knowledge are presented. The Critical, Unwanted, Preferred, Irrelevant and Desirable (CUPID) framework is then introduced to demonstrate how an organisation can identify and classify the successful competence and behaviour traits of employees. It also demonstrates how the cognitive mapping technique can be used to create an unbiased evaluation mechanism for intangible constructs pertaining to talent management.

With Baby Boomers on the last lap of the journey, the next generation of workforce relies on the much discussed Generation Y and the lost or forgotten generation, Generation X. Insights into what drives these generations to work, and why they behave the way they do, are presented. This is the generation that the HR professionals have to work with, mould and manage.

While the challenges of human capital management in India are being discussed, the lessons learned can be applied globally. India started emerging as a software power in the late 1980s and early 1990s. The challenges the software firms faced could not be met by traditional frameworks that existed at that time. Firms were quick to realise the value of HR professionals and they have since developed many systems, processes and strategies to manage talent. The challenge faced by these organisations in the late 1990s and early part of this millennium is what the Western world is facing at the moment.

India, for example, has more HR professionals at the board level than many Western countries. India was one of the first countries to have a HR development ministry 30 years ago. There are lessons to be learned from India, where the challenge of managing human capital has been addressed effectively.