Commerce Optional (UPSC-IAS)

HUMAN CAPITAL MANAGEMENT DEFINED Human capital management (HCM) is concerned with obtaining, analysing and reporting on data that informs the direction of value-adding people management, strategic investment and operational decisions at corporate level and at the level of front line management. The defining characteristic of HCM is this use of metrics to guide an approach to managing people that regards them as assets and emphasizes that competitive advantage is achieved by strategic investments in those assets through employee engagement and retention, talent management and learning and development programmes.

CHARACTERISTICS OF HRM The characteristics of the HRM concept as they emerged from the writings of the pioneers and later commentators are that it is: ● diverse; ● strategic with an emphasis on integration; ● commitment-oriented; ● based on the belief that people should be treated as assets (human capital); ● unitarist rather than pluralist, individualistic rather than collective in its approach to employee relations; ● a management-driven activity – the delivery of HRM is a line management responsibility; ● focused on business values. @commerceoptional

The models of HRM, the aims set out above and other definitions of HRM have been distilled by Caldwell (2004) into 12 policy goals: 1. Managing people as assets that are fundamental to the competitive advantage of the organization. 2. Aligning HRM policies with business policies and corporate strategy. 3. Developing a close fit of HR policies, procedures and systems with one another. 4. Creating a flatter and more flexible organization capable of responding more quickly to change. 5. Encouraging team working and co-operation across internal organizational boundaries. 6. Creating a strong customer-first philosophy throughout the organization. 7. Empowering employees to manage their own self-development and learning. 8. Developing reward strategies designed to support a performance-driven culture. 9. Improving employee involvement through better internal communication. 10. Building greater employee commitment to the organization. 11. Increasing line management responsibility for HR policies. 12. Developing the facilitating role of managers as enablers.

POLICY GOALS OF HRM

Meeting diverse needs HRM aims to develop and implement policies that balance and adapt to the needs of its stakeholders and provide for the management of a diverse workforce, taking into account individual and group differences in employment, personal needs, work style and aspirations and the provision of equal opportunities for all.

Employee relations The aim is to create a climate in which productive and harmonious relationships can be maintained through partnerships between management and employees and their trade unions.

Knowledge management Knowledge management is ‘any process or practice of creating, acquiring, capturing, sharing and using knowledge, wherever it resides, to enhance learning and performance in organizations’ (Scarborough et al, 1999). HRM aims to support the development of firm-specific knowledge and skills that are the result of organizational learning processes. Reward management HRM aims to enhance motivation, job engagement and commitment by introducing policies and processes that ensure that people are valued and rewarded for what they do and achieve and for the levels of skill and competence they reach.

Human capital can be regarded as the prime asset of an organization and businesses need to invest in that asset to ensure their survival and growth. HRM aims to ensure that the organization obtains and retains the skilled, committed and well-motivated workforce it needs. This means taking steps to assess and satisfy future people needs and to enhance and develop the inherent capacities of people – their contributions, potential and employability – by providing learning and continuous development opportunities. It involves the operation of ‘rigorous recruitment and selection procedures, performance-contingent incentive compensation systems, and management development and training activities linked to the needs of the business’ (Becker et al, 1997). It also means engaging in talent management – the process of acquiring and nurturing talent, wherever it is and wherever it is needed, by using a number of interdependent HRM policies and practices in the fields of resourcing, learning and development, performance management and succession planning.

Human capital management The human capital of an organization consists of the people who work there and on whom the success of the business depends. Human capital has been defined by Bontis et al (1999) as follows: Human capital represents the human factor in the organization; the combined intelligence, skills and expertise that give the organization its distinctive character. The human elements of the organization are those that are capable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long-term survival of the organization.

The overall purpose of human resource management is to ensure that the organization is able to achieve success through people. As Ulrich and Lake (1990) remark: ‘HRM systems can be the source of organizational capabilities that allow firms to learn and capitalize on new opportunities.’ Specifically, HRM is concerned with achieving objectives in the areas summarized below. Organizational effectiveness ‘Distinctive human resource practices shape the core competencies that determine how firms compete’ (Cappelli and Crocker-Hefter, 1996). Extensive research has shown that such practices can make a significant impact on firm performance. HRM strategies aim to support programmes for improving organizational effectiveness by developing policies in such areas as knowledge management, talent management and generally creating ‘a great place to work’. This is the ‘big idea’ as described by Purcell et al (2003), which consists of a ‘clear vision and a set of integrated values’. More specifically, HR strategies can be concerned with the development of continuous improvement and customer relations policies.

AIMS OF HRM

Human resource management is defined as a strategic and coherent approach to the management of an organization’s most valued assets – the people working there who individually and collectively contribute to the achievement of its objectives