EXPANDING HUMAN CAPITAL

A goal for those focusing on HR management, as well as operating executives and managers, is to enhance the human capital of the organization. Human capital is the total value of human resources to the organization. Also

sometimes referred to as intellectual capital, it is composed of the people in the organization and what capabilities they have and can utilize in their jobs.

A critical part of expanding human capital is to utilize the talents of all people

inside the organization and to bring in the best from the diverse population outside.

Due to the shifting demographics in the workforce, HR management must be built to maximize the capabilities of all the diverse human resources. Thus, HR professionals must be those who ensure that all people, regardless of their life circumstances or backgrounds, are provided opportunities to develop their capabilities.

ATTRACTING AND RETAINING HUMAN RESOURCES As strategic business contributors, HR professionals must ensure an adequate supply of people with the capabilities needed to fill organizational jobs. Various experts on human capital have predicted a skills shortage for U.S. organizations that would hurt their competitive edge unless more investment is made in human capital. If that trend spreads as predicted, being able to attract people to the organization with the requisite capabilities currently requires more planning and creative implementation than in the past. For instance, at a computer software firm, growth is being limited by shortages of programmers and systems analysts. The company plans to open a new facility in another state so that a different labor market can be tapped, and the HR director heads up the site-selection team.

As the HR Perspective indicates, in many geographic locations in the United States and in many occupations, it is difficult to find sufficient qualified workers with the necessary capabilities. Truck drivers, welders, computer software engineers, legal assistants, and many others are just some jobs for which difficulty in recruiting has occurred. In many geographic locales in the United States, the official unemployment rate has been below 3%, which creates more staffing pressures.

To meet the staffing challenges, HR professionals are using a greater number of options. Traditionally, work was done by people who were employees. Increasingly today, work is done by independent contract workers, consultants,

temporary workers, and others who are not employees of organizations. Developing policies, negotiating contracts, evaluating staffing suppliers, and monitoring work performance of these non-employees requires a broader role than when all workers are employees.

But recruiting and selecting new employees is only part of the challenge. The HR activities in organizations must be revised in order to retain employees. For

every employee who does not leave the organization for a new job elsewhere,

that is one less employee who has to be recruited from outside. Therefore, significant emphasis is being placed on keeping existing employees and providing growth opportunities for them.

DEVELOPING HUMAN RESOURCE CAPABILITIES The human capital in organizations is valuable because of the capabilities that the people have. As part of the strategic role, HR managers are often seen as responsible for expanding the capabilities of the human resources in an organization. Currently, considerable emphasis is being focused on the competencies that the employees in the organization have and will need for the organization to grow in the future.

HR management must lead in developing the competencies that employees have in several ways. First, the needed capabilities must be identified and linked to the work done in the organization. This identification often requires

active cooperation between HR professionals and operating managers. Next, the capabilities of each employee much be assessed. This approach requires that the competencies and depth of those competencies be identified. For example, in a firm with 100 employees, the HR director is developing career plans and succession charts to determine if the firm has sufficient human resources to operate and manage the 70% growth it expects over the upcoming

four years.

Once the comparison of the “gap” between capabilities needed in the organization and those existing in employees is identified, then training and development activities must be designed. The focus throughout is providing guidance to employees and creating awareness of career growth possibilities within the organization. For many individuals, continuing to enhance their capabilities and knowing that there are growth opportunities in the organization may lead to greater job satisfaction and longer employment with that organization.

IDENTIFYING AND REWARDING PERFORMANCE The formal reward systems in organizations must be aligned with the strategic goals for the organization. It is

important that the human capital in organizations be rewarded competitively for their capabilities. Currently, many organizations are emphasizing compensation based on individual, team, and organizational performance. If performance is going to be emphasized, then the means of identifying employee performance must be developed or reviewed. This is particularly true

when employees work in teams or if their supervisors and managers are located

elsewhere.

Once employee performance has been measured, it must be linked to compensation programs. Unlike traditional compensation programs that provide

“cost-of-living” or other across-the-board pay increases, HR is having to develop and implement more performance-oriented reward programs. In this regard they are having to serve as agents of change because of the increasing complexity of compensation issues.

Base pay for many jobs and fields has increased faster due to worker shortages

than pay structures have increased in organizations. This imbalance has affected employee retention, and has required HR professionals to develop more and different compensation programs tailored to the demands of different employee groups and business unit realities.

There has been a significant increase in variable pay programs, such as gainsharing, team-based incentives, and others. These programs link rewards directly to organizational performance goals, so that the compensation system is integrally linked to the strategic objectives and results of the organization.

Benefit programs also have had to become more varied and cost-effective as well.