1. WHITE PAPER – 2
WHY HR ASSET MANAGEMENT IS CRITICAL
WHAT IS THE MOST VALUABLE ASSET THAT A COMPANY
HAS?
Is it the name, customers, goodwill, physical resources, or product line?
The answer is “None of these”.
A company's most valuable resource is its' employees. Any organization will
go only as far as the people who are driving it. In fact, a company is really
just a group of people who interact for a common purpose. They are the
ones who make up the organization.
The last few years saw a shift in the focus of some companies. For decades,
management gurus were preaching that the customer is the most
important thing. Certainly you have seen the signs stating,
"Rule #1: The customer is always right.
Rule #2: Reread Rule #1".
This concept dominated the business culture from the late 70’s and 80’s
through today. However, organizations that hope to survive in the future
will need to adopt a new outlook. That outlook is that “the employees are
the most important aspect of any enterprise”.
Most, if not all institutions will tell you that their employees or human
resources, constitute the most valuable element in their asset portfolio
especially small and medium businesses. Yet, it is not difficult to show that
this most valuable asset, more often than not, is the most mismanaged and
ill-utilized in large and small - medium organizations.
Why is that so? The answer is simple, but not without far-reaching
implications. This kind of asset has a brain, has feelings, and its yield-to-cost
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2. performance ratio is highly unpredictable - unlike that of buildings,
equipment, and money. Nonetheless, this asset is needed in any real
organization. The planning, acquisition and management of human assets,
therefore, present a formidable challenge, and there are no magic formulas
or recipes, only guidelines which if not followed, will guarantee major
losses for organization.
WHY IS IT IMPORTANT?
The success and growth of a small company can be attributed to its culture.
Due to its size, communication between all employees is not complicated.
And alongside this communication, the trust and organizational goals are
easily shared and understood by everyone. And in its growth, it is important
that this culture is maintained and adjust to changes accordingly. HR
professionals can work both with management and employees in doing
this. With increase in employees and more demands in operations,
communication may take a backseat for both parties.
Without human resource other factors such as money, machines, materials,
methods and markets cannot be acquired and utilized. It is through people
that these factors be developed and be utilized as human factor is
responsible for the success and failure in any organization because people
are the significant input and output in an organization. Even if an
organization starts with zero funding but with creative, resourceful,
hardworking and honest people, it becomes financially viable and there is
no better or successful organization without the existence of people.
It is easy to understand why organizations talk about people as an asset,
but tend to manage them largely as a cost to be minimized. Aside from
accounting principles that encourage this perspective, HR costs are easy to
observe, while HR value creation is not. Largely because of the traditional
perspective on HR, organizations have no way to measure HR’s strategic
performance.
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3. FACTORS WHICH RESULT IN REDUNDANCIES OF HR ASSET
There are several reasons why redundancies or non-yielding human assets
accumulate in most organizations:
1. Rapid organizational growth,
2. Inability to forecast the future,
3. Inability to identify and exploit the effective capacity of human
resources,
4. A functional approach to human resource planning, acquisition, and
utilization,
5. Greed,
6. A lack of a clearly defined strategic focus
7. Inefficient approaches to hiring and promotion,
8. Lack of congruence between strategic purpose and core
competencies,
9. Inability to identify and/or articulate requisite competencies
consistent with strategic purpose,
10.Inability to quantify human resource capacity,
11.Existence of an ill-founded meritocracy,
12.Inability to attract quality staff,
13.An ineffectual organizational culture causing employees to maximize
their incompetence, and
14.Badly defined job functions.
Many organizations start small, and as opportunities present themselves,
they expand accordingly using a simple "chase" strategy. In most cases,
there is little analysis of whether the perceived opportunities are
sustainable. Most hiring’s are myopic. People are hired to do specific
functions based on current need. As the strategic direction of the
organization changes, these employees (human assets) yield less and less.
In other cases, employees hired for a specific function never have their full
capabilities assessed and/or explored. Further, there is a general inability to
quantify the asset-yield capacity of human resources. Consequently, the
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4. organization cannot effectively determine when it has reached its
affordable human asset capacity level. Some organizations are simply
greedy and develop an optimistic expansionist philosophy, particularly in
the "boom" times. But surely as night follows day, "bust" follows "boom".
WHAT CAN BE DONE TO AVOID THE MISUSAGE OF
HUMAN ASSET?
What can organizations do to avert frequent human asset acquisition and
disposition cycles (hiring’s and layoffs)?
1) Plan sustainable growth rates,
2) Understand their environment,
3) Acquire and develop flexible human resources,
4) Adopt a strong culture of an outward and forward focus,
5) Match strategic purpose with the acquisition of human resources,
6) Improve hiring approaches with clearly defined criteria,
7) Measure and review human resource capacity constantly in the
context of the organization’s strategic purpose,
8) Establish a meritocracy consistent with the organization’s strategic
purpose,
9) Develop an organizational culture that allows the optimum yield-to-
cost ratio of the organization’s human asset portfolio.
Maintaining a happy and consistent workforce is going to need to be the
primary aim. Failure to do so will result in an organization being short
quality people which will spell its ultimate demise.
The fact that the US is going to witness the exiting of 50 million baby
boomers over the next 10-12 years means that there is going to be a glut of
people. It is estimated that there will be a shortfall of workers by some 10
million or so. Certain industries are already experiencing a lack of qualified
talent. Presently, salespeople and engineers are in high demand. The
options that are available to employees are increasing at a fast pace. So
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5. employees are the biggest asset for an SME as they define the business
they are into.
CONCLUSION
Developing not only management but also its employees is significant. To
keep up with competition, employees should be given with a number of
reasons to stay with the company, and do their jobs exemplary well. Their
continuous growth, the right compensation and benefits, and work-life
balance are just some of the things that motivate employees to perform
better, producing better results for the customers and ultimately, the
company.
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