building knowledge through strategic hrm leading to sustainability

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The horizon of HRM is quite vast. The topic of discussion would be restricted strictly around one of the major aspects of HRM that is how learning organizations evolve in building knowledge and creating an edge amongst its competitors.

Over the years, the HRM concepts has grown tremendously and due to globalization organizations now consider human capital as one of its valued assets leading to competitive advantage following the soft approach of HRM rather than the rigid Personnel management treating human resource like other assets.

Let us now start with the significance of human capital.


Organizations nowadays are becoming more and more involved with its human capital. As we all know that people are the lifeblood of any organization. Our people are our most valuable asset, yet we seldom take the time to really understand the knowledge they possess or map it to the capabilities we deliver.

The term human capital is recognition that people in organisations and businesses are important and essential assets who contributes to development and growth, in a similar way as physical assets such as machines and money. The important point is the mindset behind the organisation's operation.

A lot of emphasis has been given on human, the main reason being the notion that it is the people who work and run the organization and it cannot work without them.

If people are valued, and all management and leadership actions demonstrate that, then the terminology used for them whatsoever is not so important.

To summarize, people should be treated as an asset rather than an expense. Every effort should be taken, whether formally or informally, to develop skills and abilities and to provide opportunities for people to maximise their contribution.


A very famous saying:

"Coming together is a beginning, keeping together is progress, and working together is success". Henry Ford

This is the linkage between SHRM and corporate strategy. For this organization culture needs to nurture an environment where:

"When people go to work, they should not have to leave their hearts at home."- Betty Bender

This means human capital would only be willing to contribute when there is a culture that fosters learning in an organisation. The holistic model thus represents that people of the organization being recognised as key to competitive advantage rather than just the way of implementing organizational strategy. In other words HR strategy is not just the means for achieving business strategy (the ends), but an end in itself.

Being part of a learning organization HRM has to focus on KSA of internal and external employees.

Moving on further:


Let us discuss about Learning Organizations.

A learning organization is one that seeks to learn from its environment, its employees, and their experiences and applies what has been learned in terms of improving services and products. Sarah Gilmore

The charactersistcs that learning organizations possess includes:

Culture of learning and internal exchange of ideas as well as provision for self development.

Participative approaches towards policy making by use of IT.

And finally reward strategies to promote performance and reward learning.

Another approach used by some organizations is often termed as knowledge creating company.

Organizations have to think big, start small and scale fast being a living system, where each part affects the other.

Many organizations have taken the time and effort to look at their strategies from a holistic perspective, and in the case of knowledge management, the same holds true.

For knowledge management to effect change you need to accomplish a seamless closed loop process where you know what you know; that is, understand the required capabilities your organization delivers; know who knows it - inventorying your people's knowledge based on those capabilities and then connect the dots. This holistic strategy must have an executable plan.

Many people say you cannot boil the ocean, but you need to at least know where the ocean's boundaries are and how much mass is being consumed by that body of water.

Thereby leveraging relevant knowledge assets to improve organizational efficiency, effectiveness, and innovation (Stankosky, 2007).

Once we have identified where we stand, organizations need to analyse the type of knowledge it would be using whether tacit or explicit.

They must identify two primary types of knowledge: existing knowledge of the individual (especially about the organization and its policies, etc.) and new knowledge acquired through interactions during the course of the work.

Example: Takeuchi and Nonaka write about Mitsubishi and Caterpillar's collaborated program in Japan. At the end they were asked what they learned from each other.

Thus the fundamental distinctions between tacit and explicit knowledge and between know-how, know-why, know-what and know-who are related to distinctions between public/private and local/global knowledge.

INNOVATION - slide 5

Create in your organization, the awareness that innovation and changes are essential to grow and compete successfully in the market.

Creativity is the key to innovation. With the growing competition between organizations, to stay active and the other front, the organization needs to encourage their employees so that they contribute satisfactorily and revolutionize the company. Many companies do not give their employees an opportunity to express their views or simply put a box of suggestions at the reception. Sometimes the best idea is not with the marketing team, it can emerge from the factory worker, who builds the product and knows what improvements he may have to do more success in the market.

Innovation creates lots of opportunities for business. A great example of is the success of iPod with which most of you are familiar. This product generated billions in sales on apple phone.

Another Dutch example of TOM TOM road navigation device. In 2001, a small company launched this device and now it is listed on the stock exchange with annual sales of over 1.5 billion Euros.

reshuffling of existing knowledge ( sub - heading)

Creativity requires a creative subject, i.e. a person who produces and gives existence to any product that did not exist

The new creative work that tells us, however, is not free, that is, the novelty does not appear to be only novelty. We can then say that everything that is new is creative, but not everything that is new is creative. Explaining better: the innovation appears on a given issue or a particular situation, solving it, or explaining it. Innovation is usually the reshuffling of existing knowledge that reveals unsuspected relationship or similarities between known facts that did not appear to have anything in common.

Training stimulates innovation within the organization

Once a learning organisation is establish with knowledge management, here comes the need for training and development.


The collective attitudes, skills and abilities of people contribute to organisational performance and productivity. Any expenditure in training, development, health and support is an investment, not just an expense.

As it is also said , "More investment in training results in higher profits (source: Kalleberg and Moody, 1994)

Learning and development is a key factor in involving employees and bringing about change within the company.

The company believed that by up-skilling its staff, it was creating a true "learning organisation" which in turn would improve communications and help the company in its vision to become a world-class market leader.

Roger Evans, Plant Director, said: There's no point in undergoing training just to get the qualification. There has to be a tangible difference on the shop floor where it all matters.

We wanted to have a clear vision to take the company forward, set realistic and achievable targets using as wide a consultation as possible with staff taking a firm role in their own and the company's development. (The rate article)

Also Burton-Jones (1999) shares the similar idea that:

The firm's most valuable knowledge capital tends to reside in the brains of its key workers, and ownership of people went out with the abolition of slavery. Therefore, there is a need for strategies for developing potential and identifying those in

whom a long-term investment should be made, no matter what the size of the

business. (Identification article)

All these factors would be leading to continuous training and development of individuals during the various phases of organizations life cycle thereby giving it a cut throat edge over its rivals.

Let us now review how it would be beneficial for organization to cater training as an investment.


Training is often viewed as a cost and therefore something that should be kept to a minimum or even avoided. In times of recession and economic slowdown it is often one of the first overheads that get cut from the budget. However it should be viewed as an investment in both the short and longer terms as there are a number of key benefits of formally training yourself and your staff, some are more measurable than others. Here are four important advantages of training:

1 - Increase in productivity: This is the most measurable and therefore to many the most important. For example formal software training can teach you and your staff how to use the product more efficiently, allowing you more time to spend on other activities. You can also learn about the advanced features of a product that you have not previously had the opportunity to use.

2 - Increase in confidence: No-one likes to feel that they are standing still. Learning something new is a good way to give you a boost in confidence, usually one that is also carried outside of the workplace.

3 - The out of the office factor: A change is as good as a rest or so they say. Especially if you're office based a break in the routine can only serve to refresh your mind and give you renewed energy.

4 - Networking: Of course! Training companies hold public-scheduled courses for up to 12 people at a time giving you up to 11 people to network with.

A company may see need to train some of its workers to have new skills, to reflect new company policies, or to avoid workplace problems. In order to determine the return on the investment required to train the workers (ROI), a specific purpose for the training must be stated and measurements must be made before and after the training.

A very good example is available to discuss on how firms can measure this in financial terms. (See. App. A)

Realizing the potential results that training could give, the planning for it could be next step.

A brief review with regards to this can be seen by the Product life cycle as discussed:

Start up phase: flexible hrm practices enabling entrepreneurialism

Growth: Company has moved to a certain size. Hrm practices would be formal with training and development

Maturity: Margins decrease, HRM emphasize on cost

Decline: the major challenge for hrm linked with downsizing and redundancy issues focus on retraining.


Consider a 5-day training session for 20 workers with one trainer:

1. Cost of trainer

If the trainer is making $40,000 per year, the burdened wages (adding in FICA, insurance and such) would be around $52,000 or $1000 for the week.

2. Cost of training material

Purchasing the training material could be $100 per student or $2000 for the 20 workers. Preparing training material in-house cost more up-front, but would them average out to be less in the long run.

3. Cost of wages paid during training

If each worker is making a burdened wage of $800 per week, the cost in wages for the training session would be $16,000.

4. Cost of lost opportunities

Finally, the company loses money when workers are off the job because of lost opportunities or production. Suppose they only make 10% profit from the work done. That adds another $1600 to the cost of the training.

Total cost

The total cost of training the 20 workers for a week in this example is: $20,600.

Example (continued)

Suppose after the 20 workers attended the 5-day training session and when they returned to work, their new skills resulted in a 10% increase in production and a 20% decrease in errors.

A typical example for training 20 employees is that if the workers are now only 10% more productive, the result is a savings of $80,000 in one year.

The ROI would be $80,000 for a $20,600 investment or about a 4X ROI. (This example would be shown in tabular or graph for so must be explained briefly in few lines).

This gives organization the value for money for its training.


The discussion indicated that building knowledge has great impact and positive influence for organizational growth in highly competitive environment. We have seen that how knowledge management could enhance employee performance at work place. The financial indicator backed up by ROI that if workforce is trained in the right track training and development would have a positive impact in the long run for organizational sustainability. Our recommendation is therefore in the line with the Plant Director, Roger that training has to reflect on the floor where it matters.

REFERENCES - slide 10

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Kalleberg, A.L. and Moody, J.W. (1994) 'Human Resource Management and

Organizational Performance', American Behavioral Scientist, 7(37): 948-62.

Dulebohn, J., Ferris, G. And Stodd, J. 1995. ''Toward Business University Partnership in Human Resource Management: Integration of Science and Practice''.

Hand Book of Human Resource Management: 1-13.Cambridge: Blackwell

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