Linking Human Capital Development To Financial Performance Business Essay

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In this paper, I will explain human capital within organizations and how they are used to maximize business profit and if used properly, retain its employees to keep continuity. Personally, I believe with human capital it is about educating your employees and bringing out the best in them to achieve the overall organizational goal and give people sense of accomplishment. Some things that can help maximize each individuals potential is proper time management, education, incorporating value added HR, quality recruiting and evaluation performance.

Recent surveys reveal that although business executives firmly believe that people are the most important asset, most executives are at a loss to prove that investments in people lead to improved business results. Common metrics like economic value added and return on investment shed little light on how organizations human assets are performing. The question rises "What needs to be measured?" Through interviews with senior HR executives, CFO's and financial analysts all refer back to the common theme of human capital. This reflects the way managers want to create value in their organization. Second measures need to be useful from an investment perspective. Executives and top management of organizations what to know what they should be investing in for the future both in terms of skills that their employees will need to achieve the organizations goals and the types of human resource capabilities that will need to develop and retain employees with those necessary skills. A way for organizations to do this would be to minimize risk associated with new technology, markets and acquisition.

The challenge of effectively linking human capital development to financial performance is three-fold. It measures must capture direct and indirect effects, be simple and compile results so that future planning and forecasts can be built from them. There are outside agencies that you can hire to come to your organization and evaluate the human capital practices. Their assessment includes variables that influence the relationship between a company's human capital assets and its financial performance.

Evaluating Performance

In the Article "Removing Performance Appraisal and Merit Pay in the Name of Quality, An Empirical Study of employees reaction" goes on to explain the management trends across the American industry, specifically the banking industry placing high emphasis on excelling in customer service and embedding continuous improvement into all bank processes. (Waite, 2000) The role of a company's human resources department will be able to help facilitate the goal of the organization by ensuring quality control, recruiting qualified candidates, evaluating the performance appraisal programs in place, with more emphasis on that particular category, because it is the determinant of the employee's job performance and gives them direct feedback if done properly to give them an idea of where they stand professionally in the organization, and given ways to improve. An interesting point made in the article was how performance appraisals can be criticized for stifling teamwork. When it comes time for performance appraisals, it is done on an individual basis, giving some people the thought of undermining group efforts and working as an individual and not looking out for the needs of the whole team. Being a team player is a part of individual performance, but does not have a major part in an individual assessment.

After a study done after several years to determine the effectiveness of comprehensive performance appraisals process, special attention was focused on the interview between the subordinate and his or her manager, because this is the discussion which is supposed to motivate them to improve performance, and found that criticism has a negative effect on achievement of goals, praise has little effect, performance improves when specific goals are established, defensiveness resulting from critical appraisal produces inferior performance, coaching should be a day-to-day not once a year activity and participation by the employee in the goal setting procedure helps produce favorable results. (Herbet H. Meyer)

To measure the true effectiveness of an appraisal program at the workplace, appraisals should be based on job responsibilities rather than on personal characteristics of the individual. Setting up an intensive training program by managers to help them in the appraisal process should be implemented and given techniques to help them establish rapport with their employees instead of just evaluating them once a year, but make it an ongoing process to give effective communication and feedback. An effective performance appraisal is designed to serve two major purposes. The first is to justify recommended salary action, and the second was to present an opportunity for the manager to review a subordinate's performance and promote discussion on needed improvements by drawing up a specific plans and goals for the subordinate to help improve their job performance and hopefully qualify them for future promotion. (Herbet H. Meyer)

Every ten years or so, a management innovation comes along that gives new ideas to organizations and ways to boost the organization. Three hundred sixty degree feedback has been the most notable innovation for management since the 1990s. (David A. Waldman, 1998) According to the research in the article, it says that every individual has received some written form of feedback from sources that were once nontraditional or unheard of. These sources include subordinates, peers, and internal and external customers. The goal of this type of feedback was to increase the individual's awareness of themselves and they can improve in performance. I have learned that 360 feedback is not only for subordinates or employees, but today an estimated 20-25 percent of organizations actually ask followers, peers, and our customers to rate managers for developmental and learning purposes. (David A. Waldman, 1998) This process is similar to a former rating process called upward feedback, where feedback is gained from subordinates to rate superiors but does not include peers or customers. When it comes time to give yourself a performance rating, research shows that individuals do not evaluate themselves accurately or at least not in line with how others view them, because of unreliability and bias and are inaccurate when compared with ratings provided by others or with other objective measures. (Herbet H. Meyer) Negative feedback is usually discounted or not mentioned, but on the other hand positive feedback is generally more accepted and is the most accurate than the negative feedback. When negative feedback is in the form of an anonymous message, it is difficult to discount or deny what was said, so it is more likely to be accepted. Personality plays a big part in this, and alters an individual's reality of self perception. (Herbet H. Meyer)

The intent of an effective performance evaluation to me is to modify my actions at work to get in line with the goals of the organization and making sure that I am doing my part to the best of my ability to uphold my weight at work. In the military, I have seen more than one type of evaluation being done and is very effective. Early on in my career, I was introduced to 360 degree feedback that was anonymous and was done after working with some peers after several weeks and sometimes results can be surprising or can be a wakeup call for some. The people you work with, and not the ones you work for often give you a more accurate assessment because they are with you every day and know your strengths and weaknesses. The objective of performance evaluations in the military is to weed out the weak and to promote the strong. Every time I start a new job, I am given an initial counseling outlining my goals, objectives, expectations and professional development. After the initial counseling, feedback is given to me verbally along the way, and then quarterly, I will sit with my supervisor and receive a formal evaluation letting me know if I have been meeting the intent or not. If this process is done correctly in any organization, it will force people to be more responsible and hold them accountable for their actions.

To me, the most harm you can do to an individual is fail to give them evaluations, fair evaluations in particular, because if this is one, you are only setting them up for failure and they have the false sense of success, and most of the time not meeting organizational standards and practices. The only thing that differs from performance evaluations in the military and ones done in the civilian sector, is that in the military, you will get a pay increase every year in January, and also get one at least every two years in your career whether you advance in rank or not. There are time requirements for rank, but good performance evaluations can help you accelerate on time or sometimes faster than usual.

I believe 360 degree feedback is the most effective system to measure individual performance, and gives managers a good idea of who is a good team player and who only works well with management supervision. It is nearly impossible for a manager of a large company to effectively evaluate each employee and give an accurate account of their work performance. The use of supervisors and peers help to facilitate and provide details and usually is more accurate when coming from someone in the same position as you. Companies began to use 360 feedback from customers to improve business practices and stay competitive. Performance evaluations for some people can be a wake-up call, and takes a good manager to have the ability to evaluate someone fairly and be able to let them know if they are just not doing what they are supposed to. Professionally developing the individuals in your organization will be key to overall success and making the goals of your company.

Information technology uses

Information is defined as all forms of technology used to create, store, exchange and utilize information in its various forms including business data, conversations, still images, motion pictures and multimedia presentations according to http://www.entrepreneur.com. Understanding your business needs and intent will help you to identify what type of equipment you will need and how you will use it once you receive it. No matter what business venture you plan to go into or analyze, information technology has taken its place among businesses and is growing rapidly. When we think of information technology, it is not just the development of computers, but it is the use of technology to allow you to maximize productivity more efficiently and effectively. The impact that it has, is that in order to be effective, you have to be able to educate yourself and keep up with changes in technology. Relating from this weeks article entry, information technology has to be adopted and embraced by managers. Effective communication is key to success in any organization, and if done properly, you will keep employees and other members of management informed on your goals and vision.

In the article, "Information Technology and Business Process Redesign", the author builds a link to help those aspiring to improve the way work is done and how to apply the capabilities of information technology to redesign business process. Business process design and information technology are natural partners, and their relationship today is still never utilized to their maximum capabilities, leaving managers scared to adopt it into their organizations. The businesses that have used information technology have benefited from it enormously. Information technology deals with expanding the capabilities offered by computers, software applications and telecommunications. The business process design analyzes the work flow and processes within the organization as well as between other organizations. This is the link that researchers are still trying to figure out, and encourage other top decision makers in business to adopt some form of relationship between the two.

The objectives of information technology and business process redesign, is to reduce cost, reduce time by allowing computers and software to process more data and streamline data to cut employee labor , and in return saving the company on payroll expenses. A major benefit that I can see about information technology is that it can help you to easily track the output quality and results can be measurable over a period of time. Managers can take this data and be able to see if the change in information technology was as useful. One of the major unseen benefits would be the quality of worklife, allowing control over output of products and enables employees to control productivity potential.

In Forbes magazine, an interesting point that Steve Cakebread brought up in regards to implementing information technology into your business to take your business to the "clouds", should be done one step at a time, being careful to not loose continuity while preparing your business for an I.T. breakthrough. One key thing as a manager is to sometimes sick back and see how the software and hardware is working for companies that are local or have the same background as yours before permanently changing over. A vendor and partners must also have a working knowledge of the new equipment you will be using, so that if you have issues, it can be resolved quickly and not cause a pause in business operations.

In my career, information technology is so widespread, it will be nearly impossible to go without it. Daily, we have software updates, new hardware, and new ideas to improve efficiency. After reading the article for this week, I can tie in how information technology can be easily resisted by those who have to work with it on a daily basis. Your business will have its own unique set of equipment needs that probably differ from those of the company next door and have a different amount of money to spend. At my job, the use of spreadsheets, word documents, presentations and audio/visual equipment is a daily need, and we spend millions every year for updates and supplements that we think will allow us to complete missions faster, and help manage the resources that we are allocated to its fullest extent. Depending on what you use your business for and the size of your business, the amount of technology you need will differ but the concept will remain the same.

While researching some job opportunities, your knowledge of computers and software play a big part in the growing age of information technology. What I have noticed is that the younger generation adults and teenagers and becoming more efficient at operating computers and the latest technology, versus an older adult with working experience. Companies seek out the younger generation because of their understanding of technology and help them to take their companies to the next level with minimal training required.

Time management

Time management is a necessary skill if you want to be able to experience success in all areas of your life.  Living a full and enjoyable life does not mean that you should be spending 60 hours a week or more at work,  even if you are making really good money.  What would be the point of making an enjoyable amount of money if you did not have time to enjoy it? People who are used to work hard continuously without a break. After that they are too tired to do anything at all. people who are procrastinating all the time people who are tired all the time Also,  we all know that there are many things in life that are more important than work and dollars.  Family, friends, and hobbies are all part of having a complete and full life.  So, you have to be able to effectively manage your time so that you can experience life in all of its different aspects and not just work and business.

A lot of people do not like the idea of scheduling their time because it may feel like they are losing their freedom,  but you can actually experience much more free time if you can put together a schedule that makes the best use of your time and your skills.  And there are many people who spend so much time at their business or job because they are unable to let go of the control and trust that their employees may be able to do just as good of a job. Remember, that we all want to experience success because we want to enjoy our lives.  But, we cannot enjoy them fully if we do not schedule our tasks so that we have as much free time as possible.

Value Added HR

Over the years, there has been tremendous emphasis placed on HR practitioners becoming strategic business partners and being a value added source within organizations.  Traditionally, HR professionals could talk generally and conceptually about employee morale, turnover, and employee commitment being outcomes of HR efforts.  Furthermore, the HR function is often viewed as an expense-generator and an administrative function and not as a value added partner. Human resources today is under extreme pressure to keep up with changing technology and industry. The role of HR is to develop innovative people strategies to ensure business success. Today, there are still numerous companies that still use the traditional HR model, and restrict the role of the HR department to administrative providers. This is not added value, and HR is viewed as necessary but not very valuable. The role of HR is to draft up company policies, employment laws, and assist in maintaining company profits. In simple terms, human resource management focuses on the company's mission, and assist in the planning process of getting to that goal. HR is an essential department to every manager, and can either make or break a business. Some things that a company can do to create value added to their human resource department is to first come up with a plan that is aligned with the company's overall vision and mission. When implementing new plans, you want to start small and depending on the size of your company, implement policies and procedures that will allow you to take it slow and monitor the progress. Communication is an important and crucial area. All information and changes should reflect the company's image, and communicated to personnel at all levels that is easy to understand.

Increasingly, an organization's ability to respond and adapt quickly while providing increased stability in the midst of change is a great leverage point for achieving sustainable competitive advantage. But this is not about predicting or riding trends; change needs to be a lot more than that. Organizations can get caught in pendulum swings from one trend to another. Sometimes Human Resources professionals are responsible for flavor-of-the-month initiatives; other times they may be trapped by flawed strategies advanced by senior executives. In today's business environment, organizations need to be constantly evaluating their internal and external environment for challenges and opportunities to remain competitive and to sustain growth.  Political, economic, social, and even psychological changes within our societies create significant impact on organizations.  Given any significant change or event, how ready are we as an organization to react in order to remain competitive? 

              Many factors are driving changes in organizations today including the use of technology, globalization, changes in workforce demographics, eliminating the bureaucracies in organizational structures, and balancing work-family issues.  Understanding the potential of an organization's resources and optimizing the output of such resources given the changes, provides the impetus for HR being the key source of creating the competitive advantage for the organization.  Many change efforts follow a predictable pattern likely to lead organizations down paths filled with frustration, resistance, and ultimately preservation of the status quo. After compelling arguments are developed as to why change is needed, a plan for getting from "where you are now" to "where you want to be" is viewed as the solution, with implementing the strategy seen as the last step. However, if your vision of the future - the "where you want to be" - is a shift from one pole of a polarity to the other, your efforts are guaranteed to generate amazing resistance.

Resistance in the work place Is not always a bad thing. Resistance sometimes can mean that people are just afraid of change or when people get wrapped up into managing the business like they have always done, they limit their earning and growth potential. Today, you will notice that companies are recruiting young, energetic people who have the drive and bring new ideas to organizations to help it get to new levels. As a manager, you always have to remember that there is always going to be resistance in any decision that you make.

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