Managing human capital

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In the majority of organisations people are now the prime asset. The knowledge, abilities and skills have to be set up and used to the maximum effect if the organisation is to create value. Nowadays, organizations are constantly changing as a response to the business environment with each time being more demanding and competitive. Primary aim for companies is to become more flexible by following a successful strategy.

How the company adapts to the change and how prompt it happens can assure its place within the game. Responsiveness, adaptability and flexibility are the key.

According to, Turner, Keegan & Hueman (2006:317), for an organisation to be effective and successful, the human resource management functions must be integrated into the various organisational strategy

Human resources are defined as the pool of human capital under the firm's control in a direct employment relationship, and HR practices are the organisational activities directed at managing the pool of human capital and ensuring that the capital is employed towards the fulfilment of organisational goals (Wright et al., 1994).

Hrm Function

The HRM Function plays the role of the taking care of the human capital in the organization. The HRM Function is responsible for the processes, which allow the organization to stay competitive on the external market and internally efficient.

Generally, the role and responsibilities of the HRM Function are defined well in theory, but the reality can be different from the organization to the organization. The investments needed to keep the current staff and the competition on the market usually define the playground for the HRM Function.

The HRM Function is responsible for the following areas in the organization :

  • Recruitment
  • Compensation and Benefits
  • Performance Management
  • Training
  • Reporting
  • Leadership Development
  • Personal Administration
  • Legal Compliant Processes

In recent years, HRM interest has grown in the area employee's ability and performance. Among academics performance appraisal defined as a structured system of measuring, evaluating and influencing an employee's job related attributes, behaviours and outcomes to find out what level employee is presently performing on the job. (Kramer &macgraw&schuler 1997) that is: how productive the employees are and whether they can perform more effectively in the future it is a dynamic and multidimensional process (Latham & wexley 1981, Carroll & schneirer 1982)

According to Dessler (2005) performance appraisal is a key matter in the HRM because it helps to organizations about the employee with feedback, development and incentives required helping person eliminate performance deficiencies or to continue to perform above par.

In twenties century explanation of performance appraisal has been extended new perspectives. Generally human resources managers say that measuring performance helps to get information about employee's requirement and qualification but since considering performance appraisal get an important part of HRM.

according to Heyel “ it is the process of evaluating the performance and qualifications of the employees in terms of the requirements of the job for which is employed for purposes of administration including placement , selection for promotions ,providing financial rewards and other actions which require differential treatment among the members of groups as distinguished from actions affecting all members equally.” (s.Chand 2000)

From Performance Appraisal To Performance Management

While the idea that appraisals should improve employee performance is already accepted and we know that it is not new. Many managers of companies establish their process in tree step. They are _ of setting goals, _ training employees, _appraising and rewarding them. During the period of process it calls performance management.

Generally performance management as a process that supporting to company's strategic aims. All these definitions conduct that performance appraisal takes a role in a process. employee's goals and work are related to company's goal. That is why develops the employee's capabilities, and evaluates and rewards the person‘s effort also company's benefit in new vision of human resources management.

Performance Development

Performance management strategy is related with employee development. Purpose of performance management is developing employees who are effective in their work also seek to improve performance when employees are not performing as well as they should (Campbell, and Lee, 1988; Farh, et al., 1991) The feedback is a main point which given during the performance evaluation process identify, employees weaknesses as well as opportunities for skill development.

It is clear that the purposes of en effective performance management system are link employee activities with organisation's strategic goals, provide valid and useful information for administrative decisions about employees and give employees useful developmental feedback


strategic human resource management has been defined as “ the linking of human resources with strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation and flexibility “ ( Siddharth Chatuvedi)

Strategic Human Resource Management (SHRM) is one of the most powerful and influential ideas to have emerged in the field of business and management. It is also applied by some policy makers at have drawn upon the idea of SHRM to promote a high performance workplaces and human capital management.

Researchers in the field of strategic human resource management have emphasized that human resource (HR) practices may lead to higher firm performance and be sources of sustained competitive advantages (Wright, Dunford, & Snell, 2001).

SHRM affect how organizations are changed, and how they perform. It also affects how employees are treated, security of employment and the nature of employment.

SHRM deals with organizational performance and systems of practices and HRM deals with a individual employee performance and individual HRM practices. The role of SHRM or HRM is to establish a system of HRM practices that transforms a firm's employees from commodities that provide negligible competitive advantage and middling work performance to human assets and sustaining the heightened work motivation, expanded job opportunities, and unique skills, knowledge and abilities. When a firm is planning to modify or make a progress of innovation, the best applied strategy is the research-based-review that will definitely be useful to the SHRM/HRM.

Strategic HRM And Human Capital Management

A number of writers have argued that strategic HRM and human capital management (HCM) are one and the same thing, and indeed the concept of strategic HRM matches that of the broader definition of HCM quite well as the following definition of the main features of strategic HRM by Dyer and Holder 1998 shows5:

  • Organisational level - because strategies involve decisions about key goals, major policies and the allocation of resources they tend to be formulated at the top.
  • Focus - strategies are business-driven and focus on organisational effectiveness; thus in this perspective people are viewed primarily as resources to be managed toward the achievement of strategic business goals.
  • Framework - strategies by their very nature provide unifying frameworks which are at once broad, contingency-based and integrative. They incorporate a full complement of HR goals and activities designed specifically to fit extant environments and to be mutually reinforcing or synergistic.

Theory Applied To The SHRM/HRM

The human resource management practices basically include the process of recruitment and retention. To provide the further understanding, the Grounded Theory will lead the SHRM/HRM to reach goal of employee recruitment and retention. The application of grounded theory provides the recruiters and human resource professionals to have a better understanding in the employment changes.

Application Of Two Models

A. Guest Model Of HRM

This type of model that was introduced by David Guest has six dimensions of analysis for HRM. It summarizes the HRM strategies, HRM practices, HRM outcomes, behavior outcomes, performance outcomes, and financial outcomes. The idea of this model is based on the fundamental elements of the HRM approach, such as commitment that have a direct relationship with valued business consequences.

B. Compensation And Rewards

This method might be use and also be more effective in the employment relationships, strategy, and management that can result for a better understanding on strategic human resource management systems. As a kind of motivational approach, employees can be more competitive

Creating A High Performance Workplace

How Can HR Help To Implement High Performance Work Practices?

HR help to implement high performance work practices by creating a culture whic is supportive of high performance, by influencing attitudes ( HR can help set up benchmarking visits to organizations which are achieving outstanding results through people), by designing and implementing HR processes which support the business strategy ( hr processes such as reward systems need to be aligned to the new ways of working.

In order to deliver high performance working there are a number of key characteristics of high performance workplaces:

  • Employees are highly skilled
  • Employee motivation and commitment are strong
  • Jobs are well designed and roles fit together well
  • Opportunities are provided for people to participate in improving how they do their work
  • Strong cultural values underlie how people work together and make decisions
  • Structures are efficiently organised
  • The necessary tools and resources and physical environment are provided

Making this happen requires a combination of two key elements on a high level:

  • Having a workforce of talented and motivated people
  • Having a highly effective system through which work is organised and people are recruited, managed and developed

Key Steps To Have A High Performance In Workplace

There are essentially two parts to delivering high performance working. The first part is all about putting the basic enablers in place. The second is transforming how work is done to ensure top performance day in, day out. Firstly, it is important to get the basics in place, as follows:

Selection: recruiting the best people, using techniques such as psychometric testing and competency-based interviewing to make sure candidates are accurately screened

Engaging new starters: providing useful induction with support at hand and a clear introduction to ways of working and culture

Development: analysing development needs of individuals and teams in terms of both technical and 'soft skills', and providing relevant training and development to meet any gaps

Pay and benefits: providing a competitive salary package or contract rate to secure good quality employees, with reasonable guarantees of employment security. Performance management: ensuring both individuals and teams as whole have clear objectives and are managed accordingly, rewarding excellence and dealing with under-performance

Diversity: having a good mix of skills, backgrounds and types of people brings a breadth of ideas and improved problem-solving

Work environment: ensuring resources are in place so that the tools, equipment and facilities to support high performance working are in place and people have what they need to do the job well

Accurate information: having clear data on the both the costs of employing people, who is doing what and the benefits they contribute to the programme or project Transforming into a high performance workplace requires not just the right support systems, however, but focusing on how people work together, in particular:

Leadership: most people react best to leaders who connect with them and aren't hierarchical in their approach. This means getting 'back to the floor' and spending time with people at all levels, including frontline operators, customers, support staff and other managers. Then a clear direction needs to be set and pursued vigorously, delivering on promises and inspiring confidence in staff

Team-based working: teams need to have clear tasks, be measured as a team rather than individuals and fit well with other teams. Roles within a team should be complementary, clear and interdependent. Where these criteria are met, teams are highly effective in delivering results with limited monitoring, far more so than individuals working independently.

Flexible structures: minimising the number of management levels and differences of status has significant impact on two levels. Firstly, lines of communication are quicker and more fluid between whoever is leading a programme and different people delivering key tasks. Also, with few middle managers, the project management overheads are kept to a minimum.

Communication: timely, open and honest communication with all staff, avoiding a 'need to know' culture, is invaluable in ensuring good decisions are made and mistakes avoided. This is also critical for people to feel valued, as they are in the loop and trusted.

Participation: one of the biggest areas of opportunity loss in many projects is lack of participation of team members in decisions, be they large or small. Usually the people doing the frontline tasks are those who know best how things can be improved or made more efficient. Providing regular open forums and sometimes confidential channels to raise issues are vital to get people involved in making the whole project work better. Doing this takes up some time but invariably leads to better results and savings downstream.

Continuous innovation: high performing workplaces are continuously finding new and more effective ways of delivering their goals. This doesn't mean endless time wasted navel-gazing. It does mean high quality communication and participation being used to good effect - to make things work better and always keeping an eye open for opportunities. The role of the leader in enabling this is crucial. Good innovations need to be implemented. 'No' should be a word that is not heard frequently!

By Alan Bourne, Chartered Occupational Psychologist 2007

Example From Companies

Starbuck's, Boeing, Wal-Mart, Mc Donalds, Samsung and Turkish Airlines are leaders in their industry and have been doing business successfully. During the research on their Human Resource Management (HRM), I have seen their successes are firmly related to their effective and efficient HRM strategies. There are many factors in common among these five companies' HRM strategies: devotion to employees' benefits, employee training, a diversified work environment, promotions and rewards system, friendly and healthy workplace and outsourcing opportunities.

Starbuck's business has been boosting year by year. For many people that have had Starbuck's coffee, they may notice that Starbuck's customer service is outstanding. Every customer is treated like a VIP and with high quality service. Starbuck's provides its management team and employees training to help them better understand its business process. Also, Starbuck's offers a wide range of job opportunities for people to develop their potential.

Boeing, world-famous airplane maker, provides the most advanced and diversified employees benefits I have ever known. Boeing knows treating employees generously will bring more profits and competitive advantage. In addition, Boeing provides a bright and clear career growth path for its employees, and it will definitely add to their confidence and efforts working at Boeing.

Wal-Mart is the largest private employer of African-Americans and Hispanics in the United States. Different cultures, backgrounds, and ethics have become Wal-Mart HRM's core issues. Wal-Mart embraces diversity at all levels in its organization. Wal-Mart also has an Open Door Policy in which every associate is encouraged to bring any suggestions to their supervisor. Wal-Mart's innovative and effective HRM strategies make it such a successful company.

McDonalds believes that “training is the foundation of their success and vital for improving the business”. Hourly paid staff receive on the job training, supplemented by computer based and other training methods, Management staff receive training at one of the company's six British training centres. McDonalds has a high ‘turnover' of staff, suggesting the recruitment strategy is inefficient. Incorrect job advertisement possibly leads to the submission of applications by the wrong type of person.

Samsung's strategy can be described as an effort to consistently meet customers' needs across three critical dimensions-quality, time-to-volume, and being easy to do business with. The company is constantly changing and reinventing itself in support of these goals by design in Samsung's HR management systems. Recently the firm has collected some data about why people in high tech came to (and stayed at) Samsung. It was found that "interesting work" and the quality of the work environment were key attributes. Samsung develop a lot of courses for Samsung staff to learn, and give them opportunities to go outside to learn. E.g.: The design center staff can go abroad or have chance to work with famous talents. Samsung has identified the development and maintenance of an Extraordinary Environment as a key driver in the implementation of its competitive strategy.

Turkey Airline is one of the market leaders in the flight industry .The Company has got problems which include poor communication and lack of information flow between the various departments, headhunting of key staff members by competitors, weak organisational structure, weak reward strategy and organisational culture. To solve this issue, The company has adopted a number of human resource management strategies of late. At Turkish airlines management has created a conductive environment, with more workers participation, career succession planning, career relevant training, performance reward systems, greater opportunities for higher roles, job satisfaction, trust and commitment to enhance employee commitment and satisfaction.

Bacardi-Martini is a renowned and reputable drinks manufacturer with the strongest success rates with regard to the survey conducted by ‘The Sunday Times 100 Best Companies to Work For'. One of the main factors that fuels their success, and continues to drive the company are the productivity, accountability, creativity and teamwork.

The company readily recognises that its success will only continue if the staff are committed, loyal and

happy in their work. Thus, Bacardi's staff development approach is taken very seriously, and they go to ensure that the family atmosphere is used through the operations of the company

Examples of these benefits include free hot meals at the restaurant, private health care, life insurance,

sports facilities, helplines and so on. All of these benefits are not only offered to the employee, but also

the employee's family members or live-in partners.


According to Gilbreath (2008), creating strong HRM policies requires creating a strong psychological environment in which employees can thrive. Such an environment requires conducting stress audit, monitoring the work of the environment, matching people and work environment and using teams of employees and researchers to study the work environment. Gilbreath, B., (2008).

This paper has examined the propositions of the SHRM perspectives of HR practices and their contribution to sustainable competitive advantage. The link between HR practices and firm performance has been established and from a resource-based view One of the primary conclusions from this study

It is useful for all organisations to management their people within a planned and coherent framework which reflect the business strategy. They can ensure that the various aspects of people management are mutually reinforcing in developing the performance and behaviours necessary to achieve business success.

There is not single HRM strategy that will deliver success in all situations. Organisations need to define a strategy which is unique to their own situation in terms of context, goals, and the demands of organisational stakeholders.