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In most traditional organizational structures, managers use performance analytics that correlates more to physical assets than actual employee performance. An employee generating more profit per hour than then the previous year is an improvement, but that metric does not explain why or how that improvement happened. Typically, managers would assume the increase in performance is due to the employee’s better understanding of how to use company assets. This performance increase equates to training; however, this also shows the traditional corporate mentality that managers should be focusing on maintaining high performing company assets instead of the employees utilizing them. Therefore, both senior and line managers commonly fail to see the value of human assets over physical assets.
Every company has different goals and therefore tracks metrics more in-line with their strategy. A line or operating manager may value metrics that have to do with employee turnover rates, training cost and time, and the amount of time new job openings take to fill. These are commonly used metrics, and they do not truly show the potential of individual employees. They show how an employee operates within an environment constructed by the company, which is typically in groups or teams. These are short-term investment metrics and strategies for workforce management. These strategies and metrics are more commonly used because the alternative would involve substantial investment in assets that could leave at any moment.
One way to combat these strategies and encourage those more in-line with developing employees as long-term assets would be to further entrench human resource policies into the line managers’ and senior managers’ company goals. This entrenchment would require more frequent communication and give more control to the human resources department to influence decisions concerning employee investments. Human resource staff could also design alternative performance measures to change how managers evaluate employees and eventually, the management culture. (Majaski, 2019).
When new human resource strategies are implemented to better support employees as long-term assets, competitive advantage may form competitors cannot steal that. Unlike most physical assets, employees can gain in value over time. Using training and continued education funded by the company combined with the gradual increase of experience on the job, an employee will become knowledgeable of more efficient ways to produce products or service clients. Then, the employee will have a personal experience with the inner workings of the company and will be able to more effectively make changes or adaptions to save money or increase revenue. This competitive advantage is also very sustainable since the company is directly improving the lives of the employee; they in-turn commit to the company. Through this agreement between employee and company, an employee will also naturally promote a healthy culture.
The implementation of new human resources strategies to invest in employees as long-term assets is not a guarantee of success. Many companies operate very successfully with minimal investments in employees. They are successful because not all companies rely heavily on the performance of employees. In the manufacturing industry, automation has created opportunities for companies to reduce their workforce and invest in fewer employees that have more specific expert skills. This strategy in the manufacturing industry has been widely successful and demonstrates how a company’s success depends on multiple factors, not just the human resource strategies of the company. If a company does adequately invest long-term with an employee, the potential of failure can remain the same if the company culture and structure are not capable of utilizing the employee’s new skills and talents. Using the earlier example of the manufacturing industry, if the human resources staff do not have a process to shift hiring practices to meet the new demands of automation, disaster could ensue. Human resource strategies are essential to the success of most companies, but some are perfectly capable of operating with poor workforce support. Proper workforce support and investment can, however, significantly impact the efficiency of employees and the processes that empower them, which in certain situations could break the operational flow of the company. Figuring out how much to invest in workforce, assets, and organizational structuring to find a compelling mix to expand the company incorporates most of the challenge’s managers must face concerning human capital. To design metrics to properly evaluate the many different strategies being implemented through human resources managing human capital and to create a proper support structure to promote a coexisting company culture are all very challenging tasks too.
In India, business mentalities and company culture extend beyond the company to meet the above challenges in a unique way. In India, the culture encourages people to look inwards for solutions to everyday problems. When utilizing this same mentality with business strategies, business solutions and opportunities became abundant from within the business itself. The employees became the focus and were heavily invested. What is most dramatically different from U.S. culture was the reduced emphasis on the shareholders of the company. This shift of weighted decision-making power from shareholders to employees would be quite an obstacle in the U.S. It could create an image of instability in the company and cause the reduction of interest from investors. One way to curve such mentality would be to increase the amount of transparency to the public the company promotes. (Mello, 2015).
In concern of investing highly into employees to enrichen a company financially, many studies have been done to better show the correlation between human resource management and financial performance. In each study, the impact of human resource management on a company is often positive but has proven to be challenging to implement correctly. Human resource professionals must design a complete system that can support and exploit human capital effectively. This increased demand in abilities from human resource professionals have also begun to push their roles into ethical stewardship for companies. Since human resources professionals are committed to employees and the processes, they are involved with, serving as a transformational leader that can represent both employees, and the company can have a strong positive impact. In conclusion, it is the ability of a human resource professional to be a transformational leader and ethical steward that projects a company into higher long-term profits. (Mangesh, 2019).
- Majaski, C. (2019). Human Capital vs. Physical Capital: What’s the Difference?. Retrieved 21 July 2019, from https://www.investopedia.com/ask/answers/062616/human-capital-vs-physical-capital-what-difference.asp
- Mangesh (2019). Enterprise Asset Management Market to Record an Exponential CAGR by 2021 from https://newsspaceflight.com/enterprise-asset-management-market-to-record-an-exponential-cagr-by-2021/
- Mello, J. (2015). Strategic human resource management (4th ed.). Stamford, CT: Cengage Learning.
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