Human Capital Management


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Know hows of Intellectual capital Management

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Human Capital Management

  1. 1. The Wealth of Knowledge Chapter 12 The Human Capitalist Angeline Leow Muthu
  2. 2. Scope Whose company is it, anyway? The Professionalization of Work The Capitalization of Pay Different Stake for Different Flakes E pluribus unum
  3. 3. Changing times Modern corporation vs postmodern corporation Requirement to know:  Who‟s doing what  With which  To whom Corporate boundaries defined by:  Who has property rights to intellectual capital that emerge  Who is entitled to what cash flows
  4. 4. Whose company is it , anyway?  Shareholders view  Stakeholders view  Company exist to make  In addition to money for shareholders, company shareholders, managers has responsibility to are supposed to serve only the shareholders employees, community, planet  Employess are passive participants  Employees are assets
  5. 5. Whose company is it , anyway?  In knowledge intensive companies, most of the value is produced by talent, not 8-5 work like the industrial worker  In knowledge economy, people are neither employees nor assets  investors  Shareholders invest money; employees invest time, energy and intelligence  “I‟ve given the best years of my life to XYZ Company”  Capital, personal human capital is invested. The sum of all they know, all they can do, all they might become
  6. 6. Whose company is it , anyway?  “Work is a two-way exchange of value, not a one-way exploitation of an asset by its owner”  How companies can enrich both themselves, and their investors
  7. 7. The Professionalization of Work Current trend : People change employers more often than they used to. But they change occupation less often;Mobility across employers, stability across professionIBM Sales IBM MarketingIBM Marketing P&G MarketingIBM Manufacturing Verizon MarketingIBM Finance Wells Fargo Marketing
  8. 8. The Professionalization of Work Schooling/credentials > promotions  Personal growth (and gain) Schooling builds individual‟s stock of human capital; he has more to invest (and expect to get back) Dilemma for companies – Training their employees make them more mobile (and easier for them to leave) BUT in reality, training reduces turnover
  9. 9. The Professionalization of Work Value of employee retention is huge - $25million saved for every 1% drop in rate at which people leave Therefore, people are bearers of human capital, who choose where to invest it for  an immediate reward  pay  but also for long term reward  their continued growth
  10. 10. The Professionalization of Work How to train more effectively  Emphasize action learning  Classroom training  zzzz  It works, real work is done, social networks are built  Build informal learning into work  Make it easy to ask for help  Train for today‟s job, not tomorrow‟s, and train to increase the overall flexibility of the workforce  Training at every layer  Focus on key skills and knowledge workers  Train on what differentiates from competitors, not generic training  Focus on what makes your company unique
  11. 11. The Capitalization of Pay Zurich Financial Services Groups Employee Productivity bias in its US subsidiary “40% of Annual Turn Over contributed by top third, A – players” A Bonus Pool to Capture Employee Interest Above 10% ROE , 85% of profit stays in Company or returned to Share Holders and 15% goes to Bonus pool Half of bonus pool contribution goes to A - players, 35% to B and 15% to C - players
  12. 12. Inducing more than “just a job” feeling Dramatic change in contribution profile by squaring employee‟s business interest Motivated C - players contributed to 45% of turn over suppressing A - players to 20% Realization coined two principal classes of equity investors: public shareholders and employees High implementation risks for start up firms Constructive redistribution of corporate ownership in established firms
  13. 13. Capitalists Vs Employees Responding to a real  Responding to a divided problem with real money problem with dedicated time and effort Work with board of directors to allocate the  Contribute to a specific return on investment line of business, relatively along a spectrum of risk important with financial for capital gains capital based on its risk level The investors bearing the most risk should get a shot at the greatest rewards The more human capital an individual employee puts at risk, the more he/she should be rewarded with equity.
  14. 14. Different Stakes for different flakes Risk brain power  Life time employment Efficient Resource  Remunerate with Utilization and Delivery financial capital in the Excellence form of equity or other means of direct profit High maturity with sharing legitimate power to protect their investment “The locus of invention isn‟t the boardroom or the corner office; it‟s the team.” - Philip Harris, CEO of PJM Interconnection
  15. 15. A Mega Incubator fashion with impermeable boundaries “A skunk work, rapid prototyping, rapid piloting, and rapid ramp-up, and bingo! a new business allowing the individual to put their tools, their equity, at risk” - Harris “If you have people who want to do something new, create a place, create an incubator. Create a climate in which they innovate and offer at least a share in the wealth that‟s being created there ”
  16. 16. E PLURIBUS UNUM PC „Knowledge Business‟ FC Overcoming the Innovator‟s Dilemma with product differentiation and autonomy - Teradyne‟s success story by tinkering the governance model “The idea was to think of launching a new, low cost testing equipment, Integra as a business from the start, not a R&D project.The board setup allows independence and more of a coaching attitude.” - Integra‟s GM,Levine “Do the next logical thing and make it compatible with the existing line. Be aggressive on the technology. Do something no one else has done. Because we had no revenue at stake, we could push the risk.”- Teradyne‟s VP, Rogas
  17. 17. Companies with mature human capitalprocesses have superior financial results Published by the Accenture Human Capital Development Framework for High Performance Business
  18. 18. Human <intrinsic link> Relational Capital Stock of active Shared Spin connections Values Offs Relational Capital Mutual Understanding Equity Trust carve Human Capital Alliances Joint outs Ventures • Customers • Investors • Government • Employees/retirees • Suppliers • Other stake holdersCorporate stock of human capital = financial capitalprovided by shareholders + employee‟s investment +investments of other employees + company‟s otherintangible assets (processes, intellectual property, andcustomers)
  19. 19. Key takeaways K- Economy signifies the power of human capital Induce Employee Ownership of Business Adopt incubator working style for innovation with high autonomy and high technology risks Focus on Collaboration than competition Mature human capital derives relational capital K-Business looks out for The Next Big Thing !
  20. 20. Thank you 
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