Whitepaper Why Hr Asset Management Is Critical


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Whitepaper Why Hr Asset Management Is Critical

  1. 1. WHITE PAPER – 2 WHY HR ASSET MANAGEMENT IS CRITICALWHAT IS THE MOST VALUABLE ASSET THAT A COMPANYHAS?Is it the name, customers, goodwill, physical resources, or product line?The answer is “None of these”.A companys most valuable resource is its employees. Any organization willgo only as far as the people who are driving it. In fact, a company is reallyjust a group of people who interact for a common purpose. They are theones who make up the organization.The last few years saw a shift in the focus of some companies. For decades,management gurus were preaching that the customer is the mostimportant thing. Certainly you have seen the signs stating,"Rule #1: The customer is always right. Rule #2: Reread Rule #1".This concept dominated the business culture from the late 70’s and 80’sthrough today. However, organizations that hope to survive in the futurewill need to adopt a new outlook. That outlook is that “the employees are the most important aspect of any enterprise”.Most, if not all institutions will tell you that their employees or humanresources, constitute the most valuable element in their asset portfolioespecially small and medium businesses. Yet, it is not difficult to show thatthis most valuable asset, more often than not, is the most mismanaged andill-utilized in large and small - medium organizations.Why  is  that  so? The answer is simple, but not without far-reachingimplications. This kind of asset has a brain, has feelings, and its yield-to-cost © 2010 RoosterHR Pvt Ltd. All Rights Reserved
  2. 2. performance ratio is highly unpredictable - unlike that of buildings,equipment, and money. Nonetheless, this asset is needed in any realorganization. The planning, acquisition and management of human assets,therefore, present a formidable challenge, and there are no magic formulasor recipes, only guidelines which if not followed, will guarantee majorlosses for organization.WHY IS IT IMPORTANT?The success and growth of a small company can be attributed to its culture.Due to its size, communication between all employees is not complicated.And alongside this communication, the trust and organizational goals areeasily shared and understood by everyone. And in its growth, it is importantthat this culture is maintained and adjust to changes accordingly. HRprofessionals can work both with management and employees in doingthis. With increase in employees and more demands in operations,communication may take a backseat for both parties.Without human resource other factors such as money, machines, materials,methods and markets cannot be acquired and utilized. It is through peoplethat these factors be developed and be utilized as human factor isresponsible for the success and failure in any organization because peopleare the significant input and output in an organization. Even if anorganization starts with zero funding but with creative, resourceful,hardworking and honest people, it becomes financially viable and there isno better or successful organization without the existence of people.It is easy to understand why organizations talk about people as an asset,but tend to manage them largely as a cost to be minimized. Aside fromaccounting principles that encourage this perspective, HR costs are easy toobserve, while HR value creation is not. Largely because of the traditionalperspective on HR, organizations have no way to measure HR’s strategicperformance. © 2010 RoosterHR Pvt Ltd. All Rights Reserved
  3. 3. FACTORS WHICH RESULT IN REDUNDANCIES OF HR ASSETThere are several reasons why redundancies or non-yielding human assetsaccumulate in most organizations: 1. Rapid organizational growth, 2. Inability to forecast the future, 3. Inability to identify and exploit the effective capacity of human resources, 4. A functional approach to human resource planning, acquisition, and utilization, 5. Greed, 6. A lack of a clearly defined strategic focus 7. Inefficient approaches to hiring and promotion, 8. Lack of congruence between strategic purpose and core competencies, 9. Inability to identify and/or articulate requisite competencies consistent with strategic purpose, 10.Inability to quantify human resource capacity, 11.Existence of an ill-founded meritocracy, 12.Inability to attract quality staff, 13.An ineffectual organizational culture causing employees to maximize their incompetence, and 14.Badly defined job functions.Many organizations start small, and as opportunities present themselves,they expand accordingly using a simple "chase" strategy. In most cases,there is little analysis of whether the perceived opportunities aresustainable. Most hiring’s are myopic. People are hired to do specificfunctions based on current need. As the strategic direction of theorganization changes, these employees (human assets) yield less and less.In other cases, employees hired for a specific function never have their fullcapabilities assessed and/or explored. Further, there is a general inability toquantify the asset-yield capacity of human resources. Consequently, the © 2010 RoosterHR Pvt Ltd. All Rights Reserved
  4. 4. organization cannot effectively determine when it has reached itsaffordable human asset capacity level. Some organizations are simplygreedy and develop an optimistic expansionist philosophy, particularly inthe "boom" times. But surely as night follows day, "bust" follows "boom".WHAT CAN BE DONE TO AVOID THE MISUSAGE OFHUMAN ASSET?What can organizations do to avert frequent human asset acquisition anddisposition cycles (hiring’s and layoffs)? 1) Plan sustainable growth rates, 2) Understand their environment, 3) Acquire and develop flexible human resources, 4) Adopt a strong culture of an outward and forward focus, 5) Match strategic purpose with the acquisition of human resources, 6) Improve hiring approaches with clearly defined criteria, 7) Measure and review human resource capacity constantly in the context of the organization’s strategic purpose, 8) Establish a meritocracy consistent with the organization’s strategic purpose, 9) Develop an organizational culture that allows the optimum yield-to- cost ratio of the organization’s human asset portfolio.Maintaining a happy and consistent workforce is going to need to be theprimary aim. Failure to do so will result in an organization being shortquality people which will spell its ultimate demise.The fact that the US is going to witness the exiting of 50 million babyboomers over the next 10-12 years means that there is going to be a glut ofpeople. It is estimated that there will be a shortfall of workers by some 10million or so. Certain industries are already experiencing a lack of qualifiedtalent. Presently, salespeople and engineers are in high demand. Theoptions that are available to employees are increasing at a fast pace. So © 2010 RoosterHR Pvt Ltd. All Rights Reserved
  5. 5. employees are the biggest asset for an SME as they define the businessthey are into.CONCLUSION Developing not only management but also its employees is significant. Tokeep up with competition, employees should be given with a number ofreasons to stay with the company, and do their jobs exemplary well. Theircontinuous growth, the right compensation and benefits, and work-lifebalance are just some of the things that motivate employees to performbetter, producing better results for the customers and ultimately, thecompany. © 2010 RoosterHR Pvt Ltd. All Rights Reserved