Human Capital Management (HCM) has moved from an administrative role to a strategic function in organizations. As the key enabler of people management, HCM covers recruitment, compensation, training, and development. It has grown in importance due to factors such as adhering to employee needs, increasing managerial responsibility, and legal compliance. HCM now requires expertise to develop strategic responses to challenges and its effective management is crucial for organizational success.

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Student’s Name MARDUWATI ISMAIL
Teaching Centre EIM PJ
Course Name ENTREPRENEURIAL HUMAN CAPITAL MANAGEMENT
Subject/Module HCM
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SEPTEMBER 2015
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4. Table of Contents
1. Introduction
2. Basic Functions of Human Capital Management
3. Their functions cover these roles:
4. Human Capital Management as a growing importance factor in an organization’s growth.
5. Adhering and adapting to employee’s needs
6. Increasing responsibility in the evolution of a Manager
7. Legal matters
8. Expertise
9. Increasing cost of Human Capital Management
10. Human Capital Management moves from operational to strategic
11. Human Capital Management Challenges
12. Economic and Technological Change
13. Workforce Availability and Quality
14. Demographics and Diversity
15. Organizational Restructuring
16. Human Capital Management and the Organizational Culture
17. Organization/ Industry Life-Cycle Stages and HCM Strategy
18. HCM as a strategic business contributor to improve the organization
19. Strategies to improve the organization
20. Linking the HCM Strategies and Plans to the Organization for Effective

5. 1. Introduction
Human Capital Management is regarded as an important function in your organization. How
would you use the theories learn to improve this resource-capital management in your
organization.
There are three key enablers to have an effective management: people, process and technology.
Out of these key three enablers, the most important component is people With people, your
organization’s key strategic capital would always be its human capital because people capital
defines the organization as well as it is also a reflection of either a performance of positives or
negatives. In focusing this enabler called people capital to excel in organizations, organizations
endure high budgetary expenditures to ensure success which does not necessarily guarantee
success. However, the combination of ineffective strategy and sound investment of human
capital management does serve as the catalyst of an organization’s positive market competitive
performance.
Human capital management is regarded as important in an organization because without it, a
company would cease to exist. This paper on Human Capital Management which we will cover
on at matters of recruitment, compensation, training and development, will show how HCM has
moved from an administrative role to a strategic contributor to an organization. Weak human
capital management can be caused by many factors such as hierarchical management, focus
intensive on processes, and too inward organizational focused.
In ensuring the competitive success of an organization, Human Capital Management must look
beyond the administrative activity role and more into contributing as a strategic role in an
organization. By formulating strategies, you would then have a formalized design of a human
capital management system that is meant to manage effectively the use of human talent from the
aspect of recruitment, compensation, training and personnel development. Having a formalized
human capital management system, an organization is then able to bring in the necessary human
capital resources for the work required by the organization and compensate them for their task.
In addition, should problems arise, they would be able to meet the challenges in managing
human capital with the proper planning and measure put in place as a result of proper strategic
planning.

6. Human Capital Management
2. Basic Functions of Human Capital Management
Human Capital Management is a set of strategies or a formalized system that focuses on the
policies and practices in managing the people resource activity in a work environment. Within
the organization, the Human Capital Management functions as internal organization that focuses
on the policies and strategies in managing people resource activity.
3. Their functions cover these roles:
• Staffing (human resources planning, recruitment and selection)
• Human resource development
• Compensation and benefits
• Safety and health
• Employee and labour relations
• Records maintaining
• Research (providing a human resources information base, designing and implementing
employee communication system)
• Interrelationship of human capital functions.
4. Human Capital Management as a growing importance factor in an organization’s
growth.
Human capital management is viewed today as becoming more and more critical to an
organization’s success in today’s corporate world. They play an important role in creating
the organization because human capital management talks about the management of
human resources in terms of recruitment, compensation, training and development.
Success of an organization today is dependent on its people because without it, no
organization can provide competitive advantage in today’s business world.

7. The factors below will illustrate the dynamic growing importance of human capital
management in today’s organization:
5. Adhering and adapting to employee’s needs
The employee today faces a lot of personal responsibilities like health care, family care
including child and elderly care as well as family vacation planning. The today’s worker
also seeks to balance between the working life and individual personal pursuits. As such,
the HCM is central to planning, controlling and executing such policies designed to
accommodate the demands of the employee’s needs as well as balancing the Employer’s
needs and requirement.
6. Increasing responsibility in the evolution of a Manager
The role of management today has evolved from not only just managing the work activity
of the human capital and processes but has gone beyond. The today’s manager looks at
the complexities and demands in challenges to businesses such as local and foreign
enterprise competition, evolving new technologies and new major improvement in
scientific research and development. As a result, HCM is tasked with developing and
executing strategic business decisions relating to the organization’s objectives and
matching that with the competency of the human capital. This results in strategic
decisions being made with concern to matters of recruitment, compensation, training and
personnel development.
7. Legal matters
The introduction of fair and proper legislation has increased the importance of human
capital functions today. Some policies are listed below:
• Social Security benefits (employee’s provident fund and social medical security)
• Observance to a country’s national holiday
• Family and sick leave
• Labour relations
• Compensation
• Work safety

8. The points above are some of the policies that has entrenched the importance of having a
proper HCM in not performing administrative but also in a strategic role in managing
today’s human capital. However, should these policies be infringed, this would result in
costly back-pay awards, class action legal suits, and legal penalties.
8. Expertise
In today’s organization they face many challenges, many of which are external in nature
for example, competition. As a result, HCM is tasked with coming up with new ideas in
response to those challenges. Challenges such as compensation and candidate selection
are one of those responses. Compensation packages developed with attractive benefits
such as allowances on transport travel, meals, entertainment and gadget, telecommuting
and bonuses, and organization’s stock purchase plan or given stock options to employee’s
loans for housing, academic and training. HCM also looks into the employee matching
and selection process. They have to look into subjective and objective interviews,
providing tests to potential candidates such as psychometric testing (the measurement of
knowledge, abilities, attitudes, and personality traits). This is for HCM to evaluate a
candidate’s ability to solve problems under pressure must have team spirit, logical
analytical thinking, excellent communication skills, negotiation skills and creativity.
These methods have added on the commonplace traditional matching and selection of
potential employees. With this regard, the knowledge base of the skilled human capital
department is needed to ensure the ongoing advancement in human capital management.
9. Increasing cost of Human Capital Management
The largest contributor of organizational cost today is the cost of human capital. With the
increasing demand for businesses globally and advancement in technology, the highly
skilled employee today has become a valuable asset. As a result, budgetary expense for
managing human capital is considered the highest in budgetary expenditure of an
organization.

9. 10. Human Capital Management moves from operational to strategic
The traditional role of HCM has today been increased to not look only at administrative
and daily operations but to a more strategic role. HCM has now moved to being a
strategic partner in contributing to the success of an organization by developing and
executing the human capital management strategies and practices. For HCM to execute
the new role in strategy, they must look into developing their skills and attitudes. As
such, the human capital development would be able to lead change, facilitate business
growth and enhance innovation across the organization. In doing so, the human capital
department would start a changes process strategically executing at the same time the role
of a strategic partner and change agent. (Norman and Powell 2004). The role of the
change agent here is to manage the transformation of the employee. HCM is regarded as
the vanguards and the vehicle of an organization’s culture and are also the main
contributors to identification and implementation of change processes. In Figure 1, Ulrich
(Ulrich 1998) differentiates four roles for the up-to-date HCM derived from two
dimensions. The first dimension represents the focus of HCM and it ranges from
operational to strategic. The second dimension reflects the human capital activities and
distinguishes between managing human capital processes and managing people. Crossing
these axes we arrive at the four roles of HCM: strategic partner, change agent,
administrative expert and employee champion.
Figure 1 : Human Capital role framework (Ulrich 1998)

10. For HCM to excel in a new role, strategy, the HCM professional has to be developed and be
transformed. Not only will HCM take on the operational role but they will also undertake a
strategic role in leading change, augment innovation and assist the organization growth and
success. Thus, the change transformation happens for HCM at a strategic level enabling HCM to
be a change agent as well as a strategic partner. For example, in Accenture, a technology
management consulting company, the HCM professionals have to develop new skills such as
guiding and supporting. These skills are then used to add value to building the competence skills
at senior director level. This program is called “High impact Program for HR People”. Central to
this program are coaching, mentoring, problem sharing, networking and exchanging support
(Norman and Powell 2004)
11. Human Capital Management Challenges
In today’s competitive business world, the role of HCM has become very challenging as well.
Not only does the HCM professional have to play an operational role, the person has to be able
to contribute at a strategic level towards the organization’s growth and success. According to a
study by the Hudson Institute, entitled Workforce 2020, the study has indicated issues
concerning the labour workforce. (Judy and D’Amico 1997) In that study, the challenges facing
HCM are:
• Economic and technological change
• Workforce availability and quality concerns
• Demographics and diversity issues
• Organizational restructuring
12. Economic and Technological Change
Economic changes can alter employment patterns due to increasing demand in a particular
occupational skill or an industrial shift. For example, Malaysia’s current industrial focus has
moved remanufacturing and agriculture to service and information communications technology
industries. As a result of this shift, organizations have had to lay off a number of employees. At
the same time, with a growing global marketplace, organizations have been forced to also
increase productivity and decrease labour costs in order to become more competitive. With the
growing influence of information communications technology related to the global commerce,
organizations now faced with a different set of challenges to recruitment and retention of
employees.

11. 13. Workforce Availability and Quality
In most parts of the world today, there is significant labour demand due to the lack of supply of
workers with the necessary skills. This is a result of the growing use of information
communication technology and its correlation to global business because with technology, this
decreases the challenges to global commerce. As a result, HCM is being challenged to recruit
and train new employees. At the same time, the quality of hiring of an employee is also a
concern because employers in many organizations today seek to recruit employees who have
technical competencies in engineering or information communications technology, skills which
are considered niche.
14. Demographics and Diversity
In the past where men were supposed to work with retirement package, now it is not the case.
Today, the workplace is a more diverse environment with peoples of different ethnic
background, both male and female as well. HCM today has had to adapt to a different working
environment. In the current workplace today, you would have dual-career couples and working
single parents. With the decline of the traditional family, where there is only a single income
earner and usually male, the concept of balancing family and work poses a challenge to human
capital management. For example, matters relating to employment relocation and transfer which
some employees maybe less than willing to accept. Also, the balance of work and family life
comes to a challenge especially for employees who have families as the employee faces a
decision between child rearing and employment. In order to alleviate this situation, important
HCM legislation are put in place that ensures that employers provide up to 2 weeks of unpaid
parental/family leave to employees.
15. Organizational Restructuring
Organizations today are differently structured than it was the past few years as it strives to
achieve market competitiveness. Today with mergers and acquisitions of organizations,
organizations seek to become more competitive to succeed in business. However, this could
result in drastic and sudden organizational changes, which could sometimes have a negative
effect. Examples of negative effects are employee redundancies, facilities closing and out-
placing workers. As a result, jobs are redesigned and this affects the employee. As an agent of
change, the HCM professional has to manage this human consequence of change.

12. 16. Human Capital Management and the Organizational Culture
The culture of an organization is based on the professionally accepted norms and common
values the working place in an organization. Basing firmly on the on the vision and mission
objective of the organization, the employees would be able to share values and beliefs which
allows the employee to be able to define the necessary work opportunities and plan strategies. In
doing so, the organizational culture would be defined by the different characteristic of each
employee that contributes to a norm of expected behaviours, values, philosophies, rituals, and
symbols used by the organization’s employees. However, organizational culture takes time to
evolve as it takes time for shared experiences to evolve as an organizational culture.
The correlation between organization culture and human capital management is the recruitment
and retention of employees. In being able to attract talent to organizations, employee prospects
look at the internal organizational culture of the organization that would set apart from another.
However, where organizations that supports a working culture that values the employee or view
business situations such as risks and changes thereby requiring immediate responses can a
positive differential factor when it comes to attracting new talent. With that in mind, the
evolution of organizational culture starts with the different life cycle of an organization from the
view of a start up to firmly established organization. Each different stage of an organization’s
growth affects the human capital management strategy. For example, the human capital
management strategy will differ froman Information Communications Technology Company that
is three years old vs. a company that is like IBM or HP. If you look at Appendix1, this will
explain the relationship between the life cycle of an organization and the Human Capital
Management activities. (Coff 1997)
17. Organization/ Industry Life-Cycle Stages and HCM Strategy
Explaining Appendix 1
Embryonic
At this stage is where the entrepreneurial character exists in the organization. As the organization
is still at infancy and starting, the amount of resources in terms of capital finance, compensation
packages are modest. Recruitment of candidates is based on individuals who already have the
necessary skill-sets. Personnel training and development is based on ad-hoc demand basis and is
usually on the job.
Growth
At this stage, where an organization is growing at a pace rate, so does the need for stability to
sustain its growth. This juncture is where necessary additional capital investments are needed to
expand facilities, marketing, and human resources to take advantage of the growth rate of
business demand of the organization’s business. It is important to have human capital
management plans to oversee necessary attracting and recruiting talent and not just deal with

13. immediate business demand pressures. Human capital management efforts have to be expanded
to ensure career planning, compensation practices and retention plans so that an organization is
able to ensure the organization has the necessary employee staff and is able to attract and recruit
talent.
Shakeouts
At this level as the industry reacts to rapid growth, not all organization will survive. At the stage,
most organizations will be acquired, merged or cease to continue in operations. Human capital
management is very focused at this level of the organization because it to ensure that the
necessary human capital is retained whilst reorganizing and reducing labour to manage costs
efficiently. However, a balance is needed at this level by using short term and long term
inducements targeting high potential and niche skilled employees who will ensure the
organization’s survivability.
Maturity
At this stage of the cycle, the organization should be stable and thus its culture are stabilized as
well. As a result, stability of the organization will allow human capital management to be
developed further in having formalized plans, policies and procedures. Also, at the maturity stage
of the organization, this would also the human capital management to allow plans for new
compensation plans for recruitment as well as reward incentives for the retention. Personnel
training and development plans would also be executed at this stage for the benefit of the
employee.
Decline
At this stage, where the organization has grown beyond stabilization, it sometimes would face
resistance to change. As an organization diversifies or decides to seek in another direction,
human capital management faces a challenge in order to execute the organization strategy. This
is because employees or organized employees would demand no decrease in pay as well as better
employment security. At this level, plans such as productivity enhancement and cost reduction
programs are introduced such as layoffs, early retirement programs or simply facility closure or
transfer.

14. 18. HCM as a strategic business contributor to improve the organization
Over the years, human capital management has been gaining recognition in its effort as a
strategic business contributor to the organization. With the ever growing market competition
amongst enterprise in business so does the demand for attracting and retaining talent. Even
organizations that are not-for-profit must be able to manage their human capital and in an
organized business oriented style. As such, today not only has the human capital professional has
have to manage administrative human capital tasks, they now also have contribute to the
strategic success of the organization. (Ulrich1997) . The points below will state the different
strategic of HCM in contributing to the organization:
19. Strategies to improve the organization
Enhancing Organizational Performance
The HCM professional can contribute to the strategic success of the organization by establishing
activities by enhancing organizational performance. Through planning and development, as well
as delivery of organization activities this will enhance organizational performance. (Forbringer
and Oeth 1998)
Involvement in Strategic Planning
In the past where human capital managers play a more supporting back end role in
administration and operations now they are needed as past of a strategic planning team. The
HCM professional is now viewed as a strategic partner alongside other strategic roles such as
finance, technology, production, sales and other business department concerns. The HCM
professional is able to provide input by providing information on the labour workforce by
staffing availability, employee cost and necessary staffing requirement and staffing
specifications.
Decision Making on Mergers, Acquisitions, And Downsizing
When companies are acquired, merged or even downsized, they must take into account the HCM
issues they have to face. HCM professionals are needed to be part of the discussions as you look
into matters such as merged organizational cultures and operations. According to studies, it has
been found that less than one-third of those involved in mergers surveyed have adequately
considered HCM issues. (Wall Street Journal 1997)
Redesigning Organizations and Work Processes
Organizational structure follows the strategic planning set by HCM. According to Ulrich, it is the
HCM that is the architect of the organization structure. He feels that the HCM professionals
would look into new ways to align the organization and its work with the strategic thrust of the
organization. The HCM professional would analyse the internal strengths and weaknesses of the

15. human capital in an organization in order to gain strategic competitiveness for the organization
by working with the organizational managers and executives in coming up with the analysis.
(Ulrich 1998)
Ensuring Financial Accountability for HCM results
In the past, HCM was seen as an activity of an organization, now it is seen as contributing to the
organizational performance by looking at its financial cost and benefit of the HCM effort. For
example, to reduce costs in employment vacancies and high employment turnover rate in certain
departments, the HCM professional can introduce high wages as well as program incentives in
departments where there are high employment turnover rates. (Davidson 1998) This shows that
HCM does more than its typical activity and task performance but it also looks at contributing to
the organizational strategy by looking at the returns of investment of human capital. In addition,
with effective and efficient HCM programs, it also contributes to better financial performance of
the organization rather than being a cost activity centre. (Huselid 1995)
Outsourcing HCM Activities
Nowadays, most organizations seek to outsource activities that can be handled in a cost effective
manner. HCM is no exception. The activities in outsourcing HCM activities are payroll, shift
activity planning, system maintenance, specialist HCM external expertise consulting and
recruitment. In this manner, the organization’s HCM is able to be more flexible and able to adapt
in changes to the organizational structure. The advantages in outsourcing is that the HCM does
not have to be saddled with operational costs such system maintenance of its HCM processes,
some HCM professionals in the organization may not have a certain level of expertise an
external HCM professional has. (Outsourcing Guide 1998) However, there are concerns such as
the competency of the vendor, loss of control of data as well as risk of information loss of HCM
data and the negative performance of the outsourcing vendor selected. In order to alleviate the
concerns of outsourcing, the service level contract must define the activity clearly identifying the
outsourcing relationship. The organization’s HCM must come up with a detailed analysis and
must have periodic key performance indicators to provide key reporting to ensure service levels
are met. (Mitchell III 1998)

16. 20. Linking the HCM Strategies and Plans to the Organization for Effective
Strategic Contribution
In order to be an effective strategic contributor, the organization’s HCM must link the HCM
strategy to the organization’s plans. Figure 3 will show the relationship among variables that will
determine the HCM plans an organization will develop. (McKee, Hill, Jones 1998 and Kochan
and Barocci 1985)
Figure 3
Business strategy affects strategy and HCM plans as well. When an organization decides to
further improves itself or decides on a different business strategy, the HCM must be able to
support the strategy by coming up with adequate HCM planning so that it can well coordinated
with the organization’s business strategy if there is any organizational human capital deficiency
that must be remedied. (Barney 1997)
 The differential strategy is a HCM strategy in dynamic environments where there are
rapid changes in an organization such as ICT companies. This is because companies as
seek to continuously find new products and new segments. When certain specific skills
are needed for a new market or product, it is a challenge to develop internally the
resources. With this challenge, using this strategy, the HCM would be able to shorten the
time frame and would use external resource to adequately staff the organization.

17.  The cost-leadership strategy requires the HCM to be able to plan and develop employees
to fit the specialized needs of organization. However, this requires a long term planning,
which maybe challenging if niche skills are needed internally. On the other hand, by
using this strategy, the HCM would be able to contribute strategically by focusing on
developing internal resources for the long term.
set forth by the project manager. Over the years, human capital management has moved from the
administrative and operational aspect of an organization and now has become strategic
contributor to the organization. The right strategic plan for the organization and different stages
of organization growth allows the HCM professional to plan and execute accordingly to the
organizational objectives. Being part of a providing strategy, HCM is now viewed as more of a
profit centre and away from its past view as an activity based cost centre. By being a strategic
contributor, human capital management would be able to see good returns to the organization
such as in reduction of unnecessary costs on activities that can be outsourced such as payroll and
data management, better returns of investment on labour with proper recruitment planning and
avoiding other large costs thereby allowing the HCM professional deployed to other more
important and strategic tasks.
“The most effective project managers are developed day-to-day, not year-to-year or project
mistake-to-project mistake. Mistakes will happen, even with the best of mentoring, however,
project managers with strong mentors should find their people effectiveness continually
improving. The benefit is that the company and everyone connected to the project shares in those
gains.” Neal Whitten (Whitten 1999)

19. References:
1. Richard W. Judy and Carol D’Amico,
2. Workforce 2020: Work and Workers in the21st Century
3. (Indianapolis: Hudson Institute, 1997).2.Dave Ulrich,
4. Human ResourceChampions
5. (Boston: Harvard Business SchoolPress, 1997).3.
6. Figure 2—2 are based on ideas suggested by Kathryn D. McKee,SPHR, CCP; Charles W.
L. Hill and Gareth R. Jones,
7. StrategicManagement
8. (Boston: Houghton Mifflin, 1998), 92—96; and Thomas A. Kochan and Thomas A.
Barocci,
9. HumanResourceManagement and IndustrialRelations
10. (Chicago: Scott,Foresman, 1985), 105.
11. Jay B. Barney,
12. Gaining and Sustaining Competitive Advantage
13. (Reading, MA: Addison-Wesley, 1997), Chapter 1.
14. Michael E. Porter,
15. Competitive Strategy: Techniques for AnalyzingIndustries and Competitors
16. (New York: Free Press, 1980).
17. Figure 2—4, as adapted, is based on ideas suggested in S.Ragburam and R. Arvey, “Business
Strategy Links with Staffingand Training Practices,”
18. Human Resource Planning
19. (1994), 58. PM Network Magaz