Human Resource Management – Challenges and Competencies for the future

Fundamental Changes are taking place in the World and Indian Economy. On the one hand these changes are prompted by a relaxation of trade barriers and on the other by technology.  Consequently, the way Business enterprises are run will also change.  This change will be propelled by three factors:

 

1.       Technology – There will be rapid discontinuities in technological platforms and business models due to the technology factor.  The success or failure of enterprises will be determined by the rate of technology obsolescence, and the ability to create, use, assimilate and absorb new technology.  This will be equally applicable to the old Economy enterprises as well as the new economy enterprises.  Most new enterprises will be efficient, quick and networked.   The Internet is emerging as a key medium for the conduct of business. 

 

2.       Globalization – The business environment will be hyper competitive as Nations are forced by a combination of Politics and Economics to shed trade barriers. Enterprises will necessarily pursue global standards in Productivity, Quality, Delivery, Safety and Cost, and in some cases Labor Standards, in order to survive and become competitive. This would represent a quantum leap in the way they are organized, managed and the systems they adopt.   Keeping abreast of best practices and in due course, setting standards in all areas will be the key.

 

3.       Knowledge – With the increasing influence of Technology, there will be intense Competition for People with specific skills  - Superior Human Capital as compared to Machines will make a difference. Knowledge will be a key differentiator.  The retention and motivation of the knowledgeable worker and manager will be a major issue for enterprises, whether they are they large or small.

 

Enterprises will need to focus on the following to counter the effect of these phenomena:

1. Organizational transformation – Enterprises will seek to implement radical changes in the way they are structured, managed and their focus of activity i.e rightsizing, strategic transformations/reorientation, implementation of ERP Systems, global forays, Mergers and Acquisitions, etc.)  - The organization is likely to be smaller, leaner and focused on maximizing share holder value more than ever.

2. Core Competencies – Enterprises will seek to implement a strategy of business process out sourcing in all functions accept the core operational Areas.  This will result in the growth of a Specialized Service Sector.  The   relationship between the organization and the BPO agency will add a  new dimension to the business scenario as their futures will be inextricably linked.

3. Employee Performance – Vision and Mission statements will be yardstick by which individual / Team / Organization performance is measured.  There will be a greater focus on knowledge management and intellectual capital as skills become dearer and knowledge becomes the key differentiator. Performance Management Systems geared towards the retention of talent and Performance based Compensation systems will replace traditional methodologies.

These phenomena will also have implications for the individual Employee:

a)       They will have higher aspirations  - Employees will expect be rewarded for performance through lifestyle enhancers, enrich their job, learn new skills and be treated as entrepreneurs rather than a mere cogs in the wheel.

b)       There will be higher Job Mobility  - With the increase in skill levels, and the demand for skilled personnel increasing in a technology / Knowledge dominated environment increasing rapidly, employees will be constantly looking for greener pastures.

c)       The concept of career for an individual Employee will change - Companies will no longer be able to take on the responsibility of providing a continuous source of livelihood to their employees.  They will instead offer employability, where a stint with a company will enhance an individual’s skills.  Individual Employees will therefore constantly be looking to update their skills.  Lateral growth will replace vertical growth as a career objective as it is comparatively easier to attain.

d)       Brainpower / talent will be a critical skill in the job market - acquiring new and varied skills will be the motto – the possibility and probability of job rotation and job enrichment will assume importance in an Employee’s assessment of a job offer.

e)       Work will increasingly be seen as a part of Life-Style – Consequently, the work environment, the work culture and the organization’s image in society will play an increasingly important role in the Employee’s propensity to join, stay on and contribute to an organization.

Having examined the nature of Business in this millennium, the factors transforming it, and their impact on enterprises and the individual Employee, let us now examine the impact of these phenomena on the role of the HR function.  Basically the HR function / practitioner has three roles in a business Enterprise:

a)       As a HR Product/Service Specialist - In this role, the HR Practitioner / Department is required to apply professional / Technical knowledge, skills, experience and judgment to meet business objectives and serve Employees needs by producing, managing and ensuring delivery of Employee related products and services. 

b)       As an HR Generalist – In this role the HR Practitioner / Department performs work and process redesign to improve individual and organization effectiveness.  He also involves groups and teams to resolve issues and improve their relationships and interactions and maximize team and organization effectiveness.

c)       As an HR Strategist - In this role the HR Practitioner / Department is involved in Business Process Reengineering and developing business process out sourcing strategies and ensures that human resource products and services support overall business goals.  He also develops methods for building, mobilizing and evaluating effectiveness through the Creation of Vision and Mission statements and Performance Appraisals, builds a value system, ensures that it is adhered to and facilitates communication.

Of the three roles, the emphasis has hitherto, been on the first one.  The emphasis will necessarily have to progressively shift to the second and third roles if the challenges arising out of the changing business scenario are to be tackled effectively.  These challenges are:

a)       Managing Talent

b)       Managing Performance

c)       Managing Change

d)       Managing Knowledge

a) Managing Talent

This gap between the demand and supply of skilled manpower will only widen as we move into the future. As we move into a more competitive and global economy, the market for skilled workforce will continue to change in three significant ways:

1. Whether in the hi-tech industries or in the so-called old economy companies, due to the changing nature of work/job, the demand for sophisticated and skilled people - the Knowledge Workers - who can add/create value for the company will continue to increase. Irrespective of the industry sector, technical literacy, entrepreneurial skills, ability to manage stretch and a global mindset are becoming the key attributes companies look for in their employees. 

2. The growth of economy, especially in the service and high-technology sectors, is resulting in the emergence of a large number of high technology small and medium sized enterprises (hi-tech SME's). Within last couple of years, we have seen a booming growth of small knowledge/service-based outfits (e.g., software developers, e-enabled service providers, event management firms, training/recruitment service providers, marketing agencies, etc.), which require, source and absorb a large segment of talent from the market.

3. The phenomenal growth of the "New Economy" has opened up many new job avenues for the talented workforce. This is creating a phenomenal increase in the job mobility. Earlier, a long stint in a company meant about 10 years or more. Recently, one of the big-six consultancy firms awarded extra-bonus and ESOPs to their "loyal" employees who had been with the company for more than 3 years!!

These and such other environmental change imply that the HR professionals will need to rethink the employee value proposition they offer. In spite of all the rhetoric, talent is still the most under-managed resource in most companies. The need is to go beyond the traditional practices for attracting, retaining and developing talent. Studies, for instance have shown that factors such as:

a)       Strong performance ethics in the company

b)       Opportunity for long-term wealth creation

c)       Exciting job challenges

d)       Autonomy on job

e)       Flexibility in employment terms (e.g., telecommuting, job-sharing, etc.)

f)        Differentiated and competitive compensation packages

g)       Company's concern for maintaining work/life balance,

h)       Company's practices for talent development (that go beyond just training), etc.

are some of the key factors for retention and development of talent.

b) Managing Performance

While the Performance Appraisal (PA) system has always been a tool in the HR professional's basket, its glaring inadequacies in actually improving/ managing/monitoring performance have also been largely ignored. In fact, in many companies, it is still implemented as an annual ritual, without any reflection on its impact on the actual performance.  While on the surface, performance appraisal and it’s consequent management appears to be a logical, rational approach to organization success, the problem is that it is based on assumptions that do not bear up under scrutiny. Amongst others it has the following limitations:

1)       It can't appraise and completely identify potential. The system deals only with performance on the present job.

2)       The system presumes that the man and his boss will together establish suitable standards that will serve the company well.

3)       It implies that the boss understands the strict limitations on what he is supposed to do, and will refrain from playing God.

4)       In action, it often aggravates a problem that appraisal should help to solve. It stresses results alone and doesn't provide for methods of achieving them.

In order to work as an effective performance tool, the PA system needs to be integrated with the other organizational systems, such as:

(a) The Business Plan Development Process

(b) Work-Systems And Processes

(c) Compensation And Rewards

(d) Career And Competency Development Systems, Etc.

Designing such performance-based HR systems will be the second emerging challenge for the HR professionals. The issue to address would be: how to design HR systems, processes, and activities which improve performance, help the organizations in some tangible way to serve their customers better, and increase shareholder value.  There are a number of issues that need to be addressed to make it an effective tool for performance management, e.g.:

(a)     Alignment: The extent to which the factors measured by the PA system are related to the organizational strategies and tactics.

(b)     Balance: The extent to which the system balances what is achieved (results, which impact the short-term performance) with how it is achieved (competencies that ensure the long-term sustainability).

(c)     Relevance: The extent to which the system is integrated with the emerging changes in the nature of work itself, e.g., team-based work, project assignments, virtual teams, cross-border assignments, etc.

(d)     Consequence: The extent to which the system is able to address, not just rewards for rewarding good performance (e.g., promotion, increment, bonus, etc.), but also ensures superior future performance by building in monitoring mechanisms.

(e)     Acceptance: The extent to which the system fulfills the user's (line managers and employees) expectations, and is seen as a support to improve performance.

c)  Managing Change

The emerging business environment also places another demand on the HR professionals - that of managing change. In the conventional setup, the role of HR has been more of maintaining the status quo rather than of initiating and managing change. When HR professionals act as change agents, it generally is/ has been,  in response to certain decisions or processes that have been initiated elsewhere - HR would pitch in when "change happened." During last few years, we have seen many such transformations taking place among Indian companies for e.g.:

a)       Cross-Industry Acquisitions and Mergers

b)       Movement Into Radically New Markets (e.g., Domestic To Global; Urban To Rural; Commodity To Branded, etc.)

c)       Restructuring Of Product/Service Portfolios.

d)       Corporate Restructuring, Downsizing etc.

e)       Radical Changes in Corporate Strategy

f)        Transformation Of Corporate Identity, etc.

In the emerging environment HR Professionals must be seen to be:

(a)     Leading Change: developing and identifying the resources within the company - champions, sponsors, leaders - who can initiate, lead and support change efforts

(b)     Creating a Need: stimulating the need (which exceeds the resistance) for change among those who would be involved and affected by proposed change.

(c)     Shaping a Vision: helping the organization and its members develop a vision of the desired outcome of the change.

(d)     Mobilizing Commitment: mobilizing the commitment of the key stakeholders -management, unions, powerful informal cliques - for the change outcome, so that they feel enthused about it.

(e)     Changing Systems & Structures: aligning the organizational systems and structures so that they support the change efforts.

(f)      Monitoring Progress: developing mechanisms that help indicating the progress and direction of change.

(g)     Making Change last: institutionalizing the change in the organization.

 

d) Managing Knowledge

In the emerging business environment, organization’s capacity to create, absorb, and utilize knowledge is becoming the key differentiator for competitive success. This is true not only for the knowledge-based industries (IT, service, etc.), but also for the traditional manufacturing industry. There are a number of reasons for this paradigm shift:

(a)     Product/service offerings are increasingly becoming knowledge-based - Whether a car or an insurance policy, more and more knowledge goes into their design and creation (a contemporary car has more computing power than Apollo 11).

(b)     Across the industries, one finds the products, services, and technologies becoming commoditised - Thus, the only basis for competitive advantage lies in organization’s internal processes and capabilities (e.g., for servicing the customer, for developing new products, for managing projects, etc.).

(c)     The fast changing business environment, also makes old solutions and offerings obsolete fast - To remain competitive, organizations need to keep developing innovative solutions at a regular intervals.

The HR professional must therefore be at the forefront of effort to Manage Knowledge in the Enterprise by:

1. Creating a Knowledge-Sharing Culture: While many companies have created intranets, and have got the technical infrastructure in place, it is also a common experience that sharing of knowledge and information does not happen automatically. In fact, often the organizational structure, performance management systems, practices and procedures themselves discourage people from sharing knowledge with peers (we need to remember that the traditional organizational designs were aimed at controlling/monitoring free-flow of knowledge, and not for facilitating it). New HR innovations would be needed to create structures, systems and processes that encourage knowledge sharing among organizational members

2. Creating Systems to Manage Tacit Knowledge: While the technology helps in efficiently collecting and disseminating knowledge from and among organizational members, its effectiveness remains confined to explicit knowledge - knowledge which can be codified. A larger proportion of business-relevant knowledge, however, resides in the minds, skills, practices and relationships of people. This kind of knowledge gets shared only when people meet and interact. Designing systems and practices to make this happen is another emerging priority for the HR professional.

Can the HR Professional / HR Profession cope with these challenges and come out on top?

The traditional role of HR was that of the "back-office boys" who held "staff" roles, and supported the initiatives of the line functions. As the preceding discussion highlights, in the emerging environment, the value of HR is only as much as the business-value it can create. Obviously, if HR professionals have to play the role of "partners in progress" within their own companies – and contribute - they will need to add new competencies to their repertoire. While one can derive detailed list of competencies from the preceding discussion, they can be broadly classified under four headings:

1. Business Knowledge: If HR professionals have to be value-adding service providers to their customers within the company, understanding customers priorities and context becomes imperative. Thus, understanding business and business processes - i.e., the market, technologies, financials, etc. – are essential for HR to remain relevant.

2. Deliverable HR Knowledge: Obviously, these are the basic competencies of HR - staffing, appraisal, compensation and rewards, development, etc. However, the focus so far has been predominantly on what one does. Most of the HR activities are still done without any clear measures of their effectiveness (e.g., what is the ROI on recruitment costs). If HR has to be seen as a business partner, this would need to shift to what one delivers. That is, the HR processes will need to be designed in a manner that clear measures are possible.

3. Change Agent Skills: As discussed earlier, businesses needs to continuously change in order to remain competitively viable. In the emerging environment, that capacity to change will be a key competency for companies. Naturally, this would also be a key area in which HR will need to make a significant contribution.
4. Credibility and Influence: Perhaps, most important of all, would be the challenge of building professional credibility. Expectations from what HR can deliver are still low. Good HR professionals are seen as people who care for people, are willing to listen, tolerate diversity, and are trustworthy, etc. But in order to actually command influence in the organization, a professional image should also include perceptions such as being accurate in delivering results, meeting commitments, being consistent in meeting targets, etc.

To succeed, the Human Resource Function must shift from being merely responsive to being much more proactive; from “ backroom to the front line”, from a corporate to an operations focus.  The HR Function can add significant value through the following interventions:

a)       Development, clarification and communication of an organization’s culture, vision and values

b)       Definition, communication, facilitation and development of the organization’s key capabilities (i.e. core competencies), best practices (i.e. successful strategies consistently applied by teams that support core capabilities), and the critical supporting competencies

c)       Creation, distribution, and support of business and employee products and services

d)       Generation of a clear, measurable impact on employees and the enterprise e.g. ROI assessment

Each type of intervention above will rely heavily on technology and out sourcing as key enablers of leaner more focused human resource organizations. Future HR practitioners / Departments will be the ambassadors of a high tech high touch approach in which they provide rapid, customized solutions to work force issues.

The Human resource role of the future will depend on the initiative and motivation of professionals pursuing a vision – an ideal future state in which HR practitioners become true leaders in their enterprises.  In order to realize this goal, members of the human resource community must collectively commit to change.  As the value produced by individuals and teams becomes a more important aspect of competitive success, organizational leaders will increasingly focus on their human assets.  The demand for innovative methods fro leveraging them is clear.  Whether or not HR practitioners and the function will respond creatively or quickly enough is not so clear.  If HR practitioners respond to this challenge, they will play an increasingly vital role in their organizations - that of a HR Strategist.