It may safely be said that the Industrial Revolution is over. Today is the age of information and the knowledge economy, as business strategies are now based largely on expertise and service rather than manufacturing and production. These economic, strategic changes signal correspondingly inevitable changes in strategic human resource management. Specifically, human resource management is taking on an increasingly centralized role in the overall mangement of firms. Daily business operations now require the talents of knowledge workers and other skilled, trained professionals, so that "human capital" has become the centerpiece of the new economy. Strategically managing human capital consequently means addressing issues of production, operations, and motivation from a new and decidedly humanistic perspective.
Managing Human Capital in the Knowledge Economy
Traditional economics is all about exploiting tangible resources - land, labor, and capital. From this traditional or industrial perspective, labor is little more than another factor in production, a marketable good in and of itself, subject to the same laws of supply and demand as produced goods (Arnold, 2001). However, the traditional perspective is undergoing a major revision as "human capital" is coming to be seen as the central factor of growth in the knowledge economy (Tomer, 2003). As noted by Laudon and Laudon (2003), management responsibilities have been expanded to address new "sociotechnical" knowledge and technology related fields such as management information systems (MIS) and knowledge management (KM). Because the new economy depends on the intellectual abilities and creative talents of knowledge workers and service professionals, the development of human capital - or the management of human resources - is likewise playing a more prominent role in business strategy. Strategic human resource management therefore entails the careful cultivation of human skill, intelligence and motivation in order to thrive competitively in a new age of information.
Production: Accountability and Empowerment
Accountability as a Function of Scientific Mangement
Managers have historically been concerned with maintaining reliable systems of accountability, and for good reason. As first outlined by Fayol, classical management involves activities dependent on and inseparable from accountability: "planning, organizing, command, coordination, and control" (Moorhead & Griffin, 2001, p. 439). Indeed, accounting is usually one of the top manager's premier skills, a technical skill that is - understandably - often applied in more general terms to the act of management itself. This view of management as accounting is the essence of Frederick W. Taylor's groundbreaking notion of "scientific management" - in which standardized routines and careful monitoring of employee output led to increased production among plant workers beginning in the early 1900s (Anthony, Kacmar, & Perrewe, 2002; Moorhead & Griffin, 2001). Though fruitful, Taylor's methods were criticized on basically moral grounds: "for treating the worker as a tool and not a person" (Anthony, et al, 2002, p. 11). These criticisms played a role in the development of human resource management as a distinct profession, although it left the inevitable tension between competing business ideals - measurable, rational, bottom-line productivity versus humane working conditions - unresolved.
In the contemporary work environment, however, that tension seems to have softened somewhat, as the economy is becoming less industrialized and more service and knowledge oriented. As Peters and Waterman (1982) noted with considerable insight in the early eighties: "The old rationality is, in our opinion, a direct descendant of Frederick Taylor's school of scientific management and has ceased to be a useful discipline" (p. 42). With growing numbers of management theorists and practitioners, Peters and Waterman maintain that culture-bound "soft" organizations - rather than rigidly structured hierarchies of accountability - consistently exhibit the performance criteria of "excellent companies" (Peters & Waterman, 1982).
The ongoing transformation of the economy has everything to do with the prominence of human resources in winning business strategies. Tomer (2003) makes the case that, because the economy now depends on intellectual rather than strictly physical resources, managers must invest in newly discovered "intangible" personal resources such as social and psychological capital. In turn, the investment in personal intangibles requires a basic shift in management assumptions and methodologies. Traditional business school rationality, embodied in systematic accountability, must give way to specific, and specifically strategic, expressions of trust in the human resource element.
The Role of Empowerment in Production
Because human resources are rightly at the center of contemporary business strategies, trust has become a major strategic decision: "Top management must decide how much faith it has in its employees" (Anthony, et al, 2002, p. 432). At this point, two prominent streams of business theory come to a head: Accountability measured precisely throughout the organization is a reflection of "management's ever-apparent dream - controlling the future and minimizing uncertainty" (Caucasus & Beach, n.d., par. 7). Human resource managers are themselves held accountable by top management to provide empirical evidence that their programs are justifiable in terms of cost-benefit analysis (Anthony, et al, 2002).
On the other hand, today's workers are well-educated, independently minded, and fully aware of their own marketability. Furthermore, their work is of a sufficiently complex nature that it cannot be constantly or accurately monitored for effectiveness, let alone directly measured (Anthony, et al, 2002; Caucasus & Beach, n.d.). Measuring productivity, especially in organizations dedicated to technological research and personal service, is not always an exact science (Anthony, et al, 2002). It follows that any such organization either expresses a reasonable level of trust in its employees, or seemingly relinquishes its own potential strategic advantage by alienating them and thereby reducing morale, hence impeding performance.
Trust is closely related to empowerment, or discretion or decision making authority. Long recognized as a contributor to morale and motivation, empowerment has been revealed in
empirical studies to be a definite factor in production. Studies by Langbein (2000) have demonstrated that, all other things being equal, increased discretion granted to employees leads to increased productivity. This holds especially true in service and team environments (Langbein, 2002). Anthony, et al (2002) offer sound strategic reasons for embracing empowerment to boost productivity: "First, globalization and competition have increased, requiring more and more innovation, which requires more freedom for the innovators. Second, the increased competition has forced U.S. businesses to be more productive than ever before" (p. 451). Many would assert that empowerment is a good idea regardless of particular economic or competitive environments. Before "empowerment" was even in vogue, Peters and Waterman's (1982) now-famous watershed research disclosed that there is a definite positive correlation between productivity and implicit trust in the worker.
Operations: Information Systems and Informal Communications
The Continued Expansion of Information Systems
The field of management information systems has evolved out of some profound and fairly recent changes in the business environment, most notably globalization and the shift from an industrial to an information economy (Laudon & Laudon, 20003). All the traditional business functions-including human resource management itself-now rely heavily on the proper utilization of computer technology and information systems (Laudon & Laudon, 2003; Anthony, et al, 2002). The profusion of information technology has in some cases supplanted human resources altogether. In the phenomenon of "trickle-down technology," robots have replaced production workers and automated switchboards have made human receptionists obsolete. Even that seemingly irreplaceable fixture on the American economic landscape, the middle manager, is liable to eventually disappear owing to a technology-enabled flattening of the organization (Laudon & Laudon, 2003; Griffin & Moorhead, 2001).
This trend does not seem to be slowing up in the least. Though the Industrial Revolution is past, the managerial dilemma over capital versus labor is ever-present: "Today, the same capital and labor decision is being made in factories, offices, and mines around the country, but it involves substituting smart machines-computers-for other machines and labor" (Anthony, et al, 2002, p. 28). Of course, this seemingly ominous threat amounts to a golden opportunity for the astute human resource manager, because for every new machine there must be knowledgeable machine designers, producers, operators and technicians. The irony here is that in the information age, the need for specialized training has increased - not decreased - with the proliferation of new systems and technology enhancements: "Training and development become even more critical to ensure that employees have the desired skills to be productive" (Anthony, et al, 2002, p. 75).
Utilizing Human Resources through Communication
One of the exciting fields in technology during the 80s and 90s was that of Artificial Intelligence (AI). Imaginative theorists - including government researchers - predicted the imminent emergence of fully functional robots, intellectually and cognitively indistinguishable from human beings. Recent disclosures indicate that the AI field is now pursuing more mundane (if more practical) objectives, for the simple reason that human intelligence has turned out to be extremely difficult to duplicate (Brackenbury & Raven, 2002). Information technology falls way short of human intelligence because "existing systems lack the common sense and generality of naturally intelligent human beings" (Laudon & Laudon, 2003, p. 330). These features - common sense and generality - are what enable humans to distinguish shades of meaning, to understand statements in contexts, and otherwise to effectively communicate (Brackenbury & Raven, 2002).
It seems to follow from this that whereas one of the chief stated purposes for investing heavily in information systems is communication, the fact remains that humans are (potentially) the most efficient communicators. Evidence suggests that even from a strictly operational standpoint, the best technical systems design is no substitute for value-based organizational culture, social bonds and interpersonal communications (Laudon & Laudon, 2003). This is again good news for human resource managers, because it means there is no viable substitute for the human worker or the human capacity for effective communication. Increased reliance on technology implies an increase of complexity in business operations, which in turn implies a necessary investment in "personal capital" in the form of communication skills (Tomer, 2003). Indeed, the entire field of MIS rests on the premise that adopting technical systems is a tenuous exercise requiring considerable social as well as technical skills (Laudon & Laudon, 2003).
Despite the current technology rage, Fortune 500 executives, for example, and their human resource managers are almost universally looking for good communicators above all else (O'Hair, Friedrich & Dixon, 2002). Perhaps it is the unrestrained contemporary fascination with information technology that has led employers to conclude that written communication is "the number one deficiency of the U.S. workforce" (Anthony, et al, 2002, p. 315). Human resource managers would do well to literally capitalize on the training opportunity inherent in lagging communication skills among the labor population. By focusing on communication in training and development efforts, human resource professionals can equip individual workers to excel on the job, and at the same time help correct what amounts to a pitfall in the domestic economy.
Motivation: Extrinsic and Intrinsic
The Failure of Strictly Extrinsic Incentives
Strategic human resource management involves the explicit recognition of factors external to the organization, such as globalization, technological developments, economic conditions, social trends and competition (Anthony, et al, 2002). The strategic approach therefore necessitates ongoing education - that is, awareness of developments that have the potential to either enhance or impede the organization's success. One fruitful area of human resources research is that of psychological motivation, which offers evidence that purely monetary rewards do not sufficiently motivate workers over the long term (Benabou & Tirole, 2003). Researchers suggest that study in this field has been undervalued by economists (Benabou & Tirole, 2003).
There apparently exists a fragile interplay between extrinsic rewards and the perceptions of those rewarded as to the significance of those rewards. The paradoxical finding from research, that extrinsic rewards can undermine intrinsic motivation, evidently hinges on the perceived value of the employee as either a uniquely productive contributor or simply an economic commodity. Such factors are not limited to compensation. "By making people feel controlled rather than autonomous, various extrinsic factors commonly found in the workplace -punishment, close supervision, evaluation, deadlines and competition - also have adverse effects on motivation and performance" (Brehm, Kassin, & Fein, 2002, p. 491). Numerous studies reveal, for example, that bribing or paying people to do work which they already are motivated to perform can backfire. Production in such cases invariably drops, as the "rewards" increase (Brehm, et al, 2002). Findings of this sort could prove socially and financially beneficial to the human resource professional in designing jobs, performance appraisal systems and compensation plans.
Intrinsic Rewards, Leadership and Ownership
Clearly the issue of human motivation is of paramount importance to the effective management of human resources. Employee motivation directly affects such issues as retention, collective morale, and productivity. According to related literature, the quality of leadership has much to do with intrinsic motivation, in guiding perceptions among employees of the significance of their rewards. Leaders provide for their followers more than anything "a strongly defined sense of purpose" (Anthony, et al, 2002, p. 445). A sense of vision, mission or purpose is an intrinsic motivator. Likewise, transferring this vision to the individual employee involves interpersonal coaching, including encouragement and affirmations of the employee's self-confidence (Benabou & Tirole, 2003).
Personal vision carries over into the issue of ownership. Like all leaders, human resource specialists can and should employ various strategies to enhance a sense of employee ownership. These include everything from implementing stock purchase plans and suggestion box programs to decentralizing the organization (Anthony, et al, 2002). Through stock plans and other benefits that contribute to a sense of ownership - increased employee participation, training and expansion of job responsibilities are some others - human resource managers appeal to both the extrinsic and intrinsic aspects of human motivation.
In the new knowledge economy, one method of increasing employee ownership is the sharing and eliciting of tacit knowledge (Laudon & Laudon, 2003). Unlike explicit stored knowledge or data, tacit or informal knowledge is obtained through the distinct human resource avenues of relationships and trust. Combined with a structure of decentralization, expressions of trust can prove powerful-if risky-intrinsic motivators: "The extension of trust, created and reproduced through identity work, gives members of a group the energy to perform co-ordinated action without hierarchical control" (Catasus & Beach, n.d., par. 29). When employees identify with the work - when they have a personal ownership stake in the organization's success - they become motivated to contribute to it. Strategic human resource management therefore calls for an emphasis on careful job design, as well as consideration of stock ownership and benefit packages, in order to maximize employee motivation.
Conclusions
Though some analysts have been taken aback by the dominance of technology in socioeconomics, human resource managers have every reason to believe that the careful development of individual employees is still - indeed more than ever - central to the success of business organizations. The information age has fully arrived, but human resource managers and employees alike can take heart in the fact that empowered, well trained and properly motivated people are still the driving force of any successful enterprise. A sound human resource strategy for the information age will consequently focus on employee empowerment, informal communications and intrinsic motivation.
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