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Competitive Economy,
Competent People: What do they mean for the HR
Professionals[1] Madhukar Shukla XLRI Jamshedpur The recent years have seen
the emergence of a new business environment, which has been variously described
as "New Economy", "Knowledge-Based Economy",
"hyper-competitive environment", etc. There is also an emerging
consensus among both the academicians and practitioners that certain key
factors differentiate this new paradigm from the earlier one. Some of these
factors are:
The impact of these factors
is apparent both in the way organizations are re-orienting their processes and
practices, as well in the changes in the aspirations, work and life-styles of
the employees. Organizations, for instance, are endeavouring to become
high-performance workplaces by implementing measures such as:
Likewise, one also finds the
global environmental changes making their impact on the mindset and life-styles
of the workforce, e.g.:
Clearly, these changes place
new demands on the HR professionals, as well as necessitate a relook at the
Role of HR in the contemporary organizations. This paper discusses with
these new challenges for the HR professionals under four broad heads:
Deriving from the above, the
paper then analyses at the implications these have for the HR professionals. Managing Talent In a 1998 article, McKinsey
Quarterly introduced the term "War of Talents" to highlight the fact
that across industries, the ability to attract, retain and develop skilled
people was emerging as the bases of competitive edge. As the ex-CEO of Allied
Signals, Larry Bossidy had once put it: "at the end of the day, we bet on
people, not strategies." The reasons for this
"war" are not difficult to find. Talented manpower is becoming a
scarce resource. The top 20 B-schools produce just 1,800 MBAs against the
industry requirement of close to 3,000; the country produces only 29,000 engineers
and MCAs, when, according to NASSCOM estimates, in just one single year, 1999,
the IT industry absorbed about 35,000 degree holders and 39,000
diploma/certificate holders. 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: ·
Firstly,
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. ·
Secondly,
the growth of economy, specially 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 SMEs). Within last couple of years, we have
seen a booming growth of small knowledge/service-based outfits (e.g., software
developers, e-nabled 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. ·
Lastly,
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!! But managing talent is not
just managing the skill scarcity. The technological and business discontinuities
also increase skill obsolescence at a phenomenal rate. The increasing pace of
change is not only making many past competencies obsolete, but is also throwing
up skill requirements which are too new to be taught in the finishing
professional institutes. 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: ·
Strong
performance ethics in the company ·
Opportunity
for long-term wealth creation ·
Exciting
job challenges ·
Autonomy
on job ·
Flexibility
in employment terms (e.g., telecommuting, job-sharing, etc.) ·
Differentiated
and competitive compensation packages ·
Company's
concern for maintaining work/life balance, ·
Company's
practices for talent development (that go beyond just training), etc. are some of the key factors
for retention and development of talent. Managing Performance In an increasingly competitive economy, the value of HR function is
only as much as it can contribute to enhancing the organizational performance
and productivity. In order to remain relevant in the corporate functioning,
as Dave Ulrich pointed out, we need "to define what HR delivers and not
what it does." A 1995 Rutgers University study encompassing 1000 US companies, showed
that there is a clear the link between corporate HR systems and the short- and
long-term financial performance of the company. Innovative and appropriate HR
practices were found to promote high performance companies, while the HR
practices which were misaligned to performance led to low productivity and
performance levels and decreased corporate competitiveness. 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 customer better, and increase shareholder value. 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. Moreover, in order to work as an effective performance tool, the PA
system needs to be integrated with the other organizational systems, such as: ·
Business
Plan Development Process ·
Work-Systems
And Processes ·
Compensation
And Rewards ·
Career
And Competency Development Systems, Etc. There are a number of issues that need to be addressed to make it an
effective tool for performance management, e.g.: ·
Alignment: The extent to which the factors measured by the PA system are related
to the organizational strategies and tactics. ·
Balance: The extent to which the system balances what is achieved (results
which impact the short-term performance) with how it is achieved (competencies
which ensure the long-term sustainability). ·
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. ·
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. ·
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. 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 the HR professionals act as the change agent, it is/ has been in
response to certain decisions or processes that have been initiated elsewhere -
HR would pitch in when "change happened." Moreover, the very focus of
these change efforts has been on "incremental" changes. For instance,
the company may implement a cost-reduction program, process improvement
initiative, quality-improvement efforts, etc. In contrast, survival in the
emerging business environment demands more radical, discontinuous and corporate
transformations, which are initiated from within the company. During last few
years, we have seen many such transformations taking place among Indian
companies: ·
Cross-Industry
M&As ·
Movement
Into Radically New Markets (e.g., Domestic To Global; Urban To Rural; Commodity
To Branded, etc.) ·
Restructuring
Of Product/Service Portfolios ·
Corporate
Restructuring, Downsizing etc. ·
Radical
Changes in Corporate Strategy ·
Transformation
Of Corporate Identity, etc. The reasons for such changes
are implicit in the very nature of changing business environment: ·
The
fast pace of environmental change is making many sectors, industries and
markets obsolete or overcrowded. In order to survive and grow, the
organizations are forced to move into newer and more attractive fields. ·
Changing
market dynamics and customer expectations is rendering many old strategic
options and paradigms ineffective. To cope with these changes, organisations
are forced to innovate and adapt new strategies. ·
Technological
innovations and globalisation are creating new markets which were never there
earlier. To leverage on these emerging opportunities, it becomes imperative for
the organizations to realign their strategies, structures and systems to the
new realities. Adapting to such changes has
a deeper impact on the organization than the conventional incremental changes;
they aim at altering, in the words of Dave Ulrich, "how the organization
thinks and feels about itself." The challenge for the HR professionals
would be to build up corporate capacity for initiating, managing and
institutionalizing such changes. A 1992 study on corporate change, commissioned
by GE, highlighted seven critical factors that constitute the corporate
capacity for change. Building and nurturing these would be the key agenda for
HR professionals in the emerging environment: ·
Leading Change: developing and identifying the resources within the company -
champions, sponsors, leaders - who can initiate, lead and support change
efforts ·
Creating a Need: stimulating the need (which exceeds the resistance) for change among
those who would be involved and affected by proposed change ·
Shaping a Vision: helping the organization and its members develop a vision of he
desired outcome of the change ·
Mobilizing Commitment: mobilizing the commitment of the key stakeholders
- management, unions, powerful informall cliques - for the change outcome, so
that they feel enthused about it ·
Changing Systems & Structures: aligning the organizational systems and
structures so that they support the change efforts ·
Monitoring Progress: developing mechanisms which help indicating the progress and
direction of change ·
Making Change Last: institutionalizing the change in the organization Managing Knowledge In the emerging business
environment, organisation'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 (the co-called smokestack) industry. There are a
number of reasons for this paradigm shift: ·
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). ·
Across
the industries, one finds the products, services, and technologies becoming
commoditised. Thus, the only basis for competitive advantage lies in
organisation's internal processes and capabilities (e.g., for
servicing the customer, for developing new products, for managing projects,
etc.). ·
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 interval. All these new competitive
requirements, demand creating an orgnisation which can effectively create,
process and codify its knowledge into its offerings and processes. While
managing knowledge may not be entirely an HR function, HR does have a major
role in designing and implementing many processes and systems. Besides managing
and developing talent, there are two other HR interventions which will become
critical: 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
which encourage knowledge sharing among organizational members Systems to Managing Tacit
Knowledge:
While the technology helps in efficiently collecting and disseminating
knowledge from and among organisational 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. Refocusing HR So what does all this mean
for HR professionals? 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 addd new competencies to their reportaire.
While one can derive detailed list of competencies from the preceding
discussion, they can be broadly classified under four headings: 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. 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. 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. Credibility and Influence: Perhaps, most important of
all, would be the challenge of building professional credibility. No, it does
not mean that HR professionals lack professional credibility. But the
expectations from what HR can deliver are still low. Good HR professionals are
seen as people who care of 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. [1] Keynote Address given at NIPM SRC Conference on Competitive Economy, Competent People (Mysore, November 24-25, 2000) |
