Posts filed under ‘HRM’
Human capital versus organisational capital in practice (caring about people)
In light of a recent experience (yes, I’ve been rather busy these days) I’ve been thinking about the difference between human capital and organisational capital (organizational at the other side of the ocean, of course) and how that difference impacts into everyday work.
Let’s first use the books. When defining human capital, Bontis et al. propose the following:
Human capital represents the human factor in the organization; the combined intelligence, skills and expertise that gives the organization its distinctive character. The human elements of the organization are those that are capable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long-term survival of the organization.
While if we focus on organisational capital (also called structural capital), and quoting Yondt this time:
Organizational capital is the institutionalized knowledge possessed by an organization, which is stored in databases, manuals, etc
As you can see there’s a difference there, a huge difference. This difference can be named as the human factor. For there’s a difference between the knowledge that the organisation owns and contains, and the knowledge, skills and abilities that every worker possesses. It’s not only a matter of accounting these different sets of knowledge as assets or not, as I reflected in my last post HRM and the triple bottom line (do we really believe in people?), there’s much more than that: the effective use of that knowledge is far more important.
Because the employer-employee is not a simply-transactional one-way relationship (at least we can say it no longer is) but a sophisticated dialogue between different entities, an usually effective interchange inserted in the complex framework of the psychological contract.
The psychological contract is a useful construct that reflects the true relationship of the employment contract as assumed by the different parts: what we really expect, what we have understood we should expect, how we agree our post has been designed and our responsibilities are, and many other things that, albeit not written anywhere, are, sometimes unconsciously, stored in our minds.
If our psychological contract is breached, what will become of our knowledge? It won’t be as readily available to our company as it used to be. In fact that’s a moment where the organisational capital will be as available as always, but the human capital simply won’t.
The human factor means that we can make choices. And the drive of those choices can range from self-interest to commitment to your organisation. This commitment modulates the real availability of human capital for the organisation.
That’s why treating people right is so important. In a zillion of a second the most committed employee can turn into an alien counting the minutes until eating-time. And it is, and will be, the responsibility of her manager to make the right decisions, in the right timing, and using the right way to do things, whatever that is.
You can’t be a good manager without caring about people. You simply can’t. As good engineers must love the systems they are designing and good teachers must love what they teach (and children too), people that are managed must matter to the manager. There’s no other way.
HRM and the triple bottom line (do we really believe in people?)
I’ve blogged before about hard and soft human resources management, about the Michigan and the Harvard model, about to paying lip-service to it and the gap between theory and practice, and even about commitment (to commit or not to commit). But the more I think of HRM versus the old paradigm of “personnel management”, the more inconsistencies I detect.
Because if people was that important, it would be somewhere in the so called triple bottom line of the company, made of finance, social corporate responsibility a.k.a. CSR and sustainability a.k.a. our carbon footprint.
I feel that HRM is surprisingly absent of the triad.
But if we are to believe that people are our greatest asset they should be at our triple bottom line somewhere. Or even in several places.
The first place to look could be in financials. Maybe we could find our people in-between assets? I do not think so. After all assets are usually accounted at acquisition prices. And, fortunately, people are no longer acquired in the slave market. Consequently people are not assets for any company. Not anymore.
Where are those fundamental assets for the competitive advantage of the organisation? It’s funny to point that, not being assets, our relationship with our company is actually accounted as an expense. And some related concepts, such as our pension funds as liabilities… (wait, that’s not true, the pension funds are one of the main sources of creative accounting… where finance becomes an art. I’ll write about this another day though…)
In any case, it’s quite clear that our skills and abilities are not on the assets list. Neither the real value of our relationship with our company. Even when the opportunity cost of our leaving the company can be measured with the cost of recruiting our substitute, the cost of training her, the cost of the information the organisation is going to lack now, the cost of under-performance for our customers and many more.
But when we, employees, were encouraged to pursue our own learning and self development, it was clear that those assets would consequently become ours. So there’s nothing wrong with measuring assets that way. We are just another provider in an increasingly complex and atomised supply chain. Maybe we can still be in the second or third bottom line. Around corporate social responsibility, as stakeholders that we are. After all shareholders are only entitled the rights to the residual earnings, after the employees, the creditors and the state.
Let’s wake up. CSR and carbon footprints are only valid arguments when the company is earning money. But there’s only one bottom line: finance. And after that bottom line and before the second and the third there are still other business priorities as well as short-termism, insufficient resources allocated, resistance to change, and distrustful organisations. A huge gap that can’t be easily bridged. At least not with rhetoric.
Experiment: a management lesson from Porter (Cole, not Michael)
This week I’ve been listening to Cole Porter’s songs while driving to work.The Mobile World Congress 2008 has been clogging the traffic around Barcelona these days. Believe me, that has meant that I’ve had a lot of time while going to the airport. I happened to record a CD with a lot his songs and, one of them, simply surprised me: an unexpected snippet of wisdom.
It’s related to what I call ossification.
Ossification can happen in organisations, or to people. We tend to get used to the same thing, that we do increasingly efficiently.
Don’t you wish you were given the same assignment, the same topic, the same customer year after year? That would surely boost your ease and ability to achieve it. The customer would get to know you better and better… more trust, and you’d face that fright to a blank sheet no more.
But, as every good thing in life, that would also come with a trade off. You’d become less versatile, less adaptable.
You’d build muscle, yes, but your joints would calcify, become increasingly stable and unimaginative. You’d simply trade safety for vitality, stability for adaptability.
That means that not only your profit would increase but also your costs, albeit you wouldn’t perceive it, specially your opportunity costs (the gains you could have obtained if you had chosen the best available option). And your employability would decrease.
Finally, on the long run, there would be an expected outcome, that would not be the best possible outcome. Just imagine.
The treatment… that’s when Cole Porter, a composer and song writer that was born in 1891 and died in 1964 comes into play. There’s a simple but sound advice in this song. Think and reflect about it.
to meet less fortunate mortals,
there’s just one final message I would give to you.
You all have learned reliance
on the sacred teachings of science,
so I hope through life you never will decline,
in spite of philistine defiance,
to do what all good scientists do.
Experiment,
Make it your motto day and night.
Experiment,
And it will lead you to the light.
The apple on the top of the tree
is never too high to achieve.
So take an example from Eve.
Experiment.
Be curious,
Though interfering friends may frown.
Get furious,
At each attempt to hold you down.
If this advice you’ll only employ,
the future can offer you infinite joy
and merriment.
Experiment,
and you’ll see.
Soft and hard human resource management (utilitarian instrumentalism versus developmental humanism)
In 1960 Douglas McGregor developed two sets of theories that would shape two antagonistic currents in human resource management: Theory X and Theory Y. They are based on radically different assumptions.
Charles Chaplin working Theory X style
Theory X is the classical managerial distrust approach. People are lazy by nature and only pursuing self-interests. That means that there are two different and opposite sets of interests: those of the company and those of its workers. It’s management’s task to induce the appropriate behaviour in workers so as that they actions pursue the accomplishment of the company’s goals, not their own. If there ever was a carrot and a stick, that’s the stick. Thus there’s a case for the existence of “correctives” and “coercion”.
It may be argued that this view doesn’t exactly reflect human nature but the organisations’ nature: they were born long ago, and one of the first theories that were developed (they have become the classic perspective) regarding on how to manage the workforce was scientific management. Those theories regarded people as resources in the same way that machinery was also a resource. People had to be assigned fixed, repetitive (I could add unfulfilling and alienating) tasks. That was only one hundred of years ago and there’s still a lot of Taylorism in us.
By the way that matches with many of our current economic theories when we say that people as economic agents are always looking to maximise their perceived utility. That’s what we mostly assume that consumers will do. But then there are still economic realities that cannot be explained from that point of view.
Regarding HRM many authors classify this approach as a classic approach, hard HRM or the Michigan model. Ever seen a manager that style? I bet you have, many of them.
Vicent le Moign, a freelance designer, working Theory Y style
Theory Y is the opposite approach. Instead of thinking of people as lazy machines deals with their emotions, feelings and motivations. People may actually want personal realisation and work can be one the ways to attain it. People like things well done, making a difference. Managers, thus, must enable them to do so and keep their motivation high. People don’t hate working, are not lazy and can be self-responsible. That way coercions are no longer needed.
Following this theory, compensation is still important, but not exclusively attained through money but also many implicit compensations are of utmost importance. Under the right circumstances, people will seek higher responsibilities, not reject them. The individuals can be creative and proactive, values that the organisation must nurture to ensure their commitment.
This approach is called the Harvard model, or soft HRM.
Fortunately it works. Unfortunately it does not always work. Theory Y integrates the personal objectives with those of the corporation, but that cannot always be done. Here comes the dilemma between the two models. In fact neither of them completely represents reality, because people can behave in very different ways. And I’m not referring to different people but everyone of us.
That means that we must use both models to describe reality. And that’s what many managers use. Sometimes a hard approach, sometimes a soft approach.
But that mixed approach holds a contradiction in itself, although if we don’t go deep into the theory we may not notice. Both models are holding two basic and irreconcilable fundamental ideas: self-interest versus self-direction, distrust and trust, negative and positive. How can both be mixed at a higher deductive level?
In the meanwhile, it has never been proved that committed workers are more productive than closely controlled ones. And, after all workers know that HRM considerations are always in a lower precedence than business strategy considerations, so the company, whatever it might say, has a clear precedence for hard shareholder goals over people goals. Some recent models have been developed to try to link employee satisfaction to results through the value chain. The same way as Balanced Scorecards try to enforce soft issues that have been marginal to date in front of long established hard issues. But still, if you think of your company… which are the most relevant business goals? Do you really think that people is among them?
(To think more about this, you may review the past posts: To commit or not to commit (treating and spoiling yourself at your post and The wide gap between theory and practice in human resource management)
Living with delusional and schizophrenic consultants
Imagine for an instant living with a group of consultants, fortunately just a few of them but nevertheless a representative group, that had an schizophrenia issue. Always hypothetically, of course.
And what would their syndrome be? Well, they would envision themselves as managers, not as consultants. They would be saying they are there to help, to assist, to counsel and consult… but, in their inner depths, they’d envision themselves as in charge of something. They’d be saying “I’ll help you” but they’d be meaning “let me be in charge of”.
Asymmetry between reality and perceptions is always a problem. It’s not about being, or not being in charge of something or about being a consultant or a manager. It’s the dysfunction of perceiving reality different than it ontologically is.
A schizophrenic mind can indeed be beautiful, and may not even stand in the way of a Nobel Laureate like John Forbes Nash. But that needs an extraordinarily gifted mind that most of us simply lack.
Reminds me of what David Maister, in his latest book Strategy and the Fat Smoker, describes as the difference between “experts” and “advisors”. The former you delegate them the responsibility of solving or managing a certain issue, the latter must support you in your understanding and managing the issue, but the responsibility and the decisions are still yours.
Whatever you wish you want your role to be, you must be true to yourself as the first step to exteriorise your intentions and thus make them visible to others. Then you’ll be able to deal with them. But building an imaginary world for yourself and trying to trick your client (albeit maybe unconsciously) is the road for failure.
A simple roadmap: clarify your role, and then share with your customer, peers or boss the span of that role. If you don’t like the outcome, face it, make a plan, act on it. But don’t try to mask reality in order to avoid facing it. Schizophrenic geniuses do exists, but they rarely are able to work in a team.
Swim or sink (self-development)
No one can develop you. That’s something you need to do for yourself. That’s why it saddens me a lot when I see young people driving themselves to waste. Yes, I’ve been seeing that lately.
When someone is just starting, little experienced, it’s critical for him to make that additional effort, that extra step. And it’s too easy to be too proud of yourself when you hold your brand new engineering degree. Sadly, that leads nowhere. You still have not achieved anything. You’re only in your first challenge.
And with every challenge you’re offered two distinct options: confronting or denying. It’s also too easy to deny, to blame others, see other people as opponents or enemies. It’s much more difficult to see the need to tackle the challenge, the discomfort of the lack of knowledge and ability, the need to grow.
But again, nobody will be developing you. You’ll add up all the knowledge you’ll be given, if any, as well as what you can observe through your biased lenses, and then you’ll have to start doing something. That something is not that is really well known, after all you’re still in need of learning, you’ll have to start from scratch, try to order your ideas, face reality, reflect, learn, evolve. Those last words still seem too far…
I’m writing this because we are kicking somebody out of the team today. Overcoming your own resistance and incompetence is something that only you can do, nobody will do it for you. Some people will try to shield you from that but, in the end, they are not making you any favour. Reality is stubborn and, the more we try to fight it, the more it fights back.
After all, changes make you grow. Lucky you if you can change by yourself and thus lead your own personal development process. Others do not have that possibility. And while their minds are closed they can face change but still not learn anything. They will still blame me, you or anyone else except for themselves. Shame on them.
Education as a cause for increased productivity or simply an evidence of something that already existed
It is not hard to accept that higher education is correlated to higher wages. Many studies have analysed this relationship. That means that if you pursue higher education you are going to have your returns.
Just try to evaluate them: take into account what you’re spending today in your studies, take into account opportunity costs (what you could be earning of you diverted all the energies and time you’re spending into earning money), think of the possible future income surpluses that you can achieve, and actualise the inflow with reasonable rates. (higher than your mortgage, try to be realistic!)
Even if that leads to a positive figure, the causality question remains. Are you going to have that extra value because of what you’re learning, or is the value actually inside you and you are only making it visible?
Let’s ask it in another way: is a MBA (a PhD, second career, a personal blog, whatever means of learning) a cause to be more productive or simply a mark that can only be achieved by the most productive people? That’s not so simple to answer.
If it was a mark, then certain ways to achieving an MBA would signal the most productive people: for example those that go for an executive MBA thus assuming a considerable extra effort in their lives and thus minimising the opportunity cost of studying.
Is it true that higher productive individuals choose higher education to identify themselves from the rest? Maybe it’s not only that they choose it, but that being them more productive, then the whole cost of studying would be lower for them, enabling them to obtain results easier. The higher the individual productivity, the lower the marginal cost of every meme (as a whole item of additional information) is.
The opposite of signalling is enhancing. Maybe the differences were not preordained but they were simply created by the learning processes.
There’s controversy between both approaches. Some studies point to the first cause, others disagree. Whatever your view there’s (rather ambiguous) data to support it.
If I had to choose I’d go for the hybrid approach. From a pragmatic point of view the hybrid approaches always work better when the demonstrations of the pros and the cons are simply too feeble, especially in a world that’s no longer black and white. But that’s not my reason to choose this approach.
I believe in the difference between having potential and realising that potential. For example I believe that, as a race, the humans have a huge potential that we’ve just only begun to grasp. There’s more to humans than what we see today. But one of our assets is learning: that marks us as privileged individuals between all species. But having the potential to learn is not enough if we don’t make the effort.
So, if you have actually decided to embark in your personal learning project (whatever that is) it means that you have already been marked as a higher productivity individual. But now you must tackle the challenge of realising your potential. Making it a reality is what makes the difference.
To commit or not to commit (treating and spoiling yourself at your post)
This week Ted Rall surprised me with this cartoon. Whether the situation imprinted here corresponds to the our reality or not it’s for you to decide. There are many firms that only pay lip service to the HR function.
More about Ted Rall can be found in his page here. Ted Rall can be described as a liberal (well, yes, a radical liberal) so the page and his cartoons are not apt for Republicans or even mild democrats. Sometimes he exposes views that are hardly exposed in the US, and very common in the rest of the planet, I migth add. So please beware of the link 
Do you work in a company that treats you well? How do you measure that? Do they try to put you in an always changing and turbulent situation only thinking on their profit or, alternatively, do they try to give you clear goals, aligned with the corporate strategy, assign you to fixed and predictable assignments and to the same customer? For your own good of course.
Well, sometimes things are not that simple. And that’s the point of my reflection here. Sometimes better can be worse and worse can be even better.
Take the example of the second company. They value you, your loyalty. You’ve reached stability. You are always assigned to the same customer, a predictable customer that needs the same service each year. Great. You’ve reached the point where you can deliver that assignment relaxedly, where you can sit back and think proudly of your post, your company and your life.
But now lets look at the economics. The the laws of economics always end up coming into play…
You’ll be more expensive each year, yes, that’s seniority. The laws of the market will need increased quality and lower price each year for that service. (Yes, believe it, you’re protected by an entry barrier because you know the customer but others are already climbing the wall offering better service at a lesser price). And you’re being accommodated to your post reducing your employability. That’s your net value!
That means that, you’ll be costing more and more and valuing less and less, while competition is around. Who’s losing here? In time they’ll breach your barrier and you’ll need to face the outside world again.
So it seems that a company that spoils you can really spoil you! Thinking of your career, what’s best for your may not be stability, loyalty or commitment, neither be the rewards for them what you really need.
A few questions to ask yourself (from strategy to reality, purpose and accountability)
As you probably know, lately I’ve been thinking a lot about organising people. That’s great because in fact I am studying Human Resource Management (again) and the content without the reflection is just data. And there’s much more than data to learning. (Remember my old post Ackoff’s spectrum of learning?)
There’s so much philosophy on purpose. Ok, let’s change the word from purpose to strategy. Which is the strategy of your (my) company? The obvious answer is…
Let’s stop for a moment. I need your attention here. I’m going to ask again in bold:
*What’s the strategy of YOUR company?*
Do you really know? Think again.
Don’t cheat. It’s not a valid answer to say that the board does know. That’s not enough. For any strategy to be effective it must permeate the whole of the company. Not just to be in the board’s minds. No way.
Usually the use of the word strategy makes us defensive. True, this is nothing that affects us. Or maybe it does affect us but it’s nothing that we have a say on.
Wrong answer for an effective organisation. If the strategy is not only top-down but bottom-up, we should have a say. In fact I really think we should.
Let’s swap words again. Let’s talk about purpose. Purpose is not a scary word but, at the same time, has a lot in common with strategy. And ask yourself another question.
*What is the purpose of your job, of your post?*
That is easier to answer, but not quite. Is that really what you are doing? Don’t you think that’s the first thing that you should be clarifying with your boss? Along with a complementary question: what’s the purpose of her/his job? How do both purposes match?
This kind of questions should be asked periodically. Let’s not fall into the management trap. Let’s not end up being increasingly efficient with something that, at the end of the day, we shouldn’t be doing.
Let’s ask again.
*Are you being held accountable for the things you should be doing in your post or simply by the things you’re doing, for a few of them or, even worse, for things you are not doing and neither related to?*
Or in a more positive (and extrinsic) fashion:
*Are you being rewarded coherently with the purpose of your post?*
Why is that question important? Well, first there must be a clear purpose to our job, although probably one that will change quite often, but then all the metrics should match. And when I’m talking about metrics I’m not only thinking of “hard” financial metrics, but also the soft, and often much more important ones, from customer satisfaction to employee turnover rates, and the cause of these rates.
But these reflections wouldn’t be complete if we didn’t close the circle.
*Do this purpose match the strategy of the company? Is the accountability matching that purpose and strategy?*
Because if we could answer this question, we would be effectively knowing, and working for and along the strategy of the company. The strategy wouldn’t be tongue-in-cheek or lip service. It would be a common tool, a shared vision, something that would help the whole company move in phase and amplify its efforts. It would be part of a glue that would tie the parts tighter to the whole.
The wide gap between theory and practice in human resource management
I’m not really sure if I am becoming cynical, but the more that I study about HRM the more I come to realise that there’s a huge difference between what companies say they do and what they actually do. It’s something like corporate social responsibility: many talk about it, but, in the end, they all worry about their shareholders.
Sometimes it’s the impact of change, the difficulty to see what is coming in turbulent times. Strategy focus on change, and that sometimes means more changing people than helping them overcome and adapt to change. Sometimes the strategical part of HRM just loses its meaning and it all becomes too tactical. Or at least tactical enough for the HR department to become “personnel” again.
And it’s not only strategy that changes in organisations. Strategy could focus on the external situation while taking into account internal resources. But there’s more that might change. Inside the companies, different policies overlap each other and priorities shift continuously. HR should adapt itself to the resulting change. But, how can they adapt when the situation simply doesn’t settle up?
Could it be that HR is the last step of the chain? Then it would be the one that moves faster, the one that takes more to settle depending on what happens to the rest of the company. That way, is it really possible for it to establish long term HR policies? Is it possible to assure temporal consistency in a set of practices that heavily rely on credibility?
Another approach is the practical approach. Many people deeply dismiss the possibility that HR is actually useful. They see it as something that is there, more a nuisance than a tool. And maybe there’s a reason for that.
For one part, there’s a lack of evidence of the connections between HR and productivity. There’s a real problem to be able to translate “soft issues” into “hard issues”. Apparently the scientific method doesn’t apply here, and measuring is difficult.
I said apparently because I do believe HR policies make a difference. At least in most of the possible strategies, if not all. But, don’t we all focus into things easy to measure?
We tend to define the utility of a given parameter given its ability to be measured. That way our occidental minds can sail into the sea of safety. But there’s a point where this sea ends, where unknown monsters and mighty mists arise. There lay the unmeasurable variables, the soft issues. What if they happen to be the relevant ones?
When I read that some company measures and optimises the dosage for the HR policies given the point where marginal returns start to decrease and decides to stop there I wonder if they really believe what they are saying, if they have really made an innovative system to probe into their employees’ minds, or, as I began with, if I’m simply becoming cynical.
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