Human Capital Management Trends in Global Economy

Prof. R K Gupta
S.A. Jain Institute of Management & Technology
Ambala City

Challenge for Human Capital Management?

In recent years there has been significant change in the way labor is pooled across the globe. The influences of technology and growth have effectively caused industry leaders to have to change their focus from the brute force of labor (factor of production of traditional Economics) to the actual quality of the workers available globally (Global Outsourcing). This has produced a shift in tactics for those who manage Human Resources. It is now pertinent to devise strategies to develop the working population by educating them and developing their technological skills so that they can contribute to the organization requirements adequately. High mobility of workers globally (The knowledge or technical workers), wage differentials across countries, borderless business models and cultural fusion problems are some issues involved in HCM.

Transforming employee into productive asset

It is important today that organizations understand the value of increasing a laborer's output capability by investing in, and adding worth to, his or her abilities, rather than finding a mass of laborers who are willing to work yet who are unqualified to excel in today's highly technological business environment. Simply put, the idea is that, contrary to the old HR theory that emphasized people as the most fundamental asset to a company, Human Capital Management, or HCM is focused on the right kind of people to get the job done.

Our first and foremost objective is the transformation of a worker into a resource that is competitive. The entire Human Resources industry is scrambling to keep up with this trend, and the most successful are those who proactively seek to mold new labor into an asset that is potentially profitable to a company.

Those who achieve high levels of success in managing human capital are those who can harness the power of excellent leadership. But how does an HR firm or manager actually go about successfully leading workers to a place where they are able to confidently proffer their services to companies eager to employ? Likewise, what does it take to guide a company to a position in which it can be ready to hire the right talent at the right time?

Finding leaders

The failure of good leadership in the management of human capital is one of the primary causes of bad employment processes, sagging profit margins and, potentially, the overall failure of a company. In today's competitive and dynamic labor market, it is vitally important for HCM to focus extensively on the strengthening and development of excellent leadership skills. All too often programs designed to develop and improve employee capabilities are destined to fail for one simple reason they lack the backing of a strong leadership team. That is why it is crucial to set up a proactive leadership team , developing a roster of professionals with advanced leadership skills. A number of Indian companies too have been complaining about not getting adequate team work, innovative capability and Leadership qualities even in Best B schools graduates. Kind of soft skills needed to keep organization ticking to demand of dynamics of markets.

If a company's management is unsure how to begin, it will be wise to pay close attention to the skills that really do pay off. One of the most valued leadership skills in the HR industry is trust building. If Human Capital Management cannot deliver on promises it has made, both its corporate base as well as its labor pool will quickly slip away. One US Company, for instance, recruited a large number of programmers from a developing country. Dreaming to work for a U.S. company they gladly committed to the training courses provided, assuming there would be work for them after they were finished. Unfortunately, by the end of the training courses the company could only support half of positions sought by these potential workers, brutally dismaying those left behind. While the number eventually employed was still enormous by industry standards, the company lost out by the amount of negative press received.

Many companies fail by inadequately training their employees, leaving them once they are sent to work and generating a higher than expected employee turnover rate while reducing fiscal profitability. This is caused by employees being left with a sense of distrustfulness towards their employer, something that is extremely important to prevent (Issues of building Employee loyalty and emotional bond with the supervisor(s).

Development strategy

While there are several issues involved, one of the advantageous aspects of having a dynamic and changing labor pool is the availability of large number of younger, tech-savvy recruits who are, more likely than not, more susceptible to be influenced by charismatic leaders who fit with their ambition and role model. Thus leading upfront and creating a kind of dramatic work environment where experiments and newer ways are allowed would sure bring opportunity to build leadership (I have used this repeatedly during my tenures in Industry, galvanizing work environment with excitement and achieving things.

College grads between the ages of 21 and 28 in most major tech industries respond incredibly well to Human Capital Management programs headed up by engaging and personable leaders. It has been found that leadership success comes most often from those who have a certain level of the "big brother" or "big sister" approach to the younger recruits, guiding them in a nurturing manner that inspires a sense of loyalty and trust.

It should also be mentioned that a similarly charismatic approach should be taken with members of the other age groups, although adjusted somewhat so as not to demean them. Yet while other age groups do also respond well to good leadership, the salient quality of the younger demographic is its ability to adapt to the constantly evolving technology of their respective fields. When hiring for senior positions in HCM teams, it is important to focus primarily on the level of leadership skills demonstrated.

With globalization shrinking the world map on a daily basis, technology stepping ahead at a rate that is difficult to keep up with and a work force that is often hard to recognize, Human Resources Management (HRM) is in a state of great upheaval and constant change. It is important to remember, however, that this dilemma is nothing new. In manufacturing sector globalization, as we know it today has been in the works for decades, and people have long seen the need to adapt to the increasingly fluid labor pool, using the racing growth of technological development to connect employers to the work force, rather than isolate them. Still, the speed at which things are changing leaves many at a loss, providing Human Resource Management with a great opportunity to step in and lead the way all it takes is a positive attitude and the ability to sail through uncharted waters.

Outsourcing from Overseas markets

One of the biggest temptations for North American businesses has been to send jobs overseas. The trend is picking up, no one willing to miss the boat ( All most 50% cost reduction in many industries}. With recent university graduates in developing nations earning wages anywhere from a fifth (Comparing 75000$ to 15000 $ a year in India, typically for IT technicians) to a tenth of an American worker, all kinds of work can be sent out at incredibly cheap rates. Such jobs include outsourcing call centers, credit card processing, legal transcription, genetic codes analysis, invoicing, scanning of medical records-anything that has a set of simple instructions that an employee can repeatedly follow throughout the work shift. This is the direct product of the gift of technology, thanks to Internet, wireless and high speed satellite based communication channels which has made it possible to decentralize the processing of information, and has provided access to an entire world of workers (virtual classrooms, live chats and video conferencing and high speed FTP data transmission).

Outsourcing Human Resources

Indeed, there is no shortage of such workers, as India and China - the population boomers - lead the way for American and now European outsourcing. In addition, cheap labor pool is available in the former Soviet Union, South and Central America (Mexico, Brazil), and the Philippines. With such an abundance of worker resources opening up to the market, those involved in the management of Human Resources are struggling to stay ahead. If it succeeds in connecting workers with employers in a way that is beneficial to both parties, HRM could be one of the foremost beneficiaries of globalization.

For many employers, the cheap labor pool provided by globalization has finally offered to make their wildest dreams come true (IBM, GE, HSBC and so many others). Profit margins have the potential to soar as wages are cut dramatically, worker benefits are stripped and stringent U.S. labor laws do not have to be adhered to ( as compared to non existent laws in India). But many are finding out that overseas jobs aren't turning out to be as profitable as expected. It is not all success stories, however. There are too many failures, which no one talks about. In an increasingly unpredictable market, if a company does not effectively map out a strategy of how to account for the common problems that overseas jobs bring with them, they are bound to shipwreck. Unfortunately, however, many companies are completely unaware of what they are to expect from pooling labor abroad.

If a company invests heavily in onsite human resource management and training and allows time for the establishment of a cohesive and secure setup, the chances of failure are greatly reduced. Perhaps the heady fantasy of labor obtained practically for free has to be remitted by overzealous executives so that a solid foundation can be put down and tangible savings can be experienced.

What outsourcing does to domestic labor is a very complex problem for Human Resource Management. Workforce planning has always been an in-depth process of statistically determining the age and skill factors of a given labor potentiality. With globalization in the mix, the data field becomes much larger. The HRM statistician needs to balance the skills and wage requirements of a U.S. college graduate against those of a worker from abroad, and when choosing one over the other, the trade offs are significant. For instance, while many companies choose to have telephone operators with limited English skills in India and Pakistan receive questions from American customers, the rate of customer satisfaction drops (off late customers have been reacting violently). With high rates of turnover for these foreign operators (35-40% attrition rate in India in some sectors of outsourcing), the level of satisfaction for American customers does not auger improvement. Still, however, many companies choose to continue with foreign labor, experiencing a certain level of profitability regardless of various blemishes.

Implications for Work force

One of the major realities facing labor in USA is the rapid decrease in the salary and benefits expectations a U.S. worker can have while going into the job market. With a vastly increased labor pool to compete against, the U.S. worker must be prepared to develop and hone skills that otherwise might not be necessary. However, this is increasingly the case, as workers must seek to differentiate themselves from the workforce abroad. Indeed, technology, information and English skills can be the battle cry of laborers redeployed into the domestic U.S. market. In addition, many workers must face contract options that place them in a more unstable position in terms of employment guarantees from companies, leading them to rely less on one employer and more actively seek other contract positions as well. This lack of worker commitment is a major factor in Human Resource Management today.

The Indian Companies are also soon going to face similar issues. More number of foreign employees will be found here. Indian companies would do well to rope in large talent pool of NRIs technocrats who are ready to work in global wok environment with advanced training and skills.

Prof. R K Gupta
S.A. Jain Institute of Management & Technology
Ambala City

Source: E-mail June 25, 2005


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