The Changing Face of the HRM Function

A Strategic Contributor to Industry in Managing Knowledge

Faces

The Welfare department The Personnel Department The Human Resource Department The Learning Organisation Managing Knowledge Managing Human Capital

An increase in a person’s self-actualisation increases the chances of enhaning another’s self actualisation in a

virtuous circle, but this depends on providing satisfaction of their physical, safety and social needs for the development of the higher order needs to occur. This development will not occur if organisations create lousy jobs and Maslow recognised that large organisations in particular end up

with many lousy jobs (Salazar,2000)

Key Challenges

Employer Branding CSR Increasing Legislation Equal opportunities Vs Managing Diversity Recruitment and Selection Training and Development Empowerment Motivation and Retention Total Reward Any Others?

Challanges in tourism & hospitality

Complexity of the situation Immediate response to customers’ needs Avoiding lost opportunities Organising work hours Dealing with part-time and casual workers Controlling costs of labour and labour

turnover

Issues Facing Tourism and Hospitality

Lower Quartile Salaries High Labour Turnover Zero Contract Hours Poor training and development Discrimination Any Others?

Managing Knowledge

What is Human Capital? Can it be accurately measured?

Since value in today’s economy is increasingly driven by employees as opposed to hard assets , managing employes and their ideas is now a cornerstone of competative advantage (Zimmerman,E. (2001)

To effectively manage these value-driving elements, organisations must be able to accurately measure them.

Capital

The term ‘capital’ is rarely defined in and of itself, and existing definitions are vague.In the economic view it is ‘something owned which provides ongoing services’ and is ’normally summed in units of money’(Econterms,2004)

Human capital(HC) has many definitions. Some define HC as a ‘commercially valuable skill?(Marcus,Ippolito,& Zhang,1998.) or the ‘attributes of a person or people that are productive in some economic context’ (Econterms, 2004).

Others have defined HC as ‘the KSAs (Knowledge, skills and abilities) required for a particular job, which an employee generates through education, training, and experience’ (Sturman,2001) or the time, personal skills, capabilities, experiences, and knowledge of the individual’ (Sustainable Development Indicator Group, 1996)

Intellectual Capital Intellectual capital covers many intangible

elements related to an organisation’s ability to create value, and has three components:

Structual, customer, and human capital. Structual capital deals largely with the

technological side of the organisation, including hardware, software, databases, patents, trademarks, customer support systems, everything else that supports productivity.

The results of organisational learning that has become part of a firm’s operations and would continue to exist independent of various employees departure.(Edvinsson & Malone 1997)

Customer capital The contributions that customers make to

service delivery, experience and consumption processes, and to the bottom line of an organisation, calculated as the worth of a company’s relationship with its customers (Caplan & Norton 2004)

Human Capital

Most difficult component to define, includes company’s values, culture & philosophy which would cease to exist without employees.

In short human capital is the sum of all human capabilities that support the org’s objectives & strategies and that can respond to market fluctuations. (Brooking 1996)

Human Capital

Lev & Schwartz Model 1999 March

The evaluation is based on the present value of the future earnings of the employees and on the following assumptions:

• Direct and indirect benefits earned both in India and abroad.

• Incremental earnings are based on group age.

• Future earnings have been discounted at 25.32% which is being cost of capital for Infosys.

Human Capital Accounting Model

Accounting model formula:

Vr = ΣT(t=r) I(t)/(1+r)t-r

Vr=the human capital value of a person

“r” years old

l(t)= the person’s annual earnings up to retirement

r = a discount rate specific to the person

T = retirement age

Historical developments of human capital

Surfaced in the late 50s, and was described by Theodore schultz(1960) as

All those human capacities, developed by education, that can be used productively –the capacity to deal with abstractions, to recognise and adhere to rules, to use language at a high level. Human capital, like other forms of capital, accumulates over generations; it is a thing that parents `give’ to their children through their upbringing, and that children then successfuly deploy in school, allowing them to bequeath more human capital to their own children.(Traub,2000, p.46)

This macro-level construct was first applied to labour economies and population and family studies.

Then sophisticated models connected macro-level to its micro-level counterpart.

In this duel-level construct. ‘aggregate accumulation of human capital is a factor in generating aggregate economic growth, while individual accumulation is the process that generates individual growth’(Mincer,1997,)

After establishing that macro-level human capital affects income distribution, and micro-level human capital affects individual’s wages, research progressed further by exploring the organisational level

Though not represented on financial and accounting statements, the effects of human capital grew so large for publicy traded firms that they could not be ignored.

Book and Market Value of an Organisation

Human capital’s financial importance became evident in the widening gap between book and market value of firms, during the technological revolution.

Researchers began to give more credence to non financial, intangible sources of competative advantage possesed by these firms that affected what individuals were willing to pay for partial ownership.

Human Capital

Human Capital

One such study on hospitality compensation compared the levels of HC found in various economic sectors & industries.

Using the macro level variables to calculate HC, the study found that hospitality Orgs:-

(1) Had the lowest level of HC of all industries studied,&

(2) On average, required individuals with lower levels of HC than that found in people in other industries.(Sturman,2001)

Human Capital Who should measure it:- Despite its importance, many HR professionals hesitate

to deal with human capital or calculate its monetary value.

Common reasons for evading human capital valuation include

(1) HR professionals chose an HR career to avoid dealing with numbers.

(2) They fear the unknown/ or discovering that their HR programmes might be ineffective

(3) Measuring human capital is the same as placing a dollar value on individual employees which is believed to be distaseful

Human Capital

They argue that certain employee attributes are highly valuable to hospitality org’s regardless of ‘intellectual’ magnitude, and these attributes constitute hospitality-specific human capital (HHC)

Other attributes than intellect `customer’ service orientation’ are necessary to deliver a high-quality hospitality product to the customer.

Characteristics of service-based organisations in tourism &

Hospitality Manufacturing is about things and service

is about people Services are provided direct to the

customer Services are intangible Quality is defined by the customers

perceptions

Empowerment

Senge:- defines empowerment as persuading employees to take total responsibility for their own job satisfaction

Schein:- empowerment represents an attempt to establish moral involvement…

which means that the person intrinsically values the mission of the org and their job, and is personally involved and identifies with the org

Facets of empowerment

Giving employees more authority to make the decisions about their immediate tasks can increase org’s effectiveness, and improve employe satisfaction.

In service industries (e.g. tourism & hospitality)=concern to gain competative advantage through improved service quality(Gardner)

Emotional involvement=Marriot ‘It takes happy employees to make happy customers’

Leadership and empowerment (1)

HRM strategy- cascading downstream (storey)

Empowerment of General Managers and staff (Novotel)

Treating the customers as a personal guest is an appeal to these emotions of hospitality that a worker might use in a private context (Novotel)

Leadership and empowerment (2)

Likert: most effective leaders are those not just concerned with production but have complete confidence and trust in subordinates, allow subordinates to make decisions, motivate by matually agreed goals and shared ideas and opinions.

Most effective leaders appeal to emotional response from subordinates.

Marriot Hotels-Training

Empowerment = developing quality of the service = giving staff confidence to make decisions, large or small, that impact on the guest’s stay

40-60hrs per employee Develop sense of empathy to customer

experiences in the staff Benefits in two dimensions: employee &

customer

Harvester Restaurants – Autonomous work groups

Each restaurant is organised around teams – bar, restaurant & kitchen

Each team has its own responsibilities Approach required total commitment from

senior managers Benefits: lower turnover, quicker responce

to change, increase in sales, lower level of guest complaints

Delegation Vs Empowerment

Delegation in traditional management model,Limitation of this approach: assigning authority does not mean that someone has the ability, motivation, and understanding necessary to perform.

Empowerment = core concept of the new management model. Empowerment and ownership are social aspects of organising,they are based on efficacy and initiative, and not just roles and requirements. They belong to people

Conclusion

Empowerment makes greater use of knowledge and abilities of the workforce, it encourages team working and it can aid the sucessful implementation of change programmes.

In the service sector empowerment is often seen as a way to gain competatative advantage but the true potential is broader.

In order to be successful it requires a clear vision, a learning environment both from management and employees and participation and implementation techniques.

Corporate Culture

“Customer-obsession is a prerequisite for creating customer delight.”

“In God we trust; everyone else must come with data.”

“We would first like to be known as decent, honest, and trustworthy people and then as smart people.”

“One should be humble, have respect for competitors and a healthy sense of paranoia, else we will disappear like dew on a sunny morning.”

“The softest pillow is a clear conscience.”

“When in doubt, disclose.”

Corporate Culture