If your human capital unit a cost
save your organization now
Date: 06/01/2017
Human resources management has been practiced for many
centuries now, and the more human developed in their culture, science,
civilization, education, technology and social the more demand for developing
human resources concepts and practices. Managing resources has always two sides
Investment and returns like investing money returned profit and
interests, corporation shares returned dividends, land returned harvest natural
resources and so on, all this are known for centuries ago but the question now
is managing human resources does it make returns? The world today has shifted
dramatically towards more technology, science, social media, globalization knowledge
economy and advanced education, this lead the world of business to be shifted
as well towards more scientific approaches when it comes to business
management, leadership, production, finance and even human resources, which it transmitted
today to human capital management (HCM). M The paradigm shift that shake that
shake the world of yesterday facts and science added many concepts and
approaches for human capital management like, talent management, succession management
and planning, performance management, coaching and mentoring and so on, all
these concepts and approaches added value to human capital practices and models
and it has been now more understanding the importance o the human capital in
any organization, but since these organization are profit driven they are still
been derived towards other units and functions that make profit such as
marketing and sales, finance and production and consider human capital
management cost unit, these units are important no doubts of that without them
the organization cant work or even exist today, but does human capital
management considered as cost unit for real?
The answer for this question can be found in an
article wrote by Dr. John Sullivan
"Transform HR into a Revenue-Impact Function to
Increase Your Strategic Impact" in 2012, in this article you can clearly see if human capital management is a cost or profit unit, an example quoted
from the article to demonstrate it, "If the new process hired salespeople that sold on
average 10% more (than those hired under the previous recruiting process), you
could (with the CFO’s blessing), publicly state that this HR action had
improved sales revenue by X dollars (i.e. the actual amount would be the 10%
improvement in the average salesperson’s yearly sales revenue, multiplied by
the number of new salespeople who were hired under the improved process)".
From this example we can see the following:
1. All units incurred cost to operate wither they
make profit or not.
2. All units even the profit one except human
capital management unit need to be developed individually to improve and make profit.
3. Improving human capital management unit mean
you have improved all other units.
4. Improving human capital unit is much less
costly than improving and investing in other units even the profit one, as the
above article example stated.
Let us take one more example to see the result of considering human
capital unit as not a cost unit, if you think of succession management or
talent management the unit who will establish the program, make the policies
and procedures, prepare the model and guidelines and prepare the training and
development need programs are all done by human capital unit, so no matter how
much you invest in making marketing and sales successor, finance successor or
CEO successor the rerun depends on how well you invest in human capital unit
that prepared all the infrastructure for implementing the program, if you want
to increase sales, make more profit or maximize share price by new product line
or innovation and creativity its much less cost if the human capital unit
recruitment process and people are talented to identify and attract the people
who has these skills already than investing more in the existing people, even
investing in the existing people if you have talented human capital unit it
will be less cost and better result outcome to identify the need and the
development needed for achieving it.
Investing in human capital unit not just related in reducing the cost
but also to making profit, for example to incorporate organizational culture,
strategy, values and objectives with employee engagement for better, safe and productive
work environment, motivating, leadership practice, employee loyalty and discipline,
reduced turnover, promote innovating and creativity and implement human capital
programs efficiently that will enhance and improve organizational performance
towards more profit, share price maximization and competitive advantage in the
market, by just having talented effective and efficient human capital unit.
Once an organization improve human capital unit it will affect the
organization as a whole and just the unit as the other function do, so the
question is now do you still think human capital unit is cost for your
organization? Think about it again.
Mohamed Alzayani
Acc.CIPD and Acc.IHRME for human capital management
References:
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