human capital

Beginning and ending with Total Talent Management, a widening systemic approach.

The title is a mouthful and a way I round up 2014 into 2015, with a few hours to spare. The world of work has changed progressively and even more so with the latest financial crisis. According to a Deloitte report, non-employee workers can reach up to 40% of a company. And it will likely to continue in trend with skills gaps and structural differences in the economy. So I’d like to kick off the new year summing up what I’ve been posting about in 2014, a systemic view of the workplace, a consideration on Total Talent Management.

Back in 2013 in a world wide HR conference in Orlando, I’ve heard someone mentioned the term, Total Talent Management. Traditionally, talent management is about actively looking at resourcing and planning the human capital in the company. Some companies have strategies for development and training with a selected group with leadership qualities, others may have a broad stroke approach and others non at all. But in all the practices, this is mainly tied to employees in the companies.

Employment laws have often dictated how HR can behave with non-employees. To protect workers from being excluded from employment benefits through engagement under interim or contract, there are typically tight laws around engagement of temporary workforce. This limits the number of years a person can be a temporary worker in a company and to ensure the line is clear, HR has also created walls to prevent ambiguity and potential lawsuits. The limitations vary from country to country, some relaxed and some stricter, typically in Europe and US. Some are enforced and some have common practices.

The result is a general deterrence from considering non-employees and hence any form of management.

If non-employee workers remain a minority of 5-10%, we can argue it is better to avoid all risks and it doesn’t impact the company largely in overall performance and strategy.

The challenge is whilst terms of work and its contribution has evolved, the laws have not. In a company today, there can be a percentage of temporary workers to complement for productivity surge and employees on leave. In addition, there is also an influx of contractors due to skills gap in the company. This is particularly prevalent with newer technologies and advancement in digital transformation. To compete, companies either seek expertise outside or outsourced a particular work order. Hence, outsourcing partners also becomes an extension of the workforce. There is also an increasing trend of independents who would not want to be employed and are happy to continue as consultants and/or contractors to companies to provide their expertise. Non-employeed extension of the workforce is growing and can sometimes represent up to 40%. What is this 40% really?

From a systemic view, a system includes contributors and includes any influences. If we think about throwing a stone into a pool of water, the rippling effect is the layers of systems. There is an immediate system and external systems connected to it. So where do we draw the line? It’s hard but one thing is sure, it does not stay with only employees, not when the rest of the system could make up to 40% when we consider a wider system.

And here we come to the HR challenge in 2015, if it has not already peeked in 2014. The question is, will HR step up and step out beyond the comfortable legal system of human capital in their company or will they take cover under the law and abdicate the responsibility to management? So what are the considerations of Total Talent Management?

Ensuring common ways of work in selection

A company, like a system, has an established way of working (sometimes called culture). In selecting independent contractors and even outsourced partners, this has to be considered. An external injection to the existing system with a completely different way of working and functioning will create misunderstandings and slow down progress. The efforts to correct it will be greater after engagement then selecting the right people and partners. HR has started to play a greater role in engagement of individuals who are hired on temporary or contractual basis. However, the greater impact is when injecting a whole group of people such as outsourcers or consulting partners. To ensure there are enough common grounds in ways of working, this has to be considered at selection stage. If HR is not managing this, then it will be up to hiring managers and management.

Ensuring team work in integration

Most HR will recoil at providing any form of training or leadership development to non-employees as this can give rise to potential law suites or ambiguity. However, team work can benefit from good facilitation during the integration process. Hence, HR will have to explore potential ways to help teams function together within the limits of the law. This can mean facilitation workshops, identifying problem areas and reflecting to partner companies or individuals as a form of improved service provision. A simple induction session given to all non-employees on the company culture and objectives will also be helpful without crossing the line extensively. This is the most challenging area and will require innovative HR approach.

Ensuring sustainable benefits in knowledge transfer

Finally, the benefit of external workforce is the expertise they bring and help during productivity hikes. The benefits can extend over longer period of time when their knowledge is transferred to existing workforce. Knowledge transfer can happen when people work together. With a concerted effort, knowledge transfer is not by chance and can directly impact in-house expertise. This can mean creating pair working, mentoring and strategic placement of external workforce with in-house. External workforce can also provide objective feedback on teams and leadership. Hence, with their exit, interviews and handovers are just as important as it is with employees.

Stepping into 2015, why not extend the vision and assess your current management of talents and how far it reaches. And from a classic systemic view, think about your resources and not your lack of. You’ll be surprised at how much you and your team can achieve.

Happy New Year!

HR case study – Human Resources vs Human Capital

I wrote about this topic some time back as a proposition and how a word is a world of difference in human resources and human capital.

I’m still being challenged for using the word capital and I don’t have the right answers. But how about we take a step forward. How about we start treating people in the organisation as people and people with ideas and thoughts and potential to make the company better? How about we also look at HR transformation in an agile fashion, iterations by iterations, seeking continual improvement?

Some time this year, I was invited to participate in a HR case study competition in China. I thought I’ll use my experience to show the difference. And I started writing and a simple 500 word essay turned into 8000 words and I become more passionate about the subject that I went on to speak about HR in Agile Tours in Brussels, Toulouse and Montpelier. Talking about HR in agile is simply asking for trouble. But I like trouble. We need it. If we bother to fight and debate, we care enough to make a difference. So maybe, a drop in the ocean can contribute and a tiny sand can cause a ripple.

In this case study, I detail the story behind the presentations in the agile tours. And the story is told from the HR angle. And I invite HR to review the story and ask themselves, which type of HR are they in this tale of 2 HR?

A HR that is close to the business and can see potential in the situation and the people can advise, accelerate and advance efforts in an organisation. The law is kept firmly in its place of preventing deterrence and not the first draw of solutions. The people are the first considerations and their knowledge the currency of change.

A HR that is misguided (even with the best intensions) can obstruct, obscure and obliterate efforts. And OOOps is a heavy price to pay in talent drain and loss of momentum.

The choice is clear. The decision is courage. The path is arduous. The journey however, is a savour of bitter-sweet, there will be battles won and battles lost. But the war can be won. A thought is all it takes.

“Yet what is an ocean but a multitude of drops?” David Mitchell, Cloud Atlas

Edited case study from the original awarded version. http://www.slideshare.net/JasChong/hr-case-study-transformation-rh

Human Capital vs. Human Resources – A word and a world of difference

Often when I introduce my company, I’ve been asked, “Do you mean human resources?”

Actually. Not. Fundamentally, there is a philosophical difference in the 2 concepts, thus a huge difference in the type of services and solutions. Without getting too technical, conceptually, the difference lies in the word “capital” and “resources”. While we may think it is just semantics, after all, a rose by any other name smell as sweet, we forget the psychological impact of what a good name conjures. And in this case, the association and attitude can be very different by just 1 word.

Here are some fundamental differences.

Capital can be grown, resources deplete
An organization is made up of a workforce and the resulting output with or without the help of machines. When this workforce is treated like a form a resource, the organization finds the best way to exploit it and use it for its purposes. These resources are used and depleted so more are acquired and use. And since it is a form of resource, when they are no longer useful, the remuneration stops and they are replaced.

When a workforce is looked upon as a form of capital the company is acquired, the incentive is the get the best return from investment. An organization will regard a capital as down payment to work towards future returns. A capital also grows over time with productive use. In human capital, competences, knowledge and creativity grow over time and multiply in value.

Capital is invested, resources are maintained
When an organization looked upon the workforce as a form of resource or worse a “seat warmer” and other derogatory terms such as “bodies”, then the attitude is just the function they provide. Like any machines we buy for a purpose, it is maintained at best for the purpose they serve.

When a workforce is treated as a form of capital, then people are looked upon as an acquisition for the value it can bring if properly invested. Each person’s value is based on the potential of the investment that requires sound judgment on placement and development potential. If we extract the most from the workforce, the return is no longer linear such as machines. In this case, output when well invested can bring forth multiple times the initial capital purchase.

Different psychology, Different policies
With the fundamental departure on psychology, it will also be reflected in the policies. While there are many ways to breakdown human resource management, broadly, it consists of 5 key areas: Recruitment & Retention, Compensation & Benefits, Training & Development, Sustainability & Mobility and Employee Relationship & Compliance.

From a resource point of view, the key focus is making sure employees are paid and employment laws are complied including health and safety and relationships with unions. Often it is also the 2 key areas retained by a company in the HR department while all other areas suffer due to cost cutting measures or lack of vision. After all, if there are lack of jobs and plenty of candidates, when a “resource” is unhappy or unsuitable, they can be replaced by another. HR departments tend to degenerate to payroll administration and point of contact for labour unions and compliance.

Whilst the above is an extreme view of situation, it is not uncommon where HR is dysfunctional. If we insist that workforce is a form of capital, then the key focus of management may well be very different.

The relevance of high potential?
When the workforce is considered a form of capital, then the view is everyone has potential for a return. But the level of investment will depend on the level of return and impact to organization. Often this can be governed by the role and function in the organization.

The main pitfall of a high potential program is the tendency for an organization to focus large amounts of energy and efforts in a small group of identified talents while ignoring the rest. It’s like betting on a racehorse, you win big if the horse is the first to cross the line, if it comes even a second behind, the investment is lost. That happens when high potential leaves before realizing their potential or fails in their development.

It is much more logical and motivational to consider that everyone has access to development opportunities relevant to their role and earned based on performance (the return).

The idea of “right fit” in recruitment
If we think about work as a production line, with an empty seat, the best thing is to find someone who already knows the work to fill the seat. With lower propensity to risk, most companies have behaved as such in hiring. The person they seek is someone who fits perfectly and thus presents no obvious risk in bad hiring. It also means paying the same or higher salary to attract someone to leave the existing position to fill the new role.

From a long term planning perspective when a resource is looked upon as a form of capital, then recruitment criteria will change. The focus will be the potential of the candidate and the return he or she will bring. The “right fit” is someone who will grow in the role.

The outcome is greater incentive for someone to move. The compensation will be lower than trying to attract someone who already fulfills the same role somewhere. And in effect, a cheaper option than a seemingly low risk hire. The truth is performance on the job and the future is just as unpredictable in either cases since no 2 companies are exactly the same.

The true purpose of human resource management?
Whilst we cannot do away with compensation & benefits or employee relationship & compliance, it cannot be the only focus. In effect, these areas are probably better suited in finance and legal departments.

Then people management can focus on 1 or 2 key areas while engaging suitable partners and supplies to complement the others. As businesses change, the human capital in the company needs correspond to these changes.

Human resource management will then act as the protector of the human capital and investments of the company. Their role will include finding and maintaining the right vendors to acquire, manage and develop the human capital in the company.

Should we start changing all HR titles to HC?
Human resources is still the global function that looks after the well being of the workforce in the organization. The dysfunction today is due to a narrow vision of the workforce as a form of resource. For a forward moving company, treating their employees as a form of capital changes the resulting HR policies and attitudes both at management and HR level. That is an important shift in mindset.

To do this, many companies have started using terminologies such as “People Officer”, “Talent Management” etc. Regardless, a complete view of HR is important and neither can we ignore compensation, legal and compliance. But HR can do better to focus on the other aspects either by in-house capabilities or external service providers. And companies can benefit from a workforce that is motivated and energized.