Management of human capital, traditionally, has remained a support function — more often than not, under a centralized corporate back office. However, companies realized that fitting this model into the technology outsourcing industry — that is both knowledge-intensive and labor-intensive — would be like trying to fit square pegs in a round hole. A considerable amount of time has been spent by the C-level executives to better manage human resources — the prime raw material of the industry.
In offshoring, ramping up quickly while not compromising on the quality of people has been a daunting task for corporations. This has led to the management of human capital being unduly skewed toward hiring, retaining and training. But, corporations are graduating to the next level, wherein they are questioning the ethos of human capital — if we call it human capital, don’t the first principles of capitalism say that the capital must be managed to deliver optimum business value?
But, corporations are graduating to asking the next level of question: If we call it human capital, don’t the first principles of capitalism apply to it? Shouldn’t the capital be managed so as to deliver optimum business value,
That means, attracting and retaining the best talent, though necessary, are by themselves, hardly enough. The talent must be deployed rightly to maximize value creation.
That, precisely, is the next challenge for organizations.
Human Capital: Challenging at Every Step
An organization’s value creation spans three levels: First, value creation at the human-capital level, followed by structural capital, wherein, the organization creates intangible assets such as intellectual property, processes that are of proprietary use and so on. A combination of human and structural capital is what builds the final level — customer capital.
It is no-brainer that eschewing the first level — that of human capital — will more often than not lead to a weak foundation, thereby jeopardizing the end result, creation of customer capital.
More and more organizations are waking up to this foregone conclusion, not just by realizing the problem at hand, but making drastic strides in finding and putting a solution in place.
Building human capital could entail issues, including learning imparted to employees and helping them to actually create structural capital. “The key to building human capital is part witch-craft and part science,” says Subroto Bagchi, CEO, MindTree, a Bangalore-based software firm that topped the list of best companies in the category of human capital development in the 2006 Global Services 100 rankings. “What stimulates employees is the unrestricted freedom and encouragement given to the ideation process. That is essentially a function of the top management’s behavior, value system, commitment and willingness to invest in building human capital,” he adds. More a company is willing to invest in the employee, more the rewards it will reap in terms of increased productivity.
