Human Capital Strategic Management

Introduction

Human capital is an important company asset that leads an organisation to go further; human capital strategic management also develops competitive advantage for the company to battle with other competitors in the market. As an advisor to the human resources management function of Netnovation sdn, bhd, this report is based on the groundwork of strategic human resources management. By achieving 10% of market share in the mobile application industry in Malaysia, the company is required to improve in order to compete with other competitors in the market. 

Human resources management facing numerous challenges due to lack of appropriate management strategy, resources, environment influence etc. To maximise the workforce productivity and minimise the resources is one of the priority objectives on human resources management. Other than that, staffing, training and development, motivation and maintenance still are the main functions human resources management should focus on.  

1.0 Overview of the company

To differentiate human resources and human capital has to look at the meaning of both terms, human resources management regarding how to manage and monitor worker activities, also the transactional activities in a company such as payroll, employee’s benefits, hiring, compliance etc. Human capital management is different because the scope includes the strategic function in one organisation. Human capital, defined as the key element to improve a firm’s assets and employees in order to increase productivity in the company, also includes the strategy to reach competitive advantage. (Schultz, 1993) The area in Human Capital is broad, it includes the hiring and training process, education, to ensure the employees in the company are knowledgeable, skills, also ensure employee’s satisfaction to make sure to reach to personal growth and organisation growth to achieve business success of the organisation. 

Netnovation sdn.bhd has been a start up since 2010, and the organisation is growing in terms of the organisation’s structure, business and profit. As a mobile application builder company, there are several short term goals achieved in the few years since the company has started up. The company started up with five employees and now expanded to sixty employees, and the company is still growing due the business growing rapidly recently. In 2013, the company achieved annual sales revenues up to RM 3,000,000, and RM 3,200,000 in 2014, and RM 3,530,000 in 2015. Business strategy not merely just focuses on the sale and marketing strategy, but how to manage the internal staff in human capital management is also vital to the company.

Mobile application industry market is competitive in Malaysia; there are numerous rivals and new entry competitors trying to conquer the market with their own strategies. Therefore the company needs a competitive advantage strategy for business sustain and growth, such as a good human capital management strategy and plan. There are about 60 staffs working in the company in six different departments, which are the IT department, Finance department, operation department, marketing department, HR department and sale department, to ensure company’s daily functions is running well and smooth everyday.

Figure 1.0 The organisation chart of Netnovation sdn bhd.

However, the organisation also encounters numerous human capital management issues, and will lead to other impacts to the company. All these issues will further explain and elaborate in this report, also the appropriate strategy to overcome the issues. There are six different functional areas in human resources management including planning, selection and recruitment, employee relations, compensation and benefits, performance management, training and development, and safety at work. All these six functional areas have their own purpose to achieve a particular goal, however problems and issues occur in these functional areas while daily functions are running in the organisation. 

2.0 The current HR issues and challenges

From the observation, previous history record, also gathered with some existing research studies, there are several problems and issues in this company that need to find the appropriate solution and plan need to carry out immediately, to avoid it to bring bigger harm to the company. 

2.1 Planning issue

Human resource planning has to be following the overall business direction of the organisation, also the business strategy direction. The current issue the company is facing is lack of appropriate and systematic planning, also lack of skilled human resource officers to carry out the plan from the human resource division of the organisation, to link to the business direction and business strategy of the company. Time consuming for the company to develop a human resource plan, therefore the human resources strategic planning has to be carried out as soon as possible. 

2.2 Selections and Recruitment issue

Another Human Resources management problem is employee selection; hiring the right person to do the right job is a challenge sometimes. Some of the problem occurs when the company hires the wrong person to fit in the wrong position. As observed, the recruitment process in the company is inefficient. 

2.3 Employee relation’s issue

Employee relations usually mean the relationship between employer and employees, and to build up good relations between these two parties is a challenge. In this company the problem and issue occur not only with the relation between employer and employee, but also serious problem with the relationship between employee and employee. Efficient communication is the fundamental that lead to work productively and good results, the conflict between co-worker often bring out lots of issue in the company, such as communication breakdown, misguided on the task direction, develop negative working environment etc. every worker have their own strengths and weaknesses, a team work may help to gather everybody’s strengths overcome other’s weakness to deliver the good results. Conflict between employees during the work process is normal in one organisation, many conditions cause conflicts, for example, some of the employees feel they have an unfair workload compared to another colleague, some employees also feel defensive when another colleague has a work request from them.

Another situation caused by employee conflict is, when they have the desire to earn more bonus, or exceptional performance, more tend to fight with each other and eventually intensify the situation.

2.4 Compensation and benefits issue

Over the years, most of the organisations are facing a big problem on staff retention, workers come and go, some just work for months; some had just worked for years, once the employee leaves, there will be an issue for the organisation to recruit new employees to take over the job. According to the survey conducted, the employees of the company are dissatisfied with the compensation and benefits provided by the company, which also lead to staff retention problems. In simple words, staff leave because they are dissatisfied with the benefits and salary paid by the company, and they think they deserve to get better pay. 

Most of the time, organisations must bear the training cost for their employee to pick up some knowledge and skills to deliver their task accordingly. Most of the courses required the organisation to bear the cost; to train their staff required time and effort as well.  After all this cost that had been invested, employees who had learnt the skill and knowledge that leave, may cause the company loss and pain. This also means, if the employee turnover rate is high, it is costly to the organisation. Every employee that leaves the organisation, also meaning that portion of their knowledge, expertise and skills will leave with them as well. Every new replacement for the position may require taking time to learn how to solve the same problem, it takes time for new employees to learn to manage their task.

2.5 Performance management issue

Work productivity is one of the big issues in performance management. Human resource management has the obligation to monitor the employee’s performance by measuring their work productivity. Work productivity is measured by the wrong method in this organisation, for example, the management level, measures employee’s performance by the time that they have spent to work, but it can be the wrong method on employee’s appraisal format. This is one of the serious problems that the company faces when work productivity is measured by the staff’s working time. For example, those who often work overtime will gain higher marks on employee’s appraisal results. 

Employee productivity can be defined as the assessment of the efficiency of a worker or group of workers. One of the duties of human resource management is to evaluate an employee’s productivity correctly by the output of the employee in a specific period. Low productivity often becomes one of the issues in one organisation, and the wrong method to measure work productivity will become a serious problem, because the company has overlooked and ignored low work productivity problems in the company.

2.6 Training and development issue

Employee’s knowledge and skills are the most important thing for one organisation to sustain and grow their business. Incompetent staff may not be able to deliver task on time, sometime the case become worsen when incompetent staff can’t cooperate with their co-workers efficiently. Apparently training and development is needed to improve the competency of the employee.

3.0 The impact of human resource issues to the company

The Human Resources management issues discussed before had already brought a big impact to the organisation, in terms of the organisation’s performance.  Furthermore, there are numerous undesired consequences, if the problems are still ignored.

3.1 The impact of planning issue

Without the proper human resources planning, the company will lose the direction to lead all the employees to achieve the organisation goal. It also encounters numerous problems in all human resources functional areas.  For example, without proper planning, the human resources department may hire new employees at the wrong time, causing a burden to the company.

3.2 The impact of Selection and Recruitment issue

Paying salary to the employee who cannot perform well in the company is causing the company to lose money, and wasting time. More seriously, the company also needs to bear the cost when the product cannot deliver on the expected timeline, and the consequences is the company losing their customer and sale eventually. 

3.3 The impact of Employee Relations issue

Numerous cases of internal conflict in one company have led to huge problems. Combining the data from a Research Study conducted by Jeff Hayes in 2008 and Bridge Mediation, results published showed that conflict for each employee varies between 140% and 300% of his base salary. Which also means the cost of conflict is, the company needs to pay an extra 40% – 200% in addition to the actual salary. This data can be quantified as $10,080 for minor subtle internal conflicts per year or $50,400 for more serious subtle conflicts. This means that a business would pay between $10,080 and $50,400 more per year for one employee. (Alessandra Sgubini, 2015) 

Most of the cases in conflict between staff problems, will end up because some of the staff choose to leave the company, it might not seem a serious problem at first, but after the staff leave, will lead to high turnover rate in staff in one company. 

3.4 The impact of Compensation and benefits issue

Due to the dissatisfaction of the benefits provided by the company, some staff leave after work for a certain period. Employee turnover rate is correlated to business performance, which means if one organisation has a high turnover rate for employees to fit in the position, they are also facing business performance problems. The overall turnover process, such as interviewing, hiring, training, reduction etc. are costly and eventually become the burden to the organisation. Money that had been spent on employee’s skill development such as training, team building, and any other courses that attended, usually cannot guarantee return back to the company once the staff left. 

One of the real case studies in Saudi Arabia, employee turnover has been one of the most significant challenges that management levels face in a rapidly expanding economy. (Jehanzeb & Rasheed, 2013) According to the research paper, when the employees in the manufacturing sector quit their jobs, it caused an extensive amount of disruption in terms of the operations, dynamics, and overall performance, as a result, it created high cost for the organisation.  (Jehanzeb & Rasheed, 2013) Once the employee left, it took time to hire and select a new staff to replace the vacancy, the whole process had slowed down the production line, more seriously, delayed the completion date.

3.5 The impact of Performance management issue

One of the examples of low work productivity is, the task given to the employee and expected to be completed in one week, however, due to the low work productivity, the task is only delivered after two weeks. Meaning to say the low productivity problem had double the cost, and the company needs to bear the cost. Other than that, in order to meet the deadline, any staff that work overtime after working hours also required the company to pay for the overtime pay.

Some other consequences of low work productivity can be seen; such as the delay of the completion date will ruin the reputation of the company name. Companies might need to put in extra effort to handle customers’ complaints due to low quality in products and services, etc. 

3.6 The impact of Training and development issue

Employee’s competences not reaching the expectation will cause negative impacts to the company, because employee’s competences link to the quality of the product and service, specifically time management skills, problem solving skills, interpersonal skills, technical skills, etc. Other than that, leadership and management skills for management level staff also bring a big impact to the business performance. Leadership and management skill problems will cause the company losing money, customers abandon the product, and ultimately business fail. 

4.0 Human Resource Development (HRD)

Human Resource Development is the priority issue on human capital management strategy, because the growth of the employee is also meaning the growth of one organisation. Therefore, the purpose of human resource development is to ensure the organisation has the knowledge, skills and capability to cope with business sustain and business development. Once the employee is hired, the organisation should provide appropriate training, and provide opportunities to the employee to learn new skills. 

In other words, the organisation has the obligation to initiate all necessary approaches on staff development, such as events, programs, guidance and coaching, all these are supposed to be carried out, arranged, and monitored by the human resources department. Human resources development process is broad, but several processes are highly important, such as the learning process, employee development, training, and education. Learning is the process for the employee to acquire and develop new skills, knowledge, also behaviours and attitude adjustment.

Strategies for Human Resources Development

For one organisation to sustain their business and growth leadership is highly important, a good manager may lead his/her team to achieve goals efficiently. Therefore the human resources development strategy in this company is to focus on leadership development at the first stage, other human resources development programs will continue after the leadership program is completed. All team managers working in the company play an important role to drive the team’s good performance, however there are few manager positions in the company that are still empty such as Marketing manager, Product manager, Operation manager etc. 

In order to lead the current employee to growth, also an idea for the company to show appreciation to the staff, this plan was proposed to the company to select the existing employee who is qualified to be promoted to the manager position, instead of hiring a new candidate to fill the vacancy. However, the employee has to go through the knowledge and skill development process to ensure they are competent to handle the job and tasks. The objective of this human resource program is to select the right employee, promote and fill the vacancy in several departments, with sufficient training and education provided by the company. 

Stage 1- Analysis

An efficient leadership program requires a careful selection of participants, therefore the selection process may take time and effort to accomplish. Assessment process is crucial in the development and training program, a set of analysis work required during this process. To ensure the right person being chosen, several procedures are designed at stage one, such as interview, skill tests, appraisal and analysis of previous performance. 

There are several criteria for this selection program, the most important are the employee’s personality trait, and the desire to become a leader. Interview conduct to analyse and find out whether participates have the desire to be a leader, what are the purposes to make them want to be a leader, how confidence they are, also the psychological fitness to pick up the manager position, other factors such as general intelligence, assertiveness and centeredness also determine whether they fit in the position or not. Other than an interview, skill test results also prove employee competency on the particular position. Employee’s previous appraisal record also helps to analyse their performance. 

Stage 2- Program Design 


Interview → Training → Learning course → Motivation → Evaluation → Decision 

Figure 4.1 Leadership development program design.

The leadership program design has to be simple, fair, accurate and time effective. There are several procedures in the program design, and each procedure takes about one to two months to complete, and then only proceed to the next procedure. Every employee is encouraged to submit their application form to participate in the program, however, only few employees are shortlisted after the interview procedure.  Specific training is designed for different department leaders, for example, the specific technical training only for technical staff to attend. 

The main objective for specific training is to develop employee’s skill. Other than training, leadership courses are also provided after the training conducted, leadership courses provide to ensure the employee acquire leadership skill and knowledge such as interpersonal skill, problem solving skill, decision making skill etc.  All these plans are designed before the development and implementation phase starts, to ensure the program is systematic and logical. 

Stage 3- Program Development  

During the program development phase, all steps have to be completed according to the timeline.  All different steps have to be checked and revised as needed, from the experienced program administrator, mentor and supervisor. Leadership development program focuses on three main areas, which are the technical, conceptual and interpersonal. Employees require developing new technical skills after completing the program. Usually technical development is the easiest to accomplish.  Conceptual is the area to focus on teaching the leader how to think in a more abstract and critical way. Conceptual leadership skills require creativity, strategic thinking and decisiveness, even though such skills do not apply directly for some of the position and field, however, it’s still the fundamental leadership skills for them. Interpersonal skills are also a fundamental skill in leadership development programs, because communication, negotiation and persuasion skills will help to achieve goals easily. During the program development process, all skills in these areas have to be trained and delivered to the trainee. 

Stage 4- Program Implement

Program implementation phase is to focus on the resources that are needed for the program, and make sure every step is followed by the timeline. The interview process needs to take about one month to process, a leader has been chosen in the second month, training is going to be provided, all different training programs are conducted for different department managers, specific training needs to take two months to complete. The chosen participants are going to attend a three months physical class on the leadership course provided. Motivation programs also provide for the leader to ensure they have the right attitude to learn, basically there will be few classes to encourage the leader to find out their needs to be a manager.  Program administrator will take about one month to complete the evaluation reports to submit to the company director. The final decision of who is going to be promoted is decided by the program supervisor and company director. 

Stage 5- Evaluation 

The scope and the criteria of the evaluation have to be defined by the organisation’s executive and human resource development program designer or administrator to achieve the goal and objective of the program. Proper records such as documentation of the evaluation are required for the company to refer to in the future. The program administrator will collect all data from the organisation’s executives, who ever received the higher marks from the final evaluation will get promoted to be the manager. 

5.0 Models and Theory Frameworks

The Human resources development plan proposed in this report because the growth of the business and organisation required employee’s competency in the organisation is very important. Suggested by some research studies, in order to reach to organisational level, strategic development of human resources has to be carried out to improve employee performance. (Garavan et al., 1995) Appropriate strategic approach of human resources development is also an imperative request in the globalisation era, this also can ensure the strategy planning is to achieve organisational goal. (Garavan, 2007) 

Other than the reason to achieve organisational goals, human resources development also motivates employee’s self-development and growth. Motivation helps to ensure the employees are passionate and like their daily job and task, which is also one of the strategies on staff retention purpose. 

According to research studied, there are three factors on employee’s job performance; which also mean, this equation suggested all these three factors are the major influences over employee performance. These three factors are, motivation, ability and environment. (Mitchell, 1982; Porter & Lawler, 1968) which also mean employee’s performance won’t go well without these three factors.  Human resource development process also required these three factors to complete the HRD program.

Figure 5.1 Factors contributed to staff’s learning performance 

Motivation is very important in human capital management, because it affects employee’s attitude at work and leads to underperformance when the employee doesn’t like or is not passionate about their job. Motivation at work is simply defined as the desire to achieve a particular goal or certain performance level at work, where leading their goal directed behaviour. The leader or management level group should encourage their subordinates to improve and develop at work, because once the employee is motivated, they will pick up challenges and try hard to accomplish their task.  During the Human resources development process, motivation to learn refers to the effort that required completing a training task. (Machin & Forgarty, 1997) Motivation is observed to have a positive relationship with the rate of participation in training activities. (Noe & Wilk, 1993) Ability means the employee’s ability to acquire new skill and knowledge during the learning process. Finally, the environment factor also affects an employee’s learning performance, for example how the team member’s response to the training provided will affect the perception of other participants as well. 

5.2 ADDIE and Swanson’s Analysis for Improving Performance

By using the generic instructional ADDIE design model, the Human resources development program can be planned out productively and systematically.  By combining these two models, ADDIE and Swanson’s Analysis for improving performance become a useful tool on human resources development programs. Swanson suggested the widely recognized models in human resources development, which is the Analysis for Improving Performance: Tool for Diagnosing Organisations & Documenting Workplace Expertise (See figure below., Swanson, 1995). This model focuses on how to improve the employee’s performance through three steps, which are the inputs, process and output. (James E Bartlett, 2008)

Figure 5.2 Analysis for Improving Performance: Tool for Diagnosing Organisations & Documenting Workplace Expertise

During the input process (the first process), analysis work has to be carried out, and the following steps like design, develop and implement are in the second process, and evaluation is the third process which is the output. Richard A. Swanson’s work offers a systematic analysis approach for organisations on successful performance improvement. According to Swanson, the methods are designed that follow by a few steps for the program developer and manager.  These steps are, fist to assess the business needs of one organisation, also assess on the supporting system’s status.  Second step is to document the improvement of the work process. Third, is to list the specific performance requirement and evaluation standard. The last step is creating the comprehensive performance improvement plan. 

Kent Dubbe, the manager of organisation development and training in 3M Corporation, thinks that Swanson’s work provides an insightful view and practical tools for performance and work analysis, and this analysis work is vital, workplace performance will certainly fall short of the organisation’s intentions and needs without it. The CEO of Scoville Press also thinks Swanson’s method is useful and will surely continue to use it for improving performance purposes. (Swanson, 2007)

Figure 5.3 ADDIE Model

ADDIE is an Instructional System Design useful training and development program that learner-centred approach aim for an effective learning purpose.  There are 5 stages on the ADDIE approach. Analysis is the first stage, to identify the source of the problem, and find out the workable solutions, also the instructional goals. Specific research and study are required such as the job analysis, performance analysis, the needs analysis etc. Second stage is the design stage, in which strategy planning is required. Third stage is the development stage; all the support material and documents have to be ready. The fourth stage is the implementation stage, which is to carry out and execute all planned programs. The final stage is the evaluation stage, which is to measure the progress and the results of the program. 

Conclusion

Most of the human resource issues and problems can be solved and improved with the strategic solution. Issues in Human resources development is the major issue in this organisation because it will affect the business growth, therefore the HRD plan has to be implemented to solve the shortage of departments manager problem in this company. This Human resources development program required 7 to 8 months to complete, as such, the sooner the HRD program is carried out, the sooner that company can solve their current problem. 

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Reference and bibliography 

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