Evolution of Human Resource to Human Capital: A Strategic Shift

As per the Darwin’s theory of evolution, everything has to evolve in order to sustain its identity. Corporate and its environment are changing every day as per the needs and behaviour of the customer. New strategies and concepts are evolving and the old concepts are either getting modified or are getting redundant if not practised. Knowledge of attracting, selecting, deploying and developing talent and strategies has given a competitive advantage to the companies.In line of this Human Resource, that was considered as a supporting coordinate in strategy formulation, now has taken a front lead in capital generation and hence regarded as the Human Capital. Peter Drucker famously defined a knowledge economy as one in which the human brain provides the primary means of production. He then noted the obvious corollary: that an organization’s most valuable resource is lodged in the heads of its employees and goes home with them at night. [Reference4].This is how firms have star ted involving employee participation at all levels for decision making and management forecasts (be it in any field, i. . Operations, finance, Marketing, Human Resource department etc. ) and not only a pre-selected group of individuals. Concepts like brainstorming of ideas have also evolved with the concept of human capital. In this article, let us first define human resource and human capital briefly. Human Resource was regarded as the set of individuals that forms the employee strength of any organization and its planning was typically considered as the process of anticipating and providing for the movement of people into, within and out of the organization.Previously firms were giving much importance to system implementation than human resource development as technology was much simpler. But with the advancement of technology and shortage of skilled manpower, firm has started giving respect to their employees and have initiated different measures to enhance their skills. This has generated the concept of Human Capital. Human capital narrowed the concept of human resource in terms of expertise and knowledge beneficial for the company. Human Capital describes the economic value of employees’ knowledge, skills and capabilities.This concept has highlighted the fact that success increasingly depends on an organization aptitude to manage talent and stressed upon the idea of â€Å"Compete through people†. In line of strategic planning that involves a set of procedures for making decision about the firm’s long term goals and strategies, human capital has taken the front seat. In the older model with the advancement of system technology, corporates started considering system before human resource. Their main goal was to make human resource as predictable as physical assets.But in last 40 years this concept has gradually changed and now the concepts like Toyota Production system pioneered the model that human resource come much before systems and that any individual on the production line had the capability often regarded as the ownership to point out problems and stop the line when proper standard operating procedures (SOP) is not being followed or some error has occurred. This has also extrapolated the idea that it is the human resource that drives and maintains the system and is not the other way round.It has also advanced the human resource processes to be continuous and not episodic as considered previously. Human capital is clearly different from the tangible monetary capital due to the distinguishing characteristic of human capital to grow cumulatively over a long span of time. Due to the shocks experienced in the business cycles it is difficult to maintain the linearity in growth of tangible monetary capital. During the period of prosperity, monetary capital grows at relatively higher magnitude while during the period of recession and depression; there is a dip in generation of monetary capital. Reference3].Contrary to this, human capital has uniformly rising rate of growth over a long period of time because the foundation of this human capital is laid down by the skills both technical as well as educational and health inputs. [Reference3]. The current generation is qualitatively developed by the effective inputs of education and health that will also benefit the future generation by its advance research and development. Thus the future generation gets refined day by day in terms of skills, production capacity etc. generating more human capital with superior quality.Firms have started banking upon their skill inventories for their business differentiation. Skill inventories list each employee’s education, past work experience, vocational interest, specific abilities and skills, compensation history and job tenure. IT hubs in Hyderabad, Bangalore etc. have banked upon their skill inventories and this has signified the rapid growth of Indian economy. Companies such as Mackenzie etc. has o ver a period of time emphasised and given inputs to develop a pool of human capital to gain the competitive advantage.Now the trategy formulation has moved from simple analysis to devising a coherent course of inputs and actions. Thus cumulative growth of Human Capital in India is evident. Countries like china have always banked upon their human capital for their economic growth. Many reasons explicitly explain the strategic change of human resource to human capital major of which is globalization. Globalization has led to multitasking of the employees where the work force is developed in a holistic manner to accomplish many tasks at one time. The resources are utilised in a much better way.Individual knowledge bases are continually changing and adapting to the real world in front of them. So the dimension of knowledge is not limited to demographic borders and has developed leaps and bounds. Training programs complement building the human capital by developing superior knowledge, sk ills and experience within the workforce. Managers of today are thriving to develop business agility in their team. Many development assignments are getting structured for employees, empowering them and ensuring that their job duties and requirements are flexible enough to allow growth and learning.Human capital is intangible and elusive and cannot be tapped the way organizations manage jobs, products and technologies. One of the reasons for this is that the employees, not the organization or system own their human capital. If valued employees leave a company, they take their human capital with them, and any investment the firm has made in training and developing those employees is lost. Technology advancement has also pioneered the shifting of human resource to human capital.Companies like Apple, Samsung are coming up with more than one product in a year where the human talent is used profusely to gain the technical niche. Advancement of technology tends to reduce the job openings that required little skill and increased the position that required considerable skills. This transformation has shifted the human resource from â€Å"touch labours† to â€Å"knowledge workers†, in which the employee responsibilities expand to map a richer array of activities such as planning, decision making and problem solving.Even the firm are preparing blue prints of programs to improve the skills of not only the upper management but also the middle and the lower management also. Firms are creating programs and awards like mentorship program, performance pay, incentives, bonuses and other awards for all level of employees to retain their human capital. Because employee skills, knowledge and abilities are amongst the most distinctive and renewable resources on which a company can draw, their strategic management is more important than ever. Reference2].Thus HR professional can concentrate more effectively on the firm premeditated direction instead of daily routine t asks. This blueprint can include forecasting personnel needs especially for firms planning to expand, contract or merge, planning for career and employee promotions, and evaluating the impact of the firm’s policies- both those related to HR functions and other functions- to improve the firm’s earning and strategic directions. But the main challenge comes in utilization of human resource as human capital.Without proper ownership and proper activities that capitalizes the workmanship of an employee, the part of the capital gets unutilized and goes as idle waste. Managers are architecting work for the employees in such a manner where they feel themselves connected and their skills are enhanced. This also catapults their full capacity utilization. The evolvement of this concept has inevitably changed the focus of firm from traditional Human Resource Management to strategic Human Capital Management.To be in the competition firms are using their human capital to implement bo th proactive and reactive change initiatives and are crossing the line to retain their human capital. Such is the magnitude of human capital in today’s scenario, where in a manager success is determined by the amount of human capital he has generated or retained in a year. The future depends on pursuing businesses that leverage human capital.