Question

Discuss the following statement and provide examples to clarify your answer:
Human Capital Management (HCM) goes beyond the proposal that strategic management of skilled and adaptive human resources is the primary source of competitive advantage in a dynamic global environment, suggesting that the individual and collective impact of Strategic Human Resource Management (SHRM) can and should be measured. This can subsequently be reported and marketed to the organisation’s stakeholders, including its managers, shareholders and potential investors. Your business strategy does not change on a monthly basis so your HCM should not change on a monthly basis.

Answer 1

Human Capital Management ideology mentions that human resources should be considered as capital just like any other assets.

In many organizations, we often consider the assets to be the capital, machinery, IP, and other tangible items. However, we often discount the human resources and their impact. This is often done because, calculating the impact of human resources is not often stratight forward like calculating the numbers. As a result, the company accountants and management often avoid this.

One of the key impact of such approach is that, employees in these organizations are considered as easily replacable. However, this is not exactly true. Even if we take an example of a market situation where a large number of skilled employees are available, there are still cost associated with firing people, training new people and bringing them up to the speed. On the other hand, these organizaitons fail to realize that the impact (or progress) of their venture should be completely credited to the employees.

Even though the impact of employees are often difficult to quantify and measure, organizations as a whole should develop a method to measure and improve their human resource's impact on the organization. These in turn should be reported to the stakeholders just like the balance sheet.