HUMAN RESOURCES "VALUE CHAIN"


" Competitive advantage cannot be understood by looking at a firm as a whole. It stems from the many discrete activities a firm performs in designing, producing, marketing, delivering and supporting its product." Says Michael Porter.

A systematic way of examining all the activities a firm performs and how they interact is evaluated through the concept of value chain. The value chain as a concept disaggregates a firm into its strategically relevant activities.

In the ensuing knowledge economy the importance of Human Capital is being recognized as never before. "People are the most important asset of an organisation" has been propounded long before, but adequate importance was not attached to this till late. Organizations have now woken up and acknowledged this fact. Here, in the above context one needs to analyze, how an individual can be utilized as an asset and also appreciate its value within the organisation.

The Human Resources "Value Chain" helps us understand the process in which an individuals worth can be maximized for the benefit of the individual as well as for the organization. The HR Value Chain examines the activities performed by a typical human resources department and how they interact to maximize the potential of an individual for the benefit of the organization.

THE HUMAN RESOURCES APPROACH

In an organization an individual utilizes his / her expertise and knowledge for the benefit of the organisation and in turn is rewarded in monetary terms and also in terms of enhanced knowledge acquired through experience.

The typical cycle can be described as follows:

…The individual gives a greater quality and quantity of work in his / her respective areas of expertise.
…This leads to higher organizational productivity and profits.
…This in turn leads to greater employee rewards and recognition in appreciation of the hard work put in.
…This leads to higher employee motivation and a new vigor to achieve more for the organisation.

THE HUMAN RESOURCES "VALUE CHAIN"

Every human resources function is a collection of activities, which help an individual to settle down in an organization and perform to his fullest extent. All these activities can be represented using the value chain

In competitive terms, value is the worth of an individual or the human capital. A firm is profitable if it has a collection of human capital that performs in creating a product.

The value chain displays total value, and consists of value activities and potential. Value activities are the basic building blocks by which a human resources function builds up an employee in terms of motivation and learning. Potential is the inherent capability of the individual, which has been developed, with the help of the value activities.

Value activities can be divided into two broad categories, primary activities and support activities. The primary activities in a HR value chain are - Recruitment process, Settling In (Familiarization process), On the job experience, Performance Management and Career Planning. The support activities are - Communication, Training & Management development, Compensation (Lifestyle) management and Facilities and Administration.

How each of these value activities are performed will largely determine the quality of the human capital in an organisation and the competitive advantage in terms of human capital vis-à-vis other industries.

Primary Activities

There are five generic categories of primary activities.

Recruitment Process. This is the external interface of the firm, which acts as a gateway of procuring talent for the firm. This is a very critical activity. The first impression, which is created is here, often helps or retards the ensuing process. The interview process, the facilities and the preliminary knowledge provided gives an impression of the firm to the individual incumbent. If the recruitment entails taking people from within the organisation then the fair process followed also embeds a sense of contentment in the incumbent.

Even after you've screened resumes, interviewed, cross-questioned and psycho-probed the new manager you've hired, how do you know that he will deliver what your demanding company needs? Armed though he may be with the right degrees and personality traits, will he fit in your company, its goals, its systems and its culture? A measure of how closely a candidate's mental makeup and personal values match those of the company's, fit is the keyword in today's context. In the same way the candidate also has to evaluate his fitment into the company he / she is aspiring to join.

In an economy increasingly dependent on knowledge workers, employer's are realizing they don't just need good manufacturing plants or people who know how to make, say widgets. Employers understand they need people who can think about the future of widget manufacturing. They need people who can innovate, strategize and work with others to achieve widget making goals.

If organizations are hiring people based only on their current skill sets, they're engaging in planned obsolescence. They need to be assessing broader capabilities such as judgements, leadership and communication skills. Employees who possess these fundamental characteristics are better able to grow with and contribute to an organisation.

The checks on hiring process should be on the following lines:


Whether the candidate fits the precise job he is being considered for in terms of education, experience, career expectations, mobility and compensation.

What his success factors such as executive maturity, the ability to lead people and executional excellence are.

One should not fall into the following traps:


Experience Trap - Experience is not the best predictor of success. Sometimes 12 years of experience represent one bad or mediocre year warmed over a dozen times.

Education Trap - A superior education doesn't necessarily tell you whether an applicant is bright, emphatic or flexible enough to learn and grow with your company.

The best pattern to be followed in the recruitment process is as follows:


The interviewer should draw up the profile of the ideal employee after determining the corporate culture and values.

Structure the very form of the selection process in such that it helps to test for the ideal fit.

Lay stress on subjective impression when checking a candidate for his fit.

Explain to the candidate in clear terms the details of the fit you are looking for.

Adapt your company's fit to changes in internal and external environments.

These processes if followed will ensure a right candidate for the right job and the rest of the value chain can function properly in helping the candidate to get a proper grooming in the existing culture.


Socialization-Settling In. This is a very short but nevertheless critical period in the career span of an employee. The initial period is an extremely important period. The employee takes a certain amount of time to settle down in a different cultural setup with the organisation that has it's own set of values and work ethos. The recruitment process ensures that the incumbent is in congruence with the basic value system of the organisation, but it depends on the individual and his peers of the time taken to settle in a new environment. An amount of handholding is necessary in this period.

The human resources function plays a critical role in an employee's settling down in an organisation. It has to ensure that the employee receives all the dues promised to him at the time of the recruitment and also it has to help the employee settle in the culture. A proper familiarization / socialization program would take care of the gap in knowledge of the company, its products, its competitors, its vision and values and the work ethos.


On The Job Experience. More interactions with peers and vendor departments occur in this period. This phase gives the employee the hand on experience of the organisation in terms of its culture, its people, the values, the product lines, the management practices and a gamut of other aspects which helps him to sustain in the sustain in the existing system.

The human resources function in congruence with the respective line function should ensure that the incumbent has the right job for the skills and qualities he possess. His job content should be enthralling and should give him a sense of achievement. The peer group should enthuse him to function in a team or a group. He should be properly motivated through good working conditions and rewards for his performance. He should realize that there is fairness in all the processes followed. All these will give him the energy to excel in the company.


Performance Management. Meritocracy, the system we all support, to succeed requires all of us, both as appraiser and appraisee, to develop an appraisal process which is objective, hence fair and acceptable. Whilst it is acknowledged that no Appraisal system can be totally objective, we can surely attempt to minimize subjectivity.

The performance management process links goal setting and coaching for performance and careers in a continuous process. Its purpose is to develop people and improve performance through a clear understanding of goals and regular coaching as well as to provide honest and accurate formal evaluations to support rewards for performance practices. Managers and subordinates have a mutual responsibility for making the process work.

The performance management process attempts to systematize good practice to ensure that what all managers aim for and achieve is what the organisation requires.

The performance management approach has a number of characteristics, which differentiate it from conventional management-by-results schemes.


It is a performance-improvement process based on a joint problem-solving approach rather than an evaluation and control system.

It places an emphasis on corporate goals and values with individual manager’s objectives being formulated as part of a cascade of integrated setting of goals and standards.

It recognizes that performance cannot be assessed solely by quantified measurement - qualitative performance indicators are given full recognition.

It places as much emphasis on longer-term goals as on short-term objectives.

It places emphasis on how results are obtained, with special concern for human resources management and teamwork as well as the results themselves.

It is a two-way, participatory process, not a top-down procedure.

It is a process rather than system oriented, with the emphasis on the appraiser - appraisee / manager- subordinate interaction.


Career Planning. Lives and career evolve over time. Career planning is looked upon as the management of career related roles and events that are organizationally based. The organisation would assist in an employee's career growth, but this growth is ultimately the employee's prerogative. In other words, this would mean the individual’s expectations would guide the organisation to decide whom to move, when, how and at ‘what speed’. This would depend upon the individuals recent performance on the job and his potential for growth in future assignments.

In an organisation, the employees should be allowed to grow sufficiently to enjoy achievement and to contribute to business success. The company should specially make a concerted effort to enhance the performance, skill and knowledge levels of good performers and potentially promising members. For practical purposes all outstanding performers should be focussed on for career planning activities. They are the "Star Trackers". As performance at the current job does not automatically ensure the individual’s excellence in the next higher level in his career path, Assessment Centre method should be used to find out the individuals potential for his future growth and development.

With the focus on retention and development, the company should make effective use of career planing tools such as job rotation, job enrichment, developmental inputs, and mentoring and regular Feedback. All this should be fostered in a culture of meritocracy, transparency and fairness. These activities will go a long way to increase the worth of an individual and will prove to be a tool for competitive advantage for the firm.


Support Activities

There are four generic categories of support activities.

Communication. Employees can't feel part of the company if they are not involved in decision making.

Ivy Lee liked working as a contract employee for one Hong Kong company because she was always paid promptly. Recently things have changed, and she now has to wait several weeks for payment.

The above example is by no means is an isolated case. Many managers habitually change policies with little or no communication. They don't realize that communicating a change in policy can be a valuable opportunity to win greater support from employees for corporate goals.

Managers fail to communicate because they either reject the notion that employees want to know why their company makes the decisions it does or because they have never been trained in effective communication. The damage to the employee moral in either case is far-reaching.

Communication is an integral part of the corporate life. If all changes and decisions are communicated through proper fashion and channel there would not be any discontentment amongst the employees and they would feel that they are important in the company.

Communicating across organizational boundaries is more prevalent and more critical today than ever before. It takes place across differences of background, training, professional level and nationality. These communications obviously include the sharing of ideas and processes, but increasingly they also include messages regarding changes in the organisation, changes in other aspects etc. The skill used and the sensitivity to the employee's perspective can determine not just the success of the communication but the health of the corporation.

In addition, there is also a major shift from the earlier top-down management style of communication to one, which welcomes employee input and opinions.

Training & Management Development. Defined as a planned programme designed to improve performance and to bring measurable changes in knowledge, skills, attitude and social behaviour of employees, training is imperative. Trained employees are like "missionaries for the cause". They are the elements through which the system would get influenced. As long as they keep the knowledge, they have acquired from any training program within themselves; it would be an "organizational float" the moment they start sharing that knowledge, it would be "organizational learning". Once an employee starts sharing his knowledge with others, he would have accepted what he learnt and this would mean that he has come out of his mindset.

Training in an organisation should be used as a developmental tool for employee and ideally should be according to the following approach:

Socialization and Induction Training: getting people to work in the trenches - in the shopfloor, sales field and toughen oneself to the ground realities of corporate existence. Reinforcement of Vision & Values through constant reiteration in various forums.

Basic Knowledge and Skills Training: training relevant to the individual to improve upon the knowledge and skills required performing a job, with appropriate inputs in Achievement and Affiliation training.

Cross-functional Training: basic inputs on the environment - both internal and external and a significant amount of affiliation training.

Overall Business Appreciation: a high degree of specialization in the parent function and inputs on Power and Leadership training.

Business Strategy and Environment: training on business and strategy formulation and also Leadership and Power management.

Training as a support tool is not only a skill enhancement program but it can also be viewed as a major motivational tool for the employee. This is a major value adding activity for an employee.

Compensation (Lifestyle) Management. Recognition is fast becoming its own reward. For corporates are finally beginning to believe that money - what guru Frederick Herzberg called the hygiene factor - only denotes the price of an employee. For value companies are institutionalizing non-monetary rewards and recognition systems to motivate their people.

Motivation - the need for self-fulfillment, the need to be meaningful, the need to create personal challenges - isn't only about inspiring people to work harder, it is also an effective way of retaining people and building loyalty.


Facilities and Administration. This is a critical support function, which is often overlooked in many organizations. An employee can concentrate properly on his job and give the desired results if the facilities provided to him takes care of his social and safety needs.

This support function unlike others supports the entire chain and not individual activities. This is sometimes viewed as overhead, but can be a powerful source of competitive advantage.

DEFINING THE VALUE CHAIN

Each generic category of the primary and support activities can be further subdivided into discrete value activities.

Broad functions such as Recruitment and Training can be further subdivided into value activities. The process flow should be utilized in doing so.

The appropriate degree of disaggregation depends on the economics of the activity and the purposes for which the value chain is being analyzed.

Everything a human resources function does should be captured in a primary or support activity. Value activity labels should be chosen to provide the best possible into the activity and the value, which it provides in the development of an individual within the organization.

The value chain is not a collection of individual activities. There are definite linkages within the system These linkages are necessary for proper optimization and coordination within the activities. Exploiting linkages usually requires information or information flows that allow optimization and coordination to take place. Given the difficulty of recognizing and managing linkages, the ability to do so often yields a sustainable source of competitive advantage.

Regards
Sarkar