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Running Head: People as valuable asset

People as Valuable Asset in Organizations

Elizabeth Kong Wai Yee

Human Resource Management (BA361)

Pn. Zuraida

American Degree Program

SEGi University College c

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uable of Contentsc

£ntroduction ................................................................................................................................ 3

Human Capital as £ntangible Asset .............................................................................................. 4

Competitive Advantage of Human Capital .................................................................................. 6

Human Capital in Company¶s Business Value ............................................................................ 9

Human Capital and uechnology ................................................................................................ 11

Communication as an Essential Skill......................................................................................... 13

uhe Role of Management ueam ................................................................................................ 14

Managing Human Resource ...................................................................................................... 16

Conclusion ................................................................................................................................ 18

References ................................................................................................................................ 19

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£

 
People are the basic need for organizations. Without people, the organizations could not

run even it is contented with other resources. However, there are some still doubts about the

ability of human labor as the technology is getting more and more advance. £t is believed that

one day, the human capital will totally replace by machinery and all system is automated as it is

more convenient. Yet, there is some in human capital that cannot be replace as human capital is

still classified as competitive resources. With better managing system, human capital can be as

advantage as other resources.

£n an organization, human capital is arguably as the most valuable assets. £n the past,

executives often tried to remove human resource from the strategy equation by substituting other

capital for labor or by creating hierarchical structures. (Snell & Bohlander, 2007). Yet, there are

still some business executives firmly believed that people are the most important asset but

according to the data that had collected by the investors revealed that the economic value added

(EVA) and return on investment (RO£) shed little light on how an organization¶s human assets

are performing (Weatherly, 2003). £n short, human assets did not have huge influence in

improving business. However, a recent survey from USA uoday and Deloitte & uouche, nearly

80 percent of corporate executives reveal that the importance of human resource management

has grown substantially over the past ten years and two-thirds said that human resource

expenditures are now viewed as a strategic investment rather than simply a cost to be minimized

(Snell & Bohlander, 2007) because much is changing today.

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üothing can begin without people. People are the one who create and maintain the

intellectual capital within organizations that drives innovation and shape products. Besides,

people manage the finances, cash flow and forecasts. So, the market is an external factor that

requires people to generate interest and deliver the messaging to gain market acceptance. As a

result, people make companies a reality and make companies success which is why companies

see human capital as an investment. uhey train their employee and develop them into valuable

asset for the company. £nvestment in people is a long term strategy for the organization. uhe

salary and wages, costs of training and development and other cost of recruiting, maintenance

and development of people considered as investment to increase the value of people in return to

increased the future earning for company. uhe trend for the business are going global, invest in

training human capital enable the company to access to other country by communicating and also

understanding the culture of the foreign country.

Furthermore, human capital can be defined as an intangible asset. £n accounting balance

sheet, intangible assets also called as intangible capitals which include intellectual property such

as patent formulas, product designs, process technology, copyrights and others (Memon, Mangi,

& Rohra, 2009). But, in corporation, human capital is the collective sum of the attributes, life

experience, knowledge, inventiveness, energy, and enthusiasm that its co-workers choose to

invest in their work. So, human capital is the most valuable asset because if the employees

commit into their work, the business will improve as their work presentation will satisfy

company¶s customers. £t is either a win-win situation or a lose-lose situation because on the other

hand, if the human capital did not manage accordingly, employees are not united, they will not

commit in their work and consequently, the result of their work may not convince the company¶s

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client which lead a downfall on company¶s business (Memon, Mangi, & Rohra, 2009). So, it is

believed that if a company know how its human capital contributes to their success, it than can

be measures and managed effectively.

Developing human capital in the organizations is the challenge for the leaders for

formulating future competitive strategies. With human capital, organization can maximize their

productivity by formulating strategic plan to manage human capital. uhe motivation of the

employee to perform their job task is important because they will commit into their work and

perform well. But, dynamic and complex competitive landscape has created considerable

uncertainty also present opportunities (Bernardin & Russell, 1998). Due to the uncertainty, it had

produce opportunities for firm to change their management style by recruiting new people.

Besides, it also create opportunities for competitors of the firm as well where the competitors of

the firm will always try to employ better for the job, in short, the rival firms are likely to lure

valued employees away.

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According to the frameworks that create by Ruzzier, it has incorporated the different

factors that typically influence human capital (Ruzzier, Antoncic, Hisrich, & Konecnik, 2007).

uhe perceived VR£O (value, rareness, inimitability and organizationally-supported) values are

the one that make human capital become competitive advantage and also develop cross border

skills (Ruzzier, Antoncic, Hisrich, & Konecnik, 2007).

£n the war of talent, people now are competitive within each other where they have to

upgrading their qualification by getting master or higher skills or qualification as well as posses

of different skills from different industry in order to survive in this competitive world (Auw,

2009). Companies with strong human capital management have the ability to create unique team

in a most cost effective ways to create sustainable advantage because the way in which the

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organizations manage its peoples can influence its performance. For example in £KEA, their

check-outs department has a high employee turnover rate and the consequence is that they have

not enough cashiers to do the job. uhe head of the department conduct a survey and meeting with

the entire employee to solve the problem and promote co-workers loyalty by increasing wages

for full timer and part timer. From this situation, it can be learned that employee¶s loyalty will

help the company in running their business. And, only with human capital are able to come out

with creative problem solving by making good decision when things are not always predictable.

Furthermore, the resources are easy to transfer but not human capital because employees

can be loyal to the company if their needs are fulfill and work are appreciate by the organization,

therefore, the crucial differentiating factor between companies can be how human resources are

developed and nurtured in an organization. Recent research has suggested that human capital

attributes like education, experience, and skills and the effect of leadership affect the firm¶s

performance. With their knowledge and experience, it can imply on the critical situation or

emergency that faces by the company and conduct instant solution for the problems. £n addition,

human resources are rare and difficult to imitate. uhe skills, knowledge and abilities are not

equally distributed means each individual have their own uniqueness, their strength and

weakness which make them rare and competitive so it is not equally available to competitor and

so become an advantage to the organization. £n order to compete, companies such as Microsoft,

McKinsey and Four Seasons Hotels invest a great deal to hire and train the best and the brightest

employees with the purpose of gaining an advantage over their competitors (Snell & Bohlander,

2007). Also, employee capabilities and contributions cannot be copied by others (Snell &

Bohlander, 2007). uhe teamwork and trust that the employees build between each other are so

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valuable that not anyone can imitate which make every company have its own uniqueness and

competitive advantage.

Of course, human assets unlike physical assets as the employees can decide to leave the

firm or to join it follow by their own accord because they have their own control on their

freedom. Employees may find that their options and opportunities are more attractive across

firms rather than within only one firm (Snell & Bohlander, 2007). uoday¶s labor market for both

employee and employer has become more ³free agent´ oriented (Snell & Bohlander, 2007).

Employees are less likely to work in the same job for long period as well as unlikely to spend

their entire careers in one firm because they look forward to promotions so flatter organization

structure means fewer positions for promotions that cannot promote employee loyalty. uhis can

be costly to organization for the reason that the recruiting cost and training and development cost

have to be incurred in the company¶s balance sheet.

uhe newly recruit workers have to go through training for them to adapt to the company¶s

culture and values before getting start to work moreover going through interview to find the

suitable people to filled the position are time consuming and costly too. Additionally, before the

position are filled in, insufficient of workers will affect the business such as product cannot be

manufacture in time or shipping cannot be done on time which lead to a loss for the company. As

a result, organization has to value their employees to avoid unwanted loss of business.

Furthermore, if employee left, they will bring together their knowledge, the training they gone

through in the company and the skills and experience they gain. uhen it will become

disadvantage to the company while on the other hand increase competency of the competitors.

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£n this contemporary, CEOs and board chairs of corporations still recognize people as

their company¶s most important asset and imply the theory into their company¶s value. For

example, the vision of the famous Sweden furniture company, £KEA is to create a better

everyday life for many people where the many people including their co-workers beside from

focusing only on their customer (uhe £KEA way, n.d). uhe company has been practicing a

different way of culture which helps them in increasing the company¶s sustainability which is

now the company is so competitive because they value their co-workers. Besides, their human

resource idea is very impressive which is

³Giving down to earth, straightforward people the possibility to grow, both as individuals

and in their professional roles so that together we are strongly committed to creating a

better everyday life for ourselves and our customers.´ (uhe £KEA way, n.d)

So, this is the £KEA human resource idea which is strongly support that human capital is a

valuable asset. uo achieve competitive advantage, the role of human capital is greater than ever

before because it is considered to be the wealth success and major source of competitive

advantage

Besides from £KEA, even £BM also creates a business value on human capital. uhe

company comes out with few strategy plans to control human capital and overcome workforce

disruptions (µGetting personal¶, n.d.). According to them, it is still not enough even though the

company¶s business continuity plan most likely to protect the company¶s physical assets such as

data, networks, core business applications, and facilities. uhey believe that organizations that

build resiliency into their human capital are more likely to protect their most valuable resources

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and maintain operations in the event of a crisis. uhis is the main reason for £BM to spend time

and monetary expenses on developing solutions for human capital risks (µGetting personal¶, n.d.).

Examples for human capital risks are like the employees ability to attend work, the ability to

maintain business operations and to deliver critical internal services. For the business continuity

plan to work along with human capital, £BM provides a lot of facilities and flexible

accessibility¶s company strategy for the employees (µGetting personal¶, n.d.). uhe company aim

is to be competitive to the competitors. £BM has grown to become a very success company due

to reason that they willing to invest and value human capital.

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Human capital is the root of an organization. A strategic human resources management is

mean to gain competitive advantage through their co-workers which is very unlikely to other

resources of competitive advantage such as technology and physical resources. Yet business are

under pressure to increase revenue, optimizing profitability by decreasing costs, optimize

resource utilization and tightening corporate governance as far as adapting their business and £u

systems to survive, innovate and grow, but executives of organizations still convinced that

people are still the important asset. Resources other than human capital are comparatively easier

to emulate and transfer. Monetary capital can be gain by merge with other big company in order

to gain more capital and become more competitive while technology can be achieve by

importing new machinery.

uhe influence of technology in human resource is a potential weapon for lowering

administrative costs, increasing productivity, speeding up response times and improving decision

making and customer service because it had automating the routine job and alleviating

administrative burden (Messinis & Ahmed, 2009). However, there are several factors that need

to be evaluated which include does technology fit the application to the firm¶s employee base,

the ability to upgrade or customize the software, the compatibility of the system and others (Snell

& Bohlander, 2007). For example, the system may not appropriate to replace employee¶s work

on factory floor where quality control or inspection process cannot be totally automated.

Furthermore, the information may not be secured where they are a lot of cyber crime happen and

the legislation is not strong enough to protect the company as the cyber crime law is not fully

develop yet as it is still new. So, compare to human capital, it will be more save as the company

are protect by the law and also insurance. Systems which are outdated need to be upgrade when

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necessary, and of course, costs will be involved. So, by implying technology can reduce cost is

not a convincible statement while they are still containing cost to upgrade and maintenance for

the software. When there is a sudden crush in the software, business cannot be run as usual and

to hire a professional to repair is expensive which is a strong impact for the company.

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A company could not run with machinery only because it will not handle things like man

do. For example, machinery cannot do the job such as cashiers, sales assistant or customer

service. uhe trend for business in this contemporary is base on relationship selling.

Communication is an essential skill which improves human relation. People now prefer

communication and this is the biggest weakness of machinery. Communication will not happen

in machine, feedbacks cannot be gained and so no room for improvement in addition, only with

communication can reduce the misunderstanding and also create more business opportunity.

While on the other hand, human can change accordingly, to adapt and fulfill the need for

customers. For example, sales assistant can assist customers to find the product which they want

to buy, to help them to check stock which is available while customer service can help to solve

customer¶s queries such as return or exchange. With the help of human capital and the task job

perform by them; business will improve because the customers will come back as they are

satisfied with the service provided by the organization.

Since the market is undergoing globalization, communication can reduce the disparity

between countries and also promote international trade. urading with foreign company is risky,

is either lack of communication which cause losing a business or invest wrongly. uhis cannot be

done by technology or any other resource because only human capital is able to perform the task

by communicating with the business partner. £magine with a company lack of human resource,

who are going to talk with the business partner, who are going to present their company business

plan to others?

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Organizations have realized that their success is depends on their ability to hire, develop

and keep quality employees. According to Robert Reich, to attract and keep talented people,

companies today are not just experimenting with how they approach the competitive marketplace

of goods and services; they are also experimenting with how they approach the competitive

marketplace of talent (Reich, 1998). uhe model for the organization of the future aims to create

tangible and intangible value that both sides can share and enjoy. And so, companies imply a

new operating system for the employer-employee relationship to replace the old set of practices.

uhe executive level and managerial level team leaders are human resource as well. Without their

leadership, the works task cannot carry out smoothly. uhe chief executive officer is defined as

the singular organizational position that is primarily responsible to carry out strategic plan and

policies as establishes by the boards of directors. £f the company has a boards of directors to in-

charge then the chief executive have to report to the directors if the company which is

proprietorship or partnership that without board of directors then the chief executive officer sets

the direction and oversees the operations of an organization.

After CEO will be the managers. An organization has a manager in every department.

Different department have their own manager that perform different task but mainly all the

managers perform the four basic functions which is planning, staffing, organizing and controlling.

uhe staffing is the role of human resource department¶s manager. Managers communicate

organizational vision to the employees and resolve the conflicts among the employees. However,

they have to report to the chief executive. Below managers is the supervisor where their role is to

supervise the workers, inspect the progress of the work. So, all of the position in the organization

chart is fill in by human capital. uhey are the same as important as the employees. Without them

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acting as the leader for the organization, the company will be unorganized and happen to be

everyone in the company performs the same job which will not bring improvement for the

company and take it to the next level.

Besides from the manager have to act as the leader for the organization, the strategic plan

to manage the human resource is important as well. Because, without a good management plan

to manage the human capital, the resource will not be as value as they seems as because the

employees cannot fully perform their capabilities or the value of the employee is underestimated.

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At present, serious concern is emerging about the changing trend of the workforce,

actions needed to ensure effective succession planning. £n this regard, change management is

crucial because there should be no underestimating the importance of consistent, committed and

persistent leadership in bringing the human capital issue to the forefront of management

concerns. £t is clear that leaders have to create an integrated, strategic view of their human capital

and then sustain that attention to create real improvement in managing people. Firstly, employees

should not be viewed as costs to be cut but as assets to be appreciated. A strategic human capital

management recognizes that employees are a critical asset for success so organization should

design and implement human capital policies and practices into the organization¶s mission and

goals.

Additionally, there is a need to come out with meaningful and useful measurements

system from operational perspective and planning and investment perspective to make sure the

human capital is not overestimate or underestimate. Organizations are concern about the return

of investing in human capital so is better that what is measured gets managed in order to capture

the picture of the training that the company invest on human resource is spending more or less

than the organization¶s competitors. Furthermore, a useful measurement system can track the

performance of human resource to ensure that human capital management practices are effective.

By using an effective measurement system also enable executives to determine the kinds of skills

employees will need to achieve in the organization¶s long-run strategies.

For example, the General Accounting Office (GAO) of United States intends to

encourage and facilitate the adoption throughout government of a greater human capital focus, as

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well as of other performance management principles and to lead as an example to others

company (Walker, 2000). uhe company is making their own human capital a top priority and

reviewing their human capital systems from top to bottom in order to align with the

organizational mission and vision. Besides, the company under going through few new strategies

such as inventorying institutional skills, reinvigorating the company¶s recruiting and mentoring

programs, redesigning the training curriculum and also reengineering the employee appraisal and

reward system (Walker, 2000). All these activities reflect the company not just focuses on living

for today but on preparing for tomorrow by investing in their people because they believe with

these investments, they can enhance the value of their people and bringing their business and

management team to the next level.

With effective human resource management, it provides organizations with many

benefits such as allows for a more effective and efficient use of resources (Behara, 2005). Wise

use of resources is important as some organizations find themselves are able to do same amount

of work or more with fewer employees. Other than that, it helps to ensure that important

positions which are empty can be filled in because filling vacancies is critical for organizations

which facing an increasing number of resources that eligible for retirement. Furthermore, it also

provides realistic staffing projections for budget purposes because there will be a clear rationale

for linking expenditures for training and retraining, development, career counseling and

recruiting efforts (Behara, 2005). Managing human capital can helps organizations to prepare for

restructuring, reducing, or expanding its human capital. So, people with wise managing system

will be a valuable asset for organizations.

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As a result, people are the most important asset in organizations. Managing people

effectively will increase the value of human capital. Furthermore, a good leader will bring the

organization to the next level with wise use of human capital. Value added human capital will be

as competitive as other physical resources as well. Many organizations are changing their

business value by adding the culture of valuing human capital as they believe human capital will

increase competitive advantage to the organizations. Although technology has replaced some

part of human¶s work but still manpower is the best resource that organization should value as

technology come from people, is people who invent and make use of it in business. So,

eventually, without manpower technology cannot run by itself. Yet, organizations have to value

human capital in order to improve their business.

£n this competitive world, organizations keep on compete with each other to maximize its

company profit margin. Physical resources can get easily but not human capital because every

human is different with each other so the only way for company to stand out from the crowd is to

have human capital that hold of professional skills that can manage the business efficiently and

doing well in decision making.

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References
Auw, E. (2009). Human Capital, Capabilities & Competitive Advantage. £
 
  

   , 25-36.

Behara, G. K. (2005, üovember).  
 
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21, 2010, from bptrends: www.bptrends.com

Bernardin, H., & Russell, J. (1998).    


Singapore: McGraw-Hill.



  
 
 
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 "
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  (n.d.). Retrieved September 19, 2010, from £BM:
http://www.ibm.com/services/continuity

Memon, D. M., Mangi, R. A., & Rohra, D. C. (2009). Human Capital a Source of Competitive
Advantage " £deas for Strategic Leadership". 
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%  , 4182-4189.

Messinis, G., & Ahmed, A. (2009, March).   
& £ 


   # ' 
(  Retrieved September 17, 2010, from www.cfses.com/documents/wp43.pdf

Reich, R. (1998, üovember). '   
 
 Retrieved September 20, 2010, from
Fast Company: http://www.fastcompany.com/online/19/comfuture.html

Ruzzier, M., Antoncic, B., Hisrich, R., & Konecnik, M. (2007). Human capital and SME
internationalization: a structural equation modeling study.  #  $  
# 


%  , vol. 24, pp. 15-29.

Snell, S., & Bohlander, G. (2007).    
 Mason: uhomson.

' £)  (n.d). Retrieved September 16, 2010, from £KEA:
http://www.ikea.com.my/en/about-ikea/ikea-way/

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Walker, D. M. (2000, March 9).      
  
 *+
 
 Retrieved
September 21, 2010, from United States Government Accounting Office:
http://www.gao.gov

Weatherly, L. A. (2003).  
,'


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SHRM: www.shrm.org/research

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