Human Capital Management

OPTIMISING HUMAN Capital with Dr Jerry Gule, Chief Executive, Institute of People Management

With artificial intelligence, robotics, machine learning and other forces of 4IR eliminating operational inefficiency, it’s important that organisations challenge their people and extract the most from talent.

Given the current economic climate and amount of competition for scarce resources, executives are at pains to make every rand, pula, dollar or pound they spend on human resources count. Where your investment doesn’t seem to yield a corresponding return (targeted performance level), your talent management strategy and policy should address this.

The Equal Pay Principle

Legislation insists that people hired to do the same work be paid the same. That’s fair, in line with international human rights policies and our very own Constitution. Labour laws, however, allow employers to vary pay to people occupying the same position, provided the discrimination is fair and governed by a transparent policy. Where the organisation provides all employees in a specific job the same opportunity and tools to perform, yet get varying performance from individuals, it is fair that higher performance be rewarded accordingly.

Fair discrimination – Social Redress

Yes, it may sound like a contradiction in words. But if you come from a historically imbalanced society you will be familiar with national transformation programs and laws launched to eradicate the imbalance emanating from historic unfair practices or skewed opportunities previously granted to certain groups to the exclusion of others.

The Affirmative Action plans flowing from the Employment

Equity Act as well as the Skills Development Act, for example, were introduced to address old, unfair employment laws and policies.

Furthermore, these Acts were introduced to address skills upliftment and access to opportunities for previously excluded groups. In the application of these pieces of legislation in the workplace, the human resource executive might prioritise previously disadvantaged groups for (certain) new jobs or advancement opportunities, in which fair discrimination would apply. The key is to remain absolutely transparent when applying redress measures to make sure that there is no one left behind with regards the company’s strategy for change or transformation.

Fair discrimination – Performance Rewards

Where you have high contributors and high performers in a job, results are likely to reflect accordingly. Where people, for whatever reason, contribute or perform less than others, (or less than minimum targets), it is fair that higher performers are rewarded according to their contribution to the bottom line, however this should be with fair discrimination principles being applied.

Fair discrimination – Open Opportunity

While business is admittedly, in the business of making profit, how it does that should also be in consideration of the planet and people. People consideration is multi-faceted, and several elements ought to be factored if an employer is to safeguard the equal opportunity principle.

Levelling the Playing Fields at Recruitment

Operational requirements of the organisation dictate the technical qualifications required for each job. The job dictates what tools and equipment are required for proficiency. In some cases, the job together with industry standards and professional protocols will dictate what physical abilities are needed for minimum performance. These pre-requisites should be catered for in company resourcing (tools, equipment, facilities, etc.) as well as in the job adverts, to eliminate, upfront, anyone who doesn’t qualify or who will not meet the minimum requirements.

If a company provides the basic tool- or equipment requirement according to industry standard, and if all applicants offered the job have claimed competence and ability to function with the provided tools, equipment and (legally compliant) operational conditions, then the playing fields are level.

Levelling Playing Fields On-the-Job

Availing the same set of resources for employees to accomplish work objectives levels the playing fields. Whatever difference in results or output (quantity and quality) that individuals deliver - as a result of different levels of personal exertion or talent - warrants commensurate remuneration. Individual employees can yield different performance as a result of, for instance, working style, approach or methods, resourcefulness, efficiency, economy, extra personal time allocation, personal creativity, innovation, and so on. Organisations focused on maximising performance and extracting optimum value from talent apply variable income policies to ensure that every member of staff is aware and can avail himself or herself of the opportunity to maximise individual earnings.

Managing the Cost of High Performance

Companies should ensure that the healthy and admirable chase for extra output or increased topline does not come with unfactored inputor maintenance costs. For instance, extra consumption of utilities and extended use of tools and equipment may result in higher costs that neutralise what ‘advantage’ the extra output yields. If a business is in commodity-production (physical units), extra output should be encouraged to feed a real demand - whether due to seasonality or new business that was not factored during the current budget cycle.

It would make no sense for the company to encourage extra output quantities that would not have uptake.

In service businesses, any extra output (quantity or quality) should be supported by the propensity of the customer to pay – either in cash or in “loyalty” to the business that can be translated into tangible long-term value.

Hidden Costs to Watch For

Other types of hidden costs include negative health effects on employees who increase delivery by sacrificing leisure time. Also, a department can squander its efficiency by losing economies of scale that a full staff complement operation enjoys during peak office hours. For instance, attempts by one department to expedite a churn of proposals by working after hours can be frustrated by a lack of access to central resources, e.g. pricing or branded-packaging units. An employee who would have worked overnight might, therefore, still need to be in the office early morning to finish off the work, or to delegate the rest of the function. This is instead of using the time being productive on something else - an inefficiency that erodes any gains the extra time worked should have given.

Level Playing Fields among Non-sales Employees

The creation of basic and variable income is not something for sales divisions only. In any area of business, the principles can be applied. The beauty of a variable income policy in an organisation is that it accommodates seasonality among individual employees. For instance, if an employee is away on family responsibility leave and colleagues have to pick up the slack, the higher output of the overloaded employees will be duly rewarded. When the shoe is on the other foot and the same employee finds himself/herself taking on extra responsibility due to someone who happens to be indisposed - with more output than the target minimum, this employee will have a turn for what may be seen as a financial windfall. Allowing employees to pick up each other’s slack can only be a short-term measure for an organisation to maintain its output levels. While it may benefit individuals financially, it simply maintains rather than increases the organisation’s overall performance level for the period. Extended substitutions will likely dip the overall performance as substitutes suffer burn-out and/or service quality is compromised.

Curbing Abuse of Variable Income

In private corporates as well as in the public sector (government departments, State-Owned Enterprises) employees reportedly abuse the system and use “variable income” policy, mainly overtime, as a money-making scheme. Wily employees in one department or function collude and take time off or play sick at peak times so that their colleagues can cover their shifts and “earn” overtime.

Human Capital Optimisation – Strategy and Tactics

Proactive management foresees and avoids this, e.g. by delegating management responsibility and re-apportioning accountability to encourage self-regulating teams. When a team is made accountable for its team performance and output, each member holds the other(s) accountable, and they co-operate among themselves to drive performance without management interference, which could help limit exploitation.

Human Capital Optimisation – Data-driven Management

An effective use of HR Data analytics not only helps monitor real performance (activity) for continuous improvement’s sake, it also makes it easy to isolate problem departments – particularly when it comes to leave or overtime abuse. Patterns are quickly observable and specific culprits can be isolated. A commitment to consequence management and a conscientious handling of discipline processes also discourage would-be offenders.

Human Capital Optimisation for a People-Led Fourth Industrial Revolution

An optimisation of human capital in the workplace assures companies of the best-fit usage of an array of resources available to the business. It ensures that digital solutions are brought in to enhance people performance rather than replace human function as a result of a disappointing human capital return.