How to make Human Resources high-worth Human Capital Solutions
Human capital is administered as human resources and their worth in the value added to the business is unknown
In most enterprises, human resources are administered as employees and are assigned to positions in organization units. There is no way to measure the value they produce, evaluate performance costs against the value created, assess their worth as human capital, or to develop them to increase their worth and provide measured increased value to the enterprise. Administered employees do not have a defined stake in the enterprise.
The economic crisis shows that banks and other corporations do not plan, manage, and account for human worth in the value-added to the corporate business, giving rise to perceived unmanaged executive compensation and staff rewards. The only way to eliminate the problems that caused the economic crisis is to manage the business and to manage human capital as part of the business.
20th century human resource management methods prevent good human capital management
There is a lot of talk about human capital, intellectual capital, knowledge management and other means to improve the capabilities, productivity, and output of human capital. But, each item is treated separately. We try to manage human performance, but have no framework to understand real human performance related to measured value to the business. We try to develop human capabilities, but have no framework to relate human capabilities to specific business needs. We have no way to integrate human capital performance with the value created and the worth of human capital.
We must manage the business to manage the worth of capital in development costs and the future value added to results produced
Before we can manage human capital properly, we must organize the business for 21st century management. The business is “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. We must identify and organizes the results needed for business success, the human and other capital solutions needed to produce results, and performance in the utilization of each solution to produce each result. We must manage the development and utilization of specific human capital solutions to produce measured result value, to increase capital worth, and justify increased performance costs.
We must improve human performance by managing the results humans produce
The key to making human capital a high-worth asset is to manage the results our enterprise produces related to human and other capital utilized. We need to document the human capabilities required as solutions of worth by our business processes to produce specific results. We need to understand the capabilities available in our enterprise and those that need to be developed or acquired. Human capital development programs can focus on the capabilities required in the business to utilize the business process and other performance solutions to produce specific results.
Instead of deploying personnel to positions, we need to deploy qualified personnel solutions to be ready to produce a specific set of results. When new business results are needed, we must qualify specific human capital and backup to produce the results. When the business process requires a special capability, we must deploy the specific human capability solution required to produce the specific result. We must support human personnel and capability solutions with the precise human knowledge solutions required to utilize a specific performance solution and to produce a specific result.
Productivity is the volume of quality results produced over a time and cost by human and other capital. We need to understand the volume, value, and quality of results in order to understand the value added to the business by the results and the corresponding worth of the capabilities essential to producing the result. We can then plan career development for human capital to produce results of increasing value-added to increase individual worth and justify an increase in their reward. Human capital development increases development costs and increased reward increases operation costs, which must be covered by the increased result value-added.
We must integrate human personnel, capabilities and knowledge as human capital
In order to make human capital a high-worth asset, we need to integrate the three classes of human capital:
- Human personnel: The specific employees, contracted human assistance, and other external human assistance producing a set of business results. Human personnel costs are in the on-going operational remuneration, contract payments, etc
- Human capability: The specific capability that must be developed to produce a result. All human capital development is directed at a human capability solution. The capability can be salesmanship, machine repair, management skills, business analysis, and other capabilities needed to produce specific results. The solution is in the capability, not the human personnel solution that possesses the capability. Any personnel with the capability should be able to produce the result. Capability solution utilization amortizes the development costs incurred in learning, training courses, tutoring, etc
- Human knowledge: The knowledge solutions utilized for instructions on how to utilize a solution or produce a result. Knowledge is created for every result and capital solution in a development project. Knowledge is created and utilized to develop and implement specific human capabilities. Knowledge solutions capture knowledge creation costs that are amortized against results produced from the utilization of the knowledge
Human capital is deployed as solutions to produce specific results. Human personnel are normally deployed as readiness capital to a result unit to be utilized generally to produce results the unit is responsible for. Human capability capital is deployed as production capital to produce specific high-value or ad-hoc results. Human knowledge is deployed as information capital to be leveraged by human personnel and human capability capital to produce results.
We must utilize information technology to manage human and other capital utilization
In order to manage the actual business, we must take advantage of modern information technology in relational database management systems or general ledger systems to set up and process the details of results to produce, capital to utilize, and performance in the utilization of deployed capital to incur costs and produce specific result value. We then utilize information systems solutions to manage:
- Human personnel capital available and the ongoing operation costs
- Human capability capital available and the development and amortization costs
- Human knowledge capital available and the development and amortization costs
- Special human capabilities required to produce specific high-value results
- Value of results produced by applying human capabilities
- Corresponding capabilities possessed or that can be developed in human capital
- Value provided by qualified human personnel capital ready to produce a set of results
- Value-added provided by qualified human capability capital producing a specific high-value result
- Worth of human capital producing a certain result value at a certain performance cost
- Utilization level and value creation that increases capital worth to justify increased reward
- Human knowledge required to support human personnel and capabilities to utilize a specific performance solution or to produce a specific result
- Human capital development programs needed to develop personnel, capabilities, and knowledge to utilize specific performance solutions to produce specific results
- Specific human personnel and capability development needs to increase capital worth and justify increased reward
We cannot manage human capital until we organize and manage each human personnel, capability, and knowledge solution available, plus the result values produced by human capital solutions.
Business management manages human capital to deploy human personnel solutions to be ready to be managed to produce results, human capability solutions where required by the business to produce a specific result, and human knowledge solutions to develop human capabilities and to utilize specific solutions to produce specific results.
Business management manages human capital development and utilization to increase human worth
By managing the actual business. the corporation is able to manage human capital worth to increase the value of results produced and justify increases in performance costs. Business management enables management to:
- Organize and manage the business in terms of specific results to produce and the specific human and other performance solutions required to produce the results
- Define human capability solution and knowledge solution requirements of the business to produce specific results of value
- Develop specific human capability and knowledge solutions for specific result needs
- Manage human personnel capital to be ready and utilized to produce results
- Deploy and manage qualified human capability capital needed to produce specific results
- Manage human performance costs against the result value produced
- Evaluate result value produced and assess human performance to appraise human capital worth
- Define human personnel capital worth as the attributable past or future result value-added over the assessed period
- Develop human capital and capabilities to produce higher-value results, to increase in worth, and to justify increased performance costs
- Create and deliver human knowledge solutions needed to increase human capital worth, to utilize specific performance solutions, and to produce specific valuable results.
Organizing and managing the business and the human capital role in the business, facilitates the development and management of natural human capital, and provides the structure for human capital to develop specific capabilities, perform, produce valuable results, and increase in worth.
Human capital developed and managed in performance to produce results of increasing value have a stake in the enterprise
Human capital then can feel that they have a stake in the enterprise. They are part of a team responsible to produce specific results. They know that developing their capabilities to increase the value of results produced increases their worth, and that the result value they add enables an increased reward. Increased reward is earned and not simply a matter of time in a position.
Enterprises are able to plan the value-added by executives and staff to plan and manage human capital costs to provide result value-added. Enterprises are able to account for result value-added to justify additional human reward. Reward based on seniority or position or speculative future revenues is not part of actual business management.
Result-performance Management (R-pM) provides the knowledge for actual business management and human capital management
Result-performance Management (R-pM) is the only method available to manage the actual business. R-pM is now being implemented by forward-looking enterprises to gain breakthrough advantages over competitors burdened by unsolvable 20th century management problems. R-pM is explained and documented in the R-pM Toolkit that provides the guidance for actual business management and maintains emerging 21st Century Management conventions, definitions, and standards. Management consultants are licensed to help enterprises learn, organize, and manage the actual business. R-pM is supported at result-performance-management.com.
The Solution to the Economic Crisis is explained in free downloads
Three free white papers explain the dead-end 20th century management problems, such as the failure to plan and manage actual business results, that caused the economic crisis, the way to eliminate the problems, and a government program to address the crisis by stimulating the economy, solving the problems, building an architecture for financial and economic management, and organizing local businesses to flourish in the eventual recovery.
- How to Eliminate Problems that caused the Economic Crisis explains the major unsolvable 20th century management problems and the solution to eliminate the problems
- The Only Solution to the Economic Crisis explains how to plan and manage the business to capture business data and provide management the information needed for actual business, corporation, industry, and economic management
- A Government Business Management Program to Answer the Economic Crisis outlines a government program to encourage business management, stimulate the economy, restore confidence, organize businesses to flourish in the recovery, and manage economic cycles to prevent future crisis
These three white paper downloads are available to R-pM Community Members at Result-performance Management.com. There is no cost or obligation to join the R-pM Community. Join by entering your email address and personal password. Your email address is protected and used only for download problems, product updates, and occasional R-pM Member news and white papers.
