BUS 4.

6H: HRD Strategies & Systems Unit – 4

HUMAN CAPITAL DEVELOPMENT

Introduction:

To understand the meaning of human capital development first of all need to understand the
meaning of human capital.

Capital means:

Capital refers to already produced durable goods which further contribute to the production of
goods and services. In simpler words, capital refers to any produced good/service which
enables an individual/organization to deliver high quality output. Capital acts as a catalyst to
increase productivity in organizations.

Human Capital means:

Employees are the lifeline of an organization. An organization can’t survive if there are no
employees. Organization runs with the help of individuals who contribute in their own way in
its success and productivity. Employees spend maximum part of their day in offices and strive
hard to achieve the goals and objectives of the organization. Employees ought to be motivated
from time to time so that they develop a sense of attachment towards their organization and
also deliver their best.

Thus the term human capital is recognition that people in organizations and businesses are an
important and essential asset who contributes to development and growth, in a similar way as
physical assets such as machines and money. The collective attitudes, skills and abilities of
people contribute to organizational performance and productivity. Any expenditure in training,
development, health and support is an investment, not just an expense.

Importance of Human Capital:

1. Although an organization or business is a separate legal entity, its ceases to exist
if it has no people - leaders, directors, members, employees - are required to
maintain an organization’s existence.
2. In a society which places a strong emphasis on competition, financial return and
viability, the people issues can sometimes be neglected.
3. Increasingly however, business and political leaders are starting to recognize that
having good people who are skilled and motivated can make a significant
difference.
4. Competition is so fierce and change is so fast, that any competitive edge gained
by the introduction of new processes or technology can be short-lived if
competitors adopt the same technology. But to implement change, their people
must have the same or better skills and abilities.
5. To grow and adapt, the organization’s leadership must recognize the value and
contribution of people.
6. Treating money spent on people as an investment in an important asset is a far
more appropriate mindset that treating such expenditure as an expense, to be kept
to the minimum amount necessary.
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Problems with Human capital:

1. Over the years, the terms used to describe staff and employees in businesses have
changed. We have moved from "personnel" to "human resources" (HR) and now
"human capital".
2. Other phrases, such as "talent management" have also emerged.
3. These terms can appear to be dehumanizing. That is why some HR manager titles
include the word "people" in preference to "human resources".
4. The important point is the mindset behind the organization’s operation.
5. If people are valued, and all management and leadership actions demonstrate that,
then the terminology is not so important.
6. In summary, people should be treated as an asset rather than an expense item.
Every effort should be taken, whether formally or informally, to develop skills
and abilities and to provide opportunities for people to maximize their
contribution.

Human capital Management or Human Capital Development:

Human Capital management or Development refers to managing an organization’s employees

for them to contribute significantly in the overall productivity of organization. Therefore
Human Capital Management is defined as the process of acquiring, training, managing,
retaining employees for them to contribute effectively in the processes of the organization. In
simpler words, upgrading the existing skills of an employee and extracting the best out of
him/her refers to human capital management.

Human Capital Development (HCD) Drivers:

Human Capital Development refers to the management of an organization’s employees for

them to contribute significantly in the overall productivity of organization. Every employee
tries his level best to utilize his knowledge and skills to benefit his organization and become
an indispensable resource in due course of time.
HCD Drivers act as catalysts for an effective human resource management.
HCD drivers fall into five major categories:
1. HCD Driver 1 - Leadership Practices
HCD Practices
Communication: Employees must be treated well for them to develop a feeling of
attachment and loyalty towards the organization. Managers must understand that their
role is not just to sit in closed cabins and impose ideas on others. They ought to
communicate well with their subordinates. Employees must have an easy access to the
senior management. Communication from management to employees also known as
Top down communication is essential for the employees to be aware of their goals and
objectives and for them to know what is expected out of them.
Inclusiveness: Management ought to sit with employees on a common platform to
invite suggestions and feedbacks from them.
Supervision: Senior executives and management must reduce the various levels of
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hierarchy between them and employees’. Management must interact and motivate the
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employees from time to time for them to give their level best.
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BUS 4.6H: HRD Strategies & Systems Unit – 4

Leadership: Senior executives should support, lead and influence the workforce so that
they contribute effectively towards the organization.
2. HCD Driver 2 - Employee Engagement
HCD Practice
Key Responsibility Areas: Key responsibility areas of an individual should be designed
in line with his education, skills, expertise, experience and also area of interest. This
way, work never becomes a burden for him.
Commitment: Outstanding efforts of employees must be acknowledged for them to feel
motivated and work harder even next time. Employees performing well ought to be
suitably rewarded and appreciated in front of others.
Time: Time management ensures that no employee is overburdened. Responsibilities
must be equally shared among employees.
Evaluation: Employee engagement must be evaluated from time to time by the top
management.
3. HCD Driver 3 - Knowledge Accessibility
HCD Practice
Information Availability: Employees must have an easy access to all relevant
information required to perform their duties. Organizations must organize various
training programs (In house Trainings or Out sourced trainings) to constantly upgrade
the existing skills of employees and acquaint them with new learning’s.
Team Work: Employees must be motivated to work in teams rather than working alone.
Information Sharing: Encourage employees to share information with each other.
4. HCD Driver 4 - Workforce Optimization
HCD Practice
Work processes: Senior management must define work processes of employees well
for maximum productivity.
Working Conditions: An organization needs to provide excellent working conditions
to the employees to expect the best out of them.
Accountability: Individuals must be held accountable for their work. Get a commitment
from employees and nothing like it, if everything is in writing.
Hiring: Individuals responsible for talent acquisition must ensure that they hire the
right candidate for the right role. Design a strong induction program for all the newly
joined employees.
Performance Management: Employee’s performance needs to be strongly monitored
and managed.
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5. HCD driver 5 - Learning Capacity

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HCD Practice
Innovation: New ideas should be welcome. Employees must be encouraged to come
out with new and innovative ideas which might benefit the organization.
Training: Trainings must be practical/ relevant and designed to sharpen the skills of
employees. Do not design training programs just for the sake of it. They must benefit
the employees.
Career Development: Employees must be aware of their growth plan in the
organization.
Learning’s: New learning’s should be valued by all in the organization.

Importance of Human Capital Development/ Management:

1. Hiring the right talent
2. Orienting him/her to the organization
3. Making a new employee feel comfortable
4. Training employees in order to constantly upgrade their skills
5. Retaining employees
6. Making employees self sufficient and prepare them for adverse conditions.

Benefits of HCD:
1. Human capital management helps in extracting the best out of employees. It also
plays an instrumental role in increasing the efficiency of employees, making them an
indispensable resource for the organization.
2. Human Capital Management enables the human resource professionals to hire the
right candidate for the right role. Talent Acquisition is one of the most crucial
functions of an individual representing human resource vertical. Remember one wrong
employee can lead to problems, confusions within the system. Superiors and
management do not have to spend much of their time and energy in training someone
who already is aware of his roles and responsibilities. Human Capital Management is
beneficial in recruiting the right talent for the organization. Hire employees who really
deserve to be in the system. The process of Human Capital management involves hiring
the right candidate; orienting him to the system and making him comfortable for him
to deliver his/her level best. It is generally observed that boring induction programs are
a mere waste of time and energy. Human resource professionals should not design
induction programs just because protocol demands the same. Induction programs
should be interactive sessions where the trainer should acquaint the new employee with
the policies of the organization. Human resource professionals should act as a bridge
between senior management and employees.
3. Human Capital management enables free flow of information between superiors and
subordinates. Employees have an easy access to the senior management and hence
there is no room for confusion or misunderstandings. Half of the problems evaporate
when colleagues discuss matters amongst themselves.
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4. Trainings and skill development activities are essential for upgrading the existing
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knowledge of employees. Training program increases the efficiency of employees and

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BUS 4.6H: HRD Strategies & Systems Unit – 4

eventually increases the overall productivity of organization. It is essential for every

employee to keep himself/herself abreast with the latest developments in his/her field.
Human Capital management makes an employee self sufficient. It enables employees
to adapt to changing situations easily. A well trained employee can bring better
productivity than someone who is not trained. The performances of employees must be
evaluated from time to time. Superiors ought to keep a track on subordinate’s work.
Proper feedback is essential. Human Capital management helps in monitoring
employee’s performance. Special online reporting systems help senior management to
have a direct access on the work of their juniors. Employees are aware as to what is
expected out of them.
5. Human Capital Management highlights the importance of soft skills and personality
development for employees. An employee who can speak well is always considered as
a trouble shooter by his fellow workers. Do not hire someone who has poor
communication skills. Someone with average communication skills can still be
considered.
6. Human Capital management helps the employees to improve in areas where they feel
they are lacking. It not only benefits the employees but also the entire organization.
Human capital asset life cycle development Model: (Hybrid model of human capital
management):
As the name suggests, hybrid model of human capital management is a mix of common
resource pool model and unique skill set model. In hybrid model, employees are multi skilled
and have diverse set of experiences and backgrounds. Hybrid model employees come from
varied backgrounds and have a generalist profile. In a layman’s language hybrid model of
human capital management includes diversified human capital.
Hybrid model includes front office staff, customer care representatives, sales
representatives and so on. This model does not include employees with unique skills set but
employees who have a generalist profile and are multitalented. Such employees can perform
various functions at a single time and thus come up with innovative ideas for the organization.
Hybrid model employees do not require extensive training. Light trainings can solve the
purpose. Employees under hybrid model do not have to perform specialized tasks and thus do
not require specialized training programs.
A customer care executive does not have to perform complex duties in his/her day to day
operations. In the same way a front office executive does not need to develop specialized skill
sets. Lighter trainings are useful for them and can make them more efficient for them to
contribute towards the functioning of organization.
Hybrid model of human capital management lacks staff members with specialized
experiences or unique skills and knowledge. One can find employees who are generalists
and thus lack in – depth business knowledge. Such employees would not be able to participate
in critical business decisions due to the lack of thorough work knowledge.
Talent acquisition is much simpler in hybrid model of human capital management. Interview
processes and formalities are not critical as in unique skill set model. Human resource
professionals need to hire individuals with a generalists profile, who do not have much say in
the organization’s major decisions, policy formulations or goal and objective setting. Hybrid
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model staff can be hired in just one or two discussions only. You do not need an elaborate
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questionnaire to hire a customer care executive or a front office staff.

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BUS 4.6H: HRD Strategies & Systems Unit – 4

Hybrid model of human capital management reduces the need of trainings. Such a model
also lacks good talented resource who can take up the responsibility of guiding his/her team
members. In this model there is hardly any qualified, high ranked staff member who can set an
example for other team members or lead them. You would hardly find someone who is capable
of being a leader or a team member. This is one of the major drawbacks of hybrid model of
human capital management.
Following steps should be followed in hybrid model:

1. Identify the skills, knowledge your organization has and identify the areas where there
is lack of skill portfolio.
2. Identify the human capital with skills and knowledge for which there is a high demand
but the supply is low.
3. Find out the expertise of employees. Talk to them and find out in which all areas they
can contribute maximum. A human resource professional ought to forecast knowledge,
skills or expertise his/her organization will need say five years or ten years down the
line. Try to analyze the projects in the pipeline.
4. Prepare recruitment models and refill strategies.
5. Try to design training programs to mentor the employees and upgrade their existing
knowledge.

Key Benefits of Hybrid Model

• Easy to train the employees
• Effective communication between team members and team managers
• Flexibility is more in hybrid model of human capital management
• Centralization of processes and functions
• Hybrid model achieves significant operational improvements

HRD Audit
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Introduction:
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BUS 4.6H: HRD Strategies & Systems Unit – 4

HRD audit is a systematic survey and analysis of different HRD functions with a summarized
statement of findings and recommendations for correction of deficiencies. Basically it
examines and evaluates policies, procedures and practices to determine the effectiveness of
HRD functions in an organization. HRD audit ensures that sound and cost effective policies
are implemented.

Objectives of HRD audit:

1. To determine the effectiveness of management programs which facilitates the

development, allocation and monitoring of human resource.
2. To analyze the factors involved in HRD and develop a statement of findings with
recommendations for correcting deviations, if any, on the following issues.
a) The extent of deviation from HRD Policies.
b) To what extent objectives are spelt out.
c) To what extent performance standards have been established.
3. To seek explanations and information and answers to all such above questions as: what
happened? Why did it happen?
4. To study the extent to which line managers have complied with HRD policies and as
such the operational problems in implementing the existing HRD policies.
5. To study the current manpower inventory and identify shortfall or excel, if any.

Scope of HRD Audit:

For integrating of personnel management with the HRD functions, HRD audit now
encompasses all the areas like

1. Review and integration of corporate mission, goals, policies and objectives.

2. Manpower planning.
3. Career planning and development.
4. Promotion and transfer policies.
5. Performance appraisal system.
6. Training and development functions,
7. Recruitment and selection etc.

Role/ Job of HRD auditor:

1. To get the current facts.

2. To study the effectiveness of the present system by answering the following issues:
a) Why was the practice introduced?
b) What would be the result if the practice is discontinued?
c) What needs were intended to be fulfilled and have those been fulfilled or not?
d) What could be the best possible alternative for fulfilling such needs?
e) What changes can improve effectiveness of the existing practice?
f) Are such intended changes economically and operationally viable?
g) Are such changes sustainable from the union’s point of view?
h) What should be the time frame for introducing the change?
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Records used for HRD audit:

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Records provide ready reference and serve as future guides. Reports, on the other hand,
describe and incident, event or situation. Depending upon the organization, the following
records / reports are usually checked for HRD audit.

1. Time study records and Time standards.

2. Records on scores obtained in tests and other examination.
3. Medical and accident reports.
4. Attitudinal Survey reports.
5. Grievance reports.
6. Turn over reports.
7. Data on work stoppages.
8. Performance reports.
9. Payrolls data.
10. Labor cost data, etc.

Methods and Techniques of HRD audit:

HRD audit can be carried out in two ways. i.e.

1. Attitudinal Survey and

2. Interpretation of data.

Importance of HRD audit:

1. Technological changes, inter alia, are calling for renewal of knowledge and skills of
existing manpower. Training function, therefore, has assumed importance. Periodic
HRD audit can help to identify the changing training needs and development of new
training modules for effective utilization of manpower.
2. To keep pace with the environment changes, management philosophy and practices at
the organization level also need to be changed, like participative management,
employee empowerment, total employee involvement etc. Need for all these, can be
understood only when we periodically undertake HRD.
3. Similarly changing role of trade unions, government, emergence of new working class,
emergence of international quality system requirements, changing expectations of
customers, new statutory requirement are now influencing HRD functions at the
corporate level, the effectiveness of which can only understand by periodic HRD Audit.

HR Audit
Introduction:

HR audit helps to develop good business practices in organization. Auditing has evolved and
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became increasingly specific after the functional audit has emerged. The objective of functional

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audit is to diagnose, analyze, control and advice within the boundaries of each functional area
of the company. The HR audit is a type of functional audit. Thus, as a firsts approach, one
could say that HR auditing consists of diagnosing, analyzing , evaluating and assessing future
lines of action within the framework of HRM. HR auditing is a basic tool for the management
of a company. Its objective is not only the control and quantifying of results, but also adoption
of a wider perspective that will aid in defining future line of action in the HRM field. Thus, HR
auditing must perform two basic functions. First, it must be a management information system
whose feedback provides information about the situation in order to facilitate the development
of managing processes or the development of HR. On the other hand it must be a way of
controlling and evaluating the policies that are applied as well as the established processes. It
can be understood that in order to secure the operative efficiency and user satisfaction and
appraisal of the results of HR function is necessary.

Definition:

HR audit is a process of systematic analysis and evaluation of HRM function. It provides

feedback on the current status of HRM function and enables to take corrective action.

HR audit Aim:

To ensure that people and people management function remain continuously aligned with the
corporate direction.

Purpose of HR audit:

1. Consistency in devotion to HR systems and processes.

2. Compliance with stated policies and regulations.
3. Business orientation.
4. Signal concern for the people and people management function.
5. Ensure effective utilization of HR in the organization.
6. Contribution of HR function to the organizations strategic objectives.
7. Align HR policies/ processes with latest trend and best practices.
8. Development of the professionalism of HR personnel by subjecting their function to
management scrutiny.
9. Initiate corrective action.

What to audit:

1. HR policies
2. HR systems and procedures
3. HR practices
4. Entire range of HR processes on all possible dimensions

Who to audit:

1. Part of management audit group

2. Pre requisites: Familiarity with HRM functions, systems, subsystems and processes
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When to audit:
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• Continuous process

Key Areas of HR audit:

1. Legal compliance: Consider hiring a local, independent law firm to ensure that your
organization is in compliance with all applicable federal, state and local laws. The firm
can check your files and records for compliance and identify areas where you could
improve record keeping or where there may be unknown violations. An effective audit
can prevent law suits and fines and demonstrate the efficiency of you policies.
2. Administration Audits: These check how well you are maintaining you overall HR
files, including personnel files kept in locked and confidential locations, separate files
for general personnel matters and confidential files. This type of audit also examines
regular HR duties including payroll processing, benefits administration and attendance
tracking.
3. Staffing records audits: These cover your recruiting and hiring practices. An audit of
this area can quantify turnover trends, reveal any gaps in meeting staffing needs, and
help you predict what your organization will require in the future.
4. Employee relations audits: These involves conducting surveys that will show how well
employees think HR handles problems and meets their training needs. They can also
reveal what employees think are good incentives. An audit in this area should review
exit interviews for insight into turnover and job satisfaction.
5. Diversity audits: These analyze whether your organization is meeting its goals in this
area. Such audits go beyond headcounts by racial or ethnic groups or gender and try to
gauge how your employees perceive your organizations diversity program.
6. HRIS audit: While these are essential after a merger, they are always useful. They
examine all software and hardware as well as integration issues. The results will
indicate whether you can cut down your technology budget or need to consider new
purchases.

Performing HR Audit:

Steps:

1. Look at HR’s role in achieving your organizations goals and strategies.

2. Investigate the current status of the HR indicators for each audit. These can include
recruitment, turnover, legal complaints, employee grievances, wages and salary market
indicators, information systems and training evaluation. Show managers the
relationship of the indicators to the organization’s goals.
3. Track employee’s and managers’ compliance with the organization’s policies and
practices. That is the true measure of their success. Protecting the organization from
legal actions is an important goal, but you want to see that policies and practices are
followed for productivity and financial reasons.

Approaches to HR auditing:
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1. Internal perspective: From an internal perspective, as in any function, there is a trend

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of valuing actions as a result of the activities undertaken and its costs. In this way, the
department capability would be judged on its ability to supply certain services to the
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organization at lowest possible cost. Under this approach, the operational

measurements traditionally are those, which refer to quantity, quality and reliability or
cost and speed, therefore place the focus on activities, costs or productivity ratios.
2. External perspective: From an external perspective, if it is understood that the ultimate
appraisal of the effectiveness of HR is based on their impact on the company’s results
and then the measurement should include results obtained outside the function.

Benefits of HR audit:

1. Meeting its strategic goals.

2. Enhancing those goals.
3. Fit together its goals with the organizations overall strategy.
4. Saving money.
5. Getting a return on investment from training expenditures.
6. Keeping checks on the benefits of vendors.
7. Meeting the organizations diversity goals

HRD & IR
Introduction:
The term industrial relations refer to the collective relations between employers and
employees as a group. It highlights the importance of compromise and accommodation in
place of conflict and controversy in resolving disputes between labor and management. The
HRD approach recognizes employees as invaluable assets in an organization and emphasizes
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that they can be developed to an unlimited extent with proper incentives, atmosphere and
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treatment.

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BUS 4.6H: HRD Strategies & Systems Unit – 4

HRD & IR Dimensions/ Trends:

They exhibit two extreme trends. They are
At one extreme: (IR)
1. Trade unions have become second line management. Managerial privileges are
eroded.
2. New generation of workers is more conscious of rights and privileges rather than
duties and obligations towards the organization.
3. Trade union remains silent about workers obligations towards organization forth
right leaders, if talk, they are dubbed as management stooges.
4. Trade unions succeeded in getting more through pressure and violence than by
reasoning.
5. Collective bargaining has become a pressure game. Unions are exploiting the
emotions of workers.
6. Only fear and force can restore discipline.
7. Trade unions must be dealt with a heavy hand. (i.e. Authoritarian or hard approach).
At the other extreme: (HRD)
1. Human beings are considered as assets not liabilities.
2. Employees should be cared for, persuaded and motivated.
3. Conflict and confrontation can be avoided. Win-Lose strategy does not work for
long.
4. Managers should not spend much time on trade unions wrangles but on preventive
and proactive approach.

Basic assumptions of IR & HRD/ Differences between IR & HRD:

Industrial Relations Assumptions HRD
Employee-employer Employer-employee
relations are contractual relations should be based
Philosophy
and enveloped by on trust, understanding
economic factors. and openness.
Intrinsic rewards spur
The emphasis is on
Rewards people to superior
extrinsic rewards.
performance.
Develop the employee
through HRD initiatives:
The focus is not on
Focus Caring, Counseling,
developing the employee.
mentoring, helping, and
coaching.
Follow the code book and Preventive, collaborative
put out the fires as quickly Orientation approach where relations
as you can. matter most and not rules.
Pluralist Nature of relations Unitarist
Managerial task Vis-à-vis
Monitoring Nurturing, caring, helpful
labor
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Institutionalized, Conflict Conflict could be

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Unhealthy and is at the functional, stimulating

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BUS 4.6H: HRD Strategies & Systems Unit – 4

core of industrial and healthy if used

relations, reach temporary properly; manage climate
truces. and culture.
Restricted flow Communication Increased flow
Division of labor Job design Team work
Negotiation Managerial skills Facilitation

HRD approach for dealing IR:

1. HRD generally covers some subsystems. E.g: Training & Development, Counseling,
Performance appraisal, Career Planning etc.
2. HRD concerns are: It looks human beings with more insight, with increased
sensitivity. It advocates core values like – human dignity, openness, positiveness,
and flexibility and family feelings as against hatred, suspicion and animosity.
3. HRD approach is proactive, not reactive.
At individual level:
4. Formal & Informal grievance handling
5. Suggestion schemes
6. Recognition of merit
7. Work place communication
8. Counseling
At organizational level:
9. Following Mission & Objectives
10. Healthy interaction with trade unions
11. Goal setting through mutual discussions
12. Participative forums
13. Effective communication processes and team working
14. Reduction of red-tapism

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