The Evolution of Human Resource Management and the Contemporary Approach to Human Capital Management

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It is, therefore, a measure of an employee’s economic value based on the employee’s skill set. The concept of human capital appreciates the fact that labor is not equal, and human capital can be improved through investment in training and development. The quality and level of education, experience and skills of an employee have economic value to employers and the whole economy (Skelton and Anderson 2008). Human resource management (HRM) is the process of hiring and developing employees in order to make them more valuable to the organization. Formerly known as personnel management, HRM evolves into a broader profession engaging more actively in employee management to include tasks such as, conducting job analysis, recruiting the right people, orientation and training, dispute resolution and communicating with employees at all levels. HR professionals must possess extensive knowledge of the industry and demonstrate leadership qualities and effective negotiation skills (Skelton and Anderson 2008). Overview of human resource management The Society for Human Resource Management (SHRM), in 2005, found that 54.8% of HR professionals worldwide encountered bureaucratic obstacles and marginalization in their careers, in the organizations they worked with (Lundy and Cowling 1996). In light with the terms used to define HR professionals today, for example, ‘strategic partner’, HR has adopted a more strategic role in management unlike the previous functional role. For example, in 2005, Mercer, on his global study on HR found that half of the companies were restructuring to give HR a more strategic role. HR managers have shifted from the more traditional approach of role reporting that was mainly transaction based where they had to report to an administrative manager. They are now currently members of the senior management. Unlike other professions like insurance and banking that have a more identifiable consistencies and an almost linear evolution path, HR’s role within an organization can almost be described as scatter gram characterized by a series of disjointed activities(Lundy and Cowling 1996). Borrowing from the first principles of evolution, HR has gone through an inter-generational process of variation, selection and retention of the best practices. Variation implies acquisition of new kinds of skills sets, motivations and expectations, and triggered by various internal and external environmental changes among HR professionals. These forces selectively eliminate certain variations and promote other variations to be favoured by the selection process. While variation is personal, selection impacts the structure of workforce of an organization. Studies have documented that, organizations deliberately preserve, duplicate or reproduce the selected variations as has been confirmed by the spreading of strategic HR practices through geographical regions and organizations (Lundy and Cowling 1996). Where technological innovations such as software applications have made functional tasks for HR professionals obsolete, HR professionals have had enough time to articulate on strategic goals instead of routine administrative tasks. For example, payroll software automated previously labour intensive tasks for HR professionals, leaving them with ample time for higher strategic thinking required by the knowledge economy. More sophisticated technologies like the 360-degrees performance appraisal programmeemphasizes strategic management skills, and the accompanying software requires HR professionals to upgrade their skill set to levels required in using and developing these technologies. Virtual offices have eliminated the ability to monitor employees manually, necessitating use