Part IV – “People are our greatest Asset” – Human Capital Management

Part IV – “People are our greatest Asset” – Human Capital Management

“People are our greatest Asset” – Human Capital Management
By Mahesh Jayasinghe (Phd student, Management Consultant, Executive Coach, Trainer & Lecturer)

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Very often we hear managers say that people are their greatest asset. What do they mean by this? If people are an asset, why are they shown as a liability in company financial statements?  Do managers really value the buildings and other non movables more than their people?

This is the beginning of series of articles that will look into the evolution of human capital management concepts.

When we go into the history of evolution of mankind and history of origin of management we may be able to identify some connections between the people and the organization. Stages of Evolution of Management is given below

Early thought of management

If we look back into our history, Kings build great Dagabba’s, Stone Carvings, Statues for example Sigiriya Rock Castle, Anuradhapura, Polonnaruwa era buildings, which justifies a great level of management practices. Similarly the Pyramids of Giza, Egypt or the Taj Mahal of Agra India is some of the great creations of mankind.  If people can do such great wonders during the ancient era, why they are yet not treated like assets. Something to think about?

On the 6th Century, Sun Tzu, wrote in “Art of War” the initial taught on management, strategy and knowledge.  He identified the importance of strengths and weaknesses of personal who were involved in war in terms of planning and executing strategy. Chanakya wrote in Arthashastra in 300 BC, various strategies, techniques and management theories were written on management of empires, families and economy. Among the many writers of management, Adam Smith a Scottish Philosopher in 1776, wrote in the Wealth of Nations an efficient organization of work through specialization of labour. Smith described how changes in process could boost productivity in the manufacture of pins. Although there were some evidence of people being recognized for their efforts and skills, in most instances employees were treated like as they were the property of management.

Considering this phenomena even in today’s context we see organizations in private sector treat their employees as if they own them, in terms of their time and respect. Let’s elaborate this further going forward.

Classical Approach

The period under review was 1856-1915. Among the many writers of this era , Fredric Winster Taylor , The father of scientific management theory identified by analyzing work , one best way of managing people. He identified the importance of Division of Labour, Time and Motion Study, standardization of work processes and task, focus on systematic selection methods and payment for people based on piece rate. Since this was the beginning of the Industrial era, most of the organizations were manufacturing steel and heavy construction equipments, machinery and spare parts. The tasks were assigned to people based on their specialization. Employees were treated like “machines” were their activities were strictly monitored. Employees were made to feel that, if they do not want to work the way management wants them to work, the door is open. In today’s terms “my way or high way”? Since the production processes were designed as an assembly line operation where employees need to work together as a team to complete the finished output. However they were all paid piece rate. This led to many complications which gave rise Neo Classical Approach to management.

Today after 100 years, we still practice the concept of scientific management theory in our organizations. Employees paid on piece rate, division of task, standardization of work processes, work study to name a few. Although some of the concepts of the scientific management theory are applied after adapting to today’s context, we are yet to identify a scientific process of answering the question “Are employees our greatest assets”

to be continued…      

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