Human Capital in the New Economy: Devil's Bargain?
Human capital embraces both the broader human resource considerations of the business workforce, traditionally known as the labor market, and the more specific requirements of individual competence in the form of knowledge, skills and attributes of managers and the people they manage.
Dynamic global change has impacted swiftly on the way talent is managed in businesses. At the end of the 1980s Charles Handy used the shamrock metaphor to describe the organization of the future with three shamrock semi-circles describing the division of the workforce. These divisions were the core staff of loyal employees, those who were contracted and paid for services rather than by tenure, and the flexible rump of temporary workers.
While Handy's analysis was a useful structural insight, even futurists have not predicted the pace of change in the labor market.
Globalization, various government policies, cycles of labor market de-regulation, technological innovation, the breathless nature of competition and new patterns of working have assailed the notion of a psychological contract between employers and employees. These new patterns of working include different organizational imperatives and changing worker aspirations and expectations.
The notion of the employment relationship is changing not only in relation to temporary or contract workers. Distinctions between employees and the self-employed have blurred and old conceptions of single employer-individual employee relationships, for so long the norm, have been challenged by the emergence of multi-employer-worker relationships.
What workers need for the new economy
If the modern day labor market is developing such a different complexion, what competencies do workers require? Work competence is made up of the requisite knowledge, skills and personal attributes needed to do the job.
If the attachment factors of human capital in the new economy emphasize short term involvement as temps, self-employed or shareholders, workers will first of all need to possess knowledge that is specialized, differentiated and relevant to industry. No knowledge worker can afford the trap of technological obsolescence. It is imperative to sustain technological literacy.
Workers need some knowledge of operations and processes and they will need at least generalized knowledge of the changed business environment and the potential of e-business. They will need transferable skills that are up to date, technologically relevant and portable and these include the ability to work in a team.
Workers need to be capable of building relationships and the ability to work on multiple projects at one time. They need client-focused skills and a general marketing consciousness about products and processes in an e-business environment.
The personal attributes required involve self-confidence, resilience and the ability to be flexible and adaptable. Most importantly they must be able to handle ambiguity. If job security is no longer tenure-based, new economy workers will need to be psychologically able as well as technologically proficient to scan the environment and recognize opportunities.
The more volatile reward structures in the new economy mean that professionals, in particular, with knowledge of their own market value and the negotiation skills to extract it will prosper. Underpinning the development of human capital is the requirement for fast learning and the need to acknowledge that learning cannot stop. The culture of the modern workplace is less about organizational loyalty than it is about teamwork, collaboration, relationship building and what could be called aggregated individualism based around project work.
"The competencies needed by workers have moved from dependability factors, such as loyalty, company, tenure and job security, to adaptability factors, like individualism, flexibility, resilience and change-orientation."
There can be a danger to business in attenuated relationships between people and organizations because of the risk of forgetting that developing talent is business's most important task. However, if it is assumed that people development can occur only in the way we have conventionally undertaken it, largely through organizational structures and processes, then it may be a false assumption. If it is instead accepted that there exists a transitional model of human capital and that significantly different individual competencies are needed by workers, then this does not spell death to people development, it simply makes the job different. It is different because the competencies needed by workers have moved from dependability factors, such as loyalty, company, tenure and job security, to adaptability factors, like individualism, flexibility, resilience and change-orientation. This shift alters traditional methods of people development as the control of work relationships subtly changes, both structurally and culturally.
If people relations are the "glue" of human capital development in the new economy, and conventional organizational structures are increasingly redundant, the spotlight is thrown onto managerial competencies and an individual's self-directed learning for work. A fundamental realignment of the managerial function in the new economy has occurred as increased self-management accompanies greater worker autonomy in business. This means that modern managerial competencies are more likely to be enabling and interacting rather than controlling and commanding, which does not necessarily reduce the difficulties inherent in managing the employment relationship. It may, however, shift the balance towards a combination of robust contractual arrangements and higher trust relationships.
There are a number of managerial competencies that are generally recognized as appropriate for the new economy. These are profitability, marketing competence and the three recurring themes of change management, risk management and knowledge management.
However, an additional and complementary taxonomy is required specifically to address the knowledge, skills and attributes managers need to develop talent in the new economy. Such a complementary taxonomy will require new thinking from management educators. For example, current human resource curricula spend considerable time on organizational behavior that may need to give way to a greater emphasis on human behavior and basic individual psychology.
Similarly, formalized "soft skill" development in interpersonal communication may pay as much dividend as the concentration on the harder wiring of ICT literacy in management education.
So how will managers develop these competencies? Government and economic development policy agencies emphasize the lack of management and leadership in innovation within the new economy. Suggested remedies include improvement in educational levels in order to move from prescriptive job titles to a focus on the desired end result. Research has been less specific about the nature and form of such competency enhancement. It is clear while on-the-job training remains important to specific industry sectors, such as the software industry; there is a shift from training towards self-directed education by ambitious, mobile professional workers who anticipate their own management potential.
Managerial competencies are not necessarily generic, nor will they all be located in one "super-being". They are contingent, too, on such things as the industry sector, the size of the organization and the degree of competition in the market.
What are the implications for executives if people development is required to be different rather than off-loaded and ignored by organizations? First, executives will need to recognize and acknowledge the fundamental differences in employment relations, including worker aspirations, which underpin the modern, knowledge economy labor market. Familiar thinking about HRM may be out of date and will not necessarily lift human capital to the levels required. For example, staff development is often enclosed in budgetary data under the label training and is often primarily spent on instrumental, in house skill development. But to attract and retain quality people, executives will have to understand that workers want self-development opportunities that combine self-actualization with company enhancement.
The new economy
The changed nature of human capital in the new economy requires workers, their managers and executives to possess different and sometimes unconventional characteristics to survive. Ironically the breathless nature of business, which is perhaps the only constant in the new economy, is generally blamed for the one time-deficit that can make a difference – time for people.
However, understanding what it is that drives the knowledge economy and how best people are attracted and attached to employment, what motivates them, and the nature of the employment relationship, requires a challenge to traditional conceptualizations of human resources.
This is a shortened version of the article which appeared in the Journal of Intellectual Capital, Volume 5 Number 1, 2004.
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