HUMAN CAPITAL PRACTICES

for
CULTIVATING INNOVATION IN ORGANISATION
PPM – Human Capital Forum 2013

PPM Manajemen
Jln. Menteng Raya 9, Jakarta 10340
Telp : (021) 3140112 ; Fax : (021) 3909311 ; www.ppm-manajemen.ac.id
 Human Capital Definition
Accounting for People Task Force (2003):
 HCM a strategic approach to people management that focuses on the issues
that are critical to the organization success.
 People management as a high-level strategic issues and seeks systematically to
analyse, measure and evaluate how people policies and practices create value.
CIPD (2006):
 A HC approach implies that a realistic business strategy must be informed by
HC data.
 HC it’s not primarily about measurement (metrics), it’s about creating and
demonstrating the value that great people and great people management add
to an organization.
Donkin (2005):
 The organizational strength of HCM lies in 3 areas:
 Development and application of relevant measure;
 Gathering and interpreting results;
 Utilising this information for strategic advantage
 HRM - HCM
Scarborough and Elias (2002):
 HC concept is most usefully viewed as a bridging concept, it defines
the link between HR practices and business performance in terms of
assest rather than business processes.
 HC = non-standardised, tacit, dynamic, context dependent and
embodied in people.
 Many definitions of HC  HC is treated as one of the three elements:
o intellectual capital = the stocks and flows of knowledge available to an
organization
o social capital = the features of social life – networks, norms and trust –
that enable participants to act together more effectively to pursue shared
objectives
o organizational capital = the knowledge owned by the organization rather
than by individual employees – embedded or institutionalized knowledge
that may be retained with the help of IT on readily accessibleand easily
extended data bases.
 The Practical Implications of
INTELLECTUAL CAPITAL Theory
1. Human capital issues concerning the attraction,
retention, development and reward of people in order
to create and maintain a skilled, committed and well-
motivated workforce
2. Social capital considerations relating to the design and
development of organizations that enhance the
processes of developing, capturing and disseminating
knowlegde
3. Organizational capital issues concerned with knowledge
management
 The Concept of
Human Capital Management
 Kearns, 2006: HCM is concerned with obtaining, analysing and reporting
on data that informs the direction of value adding strategic, investment
and operational people management decisions at corporate level and
at the level frontline management.
 HCM is concerned with purposeful measurement
 4 fundamental objectives:
o Determine the impact of people in the business;
o Demonstrate that HR pactices produce value for money (eq ROI);
o Provide guidance on future HR and business strategis;
o Provide diagnostic and predictive data that will inform strategies
and practices designed to improve the effectiveness of people
management in organization
 The Evolving Focus Of Strategy & The Role Of HRM
(Jon Ingham)
Competition for
Competition for Competition for
Resources and
Products and Markets Talent and Dreams
Competencies
Strategic Objectives  Defensible product-  Sustainable competitive  Competition for talent
market positions advantage
Major tools,  Industry Analysis,  Core competencies  Vision and Values
perspectives competitor analysis  Resource based strategy  Flexibility and
 Market segmentation and  Networked organization innovation
positioning  Front line
 Strategic Planning entrepreneurship
Key strategic  Financial Capital  Organizational Capability  Human and intellectual
Resources capital

Perspective on  People viewed as factor  People viewed as  People viewed as

employees of production valuable resources “talent investors”

HR Role in strategy  Implementation support  Contributory  Central

Key HR Activity  Administering  Aligning resources and  Building human capital
recruitment, training, and capabilities to achieve as a core source of
benefits strategic intent competitive advantage
Shifting From Personnel Administration To
Human Capital Management

FROM TO

Cost Center Competitiveness Provider

Efficiency Effectivity
Cost Value Added
Input Output
Data Collection Data Analysis
Traditional HR Operational Performance
 The imperative for business leaders is
to build organizational capabilities
that support
innovation, flexibility, collaboration and
continuous learning.
Cornell University
 Learning
Agility

Human
Capital
Management

Innovation Talent
Capabilities Optimization
 ENHANCING LEARNING AGILITY

1. Nuture people to be creative and generate ideas that can

drive the business agenda.

2. Not only do people improve individually, they raise the

level of the people around them and expand the
knowledge base of the group.
 Enhancing Learning Agility
Practices
1. With organizational structures evolving to matrices instead
of hierarchical structures,
2. Groups of people are charged with working together
toward a common goal, but often lack the communication
and decision-making capabilities to succeed. Within this
collaborative context, organizations.
 TALENT OPTIMIZATION
1. The proposition that striving for excellence is an
inherent goal for the individual and the enterprise.

2. The organization enables personal achievement to

superior performance.
 INNOVATIONS CAPABILITIES
1. Environment that supports it and through processes that
enable it.
2. Innovation also depends on the ability to productively
incorporate diverse contributions.
3. Valuing workforce diversity in the broadest sense implies
that those differences yield the greatest benefits for
innovation
4. When contributions enable a sense of inclusion and the
integration of multiple perspectives
5. The spectrum of methods to support innovations broad,
ranging from ideation-orientated creativity to
mathematically-based processes.
 HUMAN CAPITAL MANAGEMENT PROCESS
HC ACQUISITION Recruitment & selection
HC INFORMATION SYSTEM
Corporate Direction , placement

Workload Analysis HC Planning & Control Outsourcing

Strategic Planning
Corporate (Group) Vision, Outplacement/
Mission, Values, Business Termination
Strategy & Policies

HC DEVELOPMENT Functional/technical
Competence
Development
Competency People
Assessment Development
Business Plan & Management
Budgeting Development Programs

Result Measurement
Succession Planning Business Result
Achievement
Talent
Organization Design Development
Career Development

• Org Structure
Value added to
• Job Description HC ENGAGEMENT stakeholders
Employee Industrial Employee Satisfaction &
Engagement
Separation
Relation Relation

PEOPLE MODEL
HC RETENTION
Competency Model Business Corporate Corporate
Performance Driver KPI Perf Mgt System
Job Competency
requirement Individual Employee Perf
Job Evaluation KPI Mgt System

Job Classification Salary Remuneration

(Grading Structure) Structure System
HC STRATEGY
 HUMAN CAPITAL REQUIREMENT
1. Aquisition the right talent :
a. A deep understanding of business strategy drives both interim and long-
term.
b. Human capital need an appropriate profile, size and deployment
c. Evaluating current capabilities
d. Level of investment required to successfully operate
2. Develop their competency and potency :
a. Sophisticated, relevant and flexible enough to meet short business cycles
b. Introducing common language, ideas and tools that provide a foundation
for long-term success.
3. Retain and Engage all throgh the year :
a. Job designs
b. Career trajectories become part of a broader, more nuanced discussion
that must consider social, political and personal values or motivations as
well
c. Compensation practices which flexible and appreciate innovation
 PEOPLE MODEL PRACTICES
1. Identifying high-potential employees in the context of a
company’s long-term strategic goals
2. Top management seek to attract and select “premium
employee “ :
 Enhance client and customer interactions
 Enhance foster internal relationships necessary to
pursue new opportunities.
 Enable a shift from an individual-focused culture to
behaviors focused on collaboration and generative
thinking(cultural fit with a team based organization)
 JOB DESIGN & RESPONSIBILITY
1. Developing entrepreneurial unit within the organization :
 Giving people the freedom to think differently and
without the binds that usually are found at larger
companies
2. Create an environment in which people think in a new way,
with a workforce that is constantly learning, adjusting and
adapting to new situation
3. Share resources and often collaborate across departments,
institutions and industries
 AQUISITION
1. The top management recognize the importance of creative
& talented individuals they will often employ them
regardless of officially “vacant” positions
2. Ideal employee possesses requisite knowledge and skills as
well as cultural fit with a team based organization.
3. The organization uses behavioural interviewing techniques
to identify individuals :
 The required experience & expertise
 Problem solving behaviours to fit the organization.
 Core organizational values
 DEVELOPMENT
1. Invest more in development and education
2. Development programs must give employees more opportunities of
participation, align and experience to collaboration within work
groups and across organizational boundaries.
3. Sharing expertise across the enterprise, key knowledge holders and
the request that they conduct master classes for other - which they
receive additional bonuses
4. A focused organizational learning effort to set of disciplines and a
cultural imperative.
5. Mostly on-the-job and work-related
 RETAIN
1. A very detailed method of goal setting and performance monitoring,
documented and broken down into quarterly targets.
2. These targets are also linked to corporate target and bonuses.
3. Compensation system to encourage employees to contribute their
knowledge and skills.
4. The company has established guidelines for remuneration however :
still maintains :
 Flexibility to pay additional monies to highly skilled individuals
recognized as key contributors to the intellectual capital of the
organization.
 Recognition and reward given in the form of benefits such as
international conference attendance and personal development
opportunities
 ENGAGEMENT
Overall, the company promotes a family-friendly, flexible and
casual work environment :
1. Induction package presented on a CD/ CBT
2. End-of-project parties
3. Casual attire in the office environment
4. Ied / Christmas party with family
5. Performance to large social functions when the company
wins awards or exceeds past target
Innovative Companies
 AQUISITION

1. Assessed using the the new people model for competency

& include personality
2. Breakthrough practices :
– To bring along vendors/customers during selection process of
branch manager.
– Key Vendors & customers assess candidates for branch manager
 DEVELOPMENT
1. Use the result in for design development program Invest
US$ 50 billion to send 200 employees to pursue Master
degree abroad
2. Design development program that gives exposure to
improvement /innovation projects
3. Implements progressive career plan program (new
practices)
4. Give opportunity for potential personnel to achieve highest
possible career path
 RETAIN & ENGAGEMENT

1. New Renumeration System based on :

– Position,
– Personal Competency
– Performance
2. Performance-based culture