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The Paradigm Shift in Perception Evolution of Human Resources to Human Capital: A Strategic S

by Shri Dharmasthala Manjunatheshwara Institute For Management Development on Thursday 7 February 2013, 11:24 PM | Category: Campus Articles| View: 1873 views
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  The Paradigm Shift in Perception

Evolution of Human Resources to Human Capital: A Strategic Shift

Author: Syam Thomas



The article talks about the different strategic reasons as to why organizations shifted their perspective towards their workforce. It also addresses on how organizations have found it important to attain and retain the best talent so as to yield more benefits out of their employees.


The Paradigm Shift in Perception

Over the past century, we have seen how the world of business and management has evolved from a product-oriented era to a customer-oriented era. This shift has seen a huge change from a labor-intensive business environment towards a capital-intensive business environment. It not only saw a reduction in the use of labor but a higher output also. Organizations realized the need for workers who can help them solve problems and make good decisions, rather than just do manual labor. This resulted in a decrease in requirement of blue collared workers and an increase in requirement of white collared workers. The dynamic nature of business environment clearly outlines the evolution of labor or human resources from just a set of individuals who make up the workforce of an organization to a narrower concept of human capital. The workforce is now considered a capital, which can be invested and reinvested upon in order to make profits for the organization.

Let's consider an example to understand this shift more clearly. Traditional banking involves routine transactions being carried out at branches located at accessible points, serving customers during a specific time period. But over the last two decades the advancements in Information Technology has led to many of these transactions being carried out online, in order to serve the customers better. As a result the access points or branches have to deal with more complicated and richer transactions, instead of simpler transactions that can be carried out online or with the help of an ATM. This has brought down employment requirement in branches, but has raised the standards to be maintained by the teller staff. Teller staffs now have to be well trained and customer centric, and also have to be good at cross selling. The employees are required to be technologically well trained, as they will have to understand the information system with which they are working.

Traditional human resource system tries to hire people at the lowest possible cost. But, today organizations have realized that to implement good strategies they have to hire the best people. This in turn results in higher costs.


Organizations have started realizing that in order to improve their productivity, a more skilled workforce is required. If their workforce is educated and skilled they can bring in more for the company in every aspect. This has led to workforce being considered a capital that needs to be invested in, rather than just a resource that can be exploited.

Another reason for this shift could be the rise in competition in almost every industry. The rise of new industries has also posed threats to other industries. This rise in competition has led organizations to understand that the talent, which is required for the specific needs of the organization, has to be found, developed and retained within the organization.

Organizations have also started realizing that people are their most important asset, and if sustained in the right manner, with the proper care and nurture, this asset could be used to maximize profit and bring in the competitive edge that they require in this ever-dynamic business environment.

Organizations have realized that with a workforce that is committed, capable and clear about its strategies and objectives, the organization stands at a better position in the business environment. Employees who understand its vision and mission are crucial for survival as well as to make an impact.


With organizations recognizing their workforce as an asset, the whole system saw the inception of a rapid change.

A new type of employees emerged, known as Knowledge Workers, workers who sell their ideas, creativity and problem solving skills to organizations. These employees were specifically recruited for their knowledge on particular problems; almost contrasting to the age old era were physical force of employees were sold for money.

A new type of focus was brought into organizations known as Employee Strategic Focus. It focuses on each individual and his or her part in the organization. The focus has moved from the group to an individual. Organizations take time to explain to each member of the organization what his or her focus should be, and how it helps the organization on the whole.

New methods relating to training and mentoring have been introduced in organizations. Employees' skills are analyzed and are trained in the area where they are weak. They are also mentored instead of just micromanaging them. They were now assets that need proper shaping and modification so as to serve the organization better.

A new system came into being called feedback. It let employees give suggestions to the organization about things or situations that they thought needed change. This varied from the previous system where, employees were forced to implement orders. This system of feedback is employee centric and gives more power to employees to accept the changes that they like and to reject those they are not comfortable with. Of course there are limitations to it, but a voice of opinion has been established for the new age employees.

The concept of Talent management was introduced to implement new strategies to source, attract, select, develop, train, retain and promote employees within the organization. The human resource system was more personalized and the concentration was on not only to hire the most qualified and valuable employees but also to place a great deal of importance on retaining and satisfying these employees, who were now a crucial part of the organization.

Another result of this shift was that employees and their achievements were now acknowledged. This not only brought about a sense of pride in employees, but it also brought in competition among employees to attain these achievements. This resulted in higher productivity and effort from employees.

Most importantly organizations stopped perceiving employees as just lifeless pieces of resources that can be used and thrown away, but as assets that have to be cared for in order to attain results. As a result organizations started to create relationships with employees, by not just concentrating on their work life, but by trying to attain a work-life balance, so that they are more satisfied and proportionately more productive.

Future expectations:

The only thing constant in this world is change itself, and in the business world it is rapid change. In this dynamic business environment, what to expect next is a difficult question to answer. The change in attitude towards employees with time and the advanced studies on how to find, train, develop, motivate and retain these employees show that organizations consider attaining and retaining the best talent as a major concern. This is a clear indication that employees are in fact turning out to be the most important assets for an organization. This could result in employees being considered more as a source of value creation for shareholders rather than a cost to be minimized.  Hence, when investors look into organizations and opportunities to invest in, the major factors that they consider are the power of the workforce an organization has and what the organization is doing to nurture them.


Paper: Insights into Employee Motivation, Commitment and Retention.

Author: Barbara J Kreisman


Paper: Strategic Human Resources and Human Capital Development: Strategies for Managing the 21st Century Workforce.

Author: Kristie Roberts


Article: Stand up for Human Resources

Author: Mark A. Huselid


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