Human Capital: Weak Link in the Chain

Jan 5 , 2019

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The government’s drive to achieve economic development has gone a long way, as is evident in the nation’s success in reducing poverty and attracting foreign direct investment. A crucial ingredient has been missing though, which is human capital development, and it is not a problem limited to the public sector, writes Senay Lemma (senaylemma2@gmail.com), a human capital manager.

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It has now been less than a year since the majority of Ethiopians happily received Abiy Ahmed (PhD) as their new Prime Minister. After the Premier’s inaugural speech and subsequent stirring addresses, as well as subsequent moves toward shaking up deterring structures and unwanted practices in the existing system, many Ethiopians have come to believe that change has just begun to open a new chapter in the history of the nation.

The new administration is determined to make a holistic reform toward creating a more effective national development platform that in due course will bring a turnaround in the lives of millions of citizens.

Having acknowledged all the difficult challenges forward, the outcome of the change process will depend on the effectiveness of the new leadership to produce ready human power at all levels of the economy. Clearly, a country which is unable to develop the skills and knowledge of its people and utilise them appropriately in the national economy will be unable to develop anything else.

This implies that any development is unthinkable without developing the human capital of a nation, because people constitute the ultimate basis for the wealth of nations. Capital and natural resources are passive factors of production, while human beings are active agents who accumulate capital, exploit natural resources, build social, economic and political organisations and carry national development forward.

Taking in to account the significant impact of the new initiatives, the government should support both public and private organisations to rectify outstanding glitches in human capital management practices. Most of all, the focus should be given to addressing malfunctioning people management practices.

Of course, the problem gets worse when it comes to government organisations where the role of human capital has long been downplayed and is indeed transactional.

Now, more than any time, the government’s primary priority should be a serious review of existing policies and legal frameworks pertinent to human capital management practices. It would otherwise be daunting for the country to achieve newly aspired macroeconomic growth and transformation levels through outdated human capital management practices that have long been deterring progress and the betterment of living standards. Moreover, it would be very tough and unimaginable to stay competitive in the dynamic business world.

Experience has shown that most organisations in the country have several barriers impeding the role of human capital from advancing to the next level. Implementations of available human capital practices in organisations that operate under different sectors have been responsible for the growing public discontent, especially during the past two decades.

Most, if not many, undertakings do not consider human capital as a strategic business partner, but they instead leave it aside to remain functioning as a cost centre and police station.

It is not uncommon to see human capital losing its business purpose and playing the role of politics under the cover of traditional administrative and control roles. The crucial role of human capital is also neglected in private companies in which the cause may be attached to the absence of professional help.

Generally, stakeholders have been known to stay without having a clear understanding of the importance of human capital management and its astounding role in positively impacting the bottom line.

In addition, leaders who are held accountable for nurturing the human capital of organisations in the country have hardly been encouraged to improve their skills. These have been few among the many critical challenges holding back the development of human capital in various sectors as a result of which corruption and poor service provision became realities on the ground.

All of this has been happening in the presence of off-purpose human capital delegates with little perceivable intention of delivering learning programmes on codes of ethics and social values to staff. One might hope and say if human resource teams were able to play their ideal role in their respective workplaces, it would have been possible to reverse the ill deeds that painfully hurt the development of the country.

There is a better way forward. Organizational design, leadership, culture, engagement and learning are the top five human capital trends that should get priority by top executives, according to Deloitte’s Global Human Capital Trends Report of 2016.

Organisations are changing their structures from top-down hierarchies to a network of teams that deliver faster results. Engagement is shifting to a constant employee listening process. Learning and development programs are shifting from an internally-focused, corporate-centric learning universe to a learner-centric approach.

The future of human capital will greatly depend on its ability to smoothly integrate people, business and technology, which promotes good planning ahead of time to make sufficient successors ready as needed, to conduct timely and fair recruitment and selection processes, to put viable incentive and variable pay systems in place, and to measure, recognise and reward performance.

Studies show that companies with excellent human capital management policies and procedures have been shown to perform significantly better than their competitors, and regularly achieve higher year-on-year improvements in key business metrics such as customer satisfaction, retention and revenue.

Bringing human capital closer to the business is allowing it to play a strategic business partner role. This enables businesses to definitely outstrip rival firms on important financial and non-financial indicators.

There are ample opportunities for improving existing human capital practices in most. The key is to let it become a strategic business partner just the same way as finance and marketing.

It is compelling for owners and business leaders to first change their oblivious outlook toward the importance they give to human capital management. They need to be informed that in the global environment much of this role is transforming.

The belief that employer-employee relations are just contractual should be changed since organisational activities require human efforts and capabilities. Organisations depend on the performance of people for achieving their mission and goals. Employers, therefore, be it in a private or public setting, should appreciate the psychological attachment required between the employee and the organisation for any success to occur.

Recruitment of professionals in general and appointment of leaders should be based on merit and should be detached from political and ethnic affiliation.

It will be rewarding if the government considers conducting a national survey to assess the existing human capital challenges. Identifying and prioritising the factors that need immediate actions is crucial, which includes getting to know the human capital skill gaps, actual practices and traditions and the leadership culture. Consequently, it would be important to design a national framework based on survey findings to revitalise human capital practices and ensure their implementation.

To support and sustain the recent change we have been witnessing, the government should reform its Ministry of Public Service & Human Resource Development. It should be reinvented to accommodate and resemble the recent political and economic developments in the country. Accordingly, embedding modern human capital management practice and building the internal capacity of the Ministry should be at the top of the agenda to provide effective and efficient service to citizens.

This view toward human capital development should also extend to universities, which have been providing generic supply driven studies without clear linkage with the labour market's requirements. The education system should be re-examined and shaped to produce competent human capital to feed the labour market demand for now and for the future.

Business leaders should also know that human capital is no more a back-office function. Behind every successful organisation is a great human capital department. The top executive leadership of enterprises should make sure whether their human capital professionals in charge are real business partners who strive to think like business people, are familiar with contemporary human capital models and practices, have business acumen and are responsible for cost reductions and the measurement of all human capital programs and processes.

Human resources teams, for their part, will have to prove they are business savvy enough to sit at the executive table. Moreover, the leaders in the company should play the roles of employee advocate as well as change champion and roll out constructive and targeted programs that can help align attitudes, work cultures and the role of positively engaged human resources.

To this effect, it is advisable to consider human capital management and development as a top priority for achieving sustainable national development. In doing as such, it is imperative to establish a task force that will first diagnose and identify the bottlenecks related to practices on the ground and come up with actionable strategies resulting inappropriate policy formulation, issuance, and implementation.

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PUBLISHED ON Jan 05,2019 [ VOL 19 , NO 975]

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