Human Capital Essay Example | Topics and Well Written Essays - 2250 words

Human Capital - Essay Example In the current scenario, people are the differentiators of a business enterprise; human capital is the profit lever of the knowledge economy. Human capital is the combination of genetic inheritance, education, experience and attitude towards life and business (Bontis & Fitz-enz, 2002). Human capital is the source of innovation and strategy. Sustained competitive advantage can accrue from a pool of human capital. Human capital adds value and is not substitutable. With these factors in mind, IBM, world's leading IT hardware, software and services company has devised its own strategy for recruitment and selection. Gordon (2002), states that organizations encounter difficulties in recruiting and retaining top talent because they have yet to deal with today's most critical human resources issues. It is essential to create a talent powered company consisting of highly motivated, skilled and loyal employees because such companies not only recruit the best but also retain the best through employee-centered strategies. In toady's world compensation packages do not matter. What is important is for the managers to take responsibility for retaining the best people. Managers need to meet their employees to discuss workplace concerns and possible solutions. If the managers are able to identify what the employees value, then they have the key to retention strategy that does not rely solely on financial benefits. Person-Organization (P-O) fit is the new approach that attempts to understand the selection process as this is directly related to talent retention within the organization (Westerman & Cyr, 2004) . Research suggests that the recruiters' perception of fit is often inaccurate as they are more predictive of hiring decisions than the actual fit between an applicant and the organization. High employee turnover is a consequence of poor P-O fit. IBM however follows a different system of recruitment and selection and is able to retain talent. They believe in equal opportunity, in work force diversity, they believe in promoting women and also re-employing the older staff. While HR practices were traditionally performed internally, companies have increasingly started outsourcing such activities. Recruiting and selection (R&S) has gradually become one of the most outsourced HR functions (Ordanini & Silvestri, 2008). According to the transaction cost principle if the cost of using the market is lower than that of internal production, it should be outsourced. The resource based view suggests that internal resources should be utilized for core competencies otherwise the activity should be externalized to preserve the internal resources for core functions. Based on these theories it has been considered profitable to outsource R&S functions and IBM too has taken such steps. In order for organizations to develop an image of 'employer of choice', they have to tread carefully in outsourcing recruitment (Thite, 2004). Mills (2002) says it is impossible to run the recruitment process single-handedly while simultaneously developing the core business. It is advisable to outsource the primary candidate selection and the first round of interviews while keeping the final selection decision with the company. Outsourcing recruitment process alleviates the administrative burden of sourcing and screening candidates with the right skills but Fish and Macklin (2004) caution the HRM professionals must ensure that the service providers have knowledge, integrity,