Environment Volatility Impact on Human Capital
The early twenty-first century experienced an economic recession which threatened many world businesses. This led to many companies to adopt a trend of laying-off staff in order to deal with this situation. This follows the perspective of seeing staff as the greatest expense. It has been argued that staff layoff is the most effective and workable solution in times of economic distress (Lesser & Blumberg, 2007). However, Boudreau (2010) argues that effective managers and most successful companies (such as IBM international) have adopted strategic management systems that take advantage of the downturn to enhance their survival. This usually involves harnessing and developing the talents and ideas of staff in order to shape and adapt the company towards the crises.
Development of talents and ideas of staff is a policy that companies can adopt to replace the practice of laying-off staff. In the article IBM’s Global Talent Management Strategy: The Vision of the Globally Integrated Enterprise, Boudreau (2010) focuses on the general impact of work force volatility on strategic human resource management. Due to increasing unpredictability of environmental factors, company sustainability has become challenging, and therefore, human capital has been considered a critical factor in gaining competitive advantage and overall good performance of the firm.
Employee intellectual capital, which is part of strategic human resource management, has gained popularity within most firms applying this system of management. Huselid (2002) established that companies faced with moderate workforce volatility tend to adopt strategic human resource management (SHRM) and human resource planning (HRP) than those with stable or dynamic workforce volatility. The core objective of SHAM and HRP system is to provide human capital development that is dynamic and flexible, aimed at maximizing overall quality and performance of company’s products and services.
Another policy that companies can adopt in place of wanton laying-off of staff in times of crises is to incorporate performance management and business intelligence as a means to effectively meet organizational long term goals and objectives (Lesser & Blumberg, 2007). Personnel that do not deliver as per performance contract definitely are faced with expulsion threat. Business intelligence will enable the company to foresee likely crises and avoid them.
In conclusion, economic havoc is an unpredictable expectation that most firms, especially multinational enterprises, should beware of. Firms should, therefore, adopt pertinent management strategies that are favorable to the company’s objectives as well as its human capital.