Human capital
Introduction 66
Dealing with HR professionals 66
HR strategy and minimising the cost of production 67
HR strategy and the quality of production 68
HR strategy: enabling growth (or decline) 73
HR strategy: compensation 74
Organisation culture and what you can do about it 75
Organisation culture and how to change it 76
When to fire someone 78
Ethics 79
Firms like to say ‘people are our most important asset’. But in too many firms,
loyalty is a one-way street: you have to be loyal to the firm which will be loyal to
you for as long as it is convenient. And yet the underlying sentiment holds true:
people make the business succeed or fail. As a manager, you will have responsi-
bility for making sure that your own team stays in the performance zone: above
the comfort zone but beneath the stress-out and burn-out zone.
Across the organisation, there is a much greater challenge: how do you help
everyone stay in the performance zone while maintaining the economics of the
business and respecting the career ambitions and development needs of all
your staff? Inevitably, you cannot achieve all of these objectives: if you have 5,000
people wanting to become CEO, you will end up with many disappointed people.
This is where the role of HR (Human Resources) becomes important. The HR
function has endless different names, but a common purpose: make the most
of our people. How this works varies by type of organisation, but the principles
remain the same. The purpose of this chapter is to explore the principles behind
making the most of your people.
In the past, firms used to have a personnel department that looked after matters
to do with personnel. Nowadays we have the strategic human capital division.
So what do they do? Look after matters to do with personnel. Whatever they call
themselves, treat them well. Managers do not need enemies, let alone ones in
the HR department.
People matters fall into two categories: operational and strategic.
Operational matters include things like payroll, PAYE, employment law
and regulations, and are normally outsourced to payroll firms, accountants
and lawyers.
Strategic matters are the ones to which managers and HR have to pay atten-
tion. There are three strategic goals for any staff strategy:
minimise the cost of production
maximise the quality of production
enable growth (and occasionally enable downsizing).
Inevitably, these three goals are often in conflict, and different parts of the firm
will be pulling in different directions, so HR has an important job to do.

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