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THE HIDDEN LEVERAGE OF HUMAN CAPITAL:

THE HIDDEN LEVERAGE OF HUMAN CAPITAL BY JEFFERY A.OXMAN JULY 15, 2002 SLOAN MANAGEMENT REVIEW

GROUP MEMBERS:

GROUP MEMBERS GULNAWAZ HINA BASAR BILAL AHMAD BINYAMIN IMRAN

INTRODUCTION:

INTRODUCTION Leveraging human capital boils down to the concept that everyone has strengths and weaknesses. Being able to quantify these strengths and weaknesses is what gives you a competitive advantage in building a world-class organization. Getting people into positions where they naturally fit, then focusing on their personal strengths dramatically improves productivity and performance

Slide 4:

If you’ve heard it once, you’ve heard it a thousand times that: “Company’s best assets walking out the door every night.” The frequency and depth of layoffs today suggest that many managers still view human capital primarily as a variable cost rather than a value- producing asset. Managers manage what they can measure and they find it hard to measure people. They typically don’t have the tools to determine causal relationships: why valued employees really leave?

Jack Welch 20-70-10 Differentiation Rule :

Jack Welch 20-70-10 Differentiation Rule Differentiation is designed to reward the top 20% or your stars. You continue to focus on training, developing and coaching the middle 70% and requires you to raise the performance of the bottom 10% or move them out, allowing you to bring in better talent. Differentiation continually raises the performance bar, increasing a company’s competitiveness year after year. The fact is People are behind every process, product, decision or sale. The better the People the better the results.

Slide 6:

In tough times what happens. Often the rewards for the top 20% are cut. Training and development budgets for the middle 70% frozen and the bottom 10% get a pass because of the economy. In some extreme cases, some of the top 20%, end up being downsized because they make too much money. Or they leave because of corporate politics.

Slide 7:

More than 20,000 times last year in the United States, according to the Bureau of Labor Statistics, midsize and large companies responded to adversity by slashing on average about 100 staff members at a time. Considering all the news coverage about the economic downturn and the poor job market .

Slide 8:

Did circumstances always merit the drastic actions? If so, were the actions taken deliberately and carefully, with all appropriate respect toward the people involved? What sorts of provisions were made to ensure that key talent was protected?

Slide 9:

It is a safe assumption that many of these 20,000 organizations did destroy value somewhere along the way by cutting capacity that they soon had to replace. By making poor choices as to who should go and who should stay. By being careless in communicating the rationale for change and protecting the motivation levels of surviving employees.

Slide 10:

Organizations such as Wal-Mart Stores, Cisco, Charles Schwab and even American Airlines have recently tried to rehire laid-off employees . But in so doing, employees becomes demoralize and create an environmental uncertainty that compromises staff engagement, loyalty, customer service and ultimately, company performance.

ISSUES:

ISSUES Is there a right way to manage a company through a time of challenge or tepid economic growth? What general guidelines can be discerned from the lessons of the past? And what sorts of decisions can managers take today to improve the odds that their companies will emerge as the winners of tomorrow?

SLASH AND BURN: RE-ENGINEERING AND CORE COMPETENCIES:

SLASH AND BURN: RE-ENGINEERING AND CORE COMPETENCIES Reengineering is a management tool that became popular in the late 1980s and early 1990s. Like many such tools, it aims to cut costs while at the same time increasing productivity and providing higher levels of service. Getting rid of excess staff members is an obvious and many times painful way to cut costs. When this happens, the layoffs should be handled in such a fashion as to not strike fear into the main employee base, causing the company to lose its competitive edge.

THE FORMER HEAD OF SCOTT PAPER Co., “Chainsaw” Al Dunlap :

THE FORMER HEAD OF SCOTT PAPER Co., “Chainsaw” Al Dunlap Starting in May 1994, in an effort to rebuild shareholder value, he let go more than 11,000 employees and shrank the company by selling off and outsourcing various business units and functions. Ultimately it became clear that the way the restructuring had been handled rendered it difficult for the company to deliver sustained performance, and Scott Paper had to realistically evaluate its ability to survive as an independent entity. In 1995, it reached a conclusion — the company was sold to Kimberly-Clark, a longtime rival.

RE-ENGIEERING SUCCESS STORY Jack Welch at General Electric Co.:

RE-ENGIEERING SUCCESS STORY Jack Welch at General Electric Co. While restructuring and selling underperforming units, made significant investments in management development and training. Communicated to employees the logical and rallying message that GE should be number one or two in any business in which it competed.

Archie Norman at Asda, the U.K. Supermarket Group :

Archie Norman at Asda, the U.K. Supermarket Group Averted bankruptcy by both flattening the organizational structure and articulating a clear long-term strategy based on everyday low pricing. In so doing, he embarked on creating an atmosphere of trust and openness.

A Broader Leadership Model for the New Millennium :

A Broader Leadership Model for the New Millennium Strengthening key relationships across customers, employees and shareholders Leveraging downtime by capitalizing on underutilized staff for innovation initiatives. Refocusing staff on what’s important at the company by prioritizing strategic roles and clarifying individual goals. Building return on compensation by forging stronger links between the pay people get and the results they achieve.

Strengthening Key Relationships :

Strengthening Key Relationships Strengthening key relationships starts with keeping a finger on the pulse of frequently changing customer and employee needs. A good way to embark upon pulse taking is executing well-designed, customized surveys . The real value of customized surveys is to help focus company resources on those customers and employees for whom company efforts yield the highest returns.

Slide 18:

In a challenging environment, follow-through on relationships means doing more than just surveying. Since customers and employees believe that companies reveal their true colors at a time of crisis, poor survey follow-up, or indeed any perceived mistreatment, can alienate those stakeholders permanently .

Slide 19:

Relationships are best fueled by face to face contact. E-mail and social networking sites are no substitute for real relationship-building . People are your best sources of information, best advocates for your success, and best connection to positive energy to keep you going. Leverage them . Get together with your staff or people in your network to brainstorm opportunities for thriving during difficult times . View networks as possibilities.

Slide 20:

Focus on productivity. Talent and Performance management. Ongoing training and development. Increase workforce flexibility. Communication across customers, employees and shareholders. Bear in mind that those companies with strong customer bonds have the best chances of weathering the storm.

Leveraging Downtime :

Leveraging Downtime

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