Hrm in the Knowledge Economy free essay sample

Knowledge is becoming a critically important resource in business organizations. And human resource management is the pillar for any organization. Managing human resources effectively has become vital to organization within the modern and fast-paced business environment. In order to survive in the current competitive environment it is mandatory for every company to recruit the right sorts of people in the right place. Now the question is why this word â€Å"right’’ has been used in here? Because if we recruit a driver to serve the customer in the check out and a person for driving the lorry who does not even know how to drive then we cannot expect the right jobs done by these people. Since today’s economy is the knowledge economy so I decided to show the relation between human resource management and knowledge economy. Knowledge is defined by Sanchez, Heene and Thomas (1996) as â€Å"the set of beliefs held by an individual about casual relationship among phenomena. We will write a custom essay sample on Hrm in the Knowledge Economy or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page ’ Alvin Toffler (2008) said â€Å"Knowledge is the most democratic source of power. ’’ This paper indicates the relation between Human resource management and the Knowledge economy. So we need to know what is knowledge economy and Human resource management. Knowledge economy is an economy that increasingly bases its economic activity on value enhancing knowledge rather than limited natural resources. It has always been important. It is becoming more important now because there has been acceleration in the creation and dissemination of knowledge. Human resource management is the organizational function that deals with issues related to people such as compensation, hiring, performance management, organization development, safety, wellness, benefits, employee motivation, communication, administration, and training. Besides capital, labour, land and organization, knowledge is the great fifth production factor in our economy. Nowadays it is the most precious of the five factors, because it takes so much effort and money to keep it well-nourished. It is the most strategic of the five factors, because we depend on it to develop our business. According to Hecker (2001) â€Å"The knowledge economy encompasses all jobs, companies and industries in which the knowledge and capabilities of people, rather than the capabilities of machine or technologies, determines competitive advantage. Of the 19. 5 million jobs that are projected to be created in the United States from 1998 to 2008, 19. 1 million of them will be in the service sector. ’’ So we can see that from retail sales to computers to biotechnology, these jobs will be more knowledge-intensive in their demands on workers and organizations. This paper reports the result of a qualitative study of human resource management in the knowledge economy. Adding Ideas in the Knowledge Economy: The knowledge economy is about adding ideas to product and turning new ideas into new products. Don Tapscott ((1996) asserts, more added value is created by brain than brawn. He provides a vivid illustration with six key attributes that distinguish them from products that were available in the past. These are the following – 1. They Learn- The more you use them, the smarter they get. The more you use them, the smarter you get. Like some word processing programs. 2. They improve with use- They are enhanced, rather than depleted, when used. They grow up instead of being used up. Like Internet banking. 3. They anticipate- They know what you want, they recommend what you might want next. Like the grocery scanners. 4. They are interactive- There is two-way communication between you and them. Like a ski jacket woven with a genetically engineered ‘phase change material. 5. They remember- They record and recall your past actions to develop a profile. Like internet sales operations. 6. They are customized- They are uniquely configured to your individual specifications in real time at no additional cost. Like injection devices for diabetics can adjust insulin dosage to respond to current blood sugar levels and activity levels. Human Resource Management Work in the Knowledge Economy: In the knowledge economy, HRM work will not be confined to its conventional functions of staffing, training and development, performance management. Human resource management work in the knowledge economy includes both activities that overlap with other traditional business functions and some that are non-traditional. That is why, HRM is no longer simply focused on â€Å"managing people’’ in the conventional meaning of the phrase. Human resource management is now responsible for managing the capabilities that people create and the relationships that people must develop. The Way How Human Resource Management Works in the Knowledge Economy: The traditional HR work is still done by HR professionals but some of that work is outsourced (staffing, benefits). In the knowledge economy, responsibility for HR will truly be jointly shared among HR managers, employees and external vendors as HRM works expands. The Opportunity of Human Resource Management in the Knowledge Economy: Don Tapscott (1996) argues that â€Å"the human resource function in general and human resource professionals in particular, should be uniquely positioned to provide leadership for the transformation of the enterprise. As we move into the digital economy, the human resource profession needs to reinvent itself and forge partnerships with others in the organization for the transformation of the corporation. ’’ How Technology can Change Human Resource Management Function: By increasing administrative efficiency, technology allows HR to have fewer staff making more value-added contributions to their organizations. Like if we think about the self check out system in the super market then we can understand that knowledge made life so easy. HR department can take few staffs what will cost them less for training and developing purpose. Computer technology also made life so easy. Now people do not need to type anything for long period of time. They can write within a very short time with the computer. Technology promises to impact HR in ways far beyond simply automating clerical activities. According to Boyett et al. (2001) twenty-one HR systems professionals have identified the following technology trends affecting HR that are in various stages of becoming realities. Like- ? Fast and cheap access to accurate real time HR information. ? Ubiquitous access to information to improve employee effectiveness and efficiency. ? A variety of analytics and decision tress. ? Smart self-service. ? Customized contents. New Roles and Challenges for Human Resource Management: Organizations will need HRM that is r ole based to effectively compete in the knowledge economy which is not tied to specific functional responsibilities, as in the past. Four roles are identified that make it possible to create those needed capabilities. Like Coy (2000) proclaims in his Business Week article â€Å"The turn of the millennium is a turn from hamburgers to software. Software is an idea, hamburger is a cow. There will still be hamburger makers in the twenty-first century, of course, but the power, prestige, and money will flow to companies with indispensable intellectual property. ’’ Later the article proposed- In the creative economy, the most important intellectual property isn’t software or music or movies. It’s the stuff inside employees’ heads. When assets were physical things like coal mines, shareholders truly owned them. But when the vital assets are people, there can be no true ownership (by anyone other than the individual employee). The best that corporations can do is to create an environment that makes the best people want to stay. Roles: ? Human capital steward Challenges: ? Intellectual capital is bought and sold in human capital market and it is not owned by the employer. ? Here workers are like free agents or volunteers. Organizational competence in the knowledge economy: According to Doz et al. , (2001), Winners in the knowledge economy will have to outdistance their competitors on three different levels. Like – 1. Competing on the sensing plane. 2. Competing on the mobilizing plane. 3. Competing on the operating plane. Organizations will have to constantly search out knowledge that could lead to the development of new products and services. Human capital is difficult but not impossible to measure. Some companies have made major efforts to develop metrics useful for characterizing their human capital. Edvinsson Malone (1997), presented in a table about Skandia’s Human Capital measurement where he described- Skandia, an international financial service company, is pioneer in measuring and managing human capital. They have developed several useful indexes. Recognizing and Rewarding the Value of Workers: Rewards are linked to the success of the whole organization. Employees earn their rewards by delivering real value to customers. Achievement of high performance may be through positive rewards or the fear of job insecurity. Rewards motivate the workforce. Motivation is anything that drives anyone to achieve their objectives. A motive is a need or a driving force within a person. The process of motivation involves choosing between alternative forms of action in order to achieve some desired end or goal. For motivating the workforce HR professionals need to follow some theories. Here knowledge comes again. All the theories are the reflection of the knowledge of the people which they are selling. If we think about the J. Sainsbury’s Plc then we can see that they are using a blend mix of some theories. To motivate its workforce it has ‘Shining Star’, ‘Pension’ ‘Bonus Scheme’ and so on. Here we can see the HR of Sainsbury’s taking the advantages of knowledge to get the competitive advantages in today’s economy. Rewards are based on contribution rather than on hierarchy. This means that HRM need to thoroughly understand how their firm intends to create competitive value and to be able to design ways to create the needed human capital in anticipation of strategic initiatives. Teamwork to Build the Organization: Teams define goals and maintain controls. Human resource management’s responsibilities are to make a good team in the organization to design selection, compensation, appraisal and training practices. Block (1993), said HRM must see its â€Å"primary contribution as creating a governance system of partnership and self-management. ’’ Human Capital Investments in the Knowledge Economy: Human capital investments include direct costs associated with pay and benefits as well as indirect costs, such as training and education. Ulrich (1998) describes five different human capital investment choices designed to create both competence and commitment to the firm: ? Buy: Acquire new talent by hiring individuals from outside the firm or from elsewhere within the firm. Build: Train or develop talent through formal job training, job rotation, job assignment and action learning. ? Borrow: From partnership with people outside the firm to find new ideas. ? Bounce: Remove individuals with low or sub-par performance. ? Bind: Retain the most talented employees. In the knowledge economy, human capital can be obtained from either inside or outside of the organization more easily than ever before. Organizational Learning in the Knowledge Economy: Kolb (1984) said that â€Å"Most would agree that individual learning preceded or at least co-occurs with any form of collective knowledge in an organization. At an individual level, experiential learning follows a cycle of experience, reflection, concept formation and testing of implications. ’’ In organization, the shift towards a knowledge-based economy involves a shift in organization away from top-down hierarchical structures to flatter structures such as networks of semi-autonomous teams. Knowledge is best acquired not by passive rote memorization but by the active involvement of the learner. Learning is by doing, not by watching or memorizing. It is the responsibilities of the HR professionals to make a good organizational learning environment for their development. Importance of Knowledge Economy on Human Resource Management: New economy is the knowledge economy that is why the HR function in the future will be very difficult from that in the past. The companies that do not see this and do not act accordingly will have a serious problem with the core assets of the â€Å"new economy’’: the knowledge workers and the knowledge professionals. Knowledge economy and human resource management draw together various stands of theory, research and practice to develop a better understanding of these issues, with special emphasis on HRM practice in knowledge-intensive organizations. The major connection is that the managers of the knowledge-intensive organizations are confronting major new issues in co-ordinating and directing the effort of knowledge workers. HRM in a Competitive Market: In the competitive market organization needs to have competitive advantages. When companies are applying new strategies which are giving them more sales and profits, then other companies need to apply more advanced strategies to go forward. Using knowledge people are making new strategies which are effective and demandable. To stay forward with the competitor organizations are applying those strategies to manage their human capital. So in the knowledge economy every HR professional should take this advantage for their betterment. Conclusions: Organizations are recognizing the importance of intellectual capital and knowledge to competitive success. Still the field of human resource management continues to be criticized for its operational and bureaucratic focus. Human Resource Management in the Knowledge Economy examines how HRM must change to be a vital part of the organization. The policies, programs and practices of human resource management that served companies well in the industrial era will not be adequate for the challenges of the new, knowledge-based economy. A number of less familiar characteristic shapes the competitive landscape in the emerging business setting. The context for decision-making and action has changed as jobs and roles are continuously redefined. Organizations must operate effectively in the face of uncertainty caused by incomplete, inaccurate, and contradictory information. To sum up, knowledge is the primary component of virtually all products, services and work activities. The effective production, accumulation, and handling of knowledge are becoming key sources of competitive advantage distinguishing business, industries and nations.