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Play to Your Strengths: new book encourages tactical approach to HR management.

In a business environment where finding an edge can be a serious challenge, companies have become aware of the value of knowledge and knowledge management--understanding the knowledge you have within your organization and keeping it within your organization. It's a theme that we've following in CMA Management regularly, particularly in columns and features by Ajay Pangarkar and Teresa Kirkwood (CMA Management, May 2003).

But while companies realize the importance of their people, and statisticians have made them aware that 60% of all of their costs are going towards maintaining these employees, really grasping the competitive advantage of this asset is still elusive to many. But help is available. Play To Your Strengths, a new publication from Mercer HR Consulting, is one such helpful guide. It outlines several areas where companies fail in their attempt to better manage their internal labour market, and offer a model by which companies should be able to improve their management techniques and create lasting, positive change in an organization.

The authors point out that, without any internal gauges to guide their attempts to reform their internal structure, companies look outside themselves for answers to their problems. They view a company like General Electric and feel that, if a certain management approach worked for them, then those methods should be adopted in their business. Companies would decide how to manage their employees by following this model.

But as this book points out, while such a model might work to great effect for G.E., it may be an abject failure in an organization with a different culture, among a staff with different expectations. Following best practices and benchmarking against other organizations, the authors argue, can only harm a company if simply grafted onto a company's current structure because they don't take into account a company's unique internal make-up. To be successful, a company has to understand its own internal dynamics and shortfalls, and make changes to that dynamic where necessary to improve its operations.

The book is divided into four distinct sections: principles, tools, applications and implications. The first section explains three underlying principles of effective human capital management: insist on systems thinking, get the right facts and focus on value. Essentially the authors argue that yon have to understand the dynamic of your human capital environment--how people are recruited, how they advance, what incentives are available, the harriers employees experience with advancement (if any), and how organizational milts, people and processes operate from day to day. You also have to make sure that what you say your company does is in Fact what happens on the ground.

All of this has to be backed up with facts, and this means more than anecdotal evidence about staff likes and dislikes. It involves benchmarking, correlating different analyses, examining causal relationships and examining simulations and forecasts. In other words, it takes more than one focus group of employees saying what they want. How employees react to certain events-for instance, how performance is affected by pay and promotions--may say more than what they tell a focus group leader. It may even be the exact opposite of what you expect.

The authors don't suggest you ignore the best practices of other organizations--a company can learn from those, but they may not offer a full solution. With the backing of solid facts about your organization's internal labour capital and how it operates, a more thoughtful approach can be taken to change initiatives.

It's also essential to understand the value that your human capital delivers. The sources of value can include tenure, experience and professional credentials. For instance, it may be cheaper to have a high number of part-time workers in an organization, but if they can't deliver innovative ideas that drive the business, then a company isn't getting value out of the savings it's making. With the right information, a company can manage its human capital more strategically for greater value.

Mercer's model suggests that a company should locate where it is at present, assess how it is using its human capital, and determine how the atmosphere of the company is affecting its employees. Once that is clear, a change process can begin. Both parts of this process are described in the second section of the book. It introduces Mercer's internal labour market (ILM) analysis, and its use of business impact modeling (BIM). The first concept, ILM, is used to build an internal labour market map to determine what is happening in a particular business environment by looking at the hiring process, how people move through the company, and how they leave. It uses data from HR and payroll to create a basic view of the organization. Then, with other information available from a variety of sources (as described above), larger trends are examined. BIM tools are used to widen the scope of the study of human capital, to include finance, quality control, marketing and operations. BIM can address larger questions such as:
 Does productivity rise with years of

 What is the impact of customer
 service training on sales?

 Is our incentive pay program producing
 the desired effects?

 Does employee turnover affect our
 bottom line?

These are the core diagnostic tools that Mercer recommends to readers. The third section of the book applies these concepts and discusses the challenges that companies will ultimately have to face in the process I with customers, mergers and acquisitions and risks. And the last section of the book expands on why it's becoming so important to tackle this issue head on. It's something that investors and analysts are going to be more aware of, and it's something that CEOs and other leaders are going to have to manage strategically.

What makes this book successful is its ability to carefully outline problems and potential solutions in clear, precise language. And with a variety of examples from a wide swathe of industries, it demonstrates how these methods can be applied in many industry sectors. The model the authors propose isn't a simple one, but it's simply explained and clearly suggests ways in which managers can generate better data and more facts on how their companies' internal labour markets actually operate. Definitely a valuable addition to the human resources literature currently available.

Play to Your Strengths: Managing your internal labor markets for lasting competitive advantage. By Haig R. Nalbantian, Richard A. Guzzo, Dave Kieffer and Jay Doherty. Published by McGraw-Hill.

Chris Cunnington is a Toronto-based freelance writer.
COPYRIGHT 2003 Society of Management Accountants of Canada
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2003 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Play to Your Strengths: Managing Your Internal Labor Markets for Lasting Competitive Advantage
Author:Cunnington, Chris
Publication:CMA Management
Article Type:Book Review
Date:Nov 1, 2003
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