Thursday, January 20, 2011
Wednesday, January 19, 2011
Something rotten in the land of Den^W... HR
There will be no prizes for knowing the three fundamental factors of production, which of course are land, labor, and capital. My background is in software, which as an industry differs mainly from other industries in the sense that it is greatly immaterial, and with the democratization of IT systems, also the capital-related entry barriers have fallen. The implication is clear: anyone with a laptop and a shed can get into the software business, assuming enough competence. This essentially means that out of the three factors above, labor is most crucial. And within labor, one could use the term of human capital as the thing to focus on: you need highly competent and specialized people in order to ship great software.
The above naturally raises human resources to a pedestal and would seem to justify the whole Human Resources discipline, which itself is barely half a century old in the academic sense. Many pure software companies, i.e. companies with their roots firmly in software development, seem to acknowledge this these days. But then there are the other companies. Based on empirical evidence as well as many discussions with friends who have either been part of HR or who have suffered from bad HR in different companies, the conclusion is clear. Something is still fundamentally wrong with how human capital is managed these days in companies.
So, what is the purpose of HR. A quick googling will give us a Wikipedia definition:
It thus seems that HR would need to have a fairly good understanding of not only the current, but also the future needs of the company. So HR must be tightly linked to all other functions in a company: business (the bread'n'butter execution stuff), research, corporate-level stuff, etc. This just gives HR a view of the current situation. But the above definition states also that HR should have an intrinsic and very thorough understanding of the corporation's strategy and future directions, so as to be able to pre-emptively attempt to facilitate the future moves of the company and make them as smooth as possible. But let's face it, many HR employees seem to be very detached from business; some even have a certain proudness associated with the fact that they "don't need to understand that nerdy stuff." So unfortunately I remain ever so slightly skeptical of how well a large HR would truly be able to grasp the present, let alone the future, of a business.
One thing that isn't mentioned in the above definition is that HR should attempt to ensure that all employee-related issues are performed in a legal way. Meaning that when team leaders from other units recruit and manage their employees, HR should be there to support and address the needs of the leaders so as to keep everything legal. That is also why strangely enough when layoffs are about HR seems to stroll a nice and neat line of specialists to sit by the table to ensure that everything goes according to protocol. But very often HR also enforces various policies and to an extent restricts the movement of leaders, not because of legal issues, but because of company policies. Which again is fine, as long as the policies are good and can be justified. But as with every other organism, HR tends to have to fight for its survival: it must have a raison d'etre, lest it be relieved of its own headcount. So the incentive to create artificial work and enforce strange policies is there.
But surely HR must have a good deal of role in recruiting new employees? Perhaps, but my hunch is still that it is fairly limited. In interviewing candidates, I just cannot understand HR's role: as was established above, more often than not an HR person has simply no possibility to credibly judge whether someone has the required competences to survive and succeed in certain tasks. The best they can often do here is match the required buzzwords of recruiting leaders to that of the buzzwords in potential candidates' CVs. But this again may be counterproductive: I would much rather interview people whose CVs I personally selected as I am fairly capable of seeing from a CV whether a person might fit the profile regardless of the fact that they might have missed some key buzzwords.
Fortunately these issues have been acknowledged and I've heard of multiple projects where HR has attempted to devise various types of taxonomies for understanding what types of competencies are needed in different roles. My personal favorite story is of a position which required competence number 123: Humor. The person who came up with that certainly had a fair bit of humor. ;)
So yes: human resource management is an important field and the possibilities there are endless. But no, it is very often not done correctly. And in fact in many larger companies Human Resources units are ridiculed for been hives of bureaucracy, inefficiency, and for creating artificial work and hoops through which people must jump. Hopefully a new breed of HR will slowly emerge in the future. A breed that actually understands that human capital is a very critical asset and potentially a great source of competitive advantage. Because as of now, many HR units are merely destroying the competitive advantage...
The above naturally raises human resources to a pedestal and would seem to justify the whole Human Resources discipline, which itself is barely half a century old in the academic sense. Many pure software companies, i.e. companies with their roots firmly in software development, seem to acknowledge this these days. But then there are the other companies. Based on empirical evidence as well as many discussions with friends who have either been part of HR or who have suffered from bad HR in different companies, the conclusion is clear. Something is still fundamentally wrong with how human capital is managed these days in companies.
So, what is the purpose of HR. A quick googling will give us a Wikipedia definition:
... an organization's human resource management strategy should maximize return on investment in the organization's human capital and minimize financial risk. Human resources seeks to achieve this by aligning the supply of skilled and qualified individuals and the capabilities of the current workforce, with the organization's ongoing and future business plans and requirements to maximize return on investment and secure future survival and success.
It thus seems that HR would need to have a fairly good understanding of not only the current, but also the future needs of the company. So HR must be tightly linked to all other functions in a company: business (the bread'n'butter execution stuff), research, corporate-level stuff, etc. This just gives HR a view of the current situation. But the above definition states also that HR should have an intrinsic and very thorough understanding of the corporation's strategy and future directions, so as to be able to pre-emptively attempt to facilitate the future moves of the company and make them as smooth as possible. But let's face it, many HR employees seem to be very detached from business; some even have a certain proudness associated with the fact that they "don't need to understand that nerdy stuff." So unfortunately I remain ever so slightly skeptical of how well a large HR would truly be able to grasp the present, let alone the future, of a business.
One thing that isn't mentioned in the above definition is that HR should attempt to ensure that all employee-related issues are performed in a legal way. Meaning that when team leaders from other units recruit and manage their employees, HR should be there to support and address the needs of the leaders so as to keep everything legal. That is also why strangely enough when layoffs are about HR seems to stroll a nice and neat line of specialists to sit by the table to ensure that everything goes according to protocol. But very often HR also enforces various policies and to an extent restricts the movement of leaders, not because of legal issues, but because of company policies. Which again is fine, as long as the policies are good and can be justified. But as with every other organism, HR tends to have to fight for its survival: it must have a raison d'etre, lest it be relieved of its own headcount. So the incentive to create artificial work and enforce strange policies is there.
But surely HR must have a good deal of role in recruiting new employees? Perhaps, but my hunch is still that it is fairly limited. In interviewing candidates, I just cannot understand HR's role: as was established above, more often than not an HR person has simply no possibility to credibly judge whether someone has the required competences to survive and succeed in certain tasks. The best they can often do here is match the required buzzwords of recruiting leaders to that of the buzzwords in potential candidates' CVs. But this again may be counterproductive: I would much rather interview people whose CVs I personally selected as I am fairly capable of seeing from a CV whether a person might fit the profile regardless of the fact that they might have missed some key buzzwords.
Fortunately these issues have been acknowledged and I've heard of multiple projects where HR has attempted to devise various types of taxonomies for understanding what types of competencies are needed in different roles. My personal favorite story is of a position which required competence number 123: Humor. The person who came up with that certainly had a fair bit of humor. ;)
So yes: human resource management is an important field and the possibilities there are endless. But no, it is very often not done correctly. And in fact in many larger companies Human Resources units are ridiculed for been hives of bureaucracy, inefficiency, and for creating artificial work and hoops through which people must jump. Hopefully a new breed of HR will slowly emerge in the future. A breed that actually understands that human capital is a very critical asset and potentially a great source of competitive advantage. Because as of now, many HR units are merely destroying the competitive advantage...
Saturday, January 08, 2011
Monday, January 03, 2011
Bureaucracy
Preparing for the upcoming elections, I've been trying to get a very rudimentary and basic knowledge of the bureaucratic world which previously has been entirely unknown to me. And to be honest, I'm getting somewhat worried about what the money we pay in taxes is actually spent on and whether or not some serious austerity and axing of budgets and scopes should be in line.
From 2002 to now, the budget of the Finnish government has soared from 35 billion to over 50 billion euros, and the trend is monotonous and rising. This quite a bit higher than what the overall inflation is while at the same time the amount of people employed by the government has remained at roughly at a constant level of about 120 000 individuals. I guess the last part is somewhat comforting, as it implies that at least the headcount isn't out of control. For comparison the municipalities employed about 430 000 individuals in 2004, so if we guestimate the level to have remained somewhat similar, we have over half a million individuals working in the public sectors. Some figures suggest the figure to be even higher at around 700 000 individuals. So for a country of about 5.3 million people, we have roughly 10% of the inhabitants working in the public sector. If we arbitrarily estimate the overall workforce to be e.g. 2.5 million, this is about 20-30% of the workforce. To be fare, I haven't had the time to dig up similar numbers for other countries, so I'm not entirely certain how Finland would fare against them. But just by applying common sense, I have a feeling that that number should be lower.
So the question is two-folded, then: 1) is everything that the public sector is doing absolutely necessary and/or even in the scope of the public sector and 2) could it be done any more efficiently with the proper application of e.g. technology? I have a hunch that if we compare the public sector to a barebones, minimum required set of functions to keep a country running, the current form has organically grown many times over the scope of a minarchist government. And point number two seems like a self-evident thing: public sector differs from the private sector in the sense that whereas private companies operate under the logic of maximizing revenue while minimizing costs to strive for maximum efficiency, the bureaucracies under the government intrinsically do not really have these types of requirements in place. So one thing to think about could be how these bureaucracies could be better incentivized to increase efficiency, since it can't be an impossible thing to do.
Relating to the previous, I also recently ran across the topic of Eurocrat salaries, which gave me quite a fright. I'd never before looked at the salary levels of this bunch, but the levels are quite amazing with the lowest of the low assistants already making around 2 600 euros a month, not including all types of allowances and other perks, which in the case of Finland already boosts it way over 3 000 euros a month and closing in on 4 000 euros at a rapid pace. Factor in the aspect that this group isn't under the normal taxation, the typical Finnish Eurocrat will in fact drag in quite a hefty amount of salary, with the higher echelons of them having a base salary of over 18 000 euros a month, not including allowances and other perks. Of course one could use the counterpoint of how the bureaucratic machine needs to be able to attract the sharpest minds in order to function brilliantly, but my apologies if I'm slightly cynical about the efficiency of even this machine (as an interesting exercise, a quick googling of e.g. "Lady Ashton" shows just some of the redundancy and waste that is going on in the EU).
Granted, this was just a very shallow scratch at the surface and I will need to spend some more time playing around with the numbers, but even this, I think, shows some of the issues associated with public sector spending.
From 2002 to now, the budget of the Finnish government has soared from 35 billion to over 50 billion euros, and the trend is monotonous and rising. This quite a bit higher than what the overall inflation is while at the same time the amount of people employed by the government has remained at roughly at a constant level of about 120 000 individuals. I guess the last part is somewhat comforting, as it implies that at least the headcount isn't out of control. For comparison the municipalities employed about 430 000 individuals in 2004, so if we guestimate the level to have remained somewhat similar, we have over half a million individuals working in the public sectors. Some figures suggest the figure to be even higher at around 700 000 individuals. So for a country of about 5.3 million people, we have roughly 10% of the inhabitants working in the public sector. If we arbitrarily estimate the overall workforce to be e.g. 2.5 million, this is about 20-30% of the workforce. To be fare, I haven't had the time to dig up similar numbers for other countries, so I'm not entirely certain how Finland would fare against them. But just by applying common sense, I have a feeling that that number should be lower.
So the question is two-folded, then: 1) is everything that the public sector is doing absolutely necessary and/or even in the scope of the public sector and 2) could it be done any more efficiently with the proper application of e.g. technology? I have a hunch that if we compare the public sector to a barebones, minimum required set of functions to keep a country running, the current form has organically grown many times over the scope of a minarchist government. And point number two seems like a self-evident thing: public sector differs from the private sector in the sense that whereas private companies operate under the logic of maximizing revenue while minimizing costs to strive for maximum efficiency, the bureaucracies under the government intrinsically do not really have these types of requirements in place. So one thing to think about could be how these bureaucracies could be better incentivized to increase efficiency, since it can't be an impossible thing to do.
Relating to the previous, I also recently ran across the topic of Eurocrat salaries, which gave me quite a fright. I'd never before looked at the salary levels of this bunch, but the levels are quite amazing with the lowest of the low assistants already making around 2 600 euros a month, not including all types of allowances and other perks, which in the case of Finland already boosts it way over 3 000 euros a month and closing in on 4 000 euros at a rapid pace. Factor in the aspect that this group isn't under the normal taxation, the typical Finnish Eurocrat will in fact drag in quite a hefty amount of salary, with the higher echelons of them having a base salary of over 18 000 euros a month, not including allowances and other perks. Of course one could use the counterpoint of how the bureaucratic machine needs to be able to attract the sharpest minds in order to function brilliantly, but my apologies if I'm slightly cynical about the efficiency of even this machine (as an interesting exercise, a quick googling of e.g. "Lady Ashton" shows just some of the redundancy and waste that is going on in the EU).
Granted, this was just a very shallow scratch at the surface and I will need to spend some more time playing around with the numbers, but even this, I think, shows some of the issues associated with public sector spending.
Subscribe to:
Posts (Atom)
