Foreword & Final Word to Hurconomics
(http://www.amazon.in/Hurconomics-Talent-Management-T-V-Rao/dp/8131759679/ref=sr_1_1_twi_pap_1?ie=UTF8&qid=1458971894&sr=8-1&keywords=Hurconomics)
For several years, the Indian corporate
sector has been using the concept of “cost to company” (CTC) by computing the
total expenditure incurred by the company directly (salaries, incentives, dearness
allowance, house rent allowance, city compensatory allowance, transportation
allowance, etc.) or indirectly (subsidies on food, transportation, housing,
education, health, etc.). This concept has been used in this book very
effectively as a measure of talent. The intention seems to be to enhance the
effectiveness of employees and return on investment for corporations. Employees
often shift jobs for higher CTCs, but are they delivering what they are
supposed to deliver? Are they providing services at a level commensurate with
what they are being paid or what their talent has been valued at? How much time is required for an employee to start providing returns
on the investments made by the company? This book aims to help employees and
corporations by raising some such important issues.
Professor Rao’s book, appropriately titled Hurconomics for Talent Management,
presents several useful thoughts on the economics of human resources. Professor
Rao costs the time and talent of employees by calculating the CTC per minute.
It is very interesting and, at the same time, amusing, to note that when an
employee is paid a CTC as low as Rs 1.20 lakh, the employee costs one rupee per minute to the company. Further,
when a manager is paid a CTC of Rs 12 lakh, he or she costs Rs 600 per hour to the company, and the opportunity cost may vary from
four to ten times that amount.
Professor Rao has also emphasized the need
for measuring intangibles through the concept of intellectual capital. As
indicated in the second chapter of this book, the market value of most
companies is due to their intellectual capital, and human capital is a
significant constituent of this. This is very true as companies witness great
changes in their share values when some of their valued managers leave.
Professor Rao has broken new ground by
costing time and talent. I hope this will lay the foundation for future work in
this area. The concepts developed have a wide applicability and include such
areas as education, health and government service. This book will be a great
help to managers, and particularly HRD managers and CEOs who need to manage
time and talent better. Managing time and talent effectively is crucial for
competitive advantage and nation building.
Dr C. Rangarajan
Chairman, Economic Advisory Council to the
Prime Minister
March, 2011
FINAL WORD
In a recent survey
by TV Rao Learning Systems, line managers from
different organizations were asked to assess the effectiveness of the HRD
function. The survey results, when compared with the results of a similar
survey conducted in 1991, indicated a definite decline in the effective
performance of various HRD roles. The study showed that line managers’
perception of the effectiveness with which the various HRD functions are being
performed today has declined as compared to two decades ago. The study
concluded that this could be an indication of: (a) the rising expectations of
line managers from HRD managers, and (b) the falling standards of performance
of various HR development activities. Monitoring HRD implementation and
conducting human process research were found to be two very poorly performed
functions across most organizations. Creating a development motivation among
line managers by organizing visits to other organizations was one of the least
attended activities. Organizational development and self-renewal activities
were also among the least effectively performed activities. The study concluded
that:
1. HRD managers need
to recognize the stakeholders’ expectations and understand the overall business
and strategic context of their function. As expectations from the HRD function
are changing, they are expected to perform more value-adding functions and
activities.
2. The HRD
function should focus on intellectual capital generation activities and, at the
same time, ensure a good ROI on performance management systems, 360º feedback, assessment and development
centres, skill and value development, and other interventions rather than
merely facilitating in-house training activities.
3. HRD
practitioners need to equip themselves with capacity and competencies required to
build the HRD function as a hands-on, proactive strategic partner with
practical contributions to organizational goals and performance effectiveness.
4. HRD
practitioners need to strengthen their partnership with and credibility in the
eyes of their stakeholders by involving them in policymaking and communicating
constantly.
In this book, I have made an attempt to point
out how to respect every human being in terms of her/his time. Respecting time
is respecting people’s talent, and we show our respect for talent by respecting
people’s time. The higher we go, the more responsible we are and the lonelier
it gets. Therefore, we need advisors and coaches to help us respect our own
talent and get the best out of ourselves and others.
Cost to company (CTC) as a measure of a person’s
value and an indirect measure of talent is a gross underestimation of the value
of talent. The higher we are in the organizational hierarchy, the more value our
time has. In education, health, and other social-service organizations, the valuation of
talent through CTC or other such measures is a gross underestimation.
The contributions of doctors; nurses; teachers; and extension workers in agriculture,
environment, and other such social service agencies cannot be measured in
financial terms similar to the ones proposed here. They should be measured in
terms of their intellectual capital contributions.
In fact, I don’t believe that people should
be measured in financial terms. I believe that human resources cannot be
measured—not easily, at any rate. However, the contemporary world has reduced
human contributions to measurable financial terms. When a leading Indian company
put its human capital value in its balance sheet, I felt that it was a gross underestimation
of the true value of human assets. If we were to have applied the formula used
by this company (five years’ earnings of each employee were taken to constitute
the human asset value) to its own chairman 20 years prior to that , his real
value would have been grossly underestimated as he has made thousands of people
wealthy over time. Therefore, the last thing I would want to do is to reduce
human value to financial terms. People make things happen and they create
money, consume money, and manage money. How then can they be measured with the
very thing they have created?
Human resources are invaluable. They have unlimited
capacity to contribute and expand. They also have a tremendous capacity to
destroy. We should, under no circumstances, underestimate them. People in this
part of the world are endowed with a lot of resources—their emotions, their
loyalty, their caring nature, their achievement drive, their hard work, their
tolerance, their ability to sacrifice, and many more things. These should
not be measured; nor should the joy of living be destroyed. If we do decide to weigh and
measure, we ought to go all the way to decide the cost of a smile and the
returns we get when employees smile. If you can make an organization smile,
perhaps you are creating a collaborative culture, synergizing the team,
enhancing productivity, and multiplying shareholder value. And if you have not
smiled, you may just have produced a competitor, a rebel, or even a destroyer
of all that you have built over the years. Let us measure our progress all the
way and use it. Why should we stop simply at HR departments and their impact?
If HR people and departments can make a lot
of people smile, let us go ahead without caring for the cost as the very raison d’être of organizations is to
bring peace and prosperity into the lives of people.
T. V. Rao
March 14, 2011
