Knowledge Work and Human Capital

Human Capital: The knowledge, education, training, skills, and expertise of a firm’s workers.

In general, the best jobs that remain require more education and more skills. For example, we
saw that automation and just in time manufacturing systems mean that even manufacturing jobs
require more reading, mathematics, and communication skills than before.

For managers, this means a growing emphasis on knowledge workers like skilled machinist Chad
Toulouse, and therefore on human capital. Human capital refers to the knowledge, education,
training, skills, and expertise of a firm’s workers. Today, as management guru Peter Drucker
predicted several years ago, the center of gravity in employment is moving fast from manual and
clerical workers to knowledge workers.

Nature of Work: Implications for HR:

Because it is the human resource function that traditionally recruits, selects, trains and
compensates employees, changes like these make employers highly reliant on effective human
resource management. For example, the key to effectively utilizing all that new technology is
usually not the technology but the people. One bank installed special software that made it easier
for customer service representatives to handle customer inquiries. Seeking to capitalize on the
new software, the bank upgraded the customer service representatives’ jobs. The bank gave them
new training, taught them how to sell more of the bank’s services, gave them more authority to
make decisions, and raised their wages. Here, the new computer system dramatically improved
profitability.

A second bank installed a similar system, but did not change the workers’ jobs. Here, the system
helped the service reps handle a few more calls. But this bank saw none of the big performance
gains the first bank had gotten by turning its reps into motivated, highly trained sales people. The
moral is that today’s employers nee more sophisticated human resources management selection,
training, pay, and employee fairness practices than did their predecessors, ones that focus on
improving performance through motivated committed employees.

Workforce Trends Demographic Trends:

At the same time, workforce demographic trends are making finding and hiring good employees
more of a challenge around the world. India is also not immune from these effects. NASSCOM,
the industry association for IT / ITES business in India, estimates the projected requirement for
knowledge workers to be 2.3 million by 2010 and the expected shortage of skilled knowledge
professionals with relevant education is estimated at 0.5 million. This estimate has been made
based on the availability of employable talent, i.e. people who may be capable of taking jobs in
these sectors. The simultaneous growth experienced in other sectors, including financial services,
manufacturing and retail business, has created a huge demand for skilled labor across sectors.
The experience of the Indian fish processing industry, a large foreign exchange earner, is an
example of this problem. In recent years, the processing companies found it attract workers to
their plants. The traditional workers prefer other employment avenues like the retail sector.
Skilled labor shortage has also prompted the construction industry to source talent from abroad,
for example, hiring carpenters from Korea.

Unlike the problem of the labor force getting older as experienced by countries like the United
States and Europe, India faces the challenge of a young work force. The challenges of dealing
with a young work force are different. Demographics consider that India is and will remain for
some time one of the youngest countries in the world. In 2000, 33% of India’s population was
aged below 15 years. By 2020, the average age is estimated to be 29.

In comparison the average age will be 37 in China and the United States, 45 in Western Europe,
and 48 in Japan. While India has a higher population at the at the employable age bracket, the
employability of India’s young workforce is considered to be poor due to the lack of requisite
skills. The situation has prompted firms like TCS, Satyam and Infosys to extensively retrain
engineers recruited from various universities before placing them on projects.

It is argued, therefore that with careful planning, the population base of India can be used for its
advantage, a demographic dividend, instead of viewing the expansion in population as a burden.
This, however, requires efforts to improve skills and generate jobs that can absorb the young
workforce.