“People are our greatest asset”: Human capital management

By Mahesh Jayasinghe

Very often we hear managers say that people are their greatest asset. What do they mean by this? If people are an asset, why are they shown as a liability in company financial statements?  Do managers really value the buildings and other non movables more than their people?

This is the beginning of series of articles that will look into the evolution of human capital management concepts.

When we go into the history of evolution of mankind and history of origin of management we may be able to identify some connections between the people and the organisation. Stages of evolution of management is given below  

Early thought of management

If we look back at our history, kings have built great dagobas, stone carvings and statues, for example, the Sigiriya rock castle, Anuradhapura, Polonnaruwa-era buildings, which justifies a great level of management practices.

Similarly the Pyramids of Giza, Egypt or the Taj Mahal of Agra, India are some of the great creations of mankind. If people were able to build such great wonders during the ancient era, why they are yet not treated like assets? Something to think about.

In the 6th century, Sun Tzu, wrote in ‘Art of War’ the initial thoughts on management, strategy and knowledge. He identified the importance of strengths and weaknesses of personnel who were involved in war in terms of planning and executing strategy.

Chanakya wrote in ‘Arthashastra’ in 300 BC various strategies, techniques and management theories on management of empires, families and economy. Among the many writers of management, Adam Smith, a Scottish Philosopher in 1776, wrote in the ‘Wealth of Nations’ of an efficient organisation of work through specialisation of labour.

Smith described how changes in process could boost productivity in the manufacture of pins. Although there was some evidence of people being recognised for their efforts and skills, in most instances employees were treated like as they were the property of management.

Considering this phenomena even in today’s context, we see organisations in the private sector treat their employees as if they own them, in terms of their time and respect. Let’s elaborate on this further going forward.   

Classical approach

The period under review was 1856-1915. Among the many writers of this era, Fredric Winster Taylor, the father of scientific management theory, identified by analysing work, one of the best ways of managing people.

He identified the importance of division of labour, time and motion study, standardisation of work processes and tasks, and focused on systematic selection methods and payment for people based on the piece rate.

Since this was the beginning of the industrial era, most of the organisations were manufacturing steel and heavy construction equipment, machinery and spare parts. The tasks were assigned to people based on their specialisation. Employees were treated like ‘machines’ and their activities were strictly monitored.

Employees were made to feel that if they do not want to work in the way the management wanted them to work, the door was open for them to leave. In today’s terms, it can be put as ‘my way or highway?’

The production processes were designed as an assembly line operation where employees needed to work together as a team to complete the finished output. However they were all paid according to the piece rate. This led to many complications which gave rise to the neo classical approach to management.                               

Today after 100 years, we still practice the concept of scientific management theory in our organisations, with employees paid according to the piece rate, division of task, standardisation of work processes, and work study to name a few.

Although some of the concepts of the scientific management theory are applied after adapting to today’s context, we are yet to identify a scientific process to answer the question ‘Are employees our greatest assets?’

(The writer is a PhD student, management consultant, executive coach, trainer and lecturer)