Financial Times

Sri Lanka as a talent capital

By Dinesh Weerakkody

Management Guru Peter Drucker once said 'Knowledge is the only meaningful resource today'. Access to other resources is no longer limited.

Capital flows freely across borders, unerringly seeking out companies that need it. Technology is available to countries that cannot create it - for the right price. Information is available to anyone who wants to flag it down on the digital highways. Crucially, the people who bring knowledge into business and government are limited but the key to build competitive advantage and improve our productivity levels is to attract and create a talent pool. Therefore, in the face of new global and internal challenges, the development of Human Resources will be increasingly important.

The ability of our talent pool to create, absorb, process and apply knowledge to generate new value will be a primary source of our competitive advantage. A country's real value is not found in its fixed assets but in its human capital, For Sri Lanka to transit successfully to a knowledge economy, our human resources must support our economic vision.

The government's HR strategy should be relevant and responsive, and our people should have the skills and learning capabilities to add and create value. We must aggressively upgrade and retool our workforce with the capabilities for the future.

Productivity is the prime determinant in the long run of a nation's standard of living, for it is the root cause of national per capita income. In the private sector the productivity of the human resources determines their wages. High productivity not only supports high levels of income but also allows citizens the option of choosing more leisure instead of long working hours.

Sustained productivity growth requires that an economy continually upgrades its human capital. Productivity therefore is a measure of the quantity and quality of work performance with resource utilization considered. Also, productivity is a broad performance factor that applies a criterion of work achievement to individuals, groups and organizations. People in the organization are in a position to influence directly the productivity of individuals and groups under their supervision. They are also in a position to help integrate these performance contributions into the organization as a whole. Only when such integration occurs is high organizational productivity possible. We also know that an organization can rise only up to the level its people can take it.

Some time ago I visited Japan on a study tour organized by the Matushita Institute. I visited a few industrial giants and in every company I ended my visit by interviewing one or more of the managing directors of the company. I would always inquire from them "Please tell me of the directors, who is the most influential?" The response would always be a variation of one theme. "We manage as a group, we are equals." But, I would probe. Is one of you somewhat more equal, more powerful than the others?' In every case the final answer surprised me, "well ordinarily the most senior and most respected managing director is in charge of personnel."

As we all know too well, human resources (HR), rarely is a powerful function in Sri Lankan companies and is often the weakest. Moreover, the difference does not have to do simply with a commitment to the importance of "people management". In Japan, it is deeper than that. In order to ascertain the views of a few top executives on the subject of "competitive advantage through people" I decided to interview key CEOs of a few companies. Other than one CEO the rest thought that the executive in charge of human resources need not occupy a position of importance and priority either on the board of directors or in the management structure of the firm. If this is the view of our top executives it shows that we cannot relate to people, if we do not believe in people as an end in itself. If we do not realize that productivity depends largely on people, and that they need to be motivated, then undoubtedly the profit figure in the balance sheet is likely to suffer. It is time therefore we realize the importance of people in the new paradigm of business.

In Sri Lanka, many companies pay lip service to the objective of being a good employer, but do firms take their obligations towards their employees seriously? Does it pay to be a nice guy in the world of business? South Western Airlines is a case in point, by investing in people this company became a profit maker from a loss maker. John Towler a HR consultant in the US says the key issue that can make a company "good to work for" is first and foremost, there must be a high degree of trust and respect between employees and management.

This is earned over time and cannot be legislated into existence. Next, open honest communication with employees. Some firms use secret surveys and meetings to encourage feedback from employees. In practice, successful companies offer more than just competitive wages. They also offer compensation and benefit plans with perks such as career development and training for all employees. Such firms have a policy of promotion coupled with an ongoing programme and the understanding that the line managers are responsible for the development of successors.

This approach creates a stable management structure a dynamic management team and a supportive system. The pay off to the company would be customer satisfaction, employee satisfaction and a healthy cash flow.

We all know that companies need not be large multinationals nor have unlimited financial resources to find ways of creating a positive working environment and in fact it may be probably easier for a small firm to achieve an excellent working environment. People are undoubtedly the most important assets of any business, and if they are not properly motivated they will respond in kind. Research suggests that the test of a firm's commitment to its workforce is the size of its training and development budget. Companies which expect employees to carry on year after year without any further development should not be surprised that their employees are turning out poor quality products at high cost. Many may argue that it is not easy to create an atmosphere and environment in which people are happy and highly productive, this may be true to an extent, however, many of Fortune's top 500 companies in the world are not only highly profitable they are also good employers.

In the face of rising operating costs and increased global competition the question is whether companies should treat their employees better than their competitors. Research suggests that a competitive advantage over a firm's rival can be gained through the firm's human resources. The Japanese philosophy of management is based on a participatory approach to decision making centred on people.

Most Sri Lankan firms generally tend to demand loyalty, without providing the necessary employment conditions, and overlook the fact that loyalty, like respect, can only be earned, not demanded. As the Japanese have discovered, worry first about the people and the profits will look after themselves.

In the final analysis, organizations that go all out to develop their people and to improve the quality of life of the employees and their families will succeed in attracting newer talent while enabling it to retain good and bright employees and above all deliver high returns to their shareholders.



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