Developing Countries and the Leverage of HRWednesday, Jan 31, 2007
Economists identify four factors of production that a society utilizes to produce goods and services. These are:
- Land - natural resources including land, minerals, oil and water resources etc.
- Capital - manufactured aids used in production e.g. factory, machinery, equipment etc.
- Labour – physical and mental talents of people used in producing goods and services
- Entrepreneurial Ability – The human resource that bears risk, seeks business opportunities, innovates and combines other resources to produce goods and services
It is interesting to note that most of the poor countries of the world are either “rich” or potentially rich in at least three of the above resource categories – land, labour and entrepreneurial ability. Further, two of the above factors relate to human resources – people and their talents.
A majority of the low income states has more land than most of the advanced countries. Pakistan for example has a surface area that is 2.23 times of Germany, 3.27 times UK, and about 36 times that of Israel.
Similarly, most poor nations are rich in labour (physical) - and many of them even in intellectual or mental resources. A classic example would be the ever increasing demand in the developed nations for IT professionals from India, Pakistan, Bangladesh etc.
Likewise, entrepreneurial ability is another human resource that can be tapped or developed by third world states to boost their economic progress.
Now it can be argued that both labour (mental) and entrepreneurial abilities are not cheap to develop in a third world context, and thus proposing a vicious cycle of poverty and underdevelopment of human resources. We have however several examples of poor nations making rapid and significant economic progress in a relatively short span. South Korea, Malaysia and China can be cited as examples. It would be safe to say that such progress would not have been possible without vision, leadership, commitment and a focus on human resource development.
The vicious cycle of poverty and underdevelopment can be and has been broken, but it requires a shift of view and assumptions, most important of which being, viewing people as an asset rather than burden. Naked, sick and hungry people have been transformed into human capital only through the former assumption. Holding a negative view only leads to more deprivation, poverty and hopelessness.
Human Resource Management
Human resource management is about efficient and effective utilization of human resources for the attainment of organizational goals and organizational effectiveness.
The main functions of HR include:
- Staffing – timely hiring the right people for the right job
- Human Resource Development – developing desired knowledge and skills for the job and building human abilities and capacity for future
- Compensation Management – offering people with salary and benefits that are market competitive and also equitable within the organization
- Health and Safety – practices aimed at maintaining a healthy workforce and a safe and healthy work environment
- Employee and Labour Relations – aimed at maintaining healthy work relationships, especially between the employer and the employees
If HR meets its functional goals, across organizations, society would benefit in a number of ways. The following section outlines the key benefits.
Contribution of HR to Socioeconomic Wellbeing
Efficient hiring implies lower unemployment and underemployment rates. If people are able to get (or switch) jobs more quickly, that means shorter cycles of unemployment or underemployment.
Effective staffing implies improved performance, less layoffs and terminations, more productivity and economic value, more goods and services produced.
Human Resource Development
There are two elements of HRD – training and development. While training focuses on skills required for the current job, development is a long term endeavour aimed at developing and enhancing skills and human capabilities for both current and future assignments.
An effective training and development function implies enhanced human capabilities and potential, improved performance, higher pay (both current and future), more employment opportunities for people, enhanced vertical movements in the socio-economic class structure, more per capita income, less poverty and human deprivation in due course.
Effective compensation management that ensures both market competitiveness and internal pay equity results in fair pay, equal opportunity, higher morale and motivation, less conflict, higher productivity, economic utilization of financial resources (on payroll).
Health and Safety
Effective management of health and safety leads to healthier people, fewer accidents, less disease (both physiological and psychological), higher productivity, fewer disputes and law suits, less disruptions in production and provision of products and services to general public.
Employee and Labour Relations
Effectively managing employee and labour relations results in healthier work environment, equal opportunity, higher morale, fewer conflicts, disputes, disruptions and law suits and higher productivity.
In summary, improved HR practices at a macro level can have a multiplier effect in an economy. And one of the main reasons is that the influence is not confined to individuals but is rather institutional. HR best practices result in more effective and efficient organizations. And organizations include private businesses, public institutions (including government), and NGOs. Thus the scope covers corporations, government agencies, colleges, universities, hospitals, and other social organizations and institutions. And further, organizations do not function in isolation. They have interdependencies for resources, products or services. Thus enhanced organizational performance of a few can positively impact several other organizations and institutions. And a similar improvement at a larger scale can trigger a multiplying effect on the overall socioeconomic conditions.
Earlier in the article I described entrepreneurial ability as an important factor of production. While it is critical to economic performance, yet it is a rather complex competency not easily developed. Here too, HR can play a critical role in coordination with other institutions – universities, training providers etc. And since organizations are the primary consumer of this ability, it makes sense too.
It is unquestionable that the road to progress of a poor nation is through the development and empowerment of its people. And HR, as we have seen in this article, can play a significant role in realizing this potential.