Industrial Engineer's Role in Managing Human Capital	August 12                                       2012
Industrial engineers have long used engineering economy and related fields to measure and project various returns on financial capital. As the relative importance of human capital has increased, IE's need to expand their approaches to include more knowledge related to Human Performance Technology (HPT) and measures of merit that examine the return on both financial and human capital. HPT employs a design approach to achieving desired performance from people. HPT uses proven methods and techniques to solve costly people-performance issues caused by organizational or process breakdowns. This paper summarizes some of the key issues associated with human capital, outlines major human capital concepts IE's should be familiar with, and provides a mini-case example on how the use of human capital concepts in the practice of industrial engineering can make a difference.		Shivangi - 93 Institute of industrial Engineering 2004 Author-Coleman,garry D,stetar,Bill,Costa Joe

     

      Industrial Engineer's Role in Managing Human Capital 

   

    1.Introduction

  Industrial engineers have long used engineering economy and related fields to measure and project various        returns on financial capital. As the relative importance of human capital has increased, IE's need to expand their approaches to include more knowledge related to Human Performance Technology (HPT) and   measures of merit that examine the return on both financial and human capital. HPT employs a design approach to achieving desired performance from people. HPT uses proven methods and techniques to solve costly people-performance issues caused by organizational or process breakdowns. This paper summarizes some of the key issues associated with human capital, outlines major human capital concepts IE's should be familiar with, and provides a mini-case example on how the use of human capital concepts in the practice of industrial engineering can make a difference

2. The importance of human capital

While human capital has always been a necessary input for business enterprises, the shift to a knowledge-based economy has increased the relative importance of human capital (Boudreau and Ramstad, 1997). Measurement practices in capitalist organizations have traditionally focused on the measurement and evaluation of the use of capital and capital goods (e.g. materials, facilities, equipment). As the economy has transitioned from agrarian to industrial to information and service, the relative importance of the human element in creating value has increased. Or one might argue that the human element has always been important to creating value, and this value is simply being increasingly recognized.

Issues associated with hiring, placing, developing, and retaining an educated and skilled work force are more critical than ever to the long-term survival of for-profit and not-for-profit organizations alike. Business organizations have traditionally emphasized growing and protecting assets such as financial capital, treating labor as an operating expense to be controlled.

Few would argue that people are truly valuable assets. This is true at the societal, national, community, family, individual, and organizational levels.

3. Key issues associated with human capital

Our deficiencies in understanding human capital are significant. We lack a wide body of applied research, and we do not have norms available for comparison. Managing human capital is much more than the sum of recruitment, training, performance management, and compensation, the traditional processes of the human resource function. Measuring human capital is much more than assessing the effectiveness and efficiency of these key human resource processes. Recognizing human capital as an asset adds a new dimension of assessing total value and looking at the big picture. There are a number of key issues associated with human capital, some represent societal challenges that are prompting the increased attention on managing and measuring our human assets. Others are issues raised as we recognize our shortcomings in managing and measuring human capital. These issues include:

* The shift to a knowledge-based economy and the increasing need for highly educated knowledge workers.

* The global availability of capital goods and goods producing equipment has reduced the competitive advantage of traditional assets. Increasingly, the most sustainable competitive advantage is more productive human capital.

* An aging workforce in industrialized nations, leading to future worker shortages particularly among positions requiring college-level skills (Schaffner & Van Horn, 2003).

* Multiculturalism and increasing diversity in the work force. Recruitment, retention, development, and motivation practices will likely be more varied to be effective.

* The changing nature of the employee-employer relationship. Ubiquitous downsizing, reengineering, temping, and outsourcing have eliminated loyalty, as it was once known.

* Organizational strategy, performance measures, and traditional financial reporting and controls must be integrated with approaches from human performance technology, industrial engineering, quality management, information technology, and related change management disciplines to address human capital at the enterprise level.

* Continual change in the enterprise, its environment and technology prompts the need for ongoing retooling and retraining of the workforce.

* Improvements must be made in the development and deployment of practices to measure the return-on-investment in human capital. Better decision supporting tools are needed to prioritize alternative investments and identify which initiatives and drivers must be emphasized to produce business results.

4. Human performance technology                                                                 

Human Performance Technology (HPT) is a systematic multidisciplinary approach that "stresses rigorous analysis of present and desired levels of performance, identifies causes of performance gaps, offers a wide range of interventions, guides the change management process, and evaluates the results" (ISPI, n.d.). HPT employs a design approach with proven methods and techniques to solve costly people-performance problems . HPT models typically include a process (loosely following the PDSA cycle) and a list of potential interventions available to address the problems identified. Like the basic engineering process, HPT models start with analysis of the situation and design of potential solutions before deciding upon which interventions (techniques) to employ.

5. Industrial Engineer's (IE's) role?

One obvious place for IE's to contribute to the field of human performance technology and improve our approaches for managing and measuring human capital is performance measurement. For human capital, effective performance measurement needs to bridge the gap between individual performance measures and strategic performance measures. Effective measurement of human capital must support strategy implementation, as well as efficient operations. As high value creation opportunities shift from physical products to services and knowledge, IE's should transfer our traditional practices regarding measurement of physical products and processes to the information economy. Establishing cause and effect relationships among the many factors affecting human capital offers opportunities for modeling, simulation, and testing.

6.Surveys:

Information derived from the analysis was found to be actionable, based on sound Industrial Engineering principles (particularly those found within the Engineering Management specialty area dealing with motivation and leadership of technical people). Principles such as treating people like the true resources they are, providing rewards and recognition consistent with the organization's goals and objectives, providing feedback so personnel know where they stand, and providing them with the tools, time, knowledge, and training necessary to get the job done. The organization's leadership was provided with ten specific recommendations for interventions, taking these principles and the data collected into consideration. Observed implementation of the recommendations three years later was then recorded to verify their effectiveness.

7. Recent Developments

Our next steps are to sign-up charter members to THCI, execute the member agreements, and setup the data collection procedures to fit the needs of each member. As consortia level data, practices, and results become available, we will disseminate our findings in forums like the annual IIE conference to further the art and science of managing human capital.

8. Conclusions

Utilizing the various tools of Industrial Engineering, including structured problem solving and a scientific approach to work, combined with a focus on people, brings bottom line results. Theories and practices taught in Engineering Management specifically form a foundation around people that can provide an organization's leadership with a better perspective on which to build their structure and process for executing work. Industrial Engineers can therefore positively affect the organizational goals of increased motivation, morale, job satisfaction, and ultimately performance, by ensuring the Human Capital aspects of work are addressed.