Issue 1

Human capitalMarch 2011

APS Human Capital Matters: Human capitalMarch 2011, Issue 1

Editor’s Note to ReadersWelcome to the first edition of Human Capital Matters.

There seems to be less time to read widely, deeply and thoughtfully about areas of professional interest. Indeed, many leaders and practitioners are time poor at a time when they most need to be at the leading edge of thinking in their field.

Human Capital Matters seeks to provide APS leaders and practitioners with easy access to the issues of contemporary importance in public and private sector human capital and organisational capability. It has been designed to provide interested readers with a monthly guide to the national and international ideas that are shaping human capital thinking and practice.

Ahead of the Game: Blueprint for the Reform of Australian Government Administration emphasised the need for a greater focus on the role of human capital in public sector regeneration. It set out an ambitious and interlinked reform agenda to improve services, programs and policies for Australian citizens. This suite of reforms seeks to boost and support the APS workforce and leadership, and to embed new practices and behaviour into the APS culture. The central goal of Ahead of the Game is to:

“transform the APS into a strategic, forward looking organisation, with an intrinsic culture of evaluation and innovation.”

Ahead of the Game adopted the term Human Capital to signal a distinct shift towards a more systematic and future-oriented approach to the building and sustaining of APS organisational capability. In this context, organisational capability is determined by the combination of people, processes, systems, structures and culture. Consequently, the starting premise for human capital management is the need to improve the performance of the business or organisation. In this framework, the performance of people matters because of their impact on the success of the business.

The shift from people management to human capital management has generated renewed interest across the public sector and within academia in how to strengthen organisational performance through better human capital practices and processes. The articles summarised in this issue of Human Capital Matters provide a variety of perspectives on how this might be done.

Gary Banks discusses COAG human capital reform initiatives, more specifically, how Australia’s human capital agenda can be advanced through educational reforms and altered governance and regulatory arrangements.

Glenn L. Starks and F. Erik Brooks look at the problem of declining interest by young Americans in entering the federal public service and outline ways in which recruitment can be increased and employees retained.

Tim Baker argues that human resource development must be modified to render it more relevant to today’s climate of accelerated change and uncertainty.

Chih-Hsun Chuang and Hui Liao outline the findings of their study of linkages between HR practices and organisational effectiveness.

Loretta O’Donnell, Robin Kramar and Maria Cadiz Dyball examine the arguments for and against attempting to maximise efficiency through industry-specific approaches to human capital reporting.

Renate E. Meyer and Gerhard Hammerschmid analyse the results of their comparative study of HR management practices in Europe.

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And finally, an unsigned PA Times article asks if, on the basis of the findings of a recent report on federal public service recruitment, public sector HR staff are up to the task of hiring (and other) reform envisioned by President Obama.

Finally, Human Capital Matters in Brief provides a quick overview of some recently published overseas documents on human capital issues (including links to the appropriate documents).

Comments, suggestions or questions regarding this publication are welcome and should be addressed to:

Dr David Schmidtchen

APS Workforce GroupAustralian Public Service Commission

Ph: 02 6202 3707

E-mail: david.schmidtchen@apsc.gov.au

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Gary Banks, ‘Advancing Australia’s “Human Capital Agenda”’, Public Administration Today, No. 23, July–September 2010, pp. 12–22.The author discusses the human capital focus of the COAG reform agenda within the context of human capital’s importance to Australian growth and development. He begins by drawing a distinction between the role of education in equipping people to do particular things (e.g. specific skills or technical competencies) and its role in fostering more generic analytical, discovery and communication capacities (e.g. the ‘foundation skills’ of literacy and numeracy). Recent Productivity Commission research supports the view that generic (or foundation) skills are more influential in shaping labour market outcomes. Developing these and maintaining them to a high standard has significant implications for public policy.

Quality improvements in education, for example, are linked strongly to higher levels of productivity and workforce participation. In its multiple dimensions human capital also drives the creation and application of knowledge, which is at the centre of economic growth. Banks argues that, although Australia is relatively well-placed in the table of human capital knowledge and skills dispersal, it needs to do more if it is to successfully address formidable challenges such as the demands of its ageing population.

A major initiative to support this is the Commonwealth-States ‘National Partnership’ aimed at improving the quality of teaching and leadership in Australian schools. The author devotes particular attention to what he terms ‘the fundamental drivers’ in developing and maintaining high-quality human capital education and teaching programs: the quality of teachers and teaching; and the governance and regulatory arrangements that influence how effectively the education profession can be utilised ‘at the coalface’.

Banks is convinced that the COAG human capital reform agenda has the potential to be ‘transformative’ and that the focus of his reflections on human capital—specifically, good governance and sound teaching—are not merely ‘items on a list of reform areas’ but rather ‘pre-conditions for attaining many of the goals of the reform program itself, including improved foundation skills, higher school retention and more balanced socio-economic outcomes’.

Gary Banks AO has been Chairman of the Productivity Commission since 1998.

Glenn L. Starks and F. Erik Brooks, ‘Strategic Human Capital Planning: Recruiting and Retaining New Federal Employees’, The Public Manager, Vol. 38, No. 1, Spring 2009, pp. 60–69.Starks and Brooks analyse the increasing difficulty US Federal Government agencies are experiencing in attracting young people to federal employment.

The authors give two main reasons for this. First, private sector positions offer more challenges and greater extrinsic and intrinsic rewards than federal service. Secondly, and more significantly, federal agencies are faced with obstacles inherent to the public service system, including salary caps, slow hiring processes and unique rules and regulations that discourage would-be applicants and frustrate many who do apply.

The authors’ proposed solution to these problems is a greater focus on strategic human capital management planning. Each agency, they argue, must develop a strategic human capital management plan that sets out tailored recruitment and retention strategies. Such a plan should contain actions (tactical—in 1–4 years) and (strategic—in 5–10 years), as well as continuing strategies, resource requirements (personnel and financial) and risk scenarios. They add that the

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plan should be developed after an agency self-assessment designed to answer the following three questions: Where are we now? Where are we going? How will we get there?

Starks and Brooks go into some detail about strategies to adopt in the areas of both recruitment and retention. The 12 suggested actions in the recruitment area include simplifying the public sector hiring process and establishing a presence in universities and secondary schools in order to raise student awareness of the potential and advantages of a public sector career. Examples of the 11 proposed retention approaches listed by the authors include ensuring a continuing focus on proper ‘job fit’ for employees and the establishment of more innovative flexible work programs.

Glenn L. Starks is a senior program analyst with the US Department of Defence. F. Erik Brooks is an Associate Professor at Georgia Southern University, USA.

Tim Baker, ‘Does the HRD Industry Have a Future?’, Training and Development in Australia, Vol. 37, No. 3, June 2010, pp. 012–014.The article is extracted from Baker’s new book, The 8 Values of Highly Productive Companies: Creating Wealth from a New Employment Relationship <http://www.winnersatwork.com.au>. Baker argues that the traditional approach to human resource development (HRD) is largely a relic of the twentieth century. HRD needs to transform its approach or risk sliding into irrelevancy in today’s climate of change and uncertainty.

Although Baker’s focus is on HRD in the private sector, most of what he says has relevance to the public sector. The author asserts that current HRD practices are preventing organisations and their workforces from realising their full potential. Conventional HRD emphasises competencies, skills development, and implementing and following processes and procedures. These approaches are primarily about doing, applying or improving something within the organisation. However, they do not question how people think (or, for that matter, encourage them to experiment or innovate).

Baker sees the term ‘human resources’ as outdated and, in fact, ‘derogatory’, one which implies that employees are ‘captives’ of their organisations. To address this, he argues, HR departments should be rebranded so as to make clear the organisation’s conviction that HR is primarily about the performance and development of people. Baker cites the example of the Rockhampton (QLD) Regional Council’s People, Performance and Well-Being Department.

The author includes a useful table comparing the seven key elements of traditional and future approaches to HRD: human resources/people; doing/thinking; training/problem solving; maintaining the status quo/managing change; operational approach/strategic approach; linear/cyclical; and top-down approach/bottom-up approach. He also discusses how organisations could better utilise new HRD approaches in unlocking the potential of their people in the areas of problem-solving, change management, a more strategic focus, action learning, and innovation.

Dr Tim Baker is Managing Director of WINNERS AT WORK and an international consultant specialising in workplace culture.

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Chih-Hsun Chuang and Hui Liao, ‘Strategic Human Resource Management in Service Context: Taking Care of Business by Taking Care of Employees and Customers’, Personnel Psychology, Vol. 63, No. 1, Spring 2010, pp. 153–197.The authors argue that the HR management practices of a high-performance work system can enhance organisational outcomes by injecting two key factors into an organisation: concern for customers; and concern for employees. These factors in turn encourage employees to engage in co-operative behaviours with clients (‘service performance’) and co-workers (‘helping behaviour’) that are essential in achieving superior organisational efficiency and effectiveness.

Chuang and Liao acknowledge that the link between HR practices and organisational performance has received much attention in the human capital and management literature while making it clear that they have sought to take traditional approaches further. They examine the elements of a high-performance work system (HPWS), especially that which gives a high priority to ‘service performance’ and ‘helping behaviour’. The author’s conclusions are based primarily on the results of a private sector study, which nevertheless has public sector relevance.

Among the approaches Chuang and Liao advocate for strengthening the connection between a HPWS and better internal and external organisational outcomes is a strong emphasis on developing highly-skilled frontline employees. The authors also contend that, although HR has for long been inwardly-focused (i.e. on employees’ well-being), it is clearly beneficial for managers to work across functional boundaries in designing and implementing a comprehensive HPWS which aligns closely the interests of employees and those of an organisation’s clients.

Chih-Hsun Chuang is based in the Department of Business and Management at the National University of Tainan, Taiwan. Hui Liao teaches in the Department of Management and Organisations at the Robert H. Smith School of Business, University of Maryland, USA.

Loretta O’Donnell, Robin Kramar and Maria Cadiz Dyball, ‘Can One Size Fit All?’, HR Monthly, November 2009, pp. 34–38.O’Donnell, Kramar and Dyball analyse the findings of their (largely interview-based) study of human capital reporting within the biotechnology industry, an exercise which has relevance for capability improvement in the public sector. They chose biotechnology because it is highly knowledge intensive, with human capital being a key element in its success. Such success requires effective management of a variety of intangible but significant elements, including creativity, efficiency, growth, renewal and stability. The authors present the ‘Star Model’ as a research-based response to the challenge of harnessing these elements in pursuit of better outcomes.

The study revealed that human capital is a useful yet under-developed component of value creation within the biotechnology industry and that this situation needs to change if human capital reporting—especially industry-specific reporting—is to become an accepted practice and tool for strengthening organisational capability. The authors concluded that comprehensive human capital reporting is still in an early phase in the private and public sectors, with industry-specific analysis and reporting being even more embryonic. O’Donnell, Kramar and Dyball suggest that this presents an opportunity for members of the HR profession to position themselves as strategic interpreters of complex human capital data and to communicate the value of that data to the relevant areas of their organisations. The authors acknowledge that the one-sector focus of their study has its limitations, and conclude that further research into the

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applicability of human capital reporting within specific industries will enhance the potential of human capital analysis to improve the efficiency and effectiveness of organisations.

Loretta O’Donnell teaches in the Australian School of Business at the University of New South Wales. Robin Kramar is a Professor of Management at the Macquarie Graduate School of Management at Macquarie University. Maria Cadiz Dyball is an Associate Professor in the Department of Accounting and Finance at Macquarie University.

Renate E. Meyer and Gerhard Hammerschmid, ‘The Degree of Decentralization and Individual Decision-Making in Central Government Human Resource Management: A European Comparative Perspective’, Public Administration, Vol. 88, No. 2, 2010, pp. 455–479.Meyer and Hammerschmid report on their comparative study of human resource management (HRM) practices in European public sector jurisdictions. They examined systems and practices in the nations of Continental Europe, Scandinavia and the UK. Their focus was the extent to which decision-making authority is decentralised, that is, passed down to management and, in some circumstances, delegated to a single decision-maker.

The article provides an analysis of the distinct ways in which HR decision-making practices are organised in Europe and reveals that, although decentralisation has been a common goal of modernisation initiatives, a high degree of centralisation still exists in some jurisdictions. The authors did not measure the level of sophistication of HR practices or the overall standing of HRM in respective countries. However, their research revealed the importance of national culture, administrative traditions and institutional arrangements in shaping HR developments in individual jurisdictions.

The study also showed that the degree of HRM centralisation is highest in Eastern European nations and lowest in Southern European and Continental European countries. Practice in Anglo-Saxon and Scandinavian jurisdictions tends to be more decentralised. The authors also concluded that decentralised decision-making frequently goes hand in hand with a higher degree of shared decision-making.

Renate E. Meyer is based in the Institute for Public Management, WU Vienna University of Economics and Business. Gerhard Hammerschmid is on the staff of the Hertie School of Governance, Berlin.

(Unsigned), ‘Federal HR Staff Might Not Be Up to the Task’, PA Times, Vol. 33, No. 4, August/September 2010, pp. 1, 8.The article deals with the findings of a Partnership for Public Service-Grant Thornton report, Closing the Gap: Seven Obstacles to a First-Class Federal Workforce, which examines the state of human capital management in the US federal public sector. The report is based primarily on interviews with the sector’s principal policy advisers on HR management issues, the Chief Human Capital Officers (CHCOs).

Closing the Gap found that building and maintaining a high-quality federal workforce is being hampered seriously by a number of long-standing, systemic and often dysfunctional approaches, policies and practices. Chief among these are a slow and cumbersome hiring system and a widespread lack of capacity among HR staff to improve existing recruitment arrangements and implement the new, more applicant-friendly hiring reforms now being introduced at the direction of President Obama. CHCOs also reported that far too many of the 25,000 federal HR employees

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are without the skills needed to help their agencies improve HR operations and workforce management.

In addition to the recruitment and capability problems, CHCOs identified five other obstacles to creating a first-class federal workforce: pay, classification and performance management systems; a sometimes tense relationship between federal agencies and the central HR authority, the Office of Personnel Management; the leadership capabilities of federal managers; sub-standard HR ICT systems; and labour relations. They also noted that insufficient resources are being devoted to HR training.

One report author, Grant Thornton, which has been surveying the federal management community (Chief Finance Officers, Chief Information Officers, Chief Acquisition Officers) for decades, has found a high level of concern about human capital to be a common and continual thread across all of these groups. Director of Grant Thornton and former CHCO, Scott Cameron, emphasised that human capital is also the number one concern of top public sector managers.

PA Times is a publication of the American Society for Public Administration.

Human Capital Matters in brief

USA

RecruitmentThe Partnership for Public Service (PPS) recently released a report, “America Has Talent: Breaking the Mold for Federal Recruiting” (20pp), which looks closely at the problems and successes surrounding recruitment by Federal Government departments and agencies. The publication sets out the findings of a PPS project—financially supported by Monster Government Solutions—relating to recruitment in five areas: 1) recruiting veterans; 2) recruiting returned Peace Corps volunteers; 3) building talent opportunities for younger workers and diverse applicants; 4) recruiting people with disabilities; and 5) e-recruitment, web technologies and branding. A central goal of the project is to help broaden the dialogue around federal recruitment and hiring by highlighting positive approaches to the problems with which many agencies struggle. The study reveals a range of difficulties: recruitment efforts are passive; agency leaders fail to prioritise talent issues; hiring takes too long; candidate quality is highly variable; and key players in the recruitment process often do not collaborate in achieving the required outcomes.

Another Partnership for Public Service report, produced in collaboration with the research and consulting firm PDRI, examines hiring across the Federal Public Service. The study, “The Weakest Link: How Strengthening Assessment Leads to Better Federal Hiring” (2010, 28pp.), takes an in-depth look at how Federal Government agencies are assessing candidates for jobs, the barriers to hiring the best candidates, and how the recruitment process can be improved. For some time it has been clear that much prospective talent is lost because selection procedures are slow and cumbersome, and because managers and HR personnel are not always well-equipped to support the hiring process. Accordingly, the Obama Administration is seeking to address these deficiencies by a new focus on more efficient recruitment machinery and practices (an initiative foreshadowed in the President’s 11 May 2010 Memorandum, “Improving the Federal Recruitment and Hiring Process”). The report identified five major weaknesses in present arrangements (summarised on pp. i–ii) and made eight recommendations for change (pp. ii–iii).

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Singapore

Public Service Retirement AgePublic servants who reach the statutory retirement age (62 years) will henceforth be offered re-employment by the Government to enable them to work up to age 65 in the first instance, and then up to age 67 if their health remains good and the Government’s Public Service Division (PSD) considers them to still be productive. The PSD has made clear that up to 124,000 public sector employees from 15 Ministries and more than 50 Statutory Boards would eventually be affected by the move. The Public Service, Singapore’s largest employer, employs about 4% of the country’s total workforce. To qualify for re-employment an officer will have to demonstrate satisfactory work performance in the three years prior to retirement; be medically fit to continue working; and have had no disciplinary action taken against him/her <http://www.psd.gov.sg>

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