“HUMAN CAPITAL;PRIME RESOURCE.”

Have you seen this year’s list of Fortune’s Global 500- 2006?
Among many surprises that you may notice, one which is quite eye-catching is the consistent profitability of Microsoft and Intel.
Microsoft on a turnover of $ 39 Billion has earned a profit of $12.5 Bn, i.e. 31%, and Intel on $38 Billion has earned a profit of $8 Billion i.e. 22% profit. Similar profitability has been noticed for the past few years in both the companies. Microsoft was established by Bill Gates, and Paul Allen in 1975, only.

Compare this with the figures of turnover, of the giant organizations , such as General Motors,(Established in 1908) Ford (established in 1903), Daimler Chrysler(the merged entity of 1998, although the, constituents are very old corporations), which is $192, $177, $186 Billion respectively, and profits, of - $10 Billion (Loss), $2 Billion, $ 3 Bn ; the picture emerges clearly. The older companies, were the leaders and epitomes of; management successes, so far.
There is something special which is happening at present, in the industrial economy; an era of intangibles has emerged.
If one were to ask, the giant organizations about the resources which were contributing to their profit and prosperity, they would have pointed to the large manufacturing facilities, monstrous machines and robots, huge factories etc, as the prime factors. The technical resources, as they are termed.
In the current context if you were to ask the same question to the new generation heroes, they would wholeheartedly attribute the success to their Human resource, more particularly to their Human capital.
If the top twenty personnel are taken off from Microsoft, they would not be able to function, so says Bill Gates.

One can not show off the human capital as the jigs and tools, and the dies and gigantic presses of the yesteryear’s successful entrepreneurs. Hence the name, as the era of intangibles. It comprises:
human competency, creativity, connectivity, new concepts which are the contributors to the generation of wealth. One can feel their impact ,but can not see them as tangible entities.

KNOWLEDGE MANAGEMENT

Peter Drucker coined the term knowledge society, and knowledge worker, to signify the changing times, from brick and mortar, to human capital.
It was in 1991, that a Fortune 500 company Skandia AFS, in assurance and finance services, from Sweden, appointed Mr. Leif Edvinsson, as the first Intellectual Capital Director. It was a bold step by their CEO Mr. Bjorn Wolrath, who gave him the brief :
to chart out the intellectual capital of the company.
Around the same time, to be precise, in October, 1994, Thomas Stewart, then Sr. Editor at Fortune, published an article in this periodical, styled
“Your Company’s Most Valuable Asset, Intellectual Capital.”
This article highlighted a new dimension, in the operations of the company, to the entrepreneurs, namely human capital.
The article created an awareness and interest in human capital, like never before.
In 1995, along with the annual report of Skandia AFS, a report on the intellectual capital of the company was published. The focus areas were:
• Financial health
• Customer rating
• Development of new processes
• A constant and focused effort for the renewal and development of human capital, by training, organizational development initiatives.
• Instead of the conventional annual reports, which are the historical documentation of the financial dealings of the company, a new insight was provided.
They termed this as ‘Navigator’, as it was to guide the future course of the company.
Management task now shifted to building of learning organizations by removing learning disabilities in the employees. A number of listening-posts for new knowledge are created throughout the company. The emphasis has shifted to building up the human competencies, which is the value enhancing factor. As distinct, from the larger and more advanced machines, that earlier economy would have voted for.

INTELLECTUAL CAPITAL

The intellectual capital of any enterprise consists of:
• Human capital: This is the collective knowledge and skills of the employees. This has to be identified, accessed, coded, built-on and fully employed. They talk of skill inventory of an organization.
• Structural capital: The organizational systems and processes in place in an enterprise to share the above human capital by e.g. intranet, meetings, overall a sharing culture. A process of knowledge creation is encouraged, through socialization, internalization, combination, communities of practice, etc.
• Customer capital: An ongoing relationship with your customer. Knowledge is the chief factor to build up a trust between the supplier and the customer. New products are developed, test-marketed, and improved on, through such an interdependent relationship.
• All the above three interact with each other and enhance the intellectual capital of an enterprise. This can be acquired, amassed and employed for larger gains like any other capital.
With global markets beckoning us for expansion of our reach and increased competition, newer fields have to be espoused, to maintain the edge over others. Customers will keep on demanding better value for money, in all products and services we offer. The route for success is to use technology to facilitate knowledge management, to enhance your capacity to work in teams; across, space and time.

TO DO LIST FOR ALL OF US

• Are you making conscious efforts to update your current level of knowledge?
• It has to be an intentional learning, not an incidental one.
• Do you lead learning, and sharing by your behavior?
• Are you making; efforts to have cross-functional teams in your workplace to ensure cross-fertilization of ideas.
• Have you a method in place to record new learning for future use.
• Let all of us be continuous learners
• What you do not use, you lose
• Have you learnt any new knowledge during the past six months or so?
• If not, please embark on the new learning right earnest
• Capacity of human brain is infinite.



M .S.RANADE,
mranade@vsnl.com
PUBLISHED IN COMPANY SECRETARY’S JOURNAL “SAMHITA.”, IN OCTOBER, 06 ISSUE.