Human Resource Management

Human Resource Management (HRM) is the creation, the development, and the maintenance of an effective workforce. Matching the requirements of the organisation and responding to the environment.


Some important principles of leadership are forgotten in many large corporate companies where managers give orders. There is a monumental focus on the  recruitment and selection process. Man management, once this process is complete, is fundamental to the morale and future productivity within the business. Various departments are driven by budgets. Managers must realize that the following personable approaches will gain universal respect, as well as performance indicator results.
In a nutshell:



Principles

1. Begin with praise and honest appreciation. If you are asking something of someone, begin by praising something which they've done for you in the past. Demonstrate your appreciation, this will ensure that the task you're asking them to complete will be carried with pride and diligence. 
2. Call attention to people's mistakes indirectly. Speak honestly about their finest contributions before subtlety pointing out the benefits of correcting their mistake.
3. Talk about your own mistakes, you've made in the past and how you've corrected them before pointing out the mistakes made by others.
4. Ask questions before giving out direct orders. Instead of saying "Do this" or "Do that", say " What do you think about using this method?" Or, " Do you think this would work, and why"?
5. Let the other person save face. Even if we are right and the other person is definitely wrong, we can only destroy ego by causing someone to lose face. Hurting someone in their dignity is a crime.
6. Praise the slightest improvement and praise every improvement. Be hearty in your approbation and lavish in your praise.
7. Give the other person a reputation to live up to. If you want to improve a person in a certain respect, act as though that particular trait were already one of his or her outstanding characteristics.
8. Use encouragement. Make the fault seem easy to correct. When a student has an issue with algebra. Point out the fact that they are doing very well in all the other aspects of Maths and if they adopt the same principles in algebra, their results will improve. Notice the use of the word and rather than but.
9. Make the other person happy about doing the thing you suggest.

"Peer Pioneers"

Peer production is emerging as an alternative model of production that can harness human skill, ingenuity, an intelligence more efficiently and effectively than traditional firms.The way companies address peer production will share the future of industry and affect their very chances for survival.



Companies will need a strategy to address peer production that takes into account both the threats and opportunities for their It's a myth to say that peer production takes away wealth from the economy and thereby erode the ability for business to make profits. Treating peer production as a myth or a transient fad is a mistake.It's not just online networking.Google CEO Eric Schmidt -peer production is about more than sitting down & having a nice conversation with nice objectives & a nice attitude Eric Schmidt -It's about harnessing a new mode of production to take innovation and wealth creation to new levels. The time to address peer production is now. Barriers to entry are vanishing and the trade-offs that individuals make when deciding to contribute to projects and organizations are changing, creating opportunities to dramatically reconfigure the way we produce and exchange information, knowledge, and culture. 


Companies that recognize, address, and learn to tap peer production will benefit, while those that ignore and resist resist peer production cause companies to miss important opportunities for innovation and cost reduction, and may even go out of business. In it's purest form peer production a way of producing goods and services that relies entirely on self-organizing, egalitarian communities of individuals who come together voluntarily to produce a shared outcome. In reality, peer production mixes elements of hierarchy and self-organization and relies on meritocratic principles of organization The most skilled and experienced members of the community provide leadership and help integrate contributions from the community.

In many peer production communities, productive activities are voluntary and nonmonetary. They are voluntary in that people contribute to these communities because they want to and because they can.No one orders a worker to contribute to wikipedia or to contribute code to the Linux operating system. 
The Linux/wiki contributions are nonmonetary because most participants don't get paid to participate, contribute. Individuals determine if, what, and how much they want to produce. Just because people don't get paid to participate in peering does not mean, however,that they do not benefit from their participation in other ways. 

The economics of production have changed significantly as we have moved from an industrial to an information-based economy. In the industrial economy most opportunities to make things that were valuable and important to people were constrained by the high costs of making them. If you wanted to make a mass-circulation newspaper you needed a printing press and a physical distribution infrastructure, for delivering your papers door-to-door. Simply wanting to do this was not a sufficient condition to make it happen. You needed financing to obtain the physical capital. And, in order to get an acceptable return on your invested capital, you needed to orient production toward the market (i.e. you needed to sell subscriptions).


Today, billions of connected people around the planet can cooperate to make just about anything that requires human creativity, a computer, and an Internet connection. Unlike before, where costs of production were high, people can collaborate and share creations at very little costs. This means that individuals needn't rely on markets or capital intensive firms to make or trade all of the goods and services they desire. In fact, a growing proportion of the things we value (including newspapers can now be produces by us in cooperation with the people we interact with socially - simply because we want to.



So how can loose networks of peers possibly assemble goods and services that compete head-to-head with those of a large, deep-pocketed company?
For one, peering taps into voluntary motivations in a way that helps assign the right person to the right task more effectively than traditional firms. The reason is self-selection. When people voluntarily self-select for creative, knowledge-intensive tasks they are more likely than managers to choose tasks for which they are uniquely qualified. Who, after all, is more likely to know the full range of tasks you are best qualified to perform- you or the manager?


The originator of Linux, says "People just self select to do projects where they have expertise and interest." As long as communities have mechanisms for weeding out weak contributions.

Cost-Volume-Profit Analysis

FINDING THE BREAK-EVEN POINT

At the zero volume of activity (zero sales), there is zero sales revenue. The profit (loss), which is the difference between sales revenue and total cost, for some volume of activity is the vertical distance between the total sales revenue line and the total cost line at that particular line of activity. Where the volume of activity is at break-even point (BEP), there is no vertical distance between these two lines (total sales revenue equals total costs) and so there is no profit or loss. That is, the activity, whatever it might be breaks even. In the company I worked for this basic procedure wasn’t carried out, hundreds of business unit were not assessed and were suffering varying degrees of loss. My particular branch was the subject of -£14,000 loss per quarter The volume of activity was below BEP, the business was incurring a significant loss, total costs were exceeding the sales revenue. After I got to grips with the team, got them working together creating unity, following my attitude and application the business operated at a volume of activity above the BEP, there was a profit because total sales revenue exceeded total costs. There was a complete change in fortunes a £36,000 turnaround in net profit. So the store was making a £22,000 net profit.  Remember, look at the figure, the further below BEP, the higher the higher the loss: the further above BEP, the higher the profit.

The sloping line at the zero represents the sales revenue at various volumes of activity. The point at which this finally catches up with the sloping total cost line, which starts at F, is the break-even point (BEP). Below this point a loss is made.

This can be a laborious business. However, since the relationships in the graph are linear that’s the lines are all straight, it’s easy to calculate the BEP.
We know that at BEP (but not at any other point):

Total sales revenue = Total costs

At all the other points except the BEP, either total sales revenue will exceed total cost or the other way round. Only at BEP are they equal.) That is,

Total sales revenue = Fixed costs + Total variable costs

If we call the number of units of output at BEP b, then
b x Sales revenue per unit = Fixed costs + (b x Variable costs per unit)
so:
b x (sales revenue per unit)- (b x variable costs per unit)=Fixed costs
and:
bx(sales revenue per unit- Variable costs per unit)=Fixed costs
giving the final, vital equation:
b=

Fixed costs

---

Sales revenue per unit - Variable costs per unit

If you look at the break-even chart in the figure this is logical. The total cost line starts at point F, higher than the starting point for the total sales revenues line (zero) by amount F (the amount of the fixed costs). Because the sales revenue per unit is greater than the variable cost per unit, the sales revenue line will gradually catch up with the total cost line. The rate at which it will catch up is dependent on the relative steepness of the two lines and the amount it has to catch up (the fixed costs). bearing in mind that the slopes of the two lines are the variable cost per unit and the selling price per unit, the above equation looks perfectly logical. Though the BEP can be calculated quickly and simply, it does not mean that the graphical approach of the break-even chart is not without value. The chart shows the relationship between cost, volume and profit over a range of output and in a form that can easily be understood by non-financial managers. The break-even chart can therefore be a useful device for explaining this relationship.
Here is an example, Dappy Industries Ltd makes bar stools. The fixed costs of operating the warehouse for a month cost a total of £500. Each bar stool requires materials that cost £2. Each bar stool takes one hour to make, and the business pays the bar stool makers £10 an hour. The bar stool makers are all on contracts such that if they don’t work for any reason, they are not paid. The bar stools are sold to a wholesaler for £14 each.
What is the BEP for bar stool making for the business?
The BEP (in number of bar stools)

Fixed Costs

---

(Sales revenue per unit- Variable costs per unit)

£500

---

£14-(£2+£10)

= 250 bar stools per month to break-even

REAL WORLD

BE at BA, Ryanair and easyJet

Commercial airlines pay a lot of attention to their BEPs and their ‘load factors’, that is, their actual level of activity. British Airways is a traditional airline. Ryanair and easyJet both ‘no frills’ carriers, which means that passengers receive lower levels of service in return for lower fares. All three operate flights within the UK and from the UK to other European destinations. Only BA operates flights beyond Europe. We can see that all three airlines are making operating profits as each has a load factor greater than it BEP.

The usefulness of being able to deduce the BEP is that it makes it possible to compare the planned or expected volume of activity with the BEP and so make a judgement about risk. Planning to operate only just above the volume of activity necessary in order to break even may indicate that it is a risky venture, since only a small fall from the planned volume of activity could lead to a loss. This  indicates to me that Ryanair make substantially more profit per unit.

What makes an Entrepreneur?

• What is an Entrepreneur?

The economy is calling out for entrepreneurs and SMEs. Some people are more naturally entrepreneurial than others. Furthermore they show these tendencies at different stages during their lives and in varying situations. 


Relationships between the social environment and personality traits. An extension of the latter point is how much of this can be learned. The terms 'entrepreneur' & 'enterprise' 


In the story of Intrason, we have met two words that have come to preoccupy so many politicians, managers and scholars. For governments throughout world, a problem has been to kindle the 'enterprise culture' which is both stimulating growth and generating new jobs. 


Often the term 'rekindle' may be more relevant because of the common feeling that the spirit of enterprise has been lost. For the general manager, enterprise has become associated with innovation and dynamic adaptability. In large organisations, leaders have sought how to reproduce the same lost spirit to revitalise their sagging hierarchies. 


For scholars, the words pose something of a puzzle. We seek answers to questions from 

1. 'Who are entrepreneurs,?' 
2. 'How are they created?'.  
3. 'What government policies encourage their activities and nurture their business?' 

While there is a consensus that the entrepreneur is a key element in the economy, divergence between two main lines of thought continues. One concentrates on willingness to accept risks while the other stresses the innovatory function. Putting these together, we can summarize by saying saying that:

• Entrepreneurs are agents of adjustment.This means that, in being flexible in their choice of business and the way they conduct it, they both lead and satisfy the adjustment needs of the whole economy.
• Entrepreneurs apply innovative ideas, changing the way businesses convert inputs into outputs. 
• Entrepreneurs go beyond replicating the current processes in the market

They find new marketing processes to reach new customers or satisfy existing customers in new ways. They also take risks. In each of these aspects; the entrepreneur breaks new ground, usually seeking incremental rather than great change.
In this way the person is a calculative risk taker yet not an out-and-out gambler. Many entrepreneurs lack formal skills in risk management. The intermediary entrepreneur is alert to profitable opportunities for trade. The opportunity arises from information.

• The intermediary spots opportunity not processed by others yet which is freely available. The intermediary's advantage is alertness, for otherwise no special skills required. Although accounting assists. 

• The originator goes beyond being alert to imagining opportunities.This is a special skill involved in not only finding openings amid uncertainty but in identifying their potential and assembling resources to exploit them.

• The innovator relies on aptitude to develop new technology.This gives a temporary advantage over other firms. These firms can eventually respond by extending or replacing the innovation. There is some difference with intermediary, who sometimes exploit the innovations of others.The innovator differentiates from the originator, whose function may equally lie in marketing as in technology.

• The risk taker gains profit as the reward for carrying risk. Assesses the uncertain future and ventures in business according to judgement.

• The co-ordinator makes judgements and co-ordinates resources.Central to this view is access to resources. without which the entrepreneur could not function. This means capital. As the economy changes, the co-ordinator is first to adapt, matching changing supply and demand. In fact co-ordinators make the economy work. Underlining their risk taking nature.

Established Entrepreneurs don't necessarily cover themselves with insurance. 
90% cover their property.  Only 10% cover health, personal accident, travel or patents and copyright.


To sum up. What is an entrepreneur?

• An entrepreneur is a person who shows willingness and ability to take reasonable risks for gain in business or commerce. 

• Enterprise is the behaviour shown by entrepreneurs, which is taking reasonable risks using personal resources. 

Note that the definitions say nothing about the size or type of business activity. As we shall see, being an entrepreneur involves using a wide range of management skills in a variety of sizes of business. 

• Personal factors 

Researchers have examined personal traits for clues to explain many aspects of behaviour, leadership, and entrepreneurship.

1. Need for achievement: Monetary gain is not the sole driving force behind entrepreneurs. They gain satisfaction from solving problems and taking responsibility for their outcomes.
2. Desire to be in control of environment and destiny: This is the preference for being one's own boss rather than being employed (and directed) by another.
3. Willingness to take risks: The consensus on this point has been documented/noted above
4. Need to be independent: This is the wish of not having to rely on, or be responsible to  others.
5. Unconventional personality: This is the feeling of being out of place at a large firm.
6. Capability for innovation: Innovation can relate to any aspect of the business.

There have been studies that have tried to establish whether such traits distinguish entrepreneurs from the rest of the population. Are entrepreneurs really different to others? Clearly some factors are required of all successful managers, especially the important need for achievement and desire to be in control. For not only are managers directly responsible to other officials, and hence dependent roles, but also they thrive on being responsible for others, their welfare. They exercise freedom and take risks. 
 A further question concerns whether entrepreneurs are born or made. If such traits are needed by managers and entrepreneurs, then entrepreneur development should, and does, have much in common with management development. In other words, many aspects of entrepreneurial behaviour can be acquired through learning and experience. 

Answers to these key questions could be useful, for example, in predicting whether an individual is likely to succeed. As with other aspects of human activity, it is inappropriate to pick out just one or a few factors when entrepreneurs are clearly characterized by their diversity. In addition, factors in the social and economic environments, which may have greater effect than personal differences. Of which, are sometimes the subject of ignorance by this approach.

• Social Factors

Beyond personality, there is evidence that social factors influence the likelihood of a person becoming an owner-manager/entrepreneur. 

• Peaks in the age profile of the self-employed;
• The best single predictor of self-employment is whether the family has included some form of the same;
• Self-employment is more prevalent among married than among single people.
• Self employment follows from social marginalization and is more common in some ethnic groups

While such factors may be noted as more typical of entrepreneurs than others they do not help much with the question of what makes an entrepreneur. For instance, from correlational data, one could argue that marriage may may encourage self-employment in some way. The danger is the same evidence supports the opposite argument - self-employed people are more likely to get married!

• Age Profiles 

The interaction of personal and social factors is illustrated by data on the age of the self-employed. One study found almost half business starters were aged between 30 and 45. Others identified two peaks in the age profile of self-employed people, namely 35-44 and over 65. A different approach compared the growth rate of small privately owned companies with the age of their directors. The companies, with a minimum turnover of £2million, were beyond the start-up phase. Companies with younger directors, around 30 years of age grow more quickly. 

 Although the measures and age groupings in such surveys do not correspond they all point to changes with age. "I can suggest that the peak among the thirty somethings" depends on their having  gained sufficient experience to set-up in business while retaining the drive for achievement. The second peak among over 65s is explained by their minimal chances of formal employment. Small-scale self-employment supplements pensions.

• Family businesses

Self -employment runs in families. This is not only because ownership is inherited but seems to follow from values and skills that parents give to their children. Inheritance might be a mixed blessing. There is evidence to support the adage, 'Rags to rags in three generations'. Only 8 per cent of family businesses reach the third generation. Decline in family businesses is not inevitable, however.

People's ability to learn is the key skill separating the potentially successful from the rest. 


I remember on freshers week, the course manager said your degree will depend on your ability to make notes. You'll have material on the projector and in handouts, but it's the notes you take while being lectured, the quality and the quantity. I take neat notes without looking at the page whilst doing so. This ensures that I'm observing body language traits and emphasis from the lecturer, as well as, writing down virtually every single word they say. If I wasn't doing this, their speech will be gradually forgotten over a period of time. With the notes you can get close to a 100% of perfection when it comes to report writing or examinations. 
Of course this is replicated in meetings and seminars in the business/real world. I actually learned this skill at store managers meetings. The notable one being the Jill Dando annual conference at the National Exhibition Centre, Birmingham. Due to the fact I took notes, I was able to recall her message that day. 


There were meetings, courses, seminars frequently, increasing in quality after the merger. Although, the synergy David Simons was seeking from the amalgamation was not forthcoming. In fact, he lost £10million out of his own purse, admitting he made a grave error. An error well documented in business pages of fleets streets finest, for a significant period following that fateful  decision.




Here is my diagram on the similarities between the general manager and the entrepreneur.

Enterprise 2.0

theEnterprise 2.0

One of the worlds largest pharmaceutical companies, the Swiss drug maker Novartis released all of its data live on the Internet, as they attempted to unlock the genetic basis of type 2 diabetes. This meant that anyone could access their raw data. This was simply unheard of in the high stakes, highly competitive world of big-time pharma.
By placing data in the public domain they were hoping to leverage talents. While this most certainly hasn’t impacted their finances in a detrimental way, there is very little evidence that this has had a profound affect on their  income statement. The variables are consistent. The performance during the financial crisis of 2007 - 2010 is very encouraging indeed. Insiders are advocating this is due to becoming ‘open source’ in February 2007. Opening up at this stage has enabled the company an insight of a global research community. Not only that, human resources have been given a lift. The company’s Scientists have significantly heightened morale, eager and relishing the idea of establishing tighter relationships with colleagues in academia on a global scale.

It’s worth noting that Novartis didn’t reveal it’s own observations in the three years leading up to becoming open source. Three years of deep research, they went ‘open’ to add to their data and achieve a breakthrough.

Open sourcing, fostered close ties and goodwill with research communities globally. It’s provided them with a competitive advantage over their rivals, who’ve remained closed. Other companies now lack a competitive edge, lacking the relationships harboured by opening their raw data on the Internet, and collaborating on mass, in February 2007.
The Novartis initiative nicely encapsulates the principles of wikinomics.
Novartis is open. It no longer just considers the 98,000 people they employ full-time, but since Feb 2007 a broad array of individuals and partner organisations they’ve formed relationships with. In industry, government, the nonprofit sector, and academia that can enrich its value proposition. They peer produce value by collaborating closely with other institutions in society to achieve their business goals.
The Norvartis 'open source' success initiative.  They don't keep secrets. They think and act globally.  Novartis also considers its responsibilities as a global citizen; in addition to research on malaria, tuberculosis, and dengue fever they donate 2% to disadvantaged patients around the world. They embrace four principles-openness, peering, sharing, and acting globally-

Novartis is transforming itself into an increasingly collaborative enterprise model. The model "ENTERPRISE 2.0"-a new kind of business enterprise. Enterprise 2.0 is a new kind of business entity, one that opens it's doors to the world; co-innovates with everyone, especially customers. Enterprise 2.0 shares resources that were previously closely guarded; harnesses the power of mass collaboration. Enterprise 2.0 behaves not as a multi-national but as something new: a truly global firm.

This model can be scaled down to a smaller business. A micro/small business can open its doors to a co-creative, collaborative community. Where its growth plans receive contributions from other successful examples. I can cite many more examples and evidence to support my thesis that firms embrace the Enterprise 2.0 model can harness external resources and talent and achieve unparalleled growth and success as a result. Its hard for people to switch off, to bi-wire their brains and turn off the old business reflexes so that you can capitalize on what the new world of wikinomics can offer. To aid efforts to internalize the new business paradigm. I will give some examples of how smart firms are putting the principles of wikinomics into practice. A growing number of smart companies are learning that openness is a force for growth and competitiveness. As long as you're smart about how and when, you can blow open the windows and unlock the doors to build vast business ecosystems on top of what we call platforms for participation.

Amazon, eBay, Google, and  flickr open up their applications and business infrastructures to increase the speed, scope, and success of innovation. Their platforms for participation create a global stage. hundreds of thousands of customers & partners added value & establish synergistic businesses. Amazon is an open platform prodigy, harnesses the power of at least two hundred thousand active developers. Amazon gains nearly 30% it's revenue from third party sellers that leverage its e-commerce engine.

Novartis are not alone in unearthing the colossal benefits of open source networking. Proctor and Gamble as mentioned in my previous blog How Mass Collaboration Changes Everything
Open sourcing key to Procter & Gamble turning their business around. Leader among thousands  of companies that participate in the global ideagora. Their business model is something akin to to an eBay for innovation. Companies that move now can leverage a global pool of talent, ideas, and innovations that vastly exceeds what they could ever hope to marshal internally. P & G figures that for every top-notch scientist inside it labs, there are another two hundred outside who are just as good.

How can a company get with the program? The starting point for any manager is personal al use  of the new collaborative technologies, preferably in conjunction with a Net-Generation youngster. Ask a novice to open a twitter, facebook account for the first time. Join myspace or produce a YouTube video clip. Get a taste for how these open communities work.

The next step is planning your innovation ecosystem (a network model), with a comprehensive map. Position your value creation and assess interdependencies will determine the flow of benefits and your ability to capture a share of them.

Note, this is not a traditional competitive landscape  or value-chain analysis but an analysis of the participants creating knowledge pertinent to your existing and future business plans. While this includes business partners and competitors, it extends to academia, public research institutes, think tanks, creative communities or communities of practice and contract organizations. The map needs to be global and cover all relevant disciplines that intersect with your strategy.