People Are an Asset, Not a Cost

People are an Asset, not a Cost

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People are an Asset, not a Cost

 Beer et al, (1984) in their book Managing Human Assets affirms that people are an asset, not a cost. This implies that, just like tangible physical assets such as buildings, inventory, financial resources and equipment among others which are necessary in for growth and productivity of an organization, human capital equally plays an integral role in the prosperity of organizations. Through their talents and skills coupled with goodwill. They are likely to contribute significantly towards the prosperity of an organization. Conversely, the orientation of organizations in regard to human resources has often proved to be one of the most difficult chores that strategic management and human resource management teams are tasked with in establishing strategic decisions with the capacity to steer the organization forward. For instance, some organizations view their employees as extra costs. This is due to the amount of money often channeled to them in terms of their basic salaries, employment taxes as well as other expenditure on employees such as training. Consequently, these organizations keep on restructuring strategies. They engage in layoffs and in calculating the amount of money that can be saved should they get rid of some employees (Englund, Graham & Dinsmore 2013). Unfortunately, the workforce in such organizations lives in constant fear of losing their jobs. Besides, their morale often goes down since such organizations do not focus on resource development as well as on the ways through which the full potential of the employees ca be enhanced. Eventually, such organizations fail to meet their goals and objectives. On the other hand, there are other firms that view people as an integral part of their success. This is due to their belief that organizations are all about a group of people who have come together to pursue a common goal. In this regard, they invest in activities that are aimed at promoting employee motivation as a result of the view that for a company to be competitive, its workforce must not only be satisfied but also highly motivated. Presently, a majority of scholars fail to agree on whether the employees should be considered as costs or assets, especially in human capital evaluations. This essay aims at demonstrating that people are indeed an asset and not a cost in an organizational setup. Further, the study also explores Resource Based View (RBV) and its impact on both empirical and theoretical development of Strategic Human Resource Management (SHRM).

Resource Based View of Firms and Human Resources

 Becker, (1993) observes that for a considerable length of time, the human resource has continued to struggle in justifying its role in organizations. In most instances, organizations struggle to justify the expenses incurred in training the employees, staffing, rewarding, as well as other expenses incurred in employee involvement wherever financial difficulties arose. This brought about the sub branch of Strategic Human Resource Management (SHRM) charged with the responsibility of assessing the role of Human Resource (HR) in promoting business strategy. According to Salaman, Storey & Billsberry (2006) SHRM acted as a link between human resource planning and strategic planning. The SHRM further became instrumental to the development of Resource Based View (RBV), a perspective that gave a rationale on how organization’s human resources were potential sources of competitive advantage (Kirsch, 2007).The RBV focused its emphasis on the role of internal resources of an organization in giving it competitive advantage. As Salaman, Storey & Billsberry posits, the continued acceptance of internal factors as having significant impact in supporting an organization’s competitive advantage has helped a great deal in giving legitimacy to assertions of human resource managers that people indeed play integral role in the success of organizations and should not be viewed as mere cost. This implies that through the resource based view of human capital, it is evidenced that with effective systems of managing people, there are specific human behaviors that can be exhibited by human beings that are essential in enabling an organization to realize its competitive advantage.

Reasons why People could be viewed as Cost

In assessing various reasons why in some organizations people could be viewed as a cost, it is established that different organizations take different perspectives. Cascio, (1991) in the book Costing Human Resources identifies various expenses that organizations must incur in settling workforce-related costs. According to the scholar, in labor-intensive organizations such as institutions of higher learning, law firms and consulting firms, high labor-related costs which totals up to 80 percent of the operating costs are often incurred. Similarly, when tabulating the employee-related costs such as salaries, benefits as well as the costs incurred in employee training, their house rents, heating or cooling costs, the total amount of money payable to the employees may take a greater percentage of the money generated by such organizations making it appear as costs and not assets to the Human Resource Managers.  What is more, the scholar argues that employee absenteeism could be an additional reason for viewing people as costs. This is because in organizations especially those that carry out manufacturing and retail operations demand that employee works within the scheduled time period. Kocakulah, Kelley, Mitchell & Ruggieri (2016) in the article Absenteeism problems and costs, identifies variety of reasons that might make an employee to miss work. Some of the reasons include stress as a result of low morale especially when an employee feels that that they are not appreciated at work. Other reasons include bullying and harassment by coworkers or bosses which might prompt an employee to call in sick so as to avoid the situation.

In the event that an employee is absent, such organizations have to incur extra costs in relation to the absence such as the total hours lost over the period of absence and the costs of managing the absenteeism problems like relocating and instructing replacement employees as well as the costs involved in counselling and disciplining employees with frequent absenteeism cases. Another additional cost that the organizations may incur according to the scholar, includes paying substitute employees who may be working in place of the absent employee which might be too high for an organization. Kocakulah, Kelley, Mitchell & Ruggieri (2016) similarly describes a survey that was conducted on workers across major occupations in the U.S that aimed at investigating the total annual costs in regard to loss of productivity due to absenteeism. The findings of the study revealed that the cost as a result of lost productivity added up to over $ 84 billion. Nevertheless, the scholar indicates that the cost associated with absenteeism differ from one organization to another with the highest impact felt in professional occupations.