Globonomics!

Consulting|Technology|International business

Harvard business review – Managing people — my review

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The book I am currently reading is the HBR series on Managing people.

It talks of a lot of interesting facets among which it measures work productivity of individuals, how well we utilize them and the fact that labor rates are not the same as labor costs.

So, why is the ‘people’ part of it so important. As one of my Human resource professors put it, human capital is exactly that. No matter what amount of automation exists, we still require labor to do things in any industry – even in this globalized world. There is a huge shortfall of talented professionals today. India itself is a witness to this global phenomenon. Among this, the IT and the BPO sectors are hit more than the others. IT companies are hiring people in thousands. If they do not have competant managers to manage the work of those thousands, the productivity of the entire company could be hit, this would directly impact their sales and obviously their bottom line. The need of the hour is to have qualified managers who know how to get the best out of people. You cannot dispense off this ‘people’ aspect in any work environment in any industry. Its the very backbone of the industries today.

Coming back to the book after the short primer on my correlation of the ‘people’ aspect with International trade, the book itself lists down a lot of myths held by conventional International managers and where they go wrong in their assessment.

Some of them are listed below (Source: HBR series on managing people)

Myth #1 – Labor rates are same as labor costs

Myth #2- Cutting labor rates will lower labor costs

Myth #3 – Labor costs represent a large portion of the company’s total costs

Myth #4 – Keeping labor costs low creates a potent and sustainable competitive edge

Myth #5 – Individual incentive pay improves performance

Myth #6 – People work primarily for the money 

It further goes on to say that monetary benefits are not necessarily the only way one can retain manpower. Its not the only carrot. There are a lot of subtle aspects that can make a difference. Many managers tend to confuse the labor rates (Total wages / # of hours worked) with labor costs (how much does it cost to utilize the same labor or in other words, labor producitivity measure). Good examples are taken to illustrate the same and I found it really enchanting as this is what reminds me of the recession of 2001 or even Intel’s recently announced layoff plans for 15000 of their employees worldwide or on my pet topic – GM – where I did measure their productivity, plant capacity utilization etc. where they lag behind their immediate competitor, Toyota by miles!

GM’s labor productivity is lesser when compared to competitors such as Toyota and this contributes to a large portion of their  misfortune in addition to their labor costs (where they are paying up large sums to take care of backdated healthcare benefits etc.) I did hear that they got into negotiations with the UAW but a turnaround in GM’s fortunes is yet to be seen. Its a behemoth and I would be pleasantly surprised if they do survive this current crisis situation.

As one of my associate residing in the US recently remarked this about GM – GM is an acronym for ‘Generally under maintenance’!

There was also a 20-year old article (published sometime in 1984) on managing people and performance in the same book – a paperback edition of the HBR that talks about Pygmalion in management! Really great article filled with common sense.

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Written by Naveen Athresh

November 13, 2006 at 7:37 pm

One Response

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  1. agree man

    lancelot

    February 22, 2007 at 11:20 am


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