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BW Businessworld

The CEO & The HR Dilemma

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The rapidity of change and the challenge of coping with it remains a central concern for the denizens of the Business world. The greater danger lies in internalising the belief that the nature of business has changed. The great theoretician of War, Clausewitz advanced an explanation on the nature of war that is perhaps applicable for business as both war and business are competitive activities.   

Clausewitz argued that inherent in war are two natures: the objective and subjective. The objective nature of war consists of the universal elements that distinguish war from all other activities. It means that war is war- in all periods, of all kinds, between all types of adversaries - regardless of the contemporary weaponry and tactics. War, Clausewitz maintained,is an instrument of policy and is always a duel on a large scale conducted for the purpose of imposing one’s will by force.It has a distinctive ‘climate’, made up of four elements- danger, exertion, uncertainty and chance. Clausewitz described war as a remarkable trinity composed of violence and hatred, chance and probability and reason or policy.

In contrast to its objective nature, its subjective nature was reflected in the method of force application or what is referred to as the character of war which is continuously changing, even though the change is uneven in pace and time. Changes in transportation, communications, lethality of weapons and explosives have always influenced the methodology of the conduct of war. The impact of the changes is variable depending on the strategic and political context of wars. In contemporary times the emergence of elements like the Al Qaeda and other non state actors who use terrorism as their primary tool, is changing the character of war.

However much its character may change the objective nature of war does not change. The essential nature of war remains an organised violence for political purposes. Clausewitz’s characterisation of war could be applied to arrive at a greater understanding to the changes taking place in the world of business. Business is a set of activities that has, as its central purpose, the creation of wealth. The instrument of business in the hands of CEOs, involves the utilisation of available resources in the market to derive profit. Profit is its enduring  and primary purpose. This is the objective nature of business and will always thus remain despite any changes in the methods of its conduct.

Business too, is conducted in a ‘climate’ of risk and the numerous factors that affect  business in varying degrees include competition in the marketplace, changes in global economic conditions, instability in financial markets, exchange rate volatility inter alia.  Uncertaintyis a perennial and varies only in degree from factors external to one’s control.On the other hand, the methods of conducting business, its character, are constantly altering. Developments in technology and changing availability of resources drive the methodology of conducting business. The Internet and its easy accessibility is a prime example in modern times that has had a profound impact on how business is conducted. So the character of business is continuously and rapidly changing but its objective nature aimed to create profit is not. Hence, it begs the question- what does its enduring objective nature and rapidly changing subjective nature mean for HR?

While Human Resource Development is, and always has been an important function in the conduct of business,it can be useful to an organisation only if it facilitates the fundamental purpose of producing profit. Profit has to be privileged over people; for it was the other way around, the business would run into a loss and eventually cease to exist. CEO’s and HR managers must grasp this truism.

It is, however, not the case that profit can be achieved without the human capital assets of business. Instead, profits have to be achieved through the leveraging of the human assets for the purpose of profit. This calls for maximizing the potential of its human capital and aligning the benefits of the value thus unlocked with a significant bottom-line return.

The growth of HR as an important function of conducting business is primarily driven by the increased bargaining power of the employee vis-a-vis the employer. The young, aspirational, ambitious, professionally qualified employee has increased bargaining power. This shift in equations between the employee and the employer is the source of challenges that confronts contemporary CEO’s and HR managers. The challenge of the CEO is to keep the balance between the investment on HR and the profit margin. Successful CEOs will invest in HR and raise profit. But it also means investment in skilling and ensuring retention of personnel for the long term in a context of competitive demands of professional skills in the marketplace. Both CEOs and HR managers are placed in an unenviable position. In the HR function, the objective and subjective nature of business frequently clash and then it is the CEO’S call. It may not be an easy decision.

The author is Lt Gen(Dr) Prakash Menon, PVSM, AVSM, VSM (Retd)