Zenith Systems Ltd provides hardware and software services customized to clients’ requirements. It is a subsidiary of a US company. The UK company is based in Slough and has four major departments: information systems, services, specialized support staff and marketing. The company has grown very rapidly since it was established three years ago, initially with the close guidance and support of the parent firm. There are about 650 employees, most of them recruited during the last two years. Labour turnover so far is fairly low (8 per cent). Extensive use is made of various forms of numerical flexibility. Around 150 employees are on short-term contracts, mainly of between two and three years’ duration; another 100 or so work part-time. In addition the firm has sub-contracting arrangements with suppliers to fulfil the client demands that its own project teams are unable to achieve. Overtime and flexible working hours are an accepted feature of the work. The nature of the business means that employees have to be technically adept and highly flexible in response to specifications of what their clients want. They work in project teams that can vary in membership, forming and disbanding as projects require.

The strategic goals of the business are to achieve sustained growth by the development and marketing of innovative systems and the provision of ever-improving levels of service to clients. The nature of the business clearly indicates that competitive success can only be achieved and sustained by developing and maintaining human capital advantage. A high-performance work system (HPWS) based largely on practice in the parent company is being introduced, priority being given to the introduction of rigorous recruitment and selection procedures, extensive and relevant learning and development activities, incentive pay systems and performance management processes.

A comprehensive human resource information system (HRIS) had been installed. The US Chief Executive has overruled the HR Director’s recommendation that an employee attitude survey should take place on the grounds that it was too soon – there were more pressing priorities. The HR Director was unhappy about this but intended to raise the matter again, making a more powerful business case than in his first attempt.

Three months later the HR Director sat down to think again about how to proceed. He had spent some time researching the concept of human capital management (HCM) in order to consider its relevance to Zenith Systems and, if it were relevant, how it could usefully be applied, what sort of business case could be made for it and how it might be developed, assuming the business case was made and accepted. He examined the data already available from the HRIS, including:

● head count and diversity information;

● a qualification and skills inventory;

● labour turnover and absence figures (but not costed);

● pay data in the form of average pay and compa-ratios;

● training statistics (number of days, costs);

● costs of recruitment.

The HRIS software also incorporated a data warehousing facility that enabled the user to assemble their own data and relate them to benchmarking data and financial information, customer information and other critical business data.

This seemed to provide a good basis for developing an HCM approach. The financial performance data in terms of sales, net profits, return on capital employed and added value were obviously available and the HR Director knew that regular surveys were taking place to measure client satisfaction.

He then spent some time with his colleagues gaining an understanding of the business drivers of the organization. He established that these were: innovation and product development, client acquisition and retention, achieving high levels of service to customers, and meeting the performance expectations of the owners. He also confirmed the list of the key performance indicators (KPIs) used by Zenith, which included financial measures such as added value, income generated, profitability, productivity measures such as added value per employee, operational measures such as successful completion of projects, customers acquired and retained, new products launched successfully and customer service measures such as levels of satisfaction and service levels. He established that the information required to monitor achievements in relation to the KPIs was available and used by management.

He also decided that the while HCM was mainly concerned with measuring business and people performance and using the metrics as a guide to future action, it was also about measuring the performance of the HR function.

He decided therefore that he was in a position at least to start the process of HCM, bearing in mind what could be involved and setting out what metrics might be used, covering both business/people performance and the evaluation of HR. He needed to consider how they would be used and to plan its future development.

Reading the literature (eg Angela Baron and Michael Armstrong, 2007, Human Capital Management) , he appreciated that HCM was not an all or nothing affair and that its introduction could and indeed should be staged. It is not a good idea to do too much too soon. Priorities have to be established in the light of an understanding of the business drivers and KPIs and the degree to which useable information is readily available.

Questions

1. What is the strategic goal of Zenith Systems? How is it to be achieved?
2. What is the competitive advantage that must be developed by Zenith Systems?
3. In general, what are the fundamental objectives of human capital management?
4. How do the concepts of human capital, social capital and organizational capital apply at Zenith systems?
5. Human Capital Management is about viewing the organization’s people as an asset that adds value. In this case, identify three specific areas in which the organization’s human capital can add value?
6. In what ways can human capital measurement be useful to Zenith systems?
7. Based on the information in the case, identify five pieces of data that Zenith systems may want to collect. (Baron and Armstrong, P 62 describes three categories of measure. The data you identify should come from at least two of those categories.)

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1 Strategic Goal of Zenith Systems The strategic goal of Zenith Systems is to achieve sustained growth by developing and marketing innovative systems ... View the full answer