Human Capital Architecture

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Introduction

Human resources are human capital.
Characteristics of human capital required for an organization will depend upon it's business strategies.
Organizations adopting different business strategies will have different human capital needs.

Architecture

Therefore, one should conceptualize a suitable human resource architecture for an organization. One framework for analyzing different types of human capital required for the organization and the HR systems that generate this human capital is known as human capital architecture.

This human resource architecture is based on the thinking that human capital varies along two factors:

Uniqueness of skills: whether the skills are general types or specific to the organization.
Strategic value of the skills to the organization.

Based on the extent of these two factors i.e. the extent of uniqueness and strategic value of the skills requirements, the human capital architecture for an organization will be decided and accordingly, the employment modes of human capital will be selected.

Mapping an Organization's Human Capital Architecture

Following four employment modes will be resorted to create the human capital architecture:

Work requiring skills that are low in uniqueness (they are general types) and are of low strategic value to the organization could be contracted outside the organization (outsourced/subcontracted).
For work requiring skills that are high on uniqueness and are of low strategic value to the organization, looking out for right kind of partnerships or alliances is necessary. Here the relationships of the partners/alliances to the organization's in-house employees (whose skills are unique and are of strategic value to the organization) are vital.
Transactional work requiring skills that are low in uniqueness but are of high strategic value to the organization will need in-house employed persons.
Knowledge based work requiring skills that are high on uniqueness and also are highly strategic to the organization will also be done by the in-house employed persons.

Based on such mapping, the decisions to carry out the work within or outside the organization will be decided and accordingly, HRM strategies to build up the human capital will be worked out which in turn will guide the HR practices to be followed.

Build or Buy Approaches

With the above-mentioned discussion, an organization can start seeing as to:

What and how much human capital to build within (in-house employment) and
What and how much human capital to buy from outside (outsource/subcontract)

The in-house employment may promote more commitment, pride, quality and security. The outsourcing may result in less supervision, minimum contracted quality and low overall costs.

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