Strategic Advantage through Human Resource

Sanjeev Baitmangalkar
Consultant

When Mysore Kirloskar’s Hubli factory inIndia had to be closed down, they recognised that developing internal resources and capabilities would be more difficult for the competitors to imitate. So, they focused on creating knowledge and building the learning processes, in their search for more dynamic, adaptive and sustainable advantages.

They had three attributes that are the core of market responsiveness: - Competency-based strategies depend on people and MKL had the people to develop those strategies. They had the expertise to drive new product development. And with key clients they had personal relationships. The strategy was built on the foundation of human resource as people were considered as the key resource.

They created teams that networked and replaced hierarchy. These teams built relationships and replaced the control based management roles. The re-engineered flexible processes and replaced the bureaucratic systems. The senior management changed roles from being analysis driven to being people oriented and from being strategy directors to strategy framers. They also acted faster than the transformation needed to sustain them. This is depicted in their growth of over 400% in three calendar years.

What was the mindset changes that brought about the strategic advantages?

1. People come with different mindsets. The belief that capital is the critical strategic resource and only the senior bean canners’ were responsible for acquiring, allocating and using it was the hardest mindset to change. At the MKL’s Hubli factory they proved that this was not what promotes growth and took a changing view of strategic resource. We have seen companies with lots of capital that could never bring us better cars, better scooters, better trucks and buses, better garments, better entertainment etc. Some times in such cases there is surplus of capital chasing a scarcity of talent. At MKL they never let talent be a constraining resource. The senior management made HR issues top priority and got them out of the way, although they were in a limited way constrained by certain diktats from the parent factory.
2. Knowledge increases when shared, unlike capital. At MKL their concept of value management was recognizing that knowledgeable people are scarce – a changed view of value. There is eroding loyalty and cynicism over the gap in the compensation packages of the front liners and those at the top, this is besides the recruiting difficulties. This in itself is an indication that the value distribution must change. Stock options is a way of recognizing that the owners of the scarce resource are not just the shareholders. Those who contribute their human and intellectual capital must enjoy the fruits of value they are creating.
3. Scarce knowledge and expertise resides in all levels of management and not only at the top. It is embedded in the teams that work together and build relationships. With customers, technology and competitors. At MKL they changed the view of senior management roles. Knowledge and expertise at the top was rotated to yield the greatest strategic advantage. Their ‘Turnaround ‘ success to be one such result. The organization restructuring was done to shift initiative to those who possess valued expertise. To allocate managers and nurture their individual expertise and initiative in their most passionate, creative and competent areas. The result – managers were creating a sense of purpose rather than deciding on strategic content integrating the frame work strategic initiatives bottom-up. These initiatives injected meaning to every effort. All this defined a community where people wanted to belong as values were defined and efforts were aligned with core objectives. The resultant proof of these developed processes getting the work done effectively, empowering people and their commitment lay in the results of growth and profitability produced at MKL Hubli.

HR managers and senior management must see employees as ‘talent investors’. Individuals with special skills, knowledge and expertise must be treated as a scarce strategic resource. Teams were constantly coached largely by internal faculty, and some by external faculty. Adopting to think on ABC methods threw out the old capital concept. The linking task was done by actively linking, leveraging and embedding the pockets of knowledge and expertise. Now there was no risk of underutilizing or losing it. The fact that manpower turnover was less than one half of a percent was proof in using human resource as a strategic advantage. They had to break down barriers in decision-making, unlock core competencies, encourage collaboration and cross team communications.

The most important bonding process came from the organization culture prevailing in Hubli. Social events involving the employees and their family helped. Recognition helped – this was non-monetary. This process bonded the talented employees and kept them together. In times of challenges this bonding led to an engaging and energizing commitment to the organization and its goals. The managers commitment to set beliefs reflected in their daily actions and decisions.. Sumantra Ghoshal says, “today’s’ managers must compete not just for product markets or technical expertise, but for the hearts, minds, and dreams of talented people”. Although there can be no one set of rule for all cases, these guiding principles helped MKL Hubli to perform.