Human Resource Management. Redefined
Part 1. Internal Resources of People
One of the fundamental problems of business literature and education is misunderstanding and further misinterpretation of the term human resources. It is generally believed that this term simply means labor, manpower, workforce, personnel, employees, or people. However, although many of us can have their own money, houses, cars, and smartphones, no one may own other people. Companies are no exception. They can own resources, but they cannot own people. Clearly, people are not a resource. [1]
Why do we use the term human resources then? And what does it mean?
Let me first classify all resources as external and internal. Money, land, minerals, wood, buildings, clothes, stationery, food — these are examples of external resources. There are many different types of them. But there are only four types of internal resources.
1 The first type is mental resources, which include aptitudes, attitudes, beliefs, knowledge, and information. Mental resources can be developed over time through learning and experience and become more valuable.
2 The second is physical resources, which include skills, abilities, and physical labor. They can be also developed over time and become more valuable. Truly, the more you do something, the better you do it.
3 The third internal resource is energy. It cannot be developed over time. It can only be transformed from one resource to another. People, basically, transform energy from water and food to physical and mental resources.
4 Finally, there is another internal resource, the most valuable one. It is time. It diminishes every second and becomes even more valuable. Unfortunately, most people do not value their time.
All four types of internal resources are related to each other and can be combined into the process that is called work. When we work, we use our energy to multiply the knowledge we have by physical activities over a period of time. At the end of this process, we produce some result. Consistently producing results, we can achieve our objectives.
Any company needs people to achieve its objectives. However, as I already mentioned, companies cannot own people. Instead, they can establish relationships with people, providing some external resources — basically, money — as compensation for work. Maintaining these relationships, companies can use and manage all of the internal and even some external resources of their employees to achieve particular goals.
But it is important to add that companies can also use and manage the resources of other people, including customers, suppliers, and members of the community. Consider the examples of Uber and Airbnb, which effectively manage the efforts (internal resources) of individuals who use their own apartments and cars (external resources) to achieve their own goals. Thus, the company’s human resources are not limited to its employees.
Human Resources are the sum of internal and external resources — of the company’s employees and, importantly, other people — that can be managed by the company to achieve its objectives.
Part 2. Managers, Talents, and the Majority
There is a common belief that HR managers love people. This is not true.
Basically, there are four types of people any manager does not and cannot love. The first type is lazy people or those who do not want to do something. The problem with these people is that they know how to do something, but they simply do not want to do it. The second type is ignorant people. The problem with them is that they want to do something, but they do not know how. In addition, usually, they do not want to learn. The third type is slow people. They want to do something and they know how to do it, but it takes a lot of time for them to accomplish something. And the last type is the most ambiguous one. These people want to do something and they know how to do it, but they do not have enough energy.
As I described in Part 1, every person in the world can have only four types of internal resources. These are mental resources (which include the ability to know something), physical resources (which include the ability to do something), energy, and time. However, there is a clear difference between having and managing resources. Obviously, lazy people cannot manage their physical resources and ignorant people cannot manage their mental resources. Those who are slow simply cannot manage their time. And there are people who cannot manage their energy.
The majority of people cannot manage some, if not all, of the internal resources they have. But surprisingly, many companies hire these people, nurture them, develop them, and invest in them. Why does this happen? Because these people and their internal resources can be managed by others.
Managers are those who can effectively manage not only their own resources but also the resources of other people, both internal and external. Obviously, to become a manager, you first need to learn how to manage yourself.
When somebody effectively manages his or her time, strategically applies his or her knowledge, works harder than others do, and consistently produces better results, — it is said that he or she is talented.
Talents are those who can effectively manage all of the internal resources they have. They always want to do something and they do. If they do not know how to do something, they simply learn how to do it. In fact, they constantly learn. They can manage their time and energy, or they just learn how to manage time and energy in the process. In other words, they manage themselves. They develop themselves and invest in themselves. They do not need other people for these purposes.
Great companies hire talents but do not try to impose management on them. They just try to create circumstances and conditions in which talented people can manage themselves. And, as you already know, this is not limited to employees. Consider the examples of Medium and GitHub, which provide platforms for thousands of talented individuals around the world to publish their stories and develop software.
Soviet poet and writer Fazil Iskander once wrote, “The paradox of upbringing is that those who respond well to upbringing simply do not need it.” Let me paraphrase this quote slightly: “The paradox of management is that those who can be managed simply do not need to be managed.” For any great company, the real question is — “Do we need managers if we already have talents?”
Of course, yes.
Since Human Resources are not limited to a company’s employees, effective Human Resource Management is substantially about managing the internal and external resources of other people.
Part 3. Exchange Relationships in Business
People need particular resources to live, such as clothes, water, and food. To get these resources on a constant basis, in a more effective and efficient way, people establish and maintain relationships with each other, and the most important kind of these relationships are relationships of exchange.
The modern economy is built on exchange relationships. An exchange occurs because different people (or groups of people) have different needs. People exchange the resources they have for the resources they need. Natural resources can be traded for financial resources, and financial resources can be provided as compensation for a combination of people’s knowledge, skills, motivation, and time. For any exchange relationship, when people get the resources they need, this relationship is considered valuable.
Perhaps, business is all about establishing and maintaining valuable relationships. Thus, any company is involved in exchange relationships with its customers — offering them a particular value and collecting a specific value in return. The value collected from customers usually takes a monetary form — in other words, customers pay money. The value offered by companies takes three basic forms: tangible products (goods), intangible products (services), and — in most cases — a combination of these two (experiences).
Any company is also involved in exchange relationships with its employees, suppliers, members of the community, the government, and many other stakeholders. Among these, the employment relationships are, possibly, the most profitable exchange for any company, since an effectively managed combination of people’s knowledge, skills, motivation, and time is always much more valuable than money.
Unfortunately, the majority of people are too focused on money (and other external resources), instead of concentrating on people and building relationships with them. This happens because many of us do not understand the very essence of Human Resource Management and how it can help us achieve our goals.
Suppose you no longer want to be employed. You want to open your own business. A small café. What do you need for that? If you ask this question to your friends, colleagues, even university professors, and other people around, probably, the most prevalent answer you would get is money. The second most common answer would be a business plan. Then, they would tell you that you need to find a good space, in a favorable location. Then, you need to find special equipment, furniture, and tableware. Only then, finally, do you need to find people — suppliers and employees.
However, if you ask a true manager about your venture, he or she would tell you that you have forgotten a very important thing. That we live in a world of people. And in the world of people, money, real estate, furniture, equipment, tableware, and many other things do not simply exist by themselves. They always belong to someone. Almost all resources belong to people. And it turns out that there is no need to look for money — you need to find a person who has financial resources and wants to invest them properly. There is no need to look for space — you need to find a person who has commercial property and wants it to be profitable. And there is no need to look for equipment, furniture, tableware, and all other things.
You do not need to have a lot of external resources to achieve your objectives. Focus on your internal resources first — gain knowledge, develop skills, learn to control your energy and time. Then, all you need to do is to find the right people, build valuable relationships with them, and help them manage their resources effectively.
Truly, this is the leader’s approach.
[1] Ewan McGaughey. A Human Is Not a Resource. January 10, 2018.
