Think back to your last project team. Who were the members of this team? Were they all employees of your company? Answers to these questions will indicate that we experience the world of work in a much more networked way today than we did just a few years ago. Firms therefore actively manage people whom they do not directly employ.

If this ‘networked-way of working’ in the knowledge economy is so familiar to us, why do our HCM practices reflect that of an industrial economy?

Many leaders today are simply unaware that a new and collaborative approach to human capital management exists. Leaders, therefore, need to reassess their understanding of their firm’s boundaries, adapt their human capital management practices accordingly, and ensure that they are fit-for-purpose both within and across these new perimeters.

This is easier said than done. Thinking across corporate boundaries doesn’t come naturally to many of today’s leaders. Nor, does becoming involved in the human capital governance of other companies. An additional challenge for leaders will be the integration of what they have learnt from the network into their current systems.

Leaders will also have to embrace an environment whereby they relinquish sole ownership and control over resources. This is something many people find most challenging. Leaders must also rethink how they define an employee. Most of us think of employees as people that are employed and managed, but we are increasingly seeing that organisations need to manage people whom they do not employ. This change in perception will, in turn, redirect a firm’s human capital strategy and practice. The view that human capital is situated within a network of firms will positively impact the entire human capital value chain, as each stakeholder becomes exposed to new and fresh ways of working.

In the recruitment process, leaders must identify talent competencies that are associated with working effectively in networks, and focus on how such skills build and maintain relationships. That is to say, the focus shifts from looking only at human capital (talent) to incorporating social capital (relationships).

The performance management system, thus, becomes the property of the network, not only that of the firm.

Within this system, companies work together to set performance targets and decide on rewards attached to behaviours that benefit the network and collaboration within the network. Ultimately, the development of talent becomes the shared responsibility of all network members. Therefore, it is in everyone’s interest to develop cutting-edge skills and create an ecosystem that outperforms other less-well integrated networks.

An example of building a successful human capital value chain can be seen in the One Team network, established by British retailer, Marks & Spencer. Here, Marks & Spencer, led by Jason Keegan, Head of Logistics-Strategic Network, teamed up with a number of logistics and fulfilment solution providers, including DHL, NDL, Wincanton, Tesam Distribution, IDS, CML and The Elite Group. The network implemented a number of common practices and a shared approach to human capital management. Upon formation of the network, each party agreed the goals of the group was to be high customer satisfaction, establishing a common culture, and building the most competitive of retail networks.

Most importantly, the leaders of One Team learnt that collaboration across third-party contractors could work in the right environment. However, the biggest challenge each member faced was the sharing of proprietary information and the releasing of information deemed to be intellectual property. Fortunately, boundaries surrounding these two areas were quickly agreed upon, which enabled the sharing of knowledge and information to pass freely.  

One Team now collectively decides on training and development, performance management, and reward. This network contributed to Marks & Spencer saving approximately GBP12 million (USD19 million) in 2011. It is also worth noting that the group’s practices are now uniform across organisations that were previously competitors. There is growing consensus that companies that collaborate effectively across boundaries have an important competitor advantage – they are more innovative and cost-effective. Leading companies like Marks and Spencer are showing that we can build human capital systems and practices to facilitate – rather than hinder - such collaboration.

This article was first published in HQ Asia (Print) Issue 03 (2012)