Management of human capital: discipline,security and controlled circulation in HRM

Abstract

This article provides a contribution to the Foucauldian problematization of HRM. It draws particular attention to Foucault’s lectures that were devoted to re-conceptualizing power relations to accommodate transformations that have arisen from the emergence of liberal and neoliberal forms of government. Whilst Foucauldian approaches to HRM have mainly focused on the centripetal elements of disciplinary power in modern management, they have tended to neglect the centrifugal mechanisms aimed at the controlled circulation of flows within networks. The article shows how these mechanisms gain in importance along with HRM’s reframing in terms of human capital. Our analysis outlines a number of modifications in the apparatus of power that emerge as a consequence of this reframing, showing how human capital management operationalizes a specific style of governmental rationality.

In her groundbreaking study, Reframing Human Resource Management, Barbara Townley wrote that, ‘[t]o be relevant […] HRM must provide people with a framework for understanding power’ (1994: 1). For many, including Townley, the work of Michel Foucault has provided the conceptual basis for reflecting on the power of practices and procedures that shape the modern work-place. In recent years Foucault’s work has largely become identified with the ‘panopticon’ and with ‘disciplinary power’. Some have argued that in certain respects we may be moving towards a ‘post-panoptic’ or ‘post-disciplinary’ world where things are in movement, in constant flux and transformation, and which is less reliant upon ‘territorial confinement with its cumbersome corollaries of order-building, order-maintenance’ (Bauman, 2000: 11, see also Deleuze, 1995). The ‘disciplinary world of l’employé’ (Jacques, 1996: 98), which is populated by docile, normalized subjects, seems to be a project of the past. In a context of dynamic and fluid organizations, where the creativity and subjectivity of employees is seen as a resource to be mobilized, rather than ‘moulded’ into disciplined patterns of identity, Foucault’s work may seem to lose some of its explanatory power. However, his later works have been seen by many as opening a way out of the confines of the disciplinary framework of analysis and providing a broader range of conceptual tools for the exploration of new techniques of managing employment relations and the emergence of new forms of workplace subjectivity associated with them (Barratt, 2003, 2008; Chan and Garrick, 2002; Hjorth, 1999; McKinlay and Starkey, 1998; Starkey and Hatchuel, 2002; Steyaert and Janssens, 1999). Foucault’s later work not only turns to ethics but also contains some fundamental shifts in the conceptualization of power. These include ‘biopolitics’, the ‘apparatus of security’ and neoliberal ‘governmentality’ (Foucault, 1981, 2004, 2007, 2008). Whilst these concepts have been developed within the field of accounting and studies of governmentality more broadly (e.g. Burchell et al., 1991; Dean, 1999; Miller and Rose, 2008) they have received far less attention in management and organization studies (Barratt, 2008). In this article we want to develop these concepts and demonstrate their relevance for analysing the employment relationship, HRM and the emergence of Human Capital Management in particular. These practices, we argue, are increasingly designed to manage the circulation of human capital and are characteristic of a post-disciplinary form of power.

The argument of this article is structured into three major sections. The first section will explain the differences between Foucault’s early conception of disciplinary power and his later conceptions of power in terms of biopower, the apparatus of security and neoliberal governmentality. Particular attention will be devoted to the neoliberal concern for the formation and circulation of human capital, which Foucault highlighted as a very recent mutation in the apparatus of power. The second section will be devoted to the reframing of the management of work relations in terms of human capital. It highlights the emergence of this discourse from broader political transformations associated with the rise of neoliberalism and analyzes how this discourse is inscribed into the reality of organizations. The third section will outline precisely how techniques for the controlled circulation of human capital mark a clear departure from disciplinary technologies of power and operationalize a specific governmental rationality in the management of work-relations in the organizational context.

Postdisciplinary Foucault

Biopower and biopolitics

In his earlier work Foucault focused on the disciplinary mode of organizing the human body. The concept of disciplinary power, which had a major impact on organization theory, stresses the formation of useful and docile bodies (see for example McKinlay and Starkey, 1998; Townley 1994, 1998). In his later work, Foucault introduced the concept of biopower in order to analyse and problematize strategies and technologies of power which have as their target the management of populations. Both forms of power over life—disciplinary power and biopower—are distinguished from the old, ‘sovereign power’, which was characterized by the ‘right to take life or let live’ (Foucault, 1981: 138). In contrast to sovereign power, biopower is characterized as a ‘power to foster life or disallow it to the point of death’ (Foucault, 1981: 138). It is not so much concerned with destroying or repressing life, as with administering life and introducing life into the circles of economic calculation. It is based on ‘methods of power capable of optimizing forces, aptitudes, and life in general without making them more difficult to govern’ (Foucault, 1981: 141).

Even though disciplinary power and biopower can be clearly distinguished, they are not to be seen as antithetical. Rather these two forms of a power over life ‘constituted … two poles of development linked together by a whole intermediary cluster of relations’ (Foucault, 1981: 139). Disciplinary power designates a pole that focuses on the capacities of the body, whereas biopower designates the collective pole of the population. These apparatuses of power operated simultaneously but on their different levels. Whereas disciplinary power aimed to produce a docile, useful body whose capacities it could optimize, biopower aimed to regulate the powers of the population as a whole, in terms of variables such as birthrate, mortality rate and longevity. Foucault highlighted the rise of forms of knowledge which had the population as a whole as their target, including statistics, demography, medicine, psychiatry, criminology and eugenics. He emphasized that disciplinary power and biopower co-existed, but each focused on a different level of analysis and intervention, using different technologies: ‘a technology of drilling, as opposed to, as distinct from, a technology of security; a disciplinary technology, as distinct from a reassuring or regulatory technology’ (Foucault, 2004: 249). In his lectures at the Collège de France in the years 1978 and 1979 Foucault was particularly concerned with the emergence of biopower and showed how this form of power gradually took shape, alongside both disciplinary techniques of power and the emergence of liberal and neoliberal forms of governmentality (Foucault, 2004, 2007, 2008).

Discipline and security

In Security, Territory, Population Foucault outlined the fundamental shifts in techniques of government that occurred around the end of the 18th century. With the historical invention of the concept of population, the disciplinary mode of organizing power over life was gradually complimented and supplanted by apparatuses of security. In these regimes of security new technologies of control were established, which no longer attempted to fix and define the human body in a more or less ordered grid, but rather sought to manage populations, to regulate its composition, qualities and growth, to organize movement and control circulation.

Foucault outlined four major differences that characterize the apparatuses (dispositifs) of discipline and those of security respectively. These differences can be summarized as follows:

• Discipline is a technology of power, which fundamentally starts by isolating space and determining segments within it. Disciplinary techniques of power establish order by imposing a partitioning grid. Ideally, any single element is clearly positioned within this grid. Things are fixed in space, so that at any point of time they can be located. This is what Foucault calls the ‘centripetal’ character of discipline: it ‘concentrates, focuses, and encloses’ (2007: 44). On the other hand, apparatuses of security are characterized as ‘centrifugal’. These centrifugal forces are associated with the emergence of markets and towns and have the constant tendency to expand and to integrate new elements into their circulations.

• The ideal of discipline is one of exhaustive regulation: ‘A good discipline tells you what you must do at every moment’ (Foucault, 2007: 46). Regimes of security, on the other hand, include an element of laissez-faire. Security allows space for discretion; however, it defines the frame within which choices can and must be made. It is associated with a specific type of organization, which allows freedom of movement but channels that movement and its flows in specific directions.

• Discipline is essentially prescriptive. It divides everything according to a code of the permitted and the forbidden. It defines what those organized under the disciplinary regime should do or are obliged to do. Discipline defines ideal models, ideal paths of movement and ideal steps of development, which should or must be followed. Security, on the other hand intervenes in reality by trying to make that reality function or to make its components function in relation to each other; in Foucault’s own words: ‘Without prohibiting or prescribing, but possibly making use of some instruments of prescription and prohibition, [its function] is to respond to a reality in such a way that this response cancels out the reality to which it responds—nullifies it, or limits, checks, or regulates it’ (Foucault, 2007: 47).

• Both discipline and security are normalizing forces. Discipline works by establishing a norm and by creating models of ideal behaviour. Disciplinary normalization thus consists in trying to bring people to conform to the norm (e.g. by training, dressage, reward-punishment, etc.). In regimes of security, normalization takes on a different form. Since security is concerned with populations and mass-phenomena, it essentially works on the basis of statistics which served as a ‘science of the state’. It is concerned with average numbers: average numbers of deaths, of births, of accidents, of illnesses, and so on. The deviation from the average indicates a problem that may call for interventions. Extremes have to be avoided. The security-type of normalization, which Foucault calls ‘normalization in a strict sense’ (Foucault, 2007: 63) is exactly a shaping and carving out of a population (as a mass-phenomenon) on the basis of purely empirical, statistical techniques.

Regimes of security do not seek to create obedience but rather seek to influence a milieu, in which a number of unforeseeable events may take place. Security incorporates liberal principles of laissez-faire and supplements the associated freedoms with technologies of control that allow for the management of the risks and dangers associated with these freedoms (Miller and Rose, 2008; Power, 2007). In fact, regimes of security are not in opposition to freedom rather they supplement freedom so as to both allow it and to control the inherent dangers associated with it. They are thus strongly associated with liberal and neoliberal forms of governmentality.

Neoliberal governmentality and human capital

In his 1979 lectures, which were only published in English in 2008 under the title of The Birth of Biopolitics Foucault places biopolitics in the general frame of liberalism and neoliberalism. Liberalism is closely associated with Adam Smith’s hugely influential conception of the self-regulating marketplace and the ‘invisible hand’ which Smith hypothesized would promote the common good as a consequence of exchanges within the marketplace. In classical Liberalism, the relation between the market and the state was defined very clearly. According to liberal thinkers, the state must not intervene in the market, since the market was seen as the mechanism that ensured an optimal distribution of goods. The development of neoliberal economics during the 20th century does not see the market as a truly natural phenomenon that is simply given and must be respected. On the contrary, the market here appears as an object of government. Competition as the fundamental organizing principle of the market will only appear under specific conditions which have to be ‘carefully and artificially constructed’ (Foucault, 2008: 120). In contrast to the laissez-faire approach of classical economics, (economic) freedom must be actively produced rather than simply protected (Rose, 1999). It requires interventions and regulatory technologies as correlates of this freedom. According to neoliberal theories economic competition requires an organization of society according to the model of enterprise. As Foucault observed:

The individual’s life must be lodged, not within a framework of a big enterprise like the firm or, if it comes to it, the state, but within the framework of a multiplicity of diverse enterprises connected up to and entangled with each other, enterprises which are in some way ready to hand for the individual, sufficiently limited in their scale for the individual’s actions, decisions, and choices to have meaningful and perceptible effects, and numerous enough for him not to be dependent on one alone. And finally, the individual’s life itself—with his relations to his private property, for example, with his family, household, insurance, and retirement—must make him into a sort of permanent and multiple enterprise. (Foucault, 2008: 241)

Foucault noticed that the generalization of the ‘enterprise form’ was a crucial element of both German Ordo-liberalism and American neoliberalism. Both held the market and competition to be the fundamental principles of social and economic regulation. The German Ordoliberals, a group of economists working in the 1930s and 1940s (the Freiburg School), attempted to restrict these principles to the economic sphere in a narrower sense than the North American School. They were aware of the potentially negative impact of competition on social solidarity and collective values and maintained that Vitalpolitik (vital policy) had ‘the function of compensating for what is cold, impassive, calculating, rational, and mechanical in the strictly economic game of competition’ (Foucault, 2008: 242). The North American brand of neoliberalism initially developed by the economists of the Chicago School in the 1950s and 1960s was much more radical in its ambitions. They generalized the economic form of the market, extending it to diverse areas of human life such as the education of children, the treatment of crime and the support of the family (Becker, 1996). In conceptualizing knowledge and skills, personal habits, work-ethos and even genetic dispositions as ‘human capital’ which can be optimized by making rational decisions on the ‘investment in human capital’ (Becker, 1962; Schultz, 1971) they laid the basis for understanding life in total as an economic function. On the basis of the analysis of costs and benefits and associated transaction costs, the exponents of neoliberalism have sought to develop forms of governmentality which are critical of any form of ‘governing too much’ in the sense of imposing disciplinary rules or prescriptions which might limit the forces of competition and the processes of economic circulation. At the same time as extending the economic grid to non-economic phenomena, the neoliberal form of governance is grounded on a ‘criticism and appraisal of the action of public authorities in market terms’ (Foucault, 2008: 248). This initial work by Foucault on the evolution of different forms of neoliberalism has been developed within various fields of social science, particularly within the fields of accounting, sociology and governmentality studies more generally (Bröckling et. al, 2000; Dean, 1999; du Gay, 1996; Gordon, 1991; Miller and Rose, 2008; Rose, 1989, 1999). Gordon’s (1991) excellent summary of Foucault’s lectures was the first to pick up on the theme that he distinguished between different varieties of neoliberalism, particularly German Ordoliberalism and American neoliberalism. In addition to the forms of neoliberalism identified by Foucault, authors such as Dean (1999), Miller and Rose (2008) and Rose (1999) have described the nuanced development of neoliberalism in terms which question its overall coherence, whilst labelling a diverse range of related techniques of governance under the umbrella term of ‘advanced liberalism’. Mitchell Dean’s (1999) survey of neoliberalism, for instance, has highlighted other influential strands of neoliberal thought that depart from the Ordoliberal school in important respects, especially the work of F. A. Hayek, with its peculiar emphasis on the role of the ‘cultural evolution’ of the marketplace.

Foucault (2008) himself pointed out that for neoliberal techniques of government the level of intervention is not the individual, but the ‘rules of the game’ that comprise the milieu in which individuals take decisions. It operates on the level of interests, creating a milieu in which individuals (entrepreneurs) can make better or worse decisions in terms of their respective costs and benefits. The role of government is to make decisions as to whether to invest or not in education, in family support, in health or in other forms of social insurance based on this cost/benefit rationality. Under this form of government, such rules require continuous modification and reinforcement in order to further intensify market relations and to promote diverse forms of competition and entrepreneurial behaviour. Individuals are to be encouraged to view their lives as a specific type of enterprise, which is understood as a specific relation to the self based on economic interest (McNay, 2009; Rose, 1999). Thus, neoliberal governmentality implies an indirect form of social control, which works by making modifications in the socio-economic milieu in which enterprising selves seek to optimize their own human capital. It constitutes a form of power, which does not work on individuals directly, but operates as the ‘conduct of conduct’ (Foucault, 2007; Gordon, 1991: 5).

Research on governmentality has highlighted an intensification of neoliberal techniques of governance centered largely on the theme of ‘entrepreneurship’ and the ‘enterprise culture’ that was promoted during the 1980s and 1990s with the elections of Margaret Thatcher in the UK and Ronald Reagan in the US. Studies of neoliberal governmentality have shown the reshaping of public and private organizations in terms of the neoliberal discourse of enterprise (du Gay, 1996, 2004; du Gay et al., 1996). Du Gay et al. (1996) have explained that the ‘entrepreneur’ is defined precisely in terms of the capacity to cultivate his own human capital. Whilst these studies have addressed the emergence of ‘enterprise culture’ they have said relatively little about the idea of ‘human capital’ itself, the way this concept is inscribed into the reality of organizations and how it is implicated in management practices and technologies that shape the modes of organizing the employment relationship. The application of this idea to all kinds of social relations, from education to employment, from migration to genetics represents ‘the radical essence of the neoliberal agenda’ (McNay, 2009: 59). A closer look at the concept of human capital is thus vital for understanding its implications, particularly with respect to reconfigurations in the apparatus of power.

Whilst highlighting the transformations in economic thought that have allowed for the emergence of this concept, Foucault’s (2008) lectures on biopolitics focus on the work of the economists of the Chicago School who sought to extend the classical concept of capital ‘to make room for human capital’ (Schultz, 1971: v). Here the concept of human capital received its first major treatment in Theodore Schultz’s book Investment in Human Capital (1971). Foucault explained the significance of this work on the grounds that it provides both a method of analysis and a type of programming. In this sense the concept of human capital plays a distinctive role as a vehicle for extending the economic grid deeper into the fabric of social relations and for exercising a specific form of power which does not operate through the imposition of social conformity, but ‘through the organized proliferation of individual difference in an economized matrix’ (McNay, 2009: 56). Human Capital Theory places the rational economic man clearly at the center of its analysis. However, it is not simply a reinvention of the (fiction) of the homo oeconomicus. Rather, as Foucault noticed, there is a fundamental reconceptualization of the homo oeconomicus. He no longer appears as an exchange partner, as in classical liberalism, but rather as a competitor in the economic game, ‘as entrepreneur of himself, being for himself his own capital, being for himself his own producer, being for himself the source of [his] earnings’ (Foucault, 2008: 226). In this respect, the neoliberal homo oeconomicus is someone who ‘responds systematically to modifications in the variables of the environment’ (Foucault, 2008: 270). This led Foucault to conclude that rather than being free from power relations, the new homo oeconomicus is ‘someone who is eminently governable’ (Foucault, 2008: 270). Interest-motivated choice and conduct makes him or her a correlate and instrument of a new art of government (Burchell, 1991; Miller and Rose, 2008). We will now show how the concept of human capital has modified the thought and practice of managing and organizing employment relations, how it is inscribed into the reality of organizations and in particular how it is associated with a shift from centripetal logic of discipline to the centrifugal logic of security.

Reframing the management of work in terms of human capital

Since the 1980s the language of neoliberalism has increasingly infiltrated the literature on the management of work and employment. It has provided the terms for depicting the world of work and for representing those who are working and those who manage the work of others, as the very term Human Resource Management (HRM) indicates. In the following sections we shall explore exactly how the idea of human capital has arisen in the discourse of HRM and how it is inscribed into the reality of organizations.

The emergence of the HRM discourse: human capital thinking and neoliberal reframing

The precise origins of the term HRM are unclear and contested. The papers that are most often referenced as founding documents were published in the 1960s and early 1970s by scholars of the USA. For example, a clear landmark in the emergence of this discourse was the publication of the first issue of the journal Human Resource Management, released in the autumn of 1961. Early research by Miles (1965) and Haire (1970) construed HRM as a ‘dramatic departure from traditional concepts of management’ (Miles 1965: 150). There are, of course, different genealogies that can be constructed of the historical emergence of this concept of management. One genealogical line leads back to the founders of the human relations movement. This line was constructed in Miles’ influential article and has been reiterated many times since. In a similar vein, O’Connor (1999) has traced back HRM to Elton Mayo, the founding father of organizational psychology. Constructing the genealogy of HRM in this way stresses the ‘humanistic’ or seemingly ‘soft’ elements of management, which HRM inherited from humanistic psychology. Researchers of the human relations and neo-human relations movement are often credited for bringing the ‘human side of enterprise’ to the awareness of management (McGregor, 1960). Townley’s (1994) genealogy of HRM follows this line and highlights the intensification of the ‘will to know’ associated with the extraction of knowledge from the employee through ‘confessional’ techniques which are closely linked to the work of the human relations school. However, in Miles’ early work we can also detect clear signs of the neoliberal reframing which stresses the creative potential of employees and redefines the tasks of management. According to Miles, a distinctive feature of HRM is the departure from the human relations image of the worker as a social being to be managed by strategies that optimize the contentment of the worker (Rose, 1989: 112) to the view of ‘organization members as reservoirs of untapped resources [which] include not only physical skills and energy, but also creative ability and the capacity for responsible, self-directed, self-controlled behavior’ (Miles, 1965: 150). In line with Human Capital thinking, the primary task of management is seen as ‘creating an environment in which the total resources can be utilised’ (Miles, 1965).

Roy Jacques (1996, 1999) traces an alternative history of the evolution of management knowledge, which shows that similar ideas had already been elaborated decades before Mayo and the human relations school had entered the scene. Jacques (1999: 205) quotes The Job, The Man, The Boss by Blackford and Newcomb (1914) which was a manifesto of the so called ‘employment managers movement’ in the United States: In this book we can read that ‘[e]very efficient employee is an asset and not an expense’ (Jacques, 1999: 60) and that ‘[i]n the ideal organization, every employee is looked upon as a bundle of limitless latent possibilities’ (Jacques, 1999: 25). According to Jacques’ (1996) historical analysis, the ‘origins’ of HRM are to be found in the conjunction of scientific management, the American employment managers movement and industrial psychology between 1900—1920.

In Europe the concept of HRM only emerged in the beginning of the 1980s. That is, it emerged in a political context where governments in the UK and the USA adopted neoliberal doctrines, particularly influenced by the work of the Chicago School. This context created new conditions of acceptability in which the language of neoliberalism was increasingly adopted as an adequate language for depicting and reflecting the management of work and employment. Even though the concept of HRM was contested right from the start, it seems that within a relatively short period of time it has become the dominant discourse both for the academic analysis of the employment relations as well as for professional self-presentation (e.g. Mueller and Carter, 2005; Keenoy, 2009).

Understanding the power of HRM

Within the critical community of HRM scholars there was much discussion about whether HRM was effectively a new approach to the management of work and employment, or if it was just ‘old wine in new bottles’ (Legge, 1995). Within a broadly Marxist framework which informed many critical studies of work and employment (e.g. Thompson and Harley, 2007; Thompson and Newsome, 2004), HRM was nothing more than a new managerial ideology that obscures and secures managerial domination. Critical commentators have therefore stressed the difference between the rhetoric and reality of HRM (Legge, 1995; Thompson, 2007). In contrast Foucauldian scholars have shifted away from the concern with the falsehood of rhetoric towards the truth-effects that are generated by the discourses and practices of HRM (Barratt, 2003). Two main strands of this scholarship can be identified: the first can be called the disciplinary paradigm, and the second, the post-disciplinary paradigm of the enterprise discourse.

In her pioneering work Townley (1994, 1996, 1998) has reframed HRM as a ‘nexus of disciplinary practices aimed at making employee’s behaviour and performance predictable and calculable—in a word, ‘manageable’’ (1994: 143). In her analysis she focuses entirely on the centripetal forces of discipline. HRM ‘encloses’, it ‘fixes individuals’ in conceptual space, it ‘imposes order’, it objectifies, it ‘binds individuals to identities’ via technologies of pastoral power. Townley’s analysis is firmly based on the assumption that ‘work organizations are enclosures’ (Townley, 1994: 24) and that the basic rationality of management in general and HRM in particular is one of constructing a disciplinary space by imposing a specific order. Underlying this is the assumption that the plethora of HR-technologies she presents, all contribute to intensify the disciplinary mode of governing the workforce. Disciplinary power, she argues ‘can also be infinitely extended. As a result, it is important to understand the operation of all technologies of governance as they work to secure enhanced control over the labour process’ (Townley, 1998: 206, emphasis in original).

Although this work explains the disciplinary elements of modern work practices, it fails to capture the specific neoliberal element of contemporary HRM. This element has been stressed by a second strand of Foucauldian scholarship in management and organization studies which has developed Foucault’s concept of governmentality to better understand the kinds of power relations developing in the recent past (e.g. Bröckling, 2007; Bröckling et al., 2000; du Gay, 1996, 2004; Hjorth, 1999). For these scholars HRM is in itself part of a discursive formation which reconstitutes both individuals and organizations in terms of enterprise. As such HRM moves competitiveness to the centre of business and labour agendas and reconstructs the employee as an active economic subject, as an entrepreneurial self that calculates costs and benefits. In contrast to the figure of l’employé, who is the classical ‘organization man’ of the disciplinary society (Jacques, 1996: 96–124) the subject of HRM has been constructed as an active, self-responsible, entrepreneurial self who actively seeks to maximize his or her own human capital. In fact, there is a significant body of work within the contemporary discourse of HRM which frames the management of labour largely in terms of the formation of human capital (Martínez Lucio, 2008; Thompson, 2007). As we will see in the next section, in this framing the management of the centrifugal forces is paramount.

HRM/HC and the management of centrifugal forces

Contrary to enclosing and fixing individuals, the idea behind the management of human capital is to encourage their controlled circulation throughout all forms of social networks. It is this idea, which distinguishes contemporary HRM discourse. As Martínez Lucio has observed in a review, HRM ‘now speaks of a post-bureaucratic age—an age of networking and network management’ (2008: 330). Social relations and contacts are themselves seen as part of human capital that needs to be mobilized in the search for competitive advantage. Networks are seen as ‘an alternative way of creating products and value’ (Martínez Lucio, 2008). Networking is described within this discourse as an activity which generates social capital and increases the value of the human capital.

Firms that invest in human capital will have the advantage that they can develop their ‘social capital through client networks’ (Hitt et al., 2001: 15). In order to ‘add value’ HRM strategies then propose to promote profitable forms of circulation by, for example, ‘training staff to work in new and more flexible ways and in supporting strategic teams that straddle the networks’ (Martínez Lucio, 2008: 330). Here, knowledge is seen as the basis of competitive success, where such knowledge resides not only in the minds of employees, but also in the minds of consultants, contractors, external workers or customers. In such a context, HRM is constructed as a ‘cultural facilitator’ that supports the movement of human capital through these networks, encouraging learning and the exchange of ideas across boundaries. In Foucauldian terms, HRM programmes provide ‘centrifugal mechanisms of security’ that allow and promote movement and control the inherent dangers associated with these circulations by means of selective investment. The role of HRM here is seen as a ‘support of mobile élite staff in management and in professional grades that work across networks and deal with the links between nodes’ (Martínez Lucio, 2008).

Within these approaches the social fabric is organized and subdivided not ‘according to the grain of individuals, but according to the grain of enterprises’ (Foucault, 2008: 241). The company is itself constructed as a multiplicity of enterprises. It is subdivided into enterprising unities—projects and profit centres for example—which are all measured, evaluated and rewarded according to their contribution to strategic goals. HRM-writers therefore suggest that ‘we should view firms as a cluster of smaller business units—or smaller business units interacting with a larger one’ (Martínez Lucio, 2008: 329). The same applies to individual workers and managers: they are also seen as enterprising units, as little enterprises in their own right, managing their own and others’ human capital.

HRM and human capital management

The HR literature makes the claim that the resource most likely to yield a competitive advantage for the firm is its human capital, because this particular resource is the one that is the most difficult to imitate. The more human capital a firm possesses, the better it is expected to perform. Moreover, the proponents of this theory believe that this relationship can be empirically observed and proven (Hitt et al., 2001; Scholz et al., 2007). This requires the quantification and measurement of variables that are assumed to be constitutive of human capital. This is not only of academic interest but has practical implications for investment decisions made by practicing managers. For instance, in an optimistically positivistic flourish, one exponent of this approach explains that the ‘calculation of human capital forms the basis for a managerial optimization of a given human resource stock’ (Bechtel, 2007: 207). Over the past four decades a series of attempts to systematically measure and evaluate the human capital of a firm have been developed (Rosledner and Stevenson, 2009). Some of these approaches have tried to translate human capital theory into a management tool, which represents the ‘human capital’ in monetary terms at the same time as providing the basis for decisions and interventions. One of the first systematic attempts was Flamholtz’ (1973, 1985) human resource accounting (HRA). The prime concern of this approach was ‘treating people as assets and accounting for their value’. Flamholtz (1985) considered this approach as an alternative to conventional financial accounting, which allows for the consideration of non-monetary factors that are not quantified in conventional accounting practices, in particular the skills and attitudes of people (Townley, 1996). In the 1980s the development of new techniques for the measurement of human capital appeared in the context of the (American) debate on national and industrial competiveness. Approaches like the ‘Intellectual Capital Navigator’ (e.g. Sewart, 1997) or the ‘Human Capital Indicator’ (Mohr and Keilholz, 2001) for example sought to broaden the perspective of conventional accounting models by drawing on a broad range of indicators that were assumed to represent human capital, which alongside relational capital and organizational capital is seen as a constitutive part of ‘intellectual capital’. Similarly Kaplan and Norton’s (1996) Balanced Score Card (BSC) was an attempt to overcome what they saw as the shortcomings of financial accounting by extending such measurements to other areas such as the ‘customer perspective’, the ‘internal business process perspective’ and the ‘learning or growth perspective’. This ‘holistic’ approach not only extends measurement but at the same time establishes a new time horizon, by measuring activities which are supposed to influence future business performance and success (Edenius and Hasselbladh, 2002: 252). To gain a clearer idea of how human capital is conceptualized and how it might be measured and thus managed we will take a closer look at an example of one such approach which has been developed by HR-experts in Saarbrucken, Germany: human capital management (HCM) based on the ‘Saarbrucken Formula’ (Bechtel, 2007; Scholz, 2006; Scholz et al., 2007; Stein, 2007).

An exemplar of human capital management: the Saarbrucken Formula

We have selected this exemplar for a variety of reasons. First, it draws on elements of Human Capital Theory as is was originally developed by theorists of the Chicago School and applies them to the management of organizations and the management of the workforce. The attempt is to ‘transfer of human capital theory into “real business world’’ (Bechtel, 2007: 209) by placing special emphasis on ‘people’s intellectual ability [as] being of core relevance for 21st century value creation’ (Bechtel, 2007: 210). For our purposes this formula provides a clear demonstration of how this specific governmental rationality is inscribed into the reality of organizations. Second, this approach claims to integrate earlier attempts to translate Human Capital Theory into systems and practices for managing the human resource and to go beyond them. In fact, the Saarbrucken Formula presents itself as being exemplary of a ‘new paradigm’ which focuses on ‘how the human resource is constituted’ (Bechtel, 2007: 225) and moves from cost-calculation to the measurement and valuation of the potential to perform. Such exemplars play an important role in the emergence of new paradigms within a discipline, and can be usefully drawn upon as case material in the analysis of the emergence of these paradigms (Flyvberg, 2006). Third, the approach has major practical implications, which are evident in the fact that the Saarbrucken Formula has been integrated into the HRM programmes of some large multinational corporations including SAP, TNT Express Germany, and Austrian Telecom amongst others. ¹

Within the HCM frame the workforce appears as a ‘specific sort of intellectual capital and Human Resource Management as an investment into this capital’ (Scholz et al., 2007: 3). The monetary value of the human capital is calculated according to the so called ‘Saarbrucken Formula’. This formula is understood both as an algorithm that provides objective and relevant information for rational decision making and as a means for ‘inspiring a new thinking’ for the management of the workforce and the identification of opportunities for intervening and improving the human capital (Stein, 2007: 308). The formula attempts to generate a monetary value to measure human capital based upon four main components: i) a value base, ii) a value depreciation, iii) a value compensation and, iv) a value adjustment. These four purportedly measurable components will now be explained in brief: i) a value base ‘FTE*l’ is calculated largely in terms of the number of Full Time Equivalents, priced according to an estimate of their market salaries (not necessarily their actual salaries); ii) a value depreciation ‘wi/bi’ is calculated according to a percentage figure of the quantity of relevant knowledge supposedly lost by employees over time due to technological change and other factors; iii) the calculation of ‘value compensation’ ‘PE’ is provided as a counterweight to value depreciation and represents the gain in human capital that can arise as a result of the use of ‘personnel development’ programmes, which presumably has the effect of increasing an employee’s relevant knowledge and skills; iv) finally, the factor ‘M’ is slotted into the equation. It is termed the ‘motivational adjustment factor’. This variable has the effect of a ‘multiplier’ on the previous productive factors included in the equation. Accordingly this results in the algorithm depicted in Figure 1 below.

Figure 1.

The Saarbrucken Formula (Scholz and Stein, 2006: 9; Scholz et. al. 2007: 12)

The creators of this formula assert that each of the four components is positively linked to the financial performance of the firm. They are less clear on how exactly their variables were selected, and whether anything might have been glossed over or left out in the desire to find something that was relatively easy to measure. This is particularly true for what they term the ‘softer factors’ such as tacit knowledge and motivation, which are accorded proxies, as these variables are not readily apparent to the naked eye. Despite all its shortcomings we need to take this formula seriously because it exemplifies a specific governmental rationality which we find in contemporary management, both in theory and in practice. It can be seen as an ‘intellectual technology’ that shapes the world it intends to reflect (Edenius and Hasselbladh, 2002). Out of the indefinite number of factors which potentially influence the performance of the workforce, it selects a limited number. It thereby selectively objectifies organizational reality and provides a calculus for responding to and intervening in this reality. As such it illustrates the centrifugal logic of security rather than the centripetal logic of discipline. This, and the differences between these two apparatuses of control, will be explained in greater detail in the following section.

Modifications in the management of human capital

The example of HCM allows us to highlight some significant modifications in the modes of governing work which might be easily overlooked when seen through the disciplinary grid. In the following we will systematically analyse HCM in terms of the key differences between the disciplinary conception of power and the neoliberal techniques of power, which have emerged for regulating the circulation of human capital. This analysis draws on the conceptual distinctions that Foucault outlined between the centripetal forces of disciplinary power and the centrifugal forces of the apparatus of security, which we have elaborated previously under the section on Discipline and Security.

• The interventions that result from measures such as the Saarbrucken Formula are not strictly disciplinary in the Foucauldian sense even though discipline and disciplinary practices still play an important role. Disciplinary power starts by positioning ideal models that it seeks to impose on a specific reality. In contrast, HCM starts from a certain reality that is constructed with considerable mathematical support and on the basis of statistical empirical techniques. The task is not primarily to impose a specific pre-designed order and to limit the actions of individuals with respect to specific results. HCM does not prescribe the actions, movements etc. of employees or managers in detail. Rather the task is to create a milieu, in which selves are allowed to unfold their potentials and entrepreneurial creativity within a specific frame.

• HCM is based on an economy of power, which is operationalized by the logic of investment. This logic runs as follows: resources are scarce and consequently demand selective investment. (Dis-)investment is legitimized in terms of improving the productivity and quality of a population (e.g. the work-force) as a whole. Investment is made in those areas which promise income in the future. Those areas which are estimated and expected not to deliver such a return on investment are consequently subject to disinvestment. The biopolitical logic which underlies the thinking in terms of investment becomes clearer in extreme cases, where disinvestment literally means: letting die. Investing resources in weapons rather than in food has the opportunity cost of letting the starving die, investing resources in healthcare according to criteria such as age, literally entails letting the old die. Making the (potentially) profitable live and letting the (potentially) unprofitable die is what gives shape to the productive body of human capital.

• Thinking in terms of investment requires a different form of objectification. The modern tendency to ‘measure everything’ (Power, 2004) is extended: measurement is not only measurement of past or actual performance—it is extended to future or potential performance. In this ‘performance potential approach’ (Stein, 2007: 308) measurement thus depends on some construction of what constitutes a potentially productive resource that is able to produce income or a ‘return on investment’ in the future. This requires ‘improved reporting about human capital stocks and risks’ (Stein, 2007: 313). Reporting about human capital stocks requires a detailed analysis of the ‘organizational population’. In the research on the organizational population (e.g. Pfeffer, 1985) a variety of variables that influence the productivity of an organization population have been suggested, such as the composition of the workforce in terms of gender differences, age differences, and so forth. Organizational strategies following from such considerations seek to optimize these differences in terms of performance. Reporting about human capital risks requires the making up of processes and people as bearers of specific risks. Uncertainties that are associated with organizational life in general and with the management of work in particular have to be transformed into risks that can be managed (Power, 2007). In contrast to the disciplinary regimes of power the rationality inherent in these technologies of risk-management is not aimed at transforming the organization into a ‘house of certainty’ (Foucault, 1977) where everything can be seen and regulated in detail. Neoliberal forms of governance, such as HCM, work on the basis of statistical probabilities. They seek to anticipate and prevent the emergence of some undesirable events (e.g. illness, deviant behavior, etc.). Such policies do not primarily address individuals, but rather factors or statistical correlations of heterogeneous elements. They create spaces of autonomy for entrepreneurial entities but enfold them in new forms of regulation (Dean, 1999; Miller and Rose, 2008; Power, 2007).

• There is a shift in the mode of organizational subjectification. The urge towards flexibility requires actualizing and mobilizing in a piecemeal fashion various segments of the self according to the demands raised in various entrepreneurial projects. The individual becomes a ‘dividual’ (Kallinikos, 2003: 601) which is assembled and reassembled in selective, mobile and reversible terms. Disciplinary ‘molding’ of employees which fits them into some more or less explicit model of the ideal worker shifts to post-disciplinary ‘modulation’ which is ‘like a self-transmuting molding continually changing from one moment to the next’ (Deleuze, 1995: 179). When conceived in terms of human capital, the working subject becomes an ‘abilities machine’ which has to be able to modulate and reconfigure continuously according to the demands of competitiveness and the threat of obsolescence (Foucault, 2008: 224–226). This is expressed in the HCM view, where employees are seen as ‘an organizational capability’ and where ‘these human resources have to be open to reconfigurations, which means organizational learning’ (Stein, 2007: 311). Continuous learning is required in order to maintain the value of one’s human capital (employability), rather than adaption to the norms and standards of a profession for example. In the post-disciplinary context you are ‘never employable enough’ (Cremin, 2009). Learning is conceived as a strategy to maintain employability and is routinely linked to the concept of self-responsibility (Burchell, 1991). Rose (1999: 160) identified the move from ‘disciplinary pedagogy to perpetual training’ as being a key characteristic of advanced liberal societies of control. The individual becomes its own portfolio, discovers and describes its own ‘strengths and weaknesses’ and sees efforts to improve him or herself as an investment. This intensifies the standardization that is often associated with bureaucracy (Kallinikos, 2004) and links it to the dynamic principle of self-transmutation.

• The formula provides a nexus which incorporates the logic of the market and of competition. It introduces the ‘permanent economic tribunal of the market’ (Foucault, 2008: 247) on the level of organizational policies. HCM thus demands ‘a permanent monitoring system in HRM which is based on monetary human capital values according to a performance potential logic and opens it to dynamic adaptations for strategic reasons’ (Stein, 2007: 312). This implies introducing a whole variety of ‘technologies of performance’ that transform professionals into ‘calculating individuals’ and introduce competition between the various enterprising units (Dean, 1999: 168). Human resource managers for example are increasingly required not only to provide indicators that measure the performance of the workforce and of organizational procedures, they are also increasingly forced to provide measures for demonstrating the value of the HR-function which has to be legitimated in terms of contributing to business performance (e.g. Pfeffer, 1997; Power, 2004). These technologies also serve to create artificial quasi-markets using rankings, ratings, performance indicators, benchmarking techniques and the like in order to foster ‘continuous improvement’. Such performance measurements which ‘exploded’ form the 1980s onwards (Neely, 1999; Power, 1994) inaugurate a new form of normalism, which is dynamic rather than static. They do not establish fixed and stable norms according to which subjects or practices are measured and judged, rather they introduce a dynamic principle and demand the adaptability to ever changing norms. This is associated with forms of control that are ‘short-term and rapidly shifting but at the same time continuous and unbounded, whereas discipline was long-term, infinite and discontinuous’ (Deleuze, 1995: 181).

• There is a fundamental shift in the concept of normalization, from what Foucault termed disciplinary ‘normation’ to biopolitical ‘normalization’ (Foucault, 2007). In traditional HR-Accounting there is still the concept of a fixed norm, to which the individual is to be adapted. In this sense it can be said that ‘human resource accounting (HAA, HRA) is perhaps the epitome of the disciplinary practice’ (Townley, 1994: 145). Such practices attempt to measure the costs and value of people. They apply financial equivalences to the time and activity of individuals and organizational procedures. These practices establish a visibility that ultimately serves to create a disciplinary norm. Concepts of human capital imply a shift in which the norm is not pre-established but rather derived from empirical observations and the application of statistical techniques of measurement to a population (e.g. the workforce). The disciplinary normation which posits a model derived from expert opinion, is thus supplemented by what Foucault described as normalization proper whereby ‘the operation of normalization consists in establishing an interplay between these different distributions of normality and [in] acting to bring the most unfavourable in line with the more favourable’ (2007: 63).

This analysis of an exemplar of HCM shows the ‘centrifugal’ nature of this technique of control in a number of important respects. The rationality at work that we have revealed is not one of disciplinary exercise or confinement, but one that is focused upon the creation of a ‘milieu’ in which enterprising individuals might better flourish according to the centrifugal logic of the marketplace (point i, above). We can see from the above analysis that this approach to HCM is designed to stimulate the circulation of human capital by means of selective investment (points ii and iii above). This technique is aimed precisely at encouraging the flow of human capital within competitive networks of circulation (points iv and v above). In summary this analysis reveals a specific style of governmental rationality which is characterized by interventionism, the logic of investment, potentialization, the modulation form of subjectification, dynamic normalism and biopolitical normalization.

Conclusions

This article provides a contribution to the call within organization and management studies to develop the concepts of Foucault’s later works (Barratt, 2008). It has devoted particular attention to Foucault’s (2004, 2007, 2008) late lectures that were focused upon re-conceptualizing power relations to accommodate transformations that have arisen from the rise of liberal and neoliberal forms of government. In these works, Foucault took pains to show that the disciplinary regime and the liberal apparatus of security co-existed and developed side by side, employing different methods of organization. Foucault (2007) observed that whilst disciplinary techniques tend to be used as centripetal mechanisms of control for fixing and confining, the apparatuses of security tend to use centrifugal mechanisms to regulate and extend the circulation of flows of commodities, people, and so forth. We have demonstrated the implications of Foucault’s observation for understanding modifications in the field and practice of HRM which emerged with the neoliberal reframing of the employment relation. We have focused on how one of the main conceptual tools for realizing neoliberal governmentality—the idea of human capital—has been translated into technologies for managing the employment relation and how they work to inscribe a new form of governmental rationality into the reality of work organizations. This has allowed us to clarify the process of controlled circulation and to show its significance in the context of managing and organizing work-relations.

Our focus on the idea of human capital and its transformative power extends the conceptual apparatus for a Foucauldian understanding and problematizing of technologies and practices of organizing work-relations. On the one hand, our analysis complements the disciplinary perspective, which has become dominant in this area. Whilst in agreement with earlier analyses which show that disciplinary techniques are key elements of emerging forms of governance, we have shown how these techniques are being modified and supplemented with new techniques which are better understood in terms of the regulation of flows and the controlled circulation of ‘human resources’ through diverse networks, rather than the delimiting of spaces and fixing within disciplinary sites. On the other hand, our analysis also complements critical studies of the emergence of the discourse of enterprise, which have developed Foucault’s concept of governmentality for understanding the ‘governing of the present’ (Miller and Rose, 2008). These studies have explored the significance of ‘enterprise culture’ in new management techniques and the governance of advanced liberal societies, where the concept of human capital may be seen to be implicit in these inquiries. The present inquiry into HCM may be seen as complementary to these existing studies, but engaging far more explicitly the concept of human capital and its role within the development of enterprise culture, specifically in terms of the management of so-called human resources. By focusing on the reframing of work and employment relations in terms of human capital and by drawing on Foucault’s distinction between discipline and security, this article reveals a style of governmental rationality which largely remains implicit in existing studies of governmentality. Our analysis thus allows an understanding of how the neoliberal discourse of enterprise is operationalized and inscribed in the reality of organizations through the specific mechanism of HCM.

In more general terms, our analysis contributes to an understanding of a fundamental shift of the role of management and organizing in post-disciplinary regimes. Earlier studies tended to conceptualize management and organization as technologies and practices that fix the flux and flow of human activities, to define limits and to impose order on organizational life. In the post-disciplinary context organizations of all types are increasingly constructed as dynamic and flexible enterprises in a competitive environment. Management’s role here is one ‘of allowing circulations to take place, of controlling them, sifting the good and the bad, ensuring that things are always in movement, constantly moving around, continually going from one point to another, but in such a way that the inherent dangers of this circulation are canceled out’ (Foucault, 2007: 65).

The critical task of further research is the exploration of practices associated with the management of circulation and the analysis of the power effects that come along with them. Further research might look to a genealogical study of the networks that provide the apparatus within which circulations are managed, including a genealogy of the idea of the ‘network’ itself. Another important avenue of research derives from the logic of investment and an exploration of the development of differential modes of treatment of individuals and of populations, which aim to maximize the profitable and marginalize that which is seen as unprofitable. The disciplinary mode of governing tended to segregate and eliminate those who did not conform to established norms, or to reintegrate them through corrective or therapeutic interventions. In contrast, managing the circulation and optimization of human capital is associated with the tendency ‘to assign differential social destinies to individuals in line with their varying capacity to live up to the requirements of competitiveness and profitability’ (Castel, 1991: 294). As we have argued in this article, HCM embodies this developing form of governmental rationality. Given, that human capital has now become a central concept, both at the level of organizations and at the level of organizing the population of the state, further research will have to explore the truth-effects that are associated with the increasing acceptance of this concept.