E1 Organisational Management - Global Edulink · 2018. 10. 17. · Monetary incentives and good...
Transcript of E1 Organisational Management - Global Edulink · 2018. 10. 17. · Monetary incentives and good...
E1 Organisational Management
Module: 05
Human Resource Management
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1. Human resource management (HRM)
It can be hard to think of people as resources but that is what we are! Much
like any other resource in an organisation, human resources must be
managed.
While human resources (HR) is typically thought of as relating to typical
people-based activities in organisation such as recruitment and training, it can
include anything that relates to the management of people in the
organisation. Back in 2010, Unilever initiated a new project called the fit
business programme which involved giving staff health checks, fitness
information and revised on-site menu options. A quarter of all of those
involved in the pilot scheme reported a weight loss. Unilever has seen an
improvement in both the health and productivity of its workforce since this
initiative and employees are said to be happier too.
So, as we can see, all aspects of people-based operations come under the banner of HR. The formal definition is a little heavy though. Human
resource management is defined as: the process of strategically
aligning a company's human assets to the needs of the business.
Let's examine this in a little more detail. Let's say the needs of the business
are to produce high quality products quickly and efficiently. Recruiting skilled
staff is a critical element of that – the greater their skill the higher quality the
products and the quicker they'll work. As is training people; the better their
training the better their quality of work and speed. But is Unilever's fit
business programme? Well yes – the results of improvement in productivity
and staff well-being support the organisation's needs too. The key thing to
notice about this definition is that it's not just 'anything people related', it's
about aligning those people elements of the business with its objectives,
making it a strategically important task.
Function
HR departments are chiefly responsible for functions relating to
employees on a personal level, these functions can include:
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Selection
Choosing the right people for the job e.g. right skills, experience, personality
and qualifications.
Training
Ensuring employees have the right skills to do their work through training
and development programmes.
Assessment
Assessment of staff performance, including management of performance
appraisals to ensure employees are meeting their targets and obtain
feedback on how to improve.
Rewarding
Making sure employees are adequately compensated for their services and
that they receive sufficient recognition for their contribution to the business. Includes pay, bonuses, pensions and so on.
Employee relations
A productive workforce will have a positive impact on the business whilst a
toxic environment will have the opposite effect. The HR department are responsible for maintaining a healthy working environment where staff
are motivated and the helping to reduce conflict for instance between
unions and management.
In order to keep the best people, jobs at the organisation must be seen as an
attractive opportunity for the individual. For example, an individual
looking for a job is less likely to be interested in an organisation if they have a
reputation for treating staff poorly. This perception, whether true or not, can
affect the quality of applicants which in turn can affect an organisation’s
ability to meet its strategic objectives. The HR department is responsible for
the general ‘employee experience’ relating to how staff feel about the
organisation.
Legal Representation
HR are responsible for ensuring the organisation abides by HR related law
such as minimum wage and equal opportunity laws. A company’s HR
department is also the front-line representative during legal disputes
between a company and its employees and is also a company’s
representative when negotiating with trade unions and another employee
organisations.
Other activities
They also have involvement in all other people related activities such as the
changing the organisational structure/hierarchy and presiding over
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cultural and strategic changes.
Hard vs Soft HRM
Human resources management can be viewed as having two perspectives:
Hard HRM – staff are a resource of the business who must be recruited and
managed, but they are no more important than other resources. Pay and
benefits are set at a fair but basic level. e.g. a factory.
Soft HRM – staff are the key resource of the business and human
resources one of the most important keys to business success. Pay is high,
benefits are significant, recruitment and training are given significant budgets
and a key priority. e.g. a consultancy practice
Personnel vs Human Resources Management
We can contrast the strategic role that human resources take with the
situation of an organisation not treating their staff as being a strategic
resource. In this instance staff management is known simply as personnel.
In this case the 'personnel department' simply undertake the staff-based
tasks as noted above from an operational perspective, but without being
part of the strategic plan, but more as a function that simply must be
undertaken. Staff must be recruited, trained and paid and personnel perform those functions. Often in this scenario staff are seen as being motivated by
pay and they need to be well supervised to ensure they work effectively.
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2. History, development and work study
The industrial revolution
So, now for a bit of history! During the industrial revolution, large employers
and large-scale production became commonplace. The conditions in these
factories, or workhouses, would often be poor and would operate with little
regard to the employee’s well-being. Think of a tale by Charles Dickens and
you’ve probably got it spot on!
In this time staff were seen as lacking self-motivation and their only reason for
working was to be paid. As such theories were developed which aimed to
maximise the use of this key resource by controlling people through rules
and procedures and severe disciplinary penalties for non-conformance.
Probably the best known was developed by Frederick Taylor.
Taylor and ‘Scientific Management’
Let's say Joe runs a doll factory and wants to find the optimum speed for his production lines which would maximise productivity. He begins an
experiment, he sets his 1st production line to 2 miles per hour, the 2nd to 4
and the 3rd to 6. Then monitors the results.
On the first production line employees have plenty of time to fix their part of
the doll correctly and to the required standard. However, they are often left at
the conveyor-belt watching as the next piece has not arrived in their station
by the time they are ready.
On the third production line quality has gone down and stress levels have
risen as the employees are being worked too hard and as a result making
mistakes.
However, on the second production line productivity is up. Here every
employee has just enough time to put their piece onto the doll without being
rushed. As soon as they have finished, the next piece arrives. As a result,
Joe decides to run all of his production lines at 4 miles per hour. This is in a sense what scientific management is, using research, experimentation
and variation of different variable factors to find the 'optimum' solution
for the business!
Where did that idea start? Frederick Taylor's theory of scientific
management began as a paper published in 1881. This paper was concerned
with making the practice of cutting metal more efficient and was first
developed during his work at the Bethlehem Iron Company in Pennsylvania.
By the time of the publication of The Principles of Scientific Management in
1911 Taylor had moved into academia, holding a professorship at Dartmouth
College in New Hampshire.
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Taylor's principles can be condensed into four main points:
• For every employee, a scientific method for their work should be created. The optimum working approach and methodology
should be developed by analysing the role, conducting work
studies, and formulating the new process in writing.
• For every employee, ensure that they are selected and trained specifically for their line of work. A physical job, for instance, will need a healthy, strong worker trained in that specific activity.
• Cooperation between workers and management so that workers follow the scientific principles to the best of their ability and managers guide and support them in doing so.
• Allocate time effectively, with managers spending most of their time
planning (rather than supervising) and workers working. This involves
workers taking on some responsibility for the task even when not being supervised.
As a result of these methods, Taylor managed to lower the workforce
responsible for shovelling coal at the Bethlehem Iron Company from 500
down to 140, one example of his work being the optimisation of shovel size to
maximise the amount of coal that could be shovelled over the course of a
worker’s shift. Much like Joe's production line, he trialled a whole variety of
different shovel sizes until he found the one that worked best and then gave
all the men the optimum type of shovel.
Although Taylor achieved significant efficiency improvements there are also
problems with scientific management. Taylor’s theory was ultimately
flawed in so far as it made several assumptions such as the expectation that
every employee would be able to rationalise the effort required against the
reward gained. In addition, the constant instruction and supervision
combined with no flexibility for the worker could have a negative effect on
employee morale.
In summary the key problems were as follows: • De-motivated employees, doing standardised, boring jobs by the rule
book. • A lack of flexibility of approach. • Union conflict; particularly when redundancies came from his
efficiency measures and over changes to roles and working conditions.
• A lack of focus on the team and team working and its importance in motivation and productivity.
To make the assumption that Taylor’s theory is no longer relevant however,
would be incorrect as Taylor’s influence can be seen today in areas which
are highly process-driven such as on manufacturing production lines,
running monthly accounting reports or running a fast food restaurant such as
McDonald’s.
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Human relations
“Western business people often don't get the importance of establishing
human relationships,” said Daniel Goleman, author of Emotional
Intelligence. But Joe does, so perhaps this management technique is for
him! Elton Mayo’s research conducted under the Hawthorne Studies of the 1930s showed the importance of groups in affecting the behaviour of
individuals at work. He carried out a number of investigations to look at
ways of improving productivity, for example changing lighting conditions in the
workplace.
These were initially Taylorist, scientific management studies. What he
found however, was that work satisfaction depended to a large extent on the
informal social pattern of the work group where norms of cooperation and
higher output were established. Personal motivation and group and team
working, he concluded, were vital to an organisation’s success.
In summary Mayo said that:
Individual workers cannot be treated in isolation but must be seen
as members of a group.
Monetary incentives and good working conditions are less
important to the individual than the need to belong to a group.
Informal or unofficial groups formed at work have a
strong influence on the behaviour of those workers in a
group.
Managers must be aware of these 'social needs' and cater for
them to ensure that employees collaborate with the official
organisation rather than work against it.
This was in contrast to the ideas of scientific management and bureaucracy
that had dominated management theory to this point and led the way in a
school of management thinking that considered worker motivation, and
group dynamics as critical to the success of organisations.
While Joe's production line is mostly organised by standard processes
on his production line, it is important that he also considers the teams
he has at work, how they work together and their motivation. This
combination of an excellent process and motivated teams could
ensure his organisation is even more effective in future.
From the 1930s onwards therefore, the management of groups and people's
motivations became more important in management of people at work.
Human resource management
In the 1980s the term/idea of ‘human resource management’ arrived
suggesting that a company’s workforce was a critical asset and could be
strategically deployed to meet the organisation's strategic objectives.
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HR programmes were designed from the business strategy downwards.
In Joe's case he would decide on his organisation's goals, perhaps to produce
the best quality dolls in the market, and then consider what he would need to
do staff-wise in order to achieve that goal – most likely to employ skilled staff,
train them well and keep them motivated.
Human Resource Management also identified three key areas which must
be present for an employee to fulfil business needs:
Ability
The employee must have the necessary skills, knowledge and if required,
the experience, to cope with the job/role and meet the company’s
expectations.
Opportunity
The company must provide a working environment where an employee
can be productive and has the chance to show what they can do.
Motivation
In order for an employee to meet expectations staff must have the desire to work
hard and productively.
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3. HR planning
Joe currently has 100 employees in his factory with makes Dolls. However,
it's now the nearing the end of summer and he'll need to ramp up production
ready for the Christmas season. During this period, he needs the equivalent
of 150 staff. He typically loses 10% of all staff each year, and so needs to
bear this in mind too. Joe will need an HR plan...
He decides to give existing staff overtime and consults with them to see how
many extra hours they'll be able to work. This would cover enough work for 20
employees. Next, he works out that he's likely to lose 3 staff in the next few
months due to natural staff turnover. That means he needs 33 new staff on a
temporary basis and runs a recruitment campaign. He then provides training
to bring those new staff up to speed. As Christmas approaches, he asks 6
staff to stay on longer term to replace those that left and those he expects will
leave in the next few months and the contracts of the other 27 are allowed to
lapse.
As we can see, for Joe, his HR planning is critical to meeting his production
targets and is a key activity for him.
Let's see a formal definition. HR planning is the process of deciding on and
planning the organisation’s structure, pay, recruitment, training and (if
necessary) redundancy process to ensure that:
• The business has the right numbers of staff in the right locations
to meet its needs.
• The roles, as defined in the organisation's structure, fully serve the organisation and its future changes.
• The skills are available to do key roles effectively.
• Staff are productive and motivated.
As human capital is perhaps the most inconsistent and unpredictable
resource it is necessary for HR plans to be both flexible and
comprehensive. Often HR plans are developed on a rolling 3-year basis,
which means that forecasts for next year and the succeeding years in the
cycle are updated every year in the light of this years’ experience.
There are two key elements in the HR planning process:
HR demand
HR Demand is is the demand for staff in the future. HR demand is predicted
using the analysis of future output, volumes, sales and product projections
and linking those to staff needs. In Joe's case he worked out he would need
150 staff up until Christmas based on predictions of demand for the sale of
his dolls.
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The HR demands should be linked through to the business strategy so
that strategic issues such as future competitor actions, economic changes,
business growth plans and so on are taken into account in the HR plan. For
example, let's say Joe's business is growing by 10% per annum then he might
consider keeping on a few more of the temporary workers given this future
expected growth.
HR supply
HR supply is the other key factor in HR planning. The current numbers,
skills and locations of staff need to be matched against the demands for
the future, so that any gaps can be filled using the plan. Staff appraisals,
records and the organisational structure can be used to assess current
supply levels. In Joe's case he had 100 production staff – that was his HR
supply.
Staff turnover (the natural percentage of people that leave each year) is a
key element of HR supply too. This must also be taken into account as there
will always be the need to fill the gaps left by those people that leave, and we
saw this was a key part of Joe's calculations. We also saw that Joe used overtime too, which can be useful too as a way to increase supply in times of
need.
Problems implementing HR plans
The key problems in implementing HR plans relate back to the forces of
demand and supply:
• Demands change e.g. Joe's orders increase and he needs 10 more staff, a new product is produced that requires different skills.
• Supply changes e.g. more staff leave than expected, people are unwell, staff go on strike.
It is therefore important that future problems are anticipated, and contingency
plans put in place. e.g. Joe might set up and agreement with an employment
agency to obtain more staff at short notice so that if demand does increase
he has access to suitable staff.
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4. Human resources and business strategy
The business strategy is a long-term plan of operation for the business with the aim of achieving the organisation’s goals. A good HR plan will be
comprehensively entwined with the business' strategy.
Professor David Guest identified a six-step process showing the link
between human resource strategy and financial performance, illustrating
the importance of an effective HR plan:
HRM strategy – The business strategy will drive the HRM strategy (similar to
the HRM plan). The business strategy could, for example, be to keep costs
down or differentiate the business through high quality.
Let’s follow through the example of Joe here too to see how this works. Joe
focuses on producing the highest quality dolls in the market as its key factor
of differentiation.
HRM practises – Practises such as training and recruitment now need to be
linked to the strategy. For Joe, experienced staff with significant expertise will
be recruited and training programmes developed to ensure they are highly
skilled.
HRM outcomes – These are the key goals of the HRM practises. In Joe's
case, quality is the focus, and so the practises put in place should help
produce highly skilled staff that focus on quality in all they do. A measure
might be the number of trained staff employed, or another, the number of
defective products produced.
Behavioural outcomes – The HRM outcomes will directly link to the actual
behaviours achieved by staff. In Joe's case, his skilled staff now need to be
organised, coordinated and motivated to produce high quality work, for
instance through good supervision or set procedures.
Performance outcomes – The right behaviours will produce the right
outcomes of performance – in Joe's case high quality products that
customers want and purchase, as demonstrated by customer satisfaction
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ratings and high sales.
Financial outcomes – The sales deliver revenue which, due to the quality, is
higher than cost which drives profits and good financial returns for shareholders.
And so the link from Joe's HR plan through to how this achieves profit for his
business is shown; that's the aim of David Guest's model.
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5. Flexible organisations
The term organisational structure refers to how the people in an
organisation are grouped and to whom they report. The organisational
structure determines how the organisation performs or operates. While this
structure is often fixed in nature, the requirements of the business often
change and having an organisation which is more flexible can have great
advantages.
There are several ways in which the company can do this, here are a few
examples:
Numerical flexibility – This involves being able to adjust the numbers and
hours of staff. Joe is using both temporary staff and overtime to increase
numbers in the run up to Christmas.
Flexible work styles (temporal flexibility) – This can include employees
working from home (teleworking), job sharing, flexible working hours
(flexitime), or shift working where employees work on shifts outside normal
working hours. Organisations can use flexible hours to match production
schedules with labour hours, to improve motivation, or to reduce office
space requirements. While Joe couldn't have people working from home, he
could certainly use flexible working hours. At busy times, he could get
people working a range of hours to ensure the production line is working for
as many hours as possible during the day and even the night too.
Flexible roles and skills (functional flexibility) – Staff can be used in
different areas of the business as is needed. In Joe's case, perhaps the
administration staff could also be trained in production work and do stints in the
factory during busy periods.
Flexible structures – Structures are not set in stone – they are dynamic
depending on the organisation's needs. A matrix structure is one such
structure, where project teams are set up, and then closed down, to meet the
needs of changing projects. This is useful for project-based companies such
as consultants or builders. The shamrock organisation is also an example,
let’s see how that works...
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The shamrock organisation
This is a flexible organisational structure where a core group of executives
and workers are supported by outside contractors and part-time help.
Shamrock organisations have an organisational structure with three distinct
parts:
Professional core - Consists of professionals, technicians and managers
whose skills define the organisation's core competence. This group defines
what the company does and what business it is in. They are essential to the
continuity and growth of the organisation.
For Joe his core administration and production staff are all key to the
business are most likely to be in-house to ensure retention of key skills within
the company.
Outsourced vendors - Made up of self-employed professionals or
technicians or smaller specialised organisations that are hired on contract, on
a project-by-project basis.
When Joe has significant recruitment needs in the run up to Christmas he
uses a recruitment consultant as they are able to source large numbers of
people at short notice on temporary contracts. Payroll is also outsourced as it
is cheaper and because the company have clear expertise that is difficult to
replicate in-house.
Contingent workforce - Comprises the contingent work force of part time or
temporary workers, whose employment derives from the external demand
for the organisation's products. There is no career track for these people and
they perform routine jobs.
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Joe bringing in extra production staff before Christmas is an example.
Ideally Joe would have a group of people that were already trained that he
could bring in for each pre-Christmas season.
As we've seen shamrock organisations can therefore be flexible to changing
resource and skill requirements at different times of the year, different
stages in the company’s growth or changing economic circumstances.
Financial flexibility
Financial flexibility is the ability of the company to adjust its wage costs
to adapt to the changing demands on the business. Being able to change
the numbers of staff or staff working hours (numerical flexibility) helps to
reduce costs during quieter periods, whilst ensuring staff are able to do a
range of roles (functional flexibility) avoids needing to bring in new staff to do
those jobs.
Paying people bonuses which relate to job performance also increases
flexibility with more only being paid when the performance is strong. A
salesperson might get paid commission on sales made, for instance, linking
their salary directly with revenues earned and ensuring the company can
afford to pay. When company performance is lower, salespeople's pay is
lower, when it's higher their pay is too.
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6. The psychological contract
Think about your relationship with your employer, how do you treat each other? It is likely that you will have an informal set of rules by which you
treat each other on a daily basis. This is called the psychological
contract.
The employee, may, for example, expect opportunities for training and
development, a Christmas party, and promotion if they work hard. While
that may not be in their employment contract, it's part of what they and
other employees expect as part of being employed.
The employer, on the other hand, might expect honesty and loyalty and for
the employee to work hard as long as they remain in employment.
Again, that's not in the employment contract, but it's just part of being in the
working world.
Essentially, the psychological contract is a mutual understanding between
employee and employer of what they expect of each other and how they
behave.
There are three types of psychological contract:
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It is important to note that a co-operative contract is the most desirable of the
three as it allows for employee involvement. The employee and employer
work together in order to achieve shared goals.
A calculative contract requires no such input from the employee, but they
will calculate the benefits of doing extra work for the benefit gained (e.g.
overtime, a bonus, or promotion).
If you thought a coercive contract sounds like being a prisoner, then you
would be right! These are commonly found within custodial institutions but
may also be found within dictatorial organisations – on a production line in
factories for instance. In this scenario the employee's only incentive to work
effectively and hard is to avoid punishment.
Thankfully it is Co-operative contracts that are emerging as the most popular
psychological contract in the modern age.