Professional Documents
Culture Documents
Published by The University of Sunderland The publisher endeavours to ensure that all its materials are free from bias or discrimination on grounds of religious or political belief, gender, race or physical ability. These course materials are produced from paper derived from sustainable forests where the replacement rate exceeds consumption. The copying, storage in any retrieval system, transmission, reproduction in any form or resale of the course materials or any part thereof without the prior written permission of the University of Sunderland is an infringement of copyright and will result in legal proceedings. University of Sunderland 2007 Every effort has been made to trace all copyright owners of material used in this module but if any have been inadvertently overlooked, the University of Sunderland will be please to make the necessary arrangement at the first opportunity. These materials have been produced by the University of Sunderland Business School in conjunction with Resource Development International.
Contents
How to use this workbook Introduction Unit 1 Definition and Purpose of Strategic Human Resource Management (SHRM)
Introduction The Changing Business Environmen Linking people management and strategic management The potential benefits of a strategic approach Approaches to the strategic management of people Evaluating the approaches Summary References 1 2 6 10 12 25 34 37
U niversity of Sunderland
The strategic options in recruitment and selection Designing, applying and evaluating human resource strategies Summary References
U niversity of Sunderland
This Activity Feedback icon is used to provide you with the information required to confirm and reinforce the learning outcomes of the activity.
This icon shows where the Virtual Campus could be useful as a medium for discussion on the relevant topic.
It is important that you utilise these icons as together they will provide you with the underpinning knowledge required to understand concepts and theories and apply them to the business and management environment. Try to use your own background knowledge when completing the activities and draw the best ideas and solutions you can from your work experience. If possible, discuss your ideas with other students or your colleagues; this will make learning much more stimulating. Remember, if in doubt, or you need answers to any questions about this workbook or how to study, ask your tutor.
U niversity of Sunderland
Introduction
Knowledge and understanding
1) 2) 3) 4) 5) Understanding of the origins and models of human resource management. Understand the relationship between business strategy and the core human competencies required of organizations. Critically evaluate the various models of HRM and the related stakeholder interests. To understand and be able to evaluate a range of HRM policies that constitute a strategy in a context. Understand and explain the HR variables that can support organisational change.
Skills
6) 7) 8) 9) Demonstrate the cognitive skills of critical thinking and analysis. Be able to conduct effective independent organizational and information sources research. Be able to conduct organizational reporting and diagnostic skills. Be able to formulate written HR policy and strategy interventions consistent with organisational goals.
Content synopsis
The module begins with a review of the nature of strategy in HRM and evaluates the various models in achieving strategic interventions in a range of business contexts derived from strategic management. The module reviews the relationship of Personnel departments with respect to designing and delivering HRM interventions, the current and historical barriers to Personnel leading on HR and change management. A range of contemporary ideas on redesigning the role of Personnel are reviewed before the module evaluates the range of HR policies that make up a strategy; recruitment and retention, performance management, human resource development, employee relations,
U niversity of Sunderland
iii
reward. The module concludes by examining HRM interventions in the light of the organisational development literature and practice. The basis of employee attitudes, commitment and cultural change are examined in terms of employee competence development through HRM.
iv
U niversity of Sunderland
Unit 1
Evaluate the potential benefits of a strategic approach. Evaluate three approaches to the strategic management of people.
Introduction
This module considers the management of people. In the past, organisations have tended to view people in three different ways: as a cost, as a resource and as an asset. What many organisations are now realising is that their employees are central to the successful performance of the organisation and therefore an integrated and coherent approach to managing people is needed. This unit will consider why people management has become more critical for organisations and will look at the formulation of strategies for dealing with that requirement.
READING ACTIVITY
Please read Chapter 1 of your key text, The Strategic Managing of Human Resources, Edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, which covers some of the subjects of this unit.
U niversity of Sunderland
Work is becoming more insecure and flexible. The notion of organisational boundaries is sometimes less
clear.
ACTIVITY
In the left-hand column of the table we have listed some examples of changes, first in the wider environment of business, then in the strategies of organisations. From your existing background knowledge of HRM, note down in the second column what the HR implications of those changes might be. We have given you an example under each heading to start you off.
U niversity of Sunderland
Economic recession
HR Implications adoption of service level agreements employee attitude and skills development
Teamworking
U niversity of Sunderland
ACTIVITY FEEDBACK
We thought the implications might include:
changes in the balance of employer/employee rights and obligations different expectations of work focus on performance to increase production HR Implications adoption of service level agreements employee attitude and skills development training needs
Different attitudes in society Economic recession Strategic Changes Greater customer focus
reduction of rules and procedures, more empowerment and accountability terms and conditions of employment, change in security and intensity of work
employee relationships and inter-personal skills, attitudes, commitment, to work to achieve co-operation and collaborative behaviour focus on efficiency and performance increased training needs
Teamworking
changed patterns of employee behaviour, involvement, participation of staff employee autonomy, decision-making and knowledge training needs value alignment
U niversity of Sunderland
The last activity has highlighted the key underlying principle that although change may come from a strategic response to the business environment or may be related to the goals of the organisation, people as well as systems and processes, are important. SHRM implies more than simply recruiting, rewarding and training staff. Traditionally, personnel management took an operational, system-based approach to managing people, for example, in recruitment and performance systems. Although there is a need for personnel systems, a strategic approach asks different questions and requires different levels in the diagnosis of requirements, for example, in culture and behaviour. It looks not just at the content of HR policies but also at the process by which people are managed, at how to create the right climate or culture through the leadership style and at the way the organisation influences how employees interact. It can be argued that there are three challenges facing organisations that must be met if they are to gain the competitive advantage we referred to earlier (Mabey and Lawton, 1998):
This means the ability to access scarce skills and to cope with the implications of new forms of organisations. These changes create major challenges for working attitudes and relationships and require a sustained and holistic approach to people management. Development, innovation and creativity become core intangible assets, a focus for managing people strategically. In other words, bringing the design tasks of innovation together with a focus on innovatory behaviour.
The challenge of managing strategic change, including trends towards flexibility in organisations and in job design, the break up of bureaucracies and of traditional structures of employment. The challenge of innovation in terms of what organisations produce by way of goods and services, and the way they approach the task.
A strategic approach to HRM involves new ways of operating in organisations and demands new skills. These include the need to understand tacit knowledge, recognise core competencies and attend to stakeholder views, to ensure that all aspects of the organisational resources are engaged. Tacit knowledge might include repertoires and knowing what routines to perform. Routinisation of behaviour and operational knowledge become unique and difficult to imitate. The process of establishing blueprints or scripts promotes a greater understanding of competitive advantage and the business of building resource mobility barriers (RMBs) to avoid imitation and dilution of complex skill formation. Tacit knowledge derives from:
U niversity of Sunderland
U niversity of Sunderland
Introduction
This is the stage where the product enters the market. The recruitment and selection function would, in this stage, aim to attract the best technical and professional expertise to the organisation.
Growth
In the growth stage the sales of a product increase rapidly. The recruitment, selection and retention function would, in this stage, recruit the right number and mix of qualified workers; plan its succession management; and manage rapid internal labour market movements.
Maturity
The product is at the peak of its sales. The aims of the recruitment, selection and retention function are to minimise layoffs by providing new opportunities and encourage mobility as company reorganisations shift jobs around, that is, the challenge becomes one of internal assessment and deployment rather than external recruitment.
Decline
Sales of and profits from the product fall. The recruitment and selection function will plan and implement workforce reductions and reallocation.
ACTIVITY
Apply the model to another HR function, that of employee learning and development. What would be the aims of the function at each of these stages?
U niversity of Sunderland
ACTIVITY FEEDBACK
A table illustrating the Kochan and Barocci (1985) model is shown next. It displays the lifecycle model breakdown for the main HR functions, including employee learning and development.
Life cycle stages Human resource functions Recruitment, selection and staffing
Growth Recruit adequate numbers and mix of qualified workers. Management succession planning. Manage rapid internal labour market movements
Maturity Encourage sufficient turnover to minimize lay-offs and provide new openings. Encourage mobility as reorganizations shift jobs around
Meet external market but consider internal equity effects. Establish formal compensation structures.
Control compensation
Mould effective management team through management development and organizational development Maintain labour peace and employee motivation and morale.
Labour/employee relations
Improve productivity and achieve flexibility in work rules. Negotiate job security and employment adjustment policies
This model is one attempt to establish the concept of the strategic response and strategic fit of SHRM.
U niversity of Sunderland
HR strategy Selection
Single product in one company Functional orientation using specialist job criteria Subjective and measured by personal contact Unsystematic, allocated perhaps paternalistically Largely through job experience. Usually a single function focus
Multiple products globally Functional and generalist orientation using systematic and objective criteria Objective, based on multiple organisational goals Based on multiple, planned goals. Some top management discretion Formal and systematic, across divisions and subsidiaries
Appraisal
Rewards
Development
ACTIVITY
Apply the above model to a company that is self-contained but has a strategy of growth by the acquisition of unrelated businesses. Briefly describe the HR functions in this type of organisation.
ACTIVITY FEEDBACK
In a company that is self-contained but has a strategy of growth by the acquisition of unrelated businesses, we would suggest the following:
Selection
This would be functionally oriented; but would vary from business to
U niversity of Sunderland
Appraisal
This would be impersonal and based on return on investment and profitability.
Rewards
Rewards would be formula-based, perhaps return on investment and profitability.
Development
This would be cross-functional but not cross-business.
The above models provide some indication of how a strategic approach to the management of people can help to:
Establish the links between SHRM and corporate strategy. Indicate the SHRM levers that can bring about effective
and appropriate employee behaviour.
10
U niversity of Sunderland
ACTIVITY
In the spaces below note down what you think an employee and an organisation might expect from or understand by the terms commitment, flexibility and quality. We have done the first one for you as a guide.
Employee expectations Commitment reward based upon contribution development opportunities job security and scope for career enhancement recognition of effort and achievement fairness of workload and treatment Flexibility
Organisational expectations establish trust beyond commitment accountability performance improvement shared organisational views.
Quality enhancement
U niversity of Sunderland
11
ACTIVITY FEEDBACK
You may have come up with some of the following:
Employee expectations Commitment reward based upon contribution development opportunities job security and scope for career enhancement recognition of effort and achievement fairness of workload and treatment Flexibility autonomy over their job scope for decision making variation in work control over location and time of work skills development
Organisational expectations establish trust beyond commitment accountability performance improvement shared organisational views.
contracting choices deciding where the organisations boundaries are, what should the size/scope of organisation be, i.e. how many levels of management, where and how control/co-ordination of work process should be skills offered
Quality enhancement
efficiency/economies continuous quality no restrictions best use of resources involvement measurement of success improved products and expertise
12
U niversity of Sunderland
The best practice view. The best fit view. The resource-based approach.
CASE STUDY
Read the following article which represents a contemporary view of the best practice model. Piece by Piece by David Guest and Angela Baron, (People Management 20 July 2000) Evidence showing that it pays to pursue progressive people management practices continues to mount. After US research findings to this effect came convincing UK evidence of the link, provided by a University of Sheffield study of manufacturing companies. Now, management perceptions of this link are being confirmed by initial evidence emerging from the first phase of research being carried out for the CIPD at Birkbeck College, London. The programme is exploring HR management, workplace reorganisation and performance as part of the ESRCs Future of Work programme. It has the advantages of being based on a large cross-section of companies of varying sizes in the UK, and of presenting the views of both the chief executives and those responsible for HR. The Birkbeck research comprises three phases. The first, a survey of 462 chief executives and 610 managers responsible for HR in private-sector
U niversity of Sunderland
13
organisations, aimed to obtain information about HR practices and business strategy. This part of the research, which has been completed and is described in this feature, obtained matched information from both the chief executive and the manager responsible for HR in 237 organisations. The second phase will link this information to the financial performance of the firms. Its results are expected at this years CIPD national conference. The third phase will consist of case studies looking at the jobs of the future and exploring how people management practices influence performance in the financial and pharmaceuticals sectors. In the initial survey of HR managers, we identified 18 key practices that were similar to those described by US academic Jeffrey Pfeffer and often associated with high-performance or high-commitment HRM (see below). The 18 Key practices Realistic job previews; Use of psychometric tests for selection; Well-developed induction training; Provision of extensive training for experienced employees; Regular appraisals; Regular feedback on performance from many sources; Individual performance-related pay; Profit-related bonuses; Flexible job descriptions; Multi-skilling; Presence of work-improvement teams; Presence of problem solving groups; Information provided on firms business plan; Information provided on the firms performance targets; No compulsory redundancies; Avoidance of voluntary redundancies; Commitment to single status; Harmonised holiday entitlement. The main findings Chief executives are waking up to the importance of good people management. Most chief executives acknowledge that there is a link between HR practices and business performance. But, despite asserting that people are their greatest asset, most businesses still fail to prioritise employee issues. Only 10 per cent of chief executives agree that people are top priority ahead of finance or marketing.
14
U niversity of Sunderland
Most businesses fail to make full use of modern HR practices. From a list of 18 key HR practices, only 1 per cent of firms use more than three-quarters, 25 per cent use more than half and 20 per cent use fewer than a quarter. Chief executives and personnel managers both give a low rating to the performance of the HR department and effectiveness of HR practices in their company. The areas whose performance is most highly rated are practices relating to the labour market and employment security, with job design and financial flexibility seen as only slightly effective. HR managers in firms using the most key HR practices have the most positive perceptions of employee attitudes and behaviour, which are linked to higher productivity and improved financial results. There is little agreement between chief executives and HR managers on a number of issues. These include the existence of an HR strategy. The researchers conclude that those who embrace HRM with enthusiasm can gain a competitive advantage. The researchers surveyed more than 1,000 chief executives and HR directors, with matched pairs of responses in 237 companies. The first key finding is that the take-up of these practices is very low. Only 1 per cent of respondents have more than three-quarters of the practices in place and are applying them to most employees. At the other extreme, 25 per cent of firms have fewer than a quarter of the practices in place. This matters, because most existing research indicates that the key to success is implementing a range of practices, rather than doing well in only one or two. The results confirm that managers believe there is a link between their use of HR practices and how the business performs. Importantly, most also agree that this link depends on the quality and commitment of the workers. In other words, the link is not straightforward. The results suggest that HR practices affect employee quality, commitment and flexibility characteristics that in turn are associated with higher productivity and improved products and services, which feed through to financial results. HR managers and chief executives do agree that investing in people to ensure their quality and commitment leads to better results. A feature of the Birkbeck study, sometimes neglected in other research, is the importance attached to the effectiveness of HR practices. Both chief executives and managers responsible for HR emphasise the importance both of having the right HR practices, and of applying them effectively. Two dimensions of effectiveness emerge from the Birkbeck study. The first is the effectiveness of practices in the core areas of personnel work, such as recruitment, training and job design.
U niversity of Sunderland
15
The second is the effectiveness of personnel processes and people, reflected in the ability to explain policies and practices, to respond to requests and to lead HR initiatives. While the effective implementation of these practices depends on both HR and non-HR managers, the effectiveness of processes depends far more on the HR department and personnel specialists. Worryingly, in both areas practices and processes are rated slightly or quite" effective by many respondents. The areas rated least effective are in taking HR initiatives forward and in managing financial flexibility. In contrast, areas rated most effective are practices associated with employee security and the labour market, and with maintaining up-to-date HR information. Those responsible for HR are at least as critical as their chief executives of their departments work in these areas. Yet they agree that the effectiveness of HR practices affects employee quality and commitment and, through this, performance. One of the main challenges in the research was the sometimes modest level of agreement between chief executives and HR managers about what practices were in place, and their effectiveness. In the matched sample, for instance, 63 per cent of chief executives, but only 41 per cent of HR managers, said that their organisation bench-marked financial performance, while 44 per cent and 35 per cent respectively said that they bench-marked labour productivity. These differences indicate either different definitions of benchmarking or a lack of internal communication. Also, chief executives and HR managers in the same companies sometimes give differing opinions on effectiveness. An HR manager might describe low numbers of HR practices and poor employee commitment, while the chief executive reports higher levels of employee commitment leading to better results. This suggests a lack of consensus among senior managers. Even so, chief executives, like HR managers, agree there is a link between effective HR practices and business performance. They also acknowledge that this link depends on the quality and commitment of the workforce, even though most firms lag behind in the adoption of relevant HR practices. The most intriguing question that arises from this first phase of the Birkbeck study is: if they believe this, why do top managers make few efforts to adopt more progressive HR practices? Why is there a gap between rhetoric and practice? One theory is that such practices do not fit in with the business strategy. But our research suggests that business strategy has little influence on HR practices, although it does affect aspects of performance. More specifically, a strategy that emphasises cost-cutting and efficiency is associated with poorer goods and services. Conversely, the results show that a quality-based strategy is associated with performance of a higher quality. This calls into question the amount of strategic choice that firms have, and the length of time for which a cost-based strategy can succeed. In assessing
U niversity of Sunderland
16
strategic priorities, most chief executives emphasise responsiveness to customers (rated crucial by 74 per cent) and quality of service (rated crucial by 59 per cent), rather than offering cheaper products and services (rated crucial by 10 per cent). Two possible explanations for the gap between rhetoric and practice can be found in the survey. One we have already noted: HR departments are not always seen as effective in leading HR projects and initiatives. It is one thing to know what should be done, but quite another to achieve it. The second is that, in practice, many chief executives pay mere lip service to the idea that people are their organisations most important assets. Only 10 per cent strongly agree that people issues are a top priority, ahead of financial or marketing matters. Despite their apparently positive beliefs, when push comes to shove, other issues still take priority. We need to learn more about what will persuade managers to change their behaviour. This report is based on managers accounts of employee attitudes and organisational performance. They are endorsed by the findings of the recent Workplace Employee Relations Survey, in which employees provided independent accounts of their attitudes and experiences. The analysis of performance that forms the second phase of our analysis will shed further light on the link between HR and financial performance. Encouragingly, the Birkbeck survey suggests that chief executives are increasingly acknowledging the importance of effective people management to business performance. But senior managers have much to learn about the importance of implementing a full range of HR practices. They should be helped in this respect by careful communication of the growing body of research, especially when it is convincingly tied to financial performance. Meanwhile, the generally low uptake of HR practices gives alert organisations an opportunity to steal a march on the competition and apply a comprehensive set of HR practices before everyone jumps on the bandwagon.
QUESTION:
From the article identify three positive and three problematic aspects of this view of HR practice.
17
Links to business performance are recognised. Common agreement on many issues by the Chief Executive
and HR Manager.
Generally, criticisms of the best practice view as a way of managing people have been constructed on the grounds of:
Cost of implementation. Tensions between the need for production and cost
minimisation on the one hand, and issues of flexibility, creativity and skills enhancement on the other.
18
U niversity of Sunderland
In the feedback to the last activity, we mentioned that HR is driven by external factors. This points us toward the next model of SHRM, the best fit view.
Integrate into the strategic plans of the organisation. Provide horizontal or vertical integration of the key
policy areas. How far organisational objectives will be met is dependent on:
The HR strategy and business strategy at a second level. The internal coherence of the policy.
For example, success may depend upon individual performance measures and appraisal not being undermined by team-based structures and collective reward structures, whereas best practice determines a set of policies such as high investment, development and communications strategies. Best fit allows organisations to determine whether a hard or a soft approach needs to be taken given the prevailing circumstances. A hard view might include outsourcing, enhanced productivity, and emphasis on tighter contracting. A soft view relies on involvement, partnership and communication and sharing.
19
Environmental triggers
Strategic objectives
Structural change
Cultural change
Job profiling
Individual behaviour
HR policy response: recruitment and selection, assessment and appraisal, performance management, training and development. Internal integration: employment relations, health and safety, etc.
It can be illustrated as shown in Figure 1.1, with the first three rows indicating strategic integration, the rest internal integration: These reciprocal planning and process issues can be illustrated in the following model adapted from Buller (1988). At one level of fit the business strategy of the organisation can inform HR strategy. This is a one-way flow, from a mainly operational model.
informs
Business strategy
Figure 1.2: Business strategy informs HR strategy
HR strategy
20
U niversity of Sunderland
Business strategy
HR strategy
A two-way flow means that there is dialogue between business and HR strategy, but not necessarily an inter-dependent relationship. A fully integrated model can be represented like this:
Business strategy
HR strategy
Here there is a top-down/bottom-up strategy formulation. HR is a full partner in the planning process. The presence of linked planning and policy formulation provides an opportunity for HR departments to operate at the strategic level and address the criticisms of their lack of strategic and business focus. We will return to this point later in the unit.
Resource-based approach
Our third model of SHRM is a bottom-up view. There are significant problems with the principles of the two previous models:
They represent rational and linear approaches to strategy. The emphasis on the fit of strategy, structure and HR
policies does not focus on the distinctive resource capabilities of individuals within the organisation.
21
first at the organisation and its potential, and develops ways to exploit or enhance the available resources. In a resource-based model, the SHRM role becomes one of creating systems and procedures that focus not on external relationships but on how staff and their abilities are used. The organisation is seen as a bundle of tangible and intangible resources based around the knowledge of products, services offered and the way that they are organised. This has been called the ...collective learning in the organisation...the core competencies... (Prahalad and Hammond 1990, p.82), the co-ordination of activities and integration of various skills, technologies and business processes to provide competitive advantage. Core competencies can include many things:
Aspects of change management. Capability of staff. Strategic development capability. Speed of response, and so on.
The resource-based model recognises that many aspects of capability can be formally defined in skill terms and developed accordingly. However, the truly distinctive aspects are often hard to define and are formed through informal processes of learning in the workplace. The challenge for SHRM is to find ways to support the process of learning, knowledge and skill development alongside more formal practices which do not confine or destroy bottom up learning. If these processes of learning and development of capabilities and experience are less visible, it can be argued that they are difficult to imitate by competitors and, therefore, constitute a resource mobility barrier (RMB). The resource-based approach allows the integration of the intangible aspects of work alongside other more visible areas such as patents, trademarks and other intellectual property. The value of the firm is not the traditional accountancy view of assets but includes some assessment of the competence value and potential in the medium and longer term. Storey (1995, p.4-5) suggest that sustained competitive advantage derives from internal resources, which must:
Add value. Be unique or rare. Be difficult to imitate. Be non-substitutable, for example, by technology.
Mueller (1998) develops the resource-based view and offers what he calls an evolutionary view founded on a number of key propositions about the creation of strategic assets or capabilities:
U niversity of Sunderland
22
Proposition 1:
Assets may only be developed in slow, incremental and uncertain ways, not in any linear or planned way. They often grow from the social structure of the organisation, in patterns of communication, learning, information exchange and so on.
Proposition 2:
Assets require broad-based commitment over a lengthy period, not a single initiative. At the heart of this is continuous improvement, and this is more about process than strategic policy intentions.
Proposition 3:
This stresses the importance of routinising skill formation activities. Formal and informal learning activities must be effectively captured by the organisation. There is a need to activate knowledge and develop skill through specific important activities, explicitly linked to work, the intention to learn and a culture of learning and knowledge acquisition and dissemination.
Proposition 4:
This concerns the development of cultures that will allow potential to be used and developed. Challenge rather than conformity, is encouraged as a strategic end, while balancing the need to store organisational value.
Proposition 5:
Organisations need to build barriers to imitation and loss of their resources, both in patents, copyright and so on, and their people resources. They will do so only by considering resources not in isolation but as integrated assets that sustain each other. An example is the pharmaceutical company that can develop the interdependency of several strategic assets:
The value of patents. Research and development capabilities. Reputation. Employee skill and commitment. Attractiveness of the organisation for employee retention
and for future employees.
U niversity of Sunderland
23
ACTIVITY
With the above propositions in mind, list at least two examples of strategic assets of the following organisations: 1. 2. 3. An airline A computer company A carrier company
ACTIVITY FEEDBACK
You may have thought of some of the following: 1. An airline
- inventive capability - product bundles - speed of design to production - customer systems evaluation
3. A carrier company
24
U niversity of Sunderland
This view demonstrates the interaction and interdependence of human and other institutional assets. We can also add to any of these types of company generic aspects: development, change, learning, adaptability and so on.
ACTIVITY
In the table below, note down your answers to the questions in the first column, as applied to the three approaches.
Best practice Does the model emphasise performance? Does the model emphasise work organisation? Does the model analyse skills and behaviour? What is the models starting point or trigger? Is the models response policy intervention or facilitation of activities? Yes
Resource-based Yes
U niversity of Sunderland
25
ACTIVITY FEEDBACK
Best practice Does the model emphasise performance? Does the model emphasise work organisation? Does the model analyse skills and behaviour? What is the models starting point or trigger? Is the models response policy intervention or facilitation of activities? Yes Yes Yes The business environment Policy intervention
Best fit Yes Yes Yes The business environment Policy intervention
CASE STUDY
Read the following article which describes a traditional managerial approach to HRM in a stable or mature product market undergoing change. Press for Success by Steve Crabb and Rebecca Johnson, (People Management, November 2000 pp. 29-36). Pindar Set, a small, family-owned Yorkshire business, has been typesetting the Yellow Pages directories for 18 years. Until May 1995, the firm was a one-customer, one-site business, enjoying a highly profitable 10-year contract to design and set advertisements for Yellow Pages customers. The arrangement was very stable, the process and the relationship with Yellow Pages had not changed significantly for many years, and the structure and management of the business was, as the company itself admits, decidedly traditional. All that was turned upside down when Yellow Pages indicated that it wanted to move to a shorter-term contract with tighter margins and greater responsiveness to customer demand. And when your sole contractor decides it is time to change the business, the choice is to respond or die. Pindar Set chose to respond in style. It was asked for new turnaround times, a new emphasis on quality and customer service, and was offered three of Yellow Pages own design studios in Birmingham, Bristol and Manchester to incorporate into its business. It was impossible to achieve the targets and integrate the new studios without a
U niversity of Sunderland
26
radical revision of operations. The way it has set about this transformation has earned it this years CIPD People Management Award. Pindar Set beat off strong competition for the award because of the way it put people management at the heart of its strategy for turning around the business. In doing this, it has not only succeeded in meeting targets agreed with Yellow Pages, but has grown the business from 99 employees in 1994-95 to 235 today, and from a turnover of just below 9 million in 1994-95 to more than 12 million in 1999. The production cost per advert has also dropped by almost half. According to chief executive Richard Lumby, Pindar Set was delighted with the challenge set by Yellow Pages because it necessitated an injection of creativity into the business and led to a more innovative and flexible relationship with its customer. Since 1995 we have been evolving a different relationship and a new wide-ranging involvement with their business, Lumby says. This, he explains, has enabled the exchange to become a two-way process, with Pindar Set more closely involved with Yellow Pages own customers and able to contribute ideas to the process as never before. Lumby even proposed moving to annual, rolling contracts, which was agreed. Targets, results and directions are now discussed between the two companies on a yearly basis. The firm has also broadened the range of services offered to BT, and Yellow Pages' new web-design business in Bristol, Pindar Net developed from scratch four years ago to enable it to respond better to advertisers needs. The new contract transferred 80 staff and three artwork origination studios in Birmingham, Manchester and Bristol from Yellow Pages to Pindar Set, nearly doubling the size of the workforce at the time. The move made sense, as their design skills fitted well with Pindar Sets production role and enabled the whole advertisement creation process to come together in one company. Lumby, together with HR director Bernadette Doyle and Gary Weston, operations director at the time, put together the necessary change programme to manage the three new sites and address the sharply reduced margins they now had to work to. As a result of the transfer, Pindar Set had a mixture of working arrangements with some staff working in large departments those based in the original plant in Scarborough where each person handled only a part of the production process, while others from the new studios worked in smaller teams with a broader range of skills. The management team had to deal with the insecurities of the new workforce as well as trying to establish mutual best practices and merge the two cultures. The company entered into a period of self-examination, assessing what it was doing and how, and what needed to change. One of the new requirements was that it turn around new advertisement production in a space of five days down from an average of 25 days previously.
U niversity of Sunderland
27
We asked: Are we organised the best way? Are people skilled and deployed in the right way and is it right that one person does only one part of a task? What will deliver our service goals?; Doyle says. The result was that, from 1997, the company set about training all its unskilled staff to do skilled jobs, phasing out unskilled text-inputting jobs completely. All the unskilled workers upgraded as planned, despite some initial wariness of the new accreditation process that was established to ensure consistent standards across the business. Remedial training was provided where necessary. Employees were also trained to follow a job through from start to finish, reducing the internal pipeline from 80 processes to one. And team-working was introduced in Scarborough to bring it in line with the other three sites. This meant creating new team-leader roles. Previously senior operators had supervised work, but had still retained hands-on tasks. The company also recognised it needed a pool of new team leaders to respond to future growth. Team leaders were given more responsibility for financial, operations and people management than before. They now run their sites as semi-autonomous businesses, with their own profit and loss accounts. This also required training and a team-leader programme was introduced (see Investing for Success below). In the first wave of training, which began in 1998, eight existing team leaders and five newly appointed people undertook 30 days training over 18 months, at a cost of around 3,000 a head. Since then, three-quarters of the people who have been through the programme have been appointed team leaders, and Pindar Sets 21 team leaders are now regarded as the firms key employees. As a result, productivity, quality, process flow, flexibility and job satisfaction have all improved markedly. The second group of initiatives related to twilight working. All four sites had been operating institutionalised overtime for a number of years, which couldnt continue. In 1997 Pindar Set experimented with a new shift working arrangement between 4.30pm and 1.00am. To start with, 18 new recruits were hired on a temporary basis at two sites, but the firm now has six twilight shifts across all four sites, with 60 people working on permanent contracts. These shifts extended the production window from eight hours to 16, made better use of premises and equipment and helped to bring fresh blood into the company the twilight workers became the firms most productive teams. According to Doyle, this is because there are fewer interruptions in the evenings. The change has also cut overtime costs by two-thirds and increased Pindar Sets availability to customers Finally, the company introduced a flexible working scheme to help cope with the uneven flow of work from customers. We get peaks and troughs, says Manchester operations manager Andy Height. From 2000 ads one week to only 600 the next. With one weeks notice (and often much less than that, according to Lumby), employees agree the hours to be worked in the following week, with built-in safeguards so that they can balance their work and home lives.
U niversity of Sunderland
28
With flexible working we can take advantage of a pool of workers. With traditional overtime we couldnt manage peoples response as we can now, Height says. The flexible work scheme is based on a form of annualised hours, with employees expected to work 1,680 hours a year and both daylight and twilight shifts annualised, but the scheme doesnt run to a standard format. Ive never seen anything like our approach to annualised hours, Doyle claims. Other firms that use it can predict shifts well in advance. We needed a concept that would work on a much more flexible basis. So the flexibility is week on week, and that makes it unique. It also works well with our five-day turnaround. The company also agreed with its staff that they would never be asked to work more than 45 hours or less than 25 hours a week, or more than five days or less than four days, unless they wanted to do otherwise. Whats more, staff who finish their annual hours can choose to take the rest of the year as holiday, or can volunteer to do additional hours paid at time and a half, if the need is there. On the other hand, if they are asked to work fewer than the set hours in a year, the company still pays the full rate. Its a win-win situation, Height says. Before introducing the scheme, the company consulted its employees directly, as well as through staff and union representatives. To begin with, annualised hours were applied as a 12-month trial, for volunteers only. Once the trial had been successfully completed in October 1998, the company extended it on a rolling 12-month timetable still on a purely voluntary basis, although 85 per cent of the workforce in Manchester, Birmingham and Bristol opted to take part. Only four people decided not to continue working flexibly after participating in the trial. Additionally, as a thank-you gesture, Pindar Set agreed to award a flexibility bonus of a minimum of 500 to all staff who volunteer for or have been recruited on to flexible contracts. Employees can also work towards an attendance bonus that pays staff a maximum of 150 not to be off sick a scheme that people say they appreciate, particularly as they can often arrange their hours around any short-term problems to increase their chances of getting the additional payment. The scheme has, on the whole, been a great success with staff. Most recognised the common sense behind the need to change and to improve productivity and quality. They had worked for the company for many years and cared about the direction the business was going in. In addition, most welcomed the opportunity for greater flexibility. They could see there were significant benefits from a company and a personal perspective, Height says. Staff who have families find it a great benefit. And those on twilight shifts are often attracted to the job because they study, or play golf, or have some other activity they prefer to do in the day.
U niversity of Sunderland
29
Ian Maclachlan, an artist and trainee team leader, agrees: People are happier with the work they are doing and they have more control over their jobs, he says. There was a dead mans shoes syndrome before, but now the company is growing you can get on the ladder to become a manager a lot earlier if you want to. One part of the change programme, however, encountered a significant obstacle: the company was not able to implement flexible working at its original base in Scarborough. Unlike the studios transferred from Yellow Pages, where the staff see themselves as primarily working in graphic design, the Scarborough workforce has a traditional printing industry culture with a strong union presence. The employees there, who were used to shift and overtime working, couldnt see how they could benefit from flexible working, and were uncomfortable with the idea of individuals volunteering to join the scheme, rather than terms and conditions being arranged collectively. Furthermore, the main print union is generally opposed to annualised-hours schemes, and there was a risk of an industrial relations problem if the scheme had been pursued. Faced with these objections, the company decided to omit its existing employees at Scarborough from the scheme. We came to the conclusion that our persuasion wasnt helping, Doyle says. It was upsetting them and wasnt worth pursuing. We stressed that no one would be penalised for failing to volunteer. In fact, it is useful to have some people working core hours, so we could work around it and, provided we didnt force people into it they seemed content. In all other respects, though, the employees at Scarborough have embraced the change programme, including teamworking, multi-skilling and the team-leader initiative, and four new teams have since joined at the site, all working flexibly. The change programme has delivered real business benefits for Pindar Set. Profit before tax plummeted from 3.6 million in 1994-95, the last year of the old Yellow Pages contract, to 1.4 million the following year and 300,000 the year after that. Last year, it had climbed back to more than 2 million. The company has been able to develop new services such as web design work, improved service levels and higher productivity the number of advertisements produced per hour has increased from 1.2 to 1.9. Customer complaints have fallen from a high of 123 a month in 1996 to a current average of 10, labour costs have been controlled and absence rates are low (averaging 2 per cent). No one thing would have worked on its own, Height says. It was everything coming together at the same time. Its created a real buzz.
30
U niversity of Sunderland
As chief executive Lumby puts it: Weve now got motivated staff who are hungry for development and bursting with bright ideas. Investing in success Pindar Set was clear that it wanted real development for its team leaders to take on key roles in the business. Rather than one-off management courses, HR director Bernadette Doyle, operations director Gary Weston and chief executive Richard Lumby devised a development programme that would take place over a period of about 18 months, involving 30 days training for each team leader at a cost of 3,000 per person. This enabled people to put learning into practice and to have responsibilities handed over gradually, acting as deputies to existing supervisors while taking part in the training. It was a big investment for a small company, but it has paid off, they believe, in the results they have achieved. The course is run as a series of modules and incorporates a wide variety of skills, including personal stress management and dealing with stress in the organisation, motivation, team-building, communication, negotiation, assertiveness, presentation skills, customer care, production and financial planning, staff appraisals, discipline and people management skills, recruitment, health and safety responsibilities, problem-solving and managing change. The programme uses Coveys Seven habits of highly effective people for personal development, as well as covering all the legal and procedural aspects of company business. Now I know that staff and team leaders dont need constant supervision, says Manchester operations manager Andy Height. I sometimes think I could disappear for a year and still find it running smoothly. The team leaders are very able people who can deal with all the day-to-day business of the company. Business background History: Established in 1980. HQ based in Scarborough with divisions in Bristol, Manchester and Birmingham. Employees: 99 in 1994-95, 235 today
1994-95 Turnover: Profit (before tax): Overtime costs: 8,858,010 3,669,467 460,882
Judging Panels Comments The judges said that this was an excellent example of a smaller scale company thinking constructively in a tough industry where it can be hard to implement change.
U niversity of Sunderland
31
It was a model of introducing flexibility in a realistic way in a difficult environment to create work, wealth and opportunity. Pindar Set was extremely honest about the obstacles it faced. It had avoided the imposition of change from above and worked with the grain in terms of trade union relations and employees concerns. Operating successfully in a highly competitive industry with strong traditions of a rigidly demarcated workforce, it had reduced the number of processes from 80 to one by introducing multi-tasking. One judge described it as an SME with a sensible HR strategy succeeding in a traditional industry that is coming to terms with global transformation in the sector. The company was also commended for having an unusually high proportion of young people in the workforce in an industry with an ageing workforce. Comments compiled by Carol Glover
QUESTION:
Summarise the extent to which this organisation has aimed for SHRM orientation using the following headings.
- business-driven production - what will deliver our service goals as a key driver - wider job responsibilities require attitude change
U niversity of Sunderland
32
- developing clear employee view of organisational goals - secure culture - faster response to market - developing staff, new ideas, training.
Strategic aspects
- faster response.
Line management
- new basis of staff selection - pay structures - flexible job content and organisational structures - flexible attitudes and culture - fundamental role of learning and development - wider ranging HR changes to support business objectives - increased flow of information about jobs, targets and organisational
goals.
U niversity of Sunderland
33
ACTIVITY
Write down whether you think that this managerial conception of SHRM can embrace any or all of the following factors:
Trade union or employee interests and voices. Employees as business stakeholders. Diversity and conflict. Creative tension and challenge to establish ways of operating. Ethics and social responsibility.
Summary
This unit has proposed a number of reasons why organisations need to concentrate more on achieving effectiveness in the management of their employees. It has considered a variety of responses. Some of these can be described as strategic responses (integrated), others appear more isolated and tactical. We have spent some time looking at different interpretations of what SHRM is and attempted to evaluate the strengths of the models of best practice, best fit and the resource-based approach. The latter is an emerging trend, with a focus on assets and capabilities. This delves deep into what creates competitive advantage, and it is not rational planning, professional HR policies alone or a focus on satisfying employee needs. Rather it is to form interdependent organisational assets: knowledge, learning, capability, experience, and skill continuity.
34
U niversity of Sunderland
REVIEW ACTIVITY
Question 1 What are the core challenges facing HR specialists in developing an HR strategy? Question 2 Give three examples of how different business strategies might affect human resource policies. Question 3 What are the suggested benefits of adopting a SHRM approach under the best practice model? Question 4 Define the different levels of integration required to meet the best fit model of SHRM. Question 5 What aspects of a companys assets underpin the resource-based approach according to Storey (1995) and Mueller (1998)?
35
Emphasis on the professionalism of personnel practice. Involvement and empowerment of staff. Advanced management skills. Ethical HR practice. Emphasis on organisational flexibility, quality and integration of
activities. Answer 4 The levels of integration required to meet the best fit model of SHRM, according to Buller (1988) are:
36
Proposition 5 is that organisations need to build barriers to imitation and loss of their resources, both in patents, copyright, and so on, and their people resources.
References
The Strategic Managing of Human Resources, edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, 2004 (Key text for this module) Becker and Gerhart (1996) The Impact of Human Resource Management on Organisational Performance: perspectives, progress and prospects, Academy of Management Journal 39(4) pp.779-801. Buller P. (1988) Successful partnerships: HR and strategic planning at eight top firms Organisational Dynamics, Austen pp. 27-93. Fombrun C., Tichy, N.M. and Devanna, M.A. (1984) Strategic Human Resource Management, New York. John Wiley & Sons. Guest D. (1992) Employee Commitment and Control in Hartley J. & Stephenson G. (eds) Employment Relations, Oxford, Blackwell pp.111-135. Huselid M. (1995) The impact of human resource management and practices on turnover, productivity and corporate financial performance, Academy of Management Journal 38(3) pp. 635-72. Kochan and Barocci (1985.) Human Resource Management and Industrial Relations, Boston MA, Little Brown. Mabey C. and Lawton L. (1998) Managing Human Resources Unit 1: Setting the Agenda, Open University Business School. Mueller F. (1998) Human resources as strategic assets: an evolutionary based theory in Mabey C., Salaman G. and Storey J. (eds) Strategic Human Resource Management, Sage/OU. Prahalad C.V. and Hammond G. (1990) The core competences of the corporation, Harvard Business Review, May/June pp. 79-91 Storey J. (1992). Developments in the Management of Human Resources, Oxford, Blackwell. Storey J. (1995) (ed) Human Resource Management: a critical text, London Routledge.
U niversity of Sunderland
37
Further reading
Beardwell I. and Holden L. (1997) Human Resource Management-a contemporary perspective, 2nd ed., London. Pitman. Bratton J. and Gold J. (1999) Human Resource Management Theory and Practice, 2nd ed. Basingstoke. Macmillan Business.
38
U niversity of Sunderland
Unit 2
Strategic HR Departments
LEARNING OUTCOMES
Following the completion of this unit you should be able to:
Explain the impact of change on the HR department function. Critically evaluate the challenges faced by HR specialists. Critically evaluate emerging trends in HR work. Assess the role of service centre organisation for HR functions.
Introduction
In Unit 1 we considered the concept of strategy in the management of human resources. We now look at the role of the HR department in supporting a strategic approach. We have referred to the historical debate surrounding the development of the Personnel/HR function and how the concept of HRM may provide a new emphasis to the functional activity. In this unit we review the current options and the thinking about what the HR function should do and how it should operate.
READING ACTIVITY
Please read Chapter 1 of your key text, The Strategic Managing of Human Resources, Edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, which covers some of the subjects of this unit.
U niversity of Sunderland
39
ACTIVITY
Use your background knowledge of HRM to identify some of the reasons for uncertainty faced by HR personnel. Try to note down at least three reasons
ACTIVITY FEEDBACK
You might have noted some of the following:
40
U niversity of Sunderland
The lack of business awareness on the part of personnel specialists. The skills of people entering the profession. The welfare tradition questions managerial credentials it is
employee-centred. HR issues always seem to be of second and third order importance. Its soft functions are seen as less important than the hard function of finance, operations, research, commerce and so on. Everybody can claim to be a personnel manager if they have expertise in managing people.
So the question has always been what does or what should a HR department do? This question has been debated exhaustively. In the 1980s the notion of HRM, Human Resource Management, became prominent. Originally an American idea, it was based around some guiding principles from best practice models:
Tasks, where the key is best practice. Take-up of integrated HR practices (the ability to manage
beliefs and assumptions, the strategic importance attached to HR, line manager involvement).
U niversity of Sunderland
41
The Chartered Institute for Personnel and Development would suggest that sophisticated practice will improve the working environment and at the same time provide prospects for improved business performance. Others fear that the emphasis on management will work against the need to identify and develop commitment and potential, or may even represent a betrayal of employees (Hart, 1993). The UK Trade Union Council (TUC) mounted a significant challenge to the concept of HRM in 1999, entitled Human resource management: a trade union response. The TUC were particularly critical of the following aspects of HRM:
Work organisation based upon teams. Quality circles that excluded trade union control. The movement of pay systems away from collective
bargaining to individual (exploitative) performance related pay systems. The Union movement still maintains the need for independent representation to balance power in the contractual relationship between employees and the organisation. Meanwhile, HR specialists have struggled with the following dilemmas inherent in the HRM approach:
To do so puts at risk the relationship with employees. To do so also risks ceding control back to line managers
and thus diluting effective professional, co-ordinated and integrated policy making. These then are the dilemmas that we address in looking at the emerging role for HR departments in the twenty first century. It seems clear that we need to revisit the role of HR personnel on revised terms if HRM is not an adequate model. Some key issues that need to be reconciled are the need:
To incorporate professional HR/personnel practice. To allow for diversity of approach, balancing stakeholder
needs.
For acceptance of stakeholder interest by management. To facilitate employee commitment and knowledge
employees need to develop their potential and commitment.
42
U niversity of Sunderland
To address issues of employee flexibility and innovation. To raise the profile of HR management. To upgrade the skill of HR managers. To market HR functions within organisations.
HR personnel face a mixture of organisational challenges, and challenges to their own function in itself. Whilst HR needs to raise its profile, facilitating change in the organisation, it must retain its specialist skills and be viewed as clearly adding value to the organisation. From the organisational perspective, HR policy must address organisational needs but at the same time attempt to integrate employee and other stakeholder interests. These various pulls may be in conflict with each other.
ACTIVITY
What activities might you undertake in order to market the HRM function within your organisation? Think of the needs that we have just described and try to note down at least two things that you could do.
ACTIVITY FEEDBACK
Foot & Hook (1996) suggest the following activities: 1. Conduct a customer survey to assess customer (both internal and external) requirements and evaluate the impact of HR policies. This becomes the basis of creating business-led service level agreements. Be proactive in putting forward formal solutions to business problems. Emphasise the benefits of HR and create a basis for measuring and evaluating the outcome by making HR issues central to the agenda at Board level. Use briefings, communications, learning and development activities and so on. Study the level of diagnostic activities performed by HR on skills, attitudes and behaviours, and form a HR consultancy perspective; be an internal change agent and an external investigator of appropriate services.
2. 3.
4.
U niversity of Sunderland
43
HRM in crisis?
This was the title given by Sparrow & Marchington (1998) in their foreword to a series of papers in 1996. They suggested that HR professionals needed increased understanding of three concepts if their contribution to organisational change was to be of lasting significance in the face of pressures to become more business-orientated and strategic:
New organisational forms and psychological contracts. The need for partnership in the employment
relationships.
44
Confidence
Lack of confidence may stem from a series of criticisms of HR staff for being:
Reactive rather than proactive. Not strategic. Not business focused. Too employee focused, working with unions.
Identity
For many, the HRM identity of personnel is simply a name change, and the substance of personnel activities has not changed.
Direction
This is significant. The degree of HR involvement in strategic policy making as opposed to implementation is problematic. Some argue that an organisations HR capability is too important to be left to HR specialists, suggesting that all managers must be involved. In this
U niversity of Sunderland
45
situation, personnel acts as a technical and independent advisor to policy-making. Torrington (1998) concludes that the prospects for the strategic development of HR functions are threefold:
CASE STUDY
Read the rather long but useful article that follows. But before you start reading, scan the case study questions (that appear after the article) and think about the questions as you read the article. Yes, Personnel does make a Difference by David Guest and Kim Hoque, (People Management, November 1999)
46
U niversity of Sunderland
Big hat, no cattle was never a very apt description of personnel managers. Most are too modest to wear big hats, and they tend not to be flamboyant. The personnel management profession has sometimes displayed an alarming lack of collective self-confidence. When David Metcalf and his team from LSE1 prodded and provoked with a claim that the presence of a personnel manager is associated with a poorer employee relations climate, they touched a nerve with a predictable response. But why does the profession still feel defensive about the need to justify itself? Most personnel managers at an individual level feel confident that they are making a useful contribution. But the Metcalf team opened up an old sore how do we know personnel managers make a real contribution? And does the evidence support the kind of challenge thrown out by the Metcalf team? We were asked by the IPD to conduct an independent review of the existing research material and extend the analysis of the third Workplace Industrial Relations survey. Our findings are summarised in this article. Before reviewing the research, we need to explore why the effectiveness of personnel management gives rise to so much anxious navel gazing. Explanations can be found in the history of the profession, in the national culture and, more especially, in the distinctive features of the personnel role. Personnel management grew as a profession partly in response to the increasing complexity of larger organisations and partly in response to the need to tackle difficult problems. As the trend towards less bureaucratic organisations gathers pace and the problems of industrial relations and selection disappear or change, organisations may question why they need a personnel department. Ambivalence towards personnel issues has sometimes been reinforced by a national culture that gives primacy to financial and relatively short-term issues over the human side of enterprise. It is often considered, rightly or wrongly, that personnel represents the soft side of life at work and, as such, does not need to be taken as seriously as some other activities. One possible indication of this is that it is not considered a suitable career route for those who graduate from the more highly regarded MBA programmes. The contribution of personnel specialists has always been hard to identify because they work in partnership with line managers and succeed by exercising influence. In many cases, line managers take personnel decisions, perhaps within a framework established by the personnel department. Therefore, although we may be able to identify the impact of personnel decisions, we cannot always be sure whether the personnel specialists contributed towards them. Furthermore, we know that when things go well, people are happy to take the credit, but when they go wrong, it is easier to blame someone else. Where the responsibility for personnel decisions is ambiguous, it can be convenient to blame the personnel specialist. If personnel managers get results by exercising influence, this places some emphasis on their influencing skills. One of the consistent findings of surveys is that the influence of the personnel department is growing. For example in the
U niversity of Sunderland
47
1990 Workplace Survey2, even among finance managers 60 per cent felt that the influence of the personnel department had increased and only 8 per cent felt it had decreased. What is not quite clear is whether this reflects the greater competence and skills of personnel specialists or a growing realisation of the importance of human resources for business success. One indication that is might be the latter is that evidence of the steadily increasing influence of personnel has been reported for so many years that if we were to take it literally, personnel departments would now be dominating organisations. Clearly there is some way to go before this is the case. By exerting influence, personnel managers help to shape the framework of personnel policy and practice; line managers will generally take day-to-day personnel decisions, sometimes referring queries and problems back to the personnel department. It therefore follows that any attempt to seek a direct link between the presence of a personnel specialist and measures of performance such as employee relations climate, labour turnover or productivity will be a fruitless exercise. Other factors and other people are going to explain most of the results. It is more useful to take a realistic view of what the personnel department can do. We know that it can help to formulate policy and practice. To take a simple example, personnel departments can set up a sound appraisal system, develop the documentation and procedures, and provide training. They can monitor the system. But the actual appraisals must be completed by line managers and the impact of the system ultimately depends on their willingness to do this seriously and competently. Personnel departments should have a direct influence on the appraisal system, but only an indirect influence on its impact. We will follow this model in our review of evidence about the impact of personnel management on performance. But first we return briefly to the issues raised by the Metcalf team. The team showed a negative link between personnel managers and the employee relations climate. However, different results emerge depending on how you define personnel managers and how you measure employee relations climate. When we take a definition of the personnel manager based on time spent on personnel activities, professional qualifications, the presence of support staff and the presence at board level of a specialist personnel director rather than someone responsible for personnel issues, and also adopt a more cautious definition of employee relations climate, then the negative links mostly disappear. In their place we have mainly positive associations, even if they are generally not significant. It is worth remembering that the survey found a positive employee relations climate in nearly 90 per cent of work-places and a poor climate in less than 2 per cent. Using our model, we do not expect a direct link between personnel management and employee relations climate. Instead, we expect a link between the presence of personnel specialists and the existence of a range of sound personnel policies and practices. We will also expect a relationship between the existence of these polices and practices, and performance.
U niversity of Sunderland
48
Although responsibility for this second link rests as much with line managers as with personnel specialists, it can work only if the personnel specialists have ensured the policies and practices are in place. Even then, the link will not be straightforward. Personnel is part of a larger system which will impose constraints arising both outside the workplace e.g. government-imposed limits to pay rises and inside. When you start to look at the research into the link between personnel management, and policy and practice, the first thing that strikes you is that there is very little, and much of what there is focuses on the company level. One of the best recent studies is the second Company Level Industrial Relations Survey3 which emphasises the important role of a personnel director. In the 30 per cent of cases where there was a personnel director, the personnel department was much more involved in the formulation of human resource policy. Foreign-owned companies were more likely to have a personnel director. Head office HR strategy was very much a child of corporate business strategy one of the constraints highlighted above. In most cases there was no clear link between business strategy and HR strategy. The findings of the Company Level survey are reinforced in a study of 30 successful companies reported by Tyson, Witcher and Doherty4. They found personnel strategy was strongly influenced by market conditions and that personnel departments did not promote any human resource strategy based on a distinctive model. Purcell and Ahlstrand5, in their study of multidivisional organisations, reach a similar conclusion, suggesting that: What they are allowed to do limits their role in the management of change. In the process, their role in strategy formulation, while often dreamed of, remained marginal. Personnel managers are caught in the middle. They know the theory, perhaps, but have not the power to enact it. Not everyone shares this pessimistic view, The Cranfield/Price Waterhouse International study of personnel management found that 43 per cent of UK personnel directors claimed to be involved in the formulation of corporate strategy from the outset6. A study of personnel departments in Scotland reinforces this - Kelly and Gennard found that personnel directors were influential in the boardroom but achieved this by focusing on the bottom line rather than by promoting distinctive approaches to HR management7. However, we must be cautious in accepting the views of personnel directors about their influence without some corroboration. One study that examined the impact of personnel departments looked at 303 NHS Trusts and Units in England, Wales and Northern Ireland8, It found no relationship between any characteristics of the personnel department and either policies or ratings of effectiveness. However, the presence of a personnel director at board level was associated with greater personnel influence over major organisational decisions which, in turn, predicted effectiveness. All these studies indicate that there is little evidence that personnel specialists make much difference, They have insufficient influence to have a major impact
U niversity of Sunderland
49
on the direction of human resource management. The exception to this is the presence of a personnel director at board level, which has a consistently positive impact. The final and most extensive source of evidence about personnel influence on personnel policy and practice is the third Workplace Industrial Relations survey, the source of material for the Metcalf analysis. Since it is a carefully selected and weighted sample of about 2000 workplaces, it is an authoritative source. One of the first things to note is that the survey revealed a small increase in the proportion of establishments with a personnel manager, more particularly in organisations with 100 to 1000 employees, but it also detected a small decline in the proportion of organisations with a specialist personnel director (down from 43 per cent in 1984 to 40 per cent in 1990). Our analysis looked for any significant link between personnel management characteristics and the presence of a range of what are generally seen as positive practices associated with employee involvement and single status. Some typical results are shown in the table (see below).
Per sonnel funct ions and char act er ist ics: all est ablishment s
Personnel characteristics Specialist manager in workplace Director on board - main job concerns personnel/ HR issues More than 50%of time spent on personnel issues Formal personnel management qualification Support staff All of the above are present Appraisal Employee involvement boosted Problem solving/ QCs Team briefing Merit pay used for some staff Job evaluation Sick pay available to all Pension available to all
+ + + +
+ + + + -
+ + + +
+ + + + +
+ + + -
+ + + + + +
+ + + + +
+ + + + +
Source:WIRS 3
The analysis controls for type of workplace, and workforce characteristics, region and type of industry: Significant at the 1%level Significant at the 5%level Significant at the 10%level
We have controlled for a number of things like size of establishment, type of industry and trade union presence, to make sure these kind of factors do not influence the results. The positive items show where there is an association between aspects of personnel management and the existence of certain
50
U niversity of Sunderland
practices. (The significance levels refer to the statistical measure of confidence in the result.) The results clearly show that the presence of specialist personnel management, reflected in the presence of a professionally-qualified personnel manager who spends more than half their time on personnel issues, has support staff and has a specialist director on the board, is likely to result in more of these practices being in place. On this basis it does seem that in British workplaces where there is a professional personnel presence, there are also better personnel practices. But are these practices resulting in superior performance? If so, then we can be confident personnel departments are making a significant contribution. Again, there are few studies that carefully examine the link between policy and practice and outcomes. There are many that look at specific practices such as employee involvement and performance-related pay and conclude that the link to performance is poor. What we need are studies looking at a range of practices. However, we can start at the more strategic level. The Tyson, Witcher and Doherty study of 30 successful companies failed to find any distinctive approach to human resource management; but it did find that all these financially successful companies, in their different ways, took human resource issues seriously. This was manifested in carefully thought out policies on management development and on employee relations, and in the involvement of employees in managing change. However, this is a long way from showing that concern for these issues was a cause of company success. Storey, in a series of case studies, also showed that companies were paying more attention to HRM issues, but his evidence led him to be sceptical about the ability of management to implement them effectively and therefore about any impact on performance9. The NHS study mentioned earlier failed to find any link between personnel policies and any measure of performance. However, it did find a link between ratings of effectiveness and the extent to which polices were formally endorsed at board level, the influence of personnel managers over non-personnel decisions and the efficiency of the personnel department. Other studies, for example the study in the mid-1980s by Edwards10 on factory managers and a Lancaster study of 60 companies11, emphasise the importance of a set of integrated policies for any impact on performance. This finding is strongly reinforced in some of the most recent studies. One sophisticated American study compared human resource policy and performance in 30 mini steel mills. It found strong evidence that those mills where a high commitment human resource strategy was pursued showed higher performance than those pursuing a more traditional control strategy. This finding is reinforced by other studies, including recent UK work on new workplaces12. This shows that those establishments which had a coherent and clearly articulated HRM strategy and had a large number of the kind of HRM practices in place that were likely to promote commitment, also had superior outcomes to those that either had no strategy or an absence of such practices.
U niversity of Sunderland
51
Here, the measures of performance were HRM outcomes such as quality and commitment of staff, employee relations outcomes and ratings of benchmarked quality and productivity. Human resource management appears to pay off. The Workplace Industrial Relations Survey does not cover a sufficiently wide range of HRM issues for us to use it to conduct the same sort of test. In most cases, perhaps not surprisingly, there is no significant link between individual practices and outcomes such as absence, employee relations climate and estimates of productivity. Nevertheless, the small number of significant results, on balance, show a positive link. Furthermore, the Metcalf team study combined those items dealing with employee involvement and those dealing with single status into composite measures and they do find a stronger pattern of generally positive results. In summary, the research evidence shows that the presence of specialist personnel managers is associated with the presence of more HR policies and practices, including what would be widely recognised as good practices. The extent to which these are endorsed at board level and presumably integrated into a coherent strategy is strongly influenced by the presence of a personnel director on the main board. The link between practices and outcomes is more tenuous. The key is strategic integration. What this means is that personnel strategy must fit the business strategy, the personnel policies must be fully integrated with each other and the values of the line managers must be sufficiently integrated or aligned with the personnel philosophy to ensure that they will implement the personnel policy and practice. This is a tall order which will often require reinforcement through leadership and through the organisational culture. Where this can be achieved, then there is growing evidence that a distinctive set of human resource practices results in superior performance. We suspect many personnel managers would like to believe this but are unsure about whether such a claim stands up to scrutiny. As a result, they are reluctant to promote a distinctive line. The evidence is beginning to accumulate that HR management does pay off. Personnel managers should be more confident about getting this message across in their workplaces.
References
1. Does HRM boost employee management relations?, by S Fernie, D Metcalf, and S Woodland, LSE, CEP Working Paper No. 546,1994; and What has human resource management achieved in the workplace? EPI Economic Report, 8,3, May 1994.
2.
Workplace industrial relations in transition, by N Millward, M Stevens, D Smart and W Hawes, Dartmouth, 1990. The control of industrial relations in large companies: an initial analysis of the second workplace industrial relations survey, by P Marginson, P
U niversity of Sunderland
3.
52
Armstrong, P Edwards, J Purcell and N Hubbard, University of Warwick Papers in Industrial Relations, No. 45,1993. 4. Different routes to excellence, by S Tyson, M Witcher and N Doherty, Cranfield School of Management, 1994. Human resource management in the multi-divisional company, by J Purcell, and B Ahistrand, Dartmouth, 1994. A European perspective on human resource management, by C Brewster and F Burnois, personnel Review, 1991, vol 20, issue 6. The role of personnel directors on the board of directors, by J Kelly and J Gennard, Strathclyde Business School, 1994. The nature and causes of effective human resource management, by D Guest and R Peccei, British Journal of Industrial Relations, vol 32, issue 2,1994. Developments in the management of human resources, by J Storey, Blackwell, 1992. Managing the factory, by P Edwards, Blackwell, 1987. Human resource management, corporate strategy and financial performance in British manufacturing, by S Fox, Management Research News, vol 14, issue 7,1991. The good, the bad and the ugly: employment relations in new non-union workplaces, by D Guest and K Hoque, Human Resource Management Journal, vol 5, issue 1,1994.
5.
6.
7.
8.
9.
10. 11.
12.
Questions:
What factors are likely to lead to more effective personnel practices being in place? What HR factors facilitate successful organisational performance? What problems do personnel specialists face when trying to raise their profile?
U niversity of Sunderland
53
- professional training of personnel staff - greater emphasis on specialist line manager input.
2. The HR factors facilitating successful organisational performance include:
- involvement and commitment of all staff - clear explicit strategy for communicating objectives.
3. The problems faced by personnel specialists include the cultural or soft issues:
- direct influences in policy outcomes - status of personnel role on the Board of Directors - responsibilities/authority - business expansion/pro action.
The article in the last case study offers mixed results for HR in relation to our previous discussion. First, HRM would appear to pay off in terms of
54
U niversity of Sunderland
employee behaviours, although organisational outcomes appear more difficult to identify. Second, a common view that a strong HR presence on the Board is associated with wide-ranging best practice is positive.
Auditing performance
This is central to the setting up of service level agreements and clear expectations of HRs role. In some institutions this has gone further and a fee structure has been established as a bonus for setting budgets that can be sensitive to internal outcomes and give added value in a business context. This practice has been prevalent in costing HRs contribution and also as a basis for open tendering of services whereby the in-house function is open to competition from private sector HR consultancy.
U niversity of Sunderland
55
The objective of auditing HR function is to ensure that the investment in personnel and training can be justified in business terms. It is therefore based on cost-effectiveness, contribution, service and the way best practice is followed. The information needed to audit includes operational data, costs, time spent on activities, the costs of external services, and departmental structure.
Devolution of HR activities
The objective of devolution is to ensure a more business-led personnel response to employment issues. It involves the reallocation of personnel activities from specialists either:
Human resource planning and work organisation. Recruitment and selection. Training, development and appraisal. Industrial relations. Reward and job evaluation. Organisation structure and development. Pensions and welfare. Health and safety. Discipline and grievances (legal matters). Management development. Redundancy.
HR departments adopt two roles:
56
U niversity of Sunderland
These can be centralised or de-centralised, although specialist services such as compensation or industrial relations, are often retained centrally. Devolution of any of these activities can be a function of either a decision making authority or the day to day management of activities, or both. Hall & Torrington(1998) suggest that devolution of the following activities is most prevalent:
ACTIVITY
Imagine that your company has decided to devolve certain personnel activities, as described in the examples given above. 1. What do you think your reaction would be to this if you were:
U niversity of Sunderland
57
ACTIVITY FEEDBACK
Line Manager reaction: Ownership of people issues is critical to company performance, so your reaction as a line manager might be a feeling of empowerment and involvement. It might also be a reluctance to take on the extra responsibility because you lack the necessary skills. You may feel that personnel specialists have opted out of their responsibilities, or you may feel vulnerable on legal issues raised in employment. HR specialist reaction: As a specialist you might react favourably if the refocusing happened to be on the more strategic aspects of personnel work, ridding you of the administrative image. You might wish to retain core specialist areas such as recruitment, selection, and reward. You might have suggested feelings of loss of skill and control over personnel practices. You may lose influence in budgeting matters such as expenditure on training and development. The benefits of devolution that you may have suggested include:
Enhanced ownership/importance of people issues. Better working relationships between managers and
employees.
Empowerment for manager. Responsive decision making in other departments. Higher operational problem solving skills. Flexibility. Better working relationships between personnel and line
managers.
Loss of integration of policies. Dilution of the strategic content of HR. Loss of professionalism and commitment to HR issues.
58
U niversity of Sunderland
The next trend is decentralisation of HR, which needs to be carefully distinguished from devolution in that it involves the movement of all HR activities to another site rather than some activities to another department or manager.
Head of department
Central head of HR
HR unit
Figure 2.1: Type A decentralisation
U niversity of Sunderland
59
Head of department
Central head of HR
HR unit
Figure 2.2: Type B decentralisation
Central head of HR
HR unit
Figure 2.3: Type C decentralisation
Reporting lines are important in determining whether HR activity is likely to be driven by professional priorities or by management needs. There has been a trend in recent years for small to medium size enterprises to recruit generalist HR staff to provide some services and to buy in specialist services. Larger organisations are more likely to recruit specialists in the main policy areas previously outlined.
ACTIVITY
It can be argued that the decentralisation of HR may lead to an inconsistency of approach. Try to write down some of the implications of an inconsistent approach, for example, when HR is decentralised from a corporate level to a
60
U niversity of Sunderland
business unit level. We have given one example, but try to think of at least two more.
ACTIVITY FEEDBACK
Examples that we thought of are:
Outsourcing
As with many business functions, outsourcing has become an important method of achieving flexibility and reducing costs. The arguments for outsourcing HR services can be summarised as follows:
61
consultants for certain specialist activities that are required only occasionally. Examples might include:
Compensation, job evaluation and pension specialists. Search and selection specialists for senior management
posts.
CASE STUDY
Read the article below: How to outsource Personnel: market testing and compulsive competitive tendering by Alan Fowler, (People Management, 20 February 1997) The compulsory competitive tendering (CCT) of some local government services dates back to the early 1980s. It began with manual functions such as buildings maintenance and refuse collection, and has since been steadily widened by statutory regulations, first to include activities such as leisure centre management, and later to professional support functions such as finance, legal services, information technology and personnel management. The governments current intention is that CCT will apply to 40 per cent of each councils personnel activities measured by cost an increase from an earlier figure of 30 per cent, which was already being targeted by many local authorities. In parallel with the detailed CCT regulations in local government, market testing has been introduced extensively throughout the civil service, the health service and many quangos. It has also been taken up in the private sector,
62
U niversity of Sunderland
particularly by companies following the core and periphery principle, under which everything other than core functions is outsourced. Market testing is much simpler than CCT. If market studies indicate that a non-core function can be satisfactorily bought in, the internal function is disbanded and an external contract is negotiated. Unlike CCT, it does not prescribe an arms-length competitive tendering process or forbid negotiations about bid prices. The difference between CCT and market testing is primarily a matter of degree: the legal formality of CCT is at one extreme, with less formal, no-commitment reviews of possible external market sources at the other. Once formal tendering has started under CCT, statutory regulations prescribe every stage of the process and require the contract to be awarded either to an external, private-sector provider or to the in-house unit. To win, the in-house function has to prove to auditors that its costs and bid have been calculated in accordance with detailed financial regulations; that it has been given no favourable treatment; and that the cost and quality criteria leading to its selection were known by, and applied equally to, all the private-sector bidders. Market testing does not require formal tendering unless this has been agreed in an earlier decision. It may involve just comparing the cost and quality of the in-house function against whatever information can be found about potential external providers. Despite the differences, those preparing a function for either CCT or market testing have to follow similar principles. In the case of personnel, a major preliminary decision is whether to consider outsourcing the entire function. CCT regulations require only a percentage to be put to the test, although local authorities can exceed this figure by any amount they choose. Market testing depends entirely on individual decisions. There are three main arguments against 100 per cent outsourcing. The first is that a significant proportion of personnel work is so central to the culture and strategic objectives of the organisation that it can be undertaken effectively only by the organisation itself. Because of this, personnel should be retained, at least in part, as an integral element of the business. The second point is more practical: the occurrence of situations such as industrial disputes may be unpredictable, but these issues require immediate action. It is all but impossible to specify such tasks precisely enough to contract them out, or to find an external provider that can guarantee the instant and informed response they require. This links to the third aspect, which is that there is no significant market for the provision of a total personnel service. The exception may be a company that is too small to justify or afford its own personnel specialist and so puts an external training programme out to tender. CCT and market testing provide an incentive to review the adequacy and relevance of many aspects of current personnel practice, and any decision about what parts of the function to
U niversity of Sunderland
63
outsource should be preceded by discussions with line managers about their real needs. The criteria that eventually decide the outcome of market testing or CCT exercises are cost and quality. It follows, therefore, that both factors need to be defined for the relevant in-house function before external comparisons can be made. Most HR departments know their total budgeted cost, but not all of them can break it down into functional components. This is essential for any true comparison. It may be necessary to introduce time sheets to obtain data about the proportions of time (and money) spent on different activities, while expert financial assistance may well be required to ensure that overheads are being allocated correctly. A function is not necessarily outsourced even if an external provider is potentially more cost-effective. Instead, the organisation may try to raise the standard of the in-house function while keeping outsourcing as an alternative if improvements are not achieved. Unit costs, such as the average cost per training day or per new recruit, and the hourly or daily costs of the personnel staff, often provide the best basis for comparisons with the external market. Defining quality is more difficult. In the absence of quality criteria, CCT decisions have to be made solely on cost, although the cheapest service is rarely the best. Where relevant, comparisons can be made on criteria such as response times to information requests, success rates for vocational training, or the proportion of recruits who are assessed as fully satisfactory at the end of their probationary periods. Both market testing and CCT involve making judgments about the general quality of potential external providers. This assessment relies partly on assurances given by these providers about their ability to meet the quality standards defined in the service descriptions or contract specifications, but it is also necessary to decide which broader quality considerations should apply. Two years ago the IPD, together with the Chartered Institute of Public Finance and Accountancy (Cipfa) and the Society of Chief Personnel Officers in Local Government (Socpo), published a guide to the evaluation of quality in personnel CCT. This suggested that the overall quality of both potential contractors and the in-house function could be assessed on a point system (see table).
64
U niversity of Sunderland
Quality factors Know-how and experience Access to specialist data and advice Acceptability and relevance of proposed methods Compatibility of style with that of the authority Price
Maximum scores 20 15 15 20 30
The details of the tendering and market-testing processes are outside the scope of this article, but an honest, in-depth review of the in-house personnel function against these criteria would be useful preparation. It might lead to improvements that reduce the pressure for market testing or, in a CCT environment, it could strengthen the in-house bid.
Question:
What do you understand to be the main decisions, problems and opportunities associated with the outsourcing of HR departments?
Assessing quality and cost effectiveness. Extent of outsourcing outsource the whole of the personnel
service or parts of it?
U niversity of Sunderland
65
New ideas and expectations. Wider base of specialists to call upon. Higher level of specialisation cost effectiveness. Competition cost effectiveness. Clearer service level standards.
Outsourcing is a critical step for the organisation that has longer-term implications for the knowledge and commitment of one of its key functions. Any decision to do so would need to be based on a careful evaluation of costs, quality of service and impact on the longer-term adaptability and flexibility of the organisation. This decision will have significant implications for the reaction and co-operation of line managers and other staff. In short, it is a matter of confidence, identification and trust in a key aspect of the business.
ACTIVITY
Suppose you had to brief a Chief Executive Officer about the desirability of outsourcing all or part of a large, centralised personnel department combining the functions of general personnel activities, resourcing, training and employee relations. What would you note as the strategic and operational advantages of outsourcing? What are the operational risks?
66
U niversity of Sunderland
ACTIVITY FEEDBACK
Your notes might highlight and develop the following points: Strategic Advantages
Outsourcing has short-term impact on costs and numbers. Outsourcing expands the range of the available services. Outsourcing adds entrepreneurial capacity to Personnel to defend
the service.
Results may not emerge. There are cost versus quality issues. Lock-in and dependency upon third party may occur rather than
skills within the organisations control.
What has the experimentation with HR outsourcing achieved? We can say that the results have not been radical in many cases. There is some evidence that organisations are rethinking the advantages of outsourcing. BP Amoco had embarked upon a world-wide plan to outsource HR transactions to an e-business company, Exult, in search of savings against an annual budget of $300m for HR. The costs have risen rather than declined, as employees have tended to reject using the e-business system to deal with administrative issues. The cost of standardising all procedures was too high (People Management, Nov 2001).
U niversity of Sunderland
67
Nevertheless, the innovation in service provision, service levels and mode and location of provision is clear evidence of a proactive approach to changing requirements within a professional framework. Let us move on to look at one final area of adaptation and look at how technology has affected HR departments.
ACTIVITY
Identify the issues an organisation needs to consider when making a decision on establishing HR service centres.
68
U niversity of Sunderland
ACTIVITY FEEDBACK
These are some of the issues an organisation needs to consider
Flexible delivery of service via technology. Importance of investment in personnel and HR service. Problem of depersonalisation from both management and
employees, with echoes of the 1970s and 1980s.
Risk of the distance of HR from business reality. Emphasis on specialist role rather than looking at business solutions. Retention of consultancy role is important using project based
thinking.
Risk of isolation of HR practitioners from organisational activities. Ability to achieve convergence and synergy of HR practice across
global boundaries; integration of HR activities as a strategic asset.
U niversity of Sunderland
69
CASE STUDY
An interesting development of the service centre concept occurs when large organisations consider changing from cost to business centres based upon income generation. Now read the short article below: BAE in HR export drive by Dominique Hammond, (People Management, 25th October 2001) Defence company BAE Systems has entered the HR outsourcing market by turning its personnel function into a separate business that will sell to other companies. The new company, Togethr HR, was formed earlier this year in partnership with business process management company, Xchanging. Togethr HR was created to sell HR services back to BAE after the company restructured following the merger of British Aerospace with Marconi Electronic Systems. The business process outsourcing market is estimated to be worth over 200 million worldwide. BT has also turned its HR function from a cost centre into a separate revenue-generating business to capitalise on the growing market for HR services. HR outsourcing has become a trend, but it is yet to prove a success, said Geoff Smith, consultant at William M Mercer. We are certainly seeing a number of suppliers developing a foothold in the market. BAE and Xchanging, which each own half of the new company, have jointly invested $20 million over the next five years to build a single, internet-based HR software system. BAE previously had 21 different systems for its 100,000-strong global workforce. BAE has transferred 462 of its 700 HR staff to the new company, most of whom will be based at a service centre in Preston. There is a massive market for these services and we are building the capability to meet those demands, said Alan Bailey, head of environment and business development at Togethr HR.
Question:
What do you consider to be the potential advantages and disadvantages of this approach. Try to think of at least two in each category:
70
U niversity of Sunderland
Develops business awareness and skills for personnel practitioners. Potentially broadens the knowledge and skills of personnel staff into
new areas and organisational sectors.
Emphasises cost efficiency of service provision. Ensures that the capacity of the resources are fully utilised. Broadens the task range and scope for experimentation and
organisational analysis.
Fits into the broader network organisation models where the supply
chain can be integrated.
Confidentiality and sectoral market information may be lost. May create a distance between organisation-based decisions and the
required level of professional advice, thereby reducing personnel involvement in strategic review. This could be the generalisation of personnel practice.
71
Strategic practitioner, aligning business and HR strategy. Administrative expert, building an efficient infrastructure
in which organisational processes can operate.
ACTIVITY
For an organisation that you have worked for or one that you have knowledge of, complete the role-assessment survey to assess that organisations HR role. For each statement, give a score from 1 to 5 where 1 is low and 5 is high. Human Resource Role-Assessment Survey by Dave Ulrich and Jill Corner Current Quality (1-5) HR helps the organization... 1. 2. 3. 4. accomplish business goals improve operating efficiency take care of employees personal needs adapt to change
HR participates in... 5. 6. 7. 8. the process of defining business strategies delivering HR processes improving employee commitment shaping culture change for renewal and transformation
HR makes sure that... 9. 10. 11. HR strategies are aligned with business strategy HR processes are efficiently administered HR policies and programs respond to the personal needs of employees
72
U niversity of Sunderland
12.
HR effectiveness is measured by its ability to... 13. 14. 15. 16. help make strategy happen efficiently deliver HR processes help employees meet personal needs help an organization anticipate and adapt to future issues
HR is seen as... 17. 18. 19. 20. a business partner an administrative expert a champion for employees a change agent
HR spends time on... 21. 22. 23. 24. strategic issues operational issues listening and responding to employees supporting new behaviours for keeping the firm competitive
HR is an active participant in ... 25. 26. 27. 28. business planning designing and delivering HR processes listening and responding to employees organization renewal, change or transformation
HR works to... 29. 30. 31. 32. align HR strategies and business strategy monitor administrative processes offer assistance to help employees meet family and personal needs reshape behaviour for organizational change
U niversity of Sunderland
73
HR develops processes and programs to... 33. 34. 35. 36. link HR strategies to accomplish business strategy efficiently process documents and transactions take care of employee personal needs help the organisation transform itself
HRs credibility comes from... 37. 38. 39. 40. helping to fulfill strategic goals increasing productivity helping employees meet their personal needs making change happen
Scoring Sheet for HR Role Survey Using the assessments in the quality column of the survey, complete this worksheet. Put your score from the quality column next to the number for each question, then add the total for each of the four roles.
74
U niversity of Sunderland
ACTIVITY FEEDBACK
Clearly, your assessment will be unique to you. However, the role-assessment survey should have indicated where the balance of HRM sits in your chosen organisation. A higher score in column 1 indicates a more strategic emphasis, in 2, a traditional personnel role and in 3 a welfare role. A high score in column 4 indicates a complete change of role for HRM.
What should the scoring profile be? Ulrichs theme is to ensure a balance between the professional and operational activities (administrative expert and employee champion) and the more strategically linked activities of strategic partner and change agent. Another way of understanding the scoring profile is to take a contingent perspective whereby emphasis is placed on a strategic or operational axis (see Figure 2.8) depending on the balance of outcomes to be achieved. For example, at different stages of its life cycle, an organisation might need to focus on one or more positions. In the diagram, the strategic axis from top left to bottom right links strategic partner with change agent and the operational axis from top right to bottom left links employee champion with administrative expert.
S t r at egic par t ner Business focus Results orientation and performance enhancement
A dminist r at ive ex per t Professional practice New policies to support change or employee commitment
E mployee champion Achieving commitment through partnership or involvement strategies in times of change
Change agent Diagnosing culture and competence change to support business change and maintenance of employee commitment
These then are the strategic roles that underpin the delivery of strategic HRM within organisations and from this point on in the module we will
U niversity of Sunderland
75
map onto these roles the activities and policies that occur within the key areas of the HR strategy:
HR planning and performance. Assessment and selection. Appraisal and the development of competence. Employee relations and organisation commitment.
READING ACTIVITY
Read the following article about SHRM: HR with attitude by Rob MacLachlan Ill make a prediction, said David Ulrich, halting his two-and-a-half-hour master class to share a sudden thought with the 2,000-strong audience. Within five years, a top HR person will change his or her firm, and the stock price will change too. The reason? Because it will be seen by the market as a test of the firms commitment [to good people management]. The implication? Because HR will at last be widely recognised as crucial to the firms business strategy and top team. Ulrich was doing a star turn at the annual conference of the Society for Human Resource Management (SHRM), the IPDs equivalent in the US. His prediction was prompted by one of the main conference talking points: the just-announced sacking of Al Dunlap, controversial chief executive of domestic appliances manufacturer Sunbeam. Dunlaps approach had been to improve cash flow and returns to investors by ruthlessly closing less profitable business units. This had dramatic short-term results, hyped as the Dunlap solution. But the sacker-in-chief was himself sacked when Sunbeams board realised he had nothing more positive to offer in the long term. Dunlap managed for investors, but ignored customers and employees. He was a liquidator, commented Ulrich, an edge of anger to his voice. The Dunlap solution is easy. Generating cash flow this year is easy. But generating cash flow for the future is more difficult. The important thing is to create sustained value, and the only way that you can do that is by creating long-term, sustained performance. There has never been a better time to be in HR, he believes. Partly this is thanks to the perception that when everybody was re-engineering, the people dimensions werent taken on board enough and it didnt have the impact that
76
U niversity of Sunderland
everyone sought. But, more importantly, the opportunity arises because the challenges facing businesses today all involve building HR capability. Ulrich comes across as a thinker about business management whose special interest is HR, rather than an HR specialist trying to find a wider audience. The difference was summed up by Craig Sturken, chief executive and chairman of Farmer Jack Supermarkets, one of the leading retail chains in the midwest, who attended with his HR director and 19 other chief executive-HR director pairs a one-day partnership forum led by Ulrich at the SHRM conference. Dave Ulrich is a businessman with an HR influence. Hes not a traditional consultant who stands at the front making speeches, Sturken said. He understands whats going on in business. Ulrich speaks the language of top executives because he concentrates on linking HR practice with the bottom line. As Mary Holden, Farmer Jacks HR director, said: Weve seen today how important it is to determine at every level what we really want to accomplish, and to move that down through every level of the business. We need to focus on what we deliver, not on what we do, Ulrich told the main conference master class on the following day. All the HR textbooks are incomplete because the chapters focus on roles rather than outcomes. Roles such as training and pay policy are important, but deliverables are more important. The sort of questions we should be asking are: how are we going to introduce cultural change, or build the organisations global capability? Ulrich believes that what will distinguish successful firms in the future is the way in which they organise themselves. Indeed, he has said that the only competitive weapon left is organisation. In a recent Harvard Business Review article1 he explained: Sooner or later, traditional forms of competitiveness cost, technology, distribution, manufacturing and product features can be copied. They have become table stakes. You must have them to be a player, but they do not guarantee you will be a winner. Winning will spring from organisational capabilities such as speed, responsiveness, agility, learning capacity and employee competence. Successful organisations will be those that are able to quickly turn strategy into action; to manage processes intelligently and efficiently; to maximise employee contribution and commitment; and to create the conditions for seamless change. This emphasis puts Ulrich directly at odds with Michael Porter, whose thinking still dominates US boardrooms. Porter, the leading business strategy guru, teaches that competitiveness depends primarily on capturing market niches by creating unique products or services for which customers are prepared to pay a premium. Once you get the business strategy right (in the boardroom), he seems to suggest, everything else will follow.2 Competitiveness doesnt come out of strategy alone, objects Ulrich. Thats only half of the game. Competitiveness also depends on whether you have the organisation you need to execute the strategy. If you dont have a good strategy, youre clearly in trouble, but having a good organisation is equally
U niversity of Sunderland
77
critical. Yet, in his latest essay, Porter dismisses the organisational side in two sentences. By organisation, Ulrich is not referring to structure. It doesnt matter how many levels of management there are, he says. Whats important are things such as speed, quality, simplicity, self-confidence, good decision-making. In other words, the capabilities of the organisation. He then told SHRM members, My job in HR is to help my executives identify the capabilities they need to win. He defined 16 broad organisational capabilities (see List 1) and challenged delegates to identify the four that are currently most important for their organisations. If you cannot get 70 to 80 per cent consensus among senior executives about the most important three or four capabilities that the firm needs to win, he said, you probably arent going to succeed. Ulrich would be last to claim that the 16 capabilities are exhaustive. He uses copious charts and worksheets in his teaching, but he told delegates: Adapt them, dont adopt them. In this case, his point was to emphasise the importance of clarity about the capabilities that an organisation needs, and consensus about the priorities. But getting senior executives to listen, let alone brokering a consensus among them, must seem a daunting task to many personnel professionals. Ulrich himself is painfully aware that the present role and calibre of HR people in many organisations does not position them to exercise influence at the top level. His recent Harvard Business Review article, addressed to chief executives and designed to persuade them to take the initiative on organisational capability, stated baldly: When more is expected of HR, a higher quality of HR professional must be found. His basic position is that the HR function must evolve or die and he strongly believes, on the basis of 20 years of research, that it must embrace four key roles if it is to survive. These are:
78
79
as well as it might be. (It can be difficult to bridge the gap. Ive heard academics claim Im not academic enough, and HR people that Im too theoretical, Ulrich said.) He believes that considerable progress has been made in demonstrating HRs effectiveness, citing in particular the work of Mark Huselid at Rutgers University,3 which shows that companies bundling HR practices have 33 per cent greater market value per employee than those that dont. Other work on the benefits of the balanced scorecard approach, and on HR efficiency and benchmarking indices, is also promising. Yet, he says, there are two issues here. Question one: do we have effectiveness research in place? Id say the score here is four or five out of 10. Question two: is it known and used by HR professionals? Here its more like two or three out of 10. When I say to practitioners, talk to me about this, their eyes mostly glaze over. The third and fourth competencies managing culture (that is, to recognise important patterns) and managing change (making it happen) are essential if HR is going to claim the key roles urged on it by Ulrich. But they are not competencies that are by any means unique to, or indeed prevalent among, HR professionals. Thus, the function needs a major shift of emphasis if more of its number are to become as effective as the best. But it is the fifth competency, personal credibility, that is regarded as most important to overall effectiveness. Ulrich explains that someone with high personal credibility demonstrates, for example, business insight, high integrity, appropriate risk-taking, chemistry with key constituents, and continuous learning. Another crucial factor is a track record of success. Credibility [also] comes from doing the little things well. Your HR function is as strong as your weakest link, he told SHRM members. Yet even when an HR person has all five of these competencies, Ulrich believes, another factor must be brought into play. And what is the latest sophistication in this theoretical tour de force? Simply (but how difficult in practice) the ability to act with an attitude. The key to success in any profession", he claims, is that once you have the competence, you must act with an attitude. Typical behaviours might be making confident predictions (based on professional knowledge) or making bold stands (based on principle). Ulrich gave several real but anonymous examples, the best of which concerned a company whose chief executive died suddenly. Half an hour into the board meeting called to pick his successor, the HR director slammed the table and objected to the process that was starting. Im going to stop this discussion right now, he said. This is wrong. Until we have agreed on a model of competence for the chief executives post, I wont agree to an appointment being made. The board was then led through a six-hour discussion of the challenges facing the organisation and the qualities needed in the new chief executive. A competence model and the desired behaviours were then agreed.
80
U niversity of Sunderland
When the board met several days later, it matched candidates to the model and chose a successor. The HR director had made a crucial intervention. His professional knowledge and principles had given him the confidence to act with an attitude when it was justified and necessary. Ulrichs parting shot to the SHRM audience hit another nerve. Ive realised one of the strangest things about acting with an attitude, he said. Most HR managers had come into HR because they cared about people. For a long time now, the function has been wary about wearing its heart on its sleeve. But this starting point, he seemed to suggest, can give HR professionals providing they have the necessary competencies some of the moral strength to act with an attitude. We should continually be asking: is my company really building the policies, the practices and the procedures that would make this an organisation everyone is delighted to work for? Because if we dont, we are not only hurting the company; we are hurting the profession as a whole. List 1. A question of priorities What four organisational capabilities is it most important for your company to excel at? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Be the preferred employer Be the quality leader Have a shared mindset Be intrapreneurial Make timely decisions Manage costs Manage information Manage work Be fast in the marketplace Be marketplace agile Manage the strategic vision Manage stakeholders Empower individuals and teams Ensure supply of talent Reward for performance
U niversity of Sunderland
81
16
(Adapted from a list of organisation cultributes or cultural attributes developed by Ulrich with Bob Eichinger and Mike Lombardo) List 2. Key competencies of HR professionals Relative Importance to effectiveness Understanding of business Knowledge of HR practices Ability to manage culture Ability to manage change Personal credibility HR as guardian of the brand Ulrich uses concepts from marketing to draw a more direct link between the competitiveness of companies and their HR policies. The objective of any business is to build a brand that customers are loyal to because they think of you as delivering high quality, keen prices, good design or whatever. But increasingly, he says, brands are becoming focused not on individual products or services (which change so fast), but on firms themselves. At this level, a brand is the identity that a company projects. It follows that organisational culture is crucial to this type of brand. The attitudes and behaviour of managers when they make key decisions, and of employees in their everyday dealings with customers, could do a lot either to strengthen or weaken the brand. A vital role for HR is to ensure that they strengthen it. Marketing people may build the organisations brand identity, but translating that into company behaviours and employee practices needs HR people, Ulrich told PM. It is up to personnel professionals to work out what that identity means in terms of recruitment, pay, training and so on. Ulrich cited Virgin as a good example of a strong organisational brand. Its not any one product that makes Virgin successful, but a brand of enterprise, he said. Virgins HR team would have had to work through what it is that employees need to know and how they need to act to enable Virgin to build the brand identity it wants. Of course, there are other capabilities that may not be directly linked to the brand, but are just as important, such as the ability to respond quickly to change. I was in a firm recently, he said, where managers spent so much time on analysis that they never seemed to get anything done. % 14 17 19 22 27
82
U niversity of Sunderland
References
1. 2. Harvard Business Review, January-February 1998. Last year People Management ran a profile of Michael Porter (23 October 1997) and an extended report on his presentation to the IPDs Harrogate conference (6 November1997).
What does this article show in relation to our previous discussion about the evolution of HR departments? Ulrich identifies the importance of the contribution and results orientation of HR. His restatement of the importance of bundling of best practice tends to justify the importance of a strong professional HR practice in the organisation. The article also confirms the importance of HR upskilling through the adoption of consultancy skills. Ulrich offers a typically combative and rousing conclusion, unashamedly unitary and managerial in focus.
U niversity of Sunderland
83
1.
HR Policy Formulation Includes strategic policy and how well it supports organisational strategy and goals, and development of core competencies, culture change, etc. How well does policy support devolution of functions where appropriate (e.g. education and training, recruitment)? How well do the enabling policies (to develop skills, career management, rewards, recognition) work?
2.
Planning How effective is HR planning, recruitment planning, career planning, succession and workforce planning? How well is workforce diversity, job design, organisational structure and change planned?
3.
Development How effective is foundation and induction training, professional development, leadership and management training, career development, mentoring, staff assignments and movement?
4.
Staff relations Areas for assessment include management of industrial relations/employee relations, enterprise bargaining, grievance resolution, communication, promotion of teamwork.
5.
Performance Is there a business code of conduct (covering ethics) and how well is it adhered to? How effective is induction, how is performance managed, how are staff supervised, how effective is the appraisal programme? Are rewards and recognition programmes effective in enhancing performance?
6.
Staffing Practices How effective is appointment and selection? How competitive is remuneration (and does it attract staff of the right calibre to support organisational aims)? How effective is delegation? How effective and fair is the job classification system, work level standards? How flexible is the work environment and is it in keeping with technological developments? How equitable are staffing practices in promotion, rewards, separation?
7.
Health and Safety What level of training is there for occupational health and safety? How do you rate the work environment and culture? How are staff with disabilities and long-term illnesses supported? How well are injuries handled?
Such an evaluation can be carried out by an external audit, but it also can be carried out internally. What is important is that corrective action be taken following an evaluation of the HR function.
84
U niversity of Sunderland
ACTIVITY
With the permission of your HR Manager, consult a cross-section of staff (line managers, business managers, staff from all levels and job categories), to get their feedback on the seven functions identified above. You may wish to design a questionnaire based on the information given in this section to elicit their feedback. Having conducted the survey, summarise your findings (in no more than one page). Identify what works well, what are the areas of weakness/failure and your recommendations for improvement.
READING ACTIVITY
Read the next article. Although it dates back to 1993, the APAC evaluation of service model that it describes is still relevant to the auditing the HR function. When Personnel Calls in the Auditors by Derek Burn and Leah Thompson, (People Management, January 1993) It has never been easy for any organisation to make an objective assessment of the effectiveness of its personnel function or to compare such an assessment with those of others. Effectiveness, at least to some extent, is relative to the required or perceived role of the function, and there is ample research evidence that this role varies widely between organisations. Ultimately, the test for any personnel unit is whether it contributes to the achievement of its organisation's business objectives - another major variable. Broad-based assessments of these kinds are inevitably subjective and do not lend themselves to statistical comparison. Yet many personnel managers (and their organisations) understandably feel a need for more detailed and objective means of assessing their performance and how this changes over time and compares with other organisations. APAC the audit of personnel activities and costs, which incorporates audits of service satisfaction (APSS) and policies and procedures (APPP) - provides just such a mechanism for setting benchmarks, both in terms of measuring internal progress and by comparing standards across a broad range of organisations. Three-tier approach APAC adopts a three-tier approach to assessing the performance of the HR function. The starting point module one gathers fundamental data about the
U niversity of Sunderland
85
operation of the department, corporate statistics and cost-effectiveness. After analysis this module provides the benchmark from which future progress of the department may be measured. The results can also be compared through the APAC database with organisations of similar size and type to provide a broader perspective of what might be achieved. Module two (APSS) focuses on application: assessing reaction to the personnel service provided and the HR needs of user departments. Module three (APPP) recognises the need for fundamental professional standards by auditing policies and procedures. The first module of APAC is designed to highlight the activities of the personnel function. The costs of providing them and the impact of personnel on the 'bottom line' of the business. This module provides the facility to analyse the time spent on each of 42 human resource activities; the costs associated with the in-house personnel function; the costs of external services, such as training, recruitment and general consultancy; the percentage of time spent by line managers on recruitment, reward and training activities; and measures of activities to establish cost-effectiveness. It also analyses the personnel department organisation structure best suited to achievement of specific business requirements. For example, a small firm would not normally need a personnel director; this kind of organisation would typically have a personnel manager reporting to a director of administration, with personnel officers responsible for tasks such as recruitment, training, remuneration and benefits, employee benefits and administration. In larger companies the structure of the department would depend on whether it had a centralised or decentralised decision-making structure. Both would usually have a main board personnel director and central personnel services, but centralised firms would need personnel units in their product divisions, while a decentralised organisation would distribute them on a site basis. An HRM environment, with personnel providing a centralised consultancy service to line managers who make and implement their own decisions on staffing issues, needs a different structure again. The time analysis schedule provides a simple means of recording inputs by every member of the personnel team, including secretarial staff, in a structured manner enabling both internal and external comparisons to be drawn and a basis for service-level agreements to be established and monitored. There are eight functional headings: staffing, development, employee relations, organisation evaluation, reward systems, records and administration, health and safety, and management. Each in turn is sub-divided into discrete activities. Staffing, for example, is broken down into HR policy, manpower planning, recruitment selection, selection interviewing, other selection activities, staff administration, discipline and dismissals, redundancy, terms and conditions, and staff handbooks.
86
U niversity of Sunderland
The database that can be drawn on for comparative purposes is substantial, with over 150 statistical comparisons from over 200 organisations providing key measures to be used in establishing the way forward. The statistics are analysed by size and type of organisation, and much of their meaning can be lost by quoting simple averages of composite data. However, key statistics (with their averages) include: Personnel staff to full-time employees Managerial/professional personnel staff to full-time employees Salary and bonus costs of personnel department staff per organisation employee Personnel salary and bonus costs as a percentage of the total Overall cost of the personnel function as a percentage of overall organisation costs Recruitment costs per new recruit Training costs per employee year (internal and external) - private sector 1:95
1:168
208
1.5%
1.7% 650
172pa,
Examples of other comparisons include staff turnover, absenteeism and sickness data, specialist advisory costs (e.g. legal, pension and actuarial), and clerical and secretarial personnel staff to managerial and executive staff. The second audit module assesses the level of service satisfaction. The audit of personnel service satisfaction (APSS) takes the main personnel functions and assesses the level of service under seven key satisfaction indicators. The seven main functions have been defined as staffing, development, employee relations organisation, reward, records, and health and safety. Satisfaction attributes include delivery of service, communications, professionalism, commitment, management, decision-making and value. The functions are the same as those identified in module one of APAC, so internal salary costs and time can readily be compared with the level of service satisfaction achieved under each of the attribute headings.
Professionalism Each attribute is defined in some detail. Professionalism, for example, is defined thus: "The standard and quality of services provided is of a level that is expected of professional practitioners. Ethical standards, objectivity and independence are maintained, knowledge and technical ability
U niversity of Sunderland
87
cannot be challenged. There is a clear perception of the reality of situations and application of practical solutions." The assessments of satisfaction are usually carried out by line managers and staff representatives on a five-point scale. In smaller organisations all employees (as users of the personnel service) may be asked to rate the function. Level one equals low quality and poor standard of service. Level two indicates a need for improvement in several) areas to achieve a level of service quality which meets the required standard. Level three means some improvement is required in limited areas to meet the required standards of quality and service. At level four, most areas are addressed to a very satisfactory standard, and level five shows that, without exception, the quality and service levels are outstanding. After rating the function as it is perceived now, assessors are asked to state if they believe more or less personnel department input should be given to each function in the future and whether line management should be more or less in involved in future delivery Thus it will be seen that by correlating these assessments to the time analyses in module one we have a powerful tool to measure, develop and improve the direction and value of human resource management. The chart shows average scores from APAC's database. The third audit module - APPP - is used to check that 'good practice' is being pursued in personnel policies and procedures. This module provides a checklist of all the legal requirements, details of IPM codes of practice, and sound, tried and tested personnel procedures against which an organisation can check its performance. This module is particularly useful in start-up and change situations and where several sites of the same organisation have drifted apart in their application of policies. The APAC methodology can, at one level, be self-administered following a brief training workshop. In more complex organisations, consultancy support is advisable to ensure consistency and interpret the statistical and qualitative findings. Once the measurement process is in place, the scope, size and structure of the personnel function can be fine-tuned to harmonise with the current demands of the organisation. Over 200 organisations, including ICL, Scottish and Newcastle Breweries, 3i, a major clearing bank, government bodies, county councils and NHS trusts, have used one or more APAC modules to conduct a self-appraisal of their function and to discover how they compare with standards achieved elsewhere. The Berkshire experience Berkshire County Council has used the APAC system in two ways directly, to assess the size and cost of the personnel function in comparison with other organisations; indirectly, as an approach to monitoring how well line managers are handling their devolved HR responsibilities.
U niversity of Sunderland
88
In 1989 the county council adopted a policy of devolving responsibility for HR decision-making to departmental line managers. It was then recognised that if they were to take on increasing responsibility for managing the human resources under their control, they would require training and guidance on best practice as well as their legal responsibilities. These managers were therefore given training in good practices within a legal framework. In addition, guidance was provided through a 'human resource management specification', which was first published in April 1990. The specification was not prescriptive, so managers had the authority to establish ways of carrying out their activities in a way which met their business needs. For example, the RB specification set out the principles of effective performance appraisal, but departmental managers were free to design their own appraisal systems to suit their particular needs and style, provided the general principles were upheld. The council gave managers this freedom to manage within a devolved framework provided that effective monitoring was undertaken on a regular basis and reports prepared to assure members that the council's resources were being used effectively and properly. To this end, the HRM specification identified those areas of human resource activities which would be monitored and in some instances described how this monitoring would take place. While it is perfectly feasible to collect data on what a department is doing in any area of human resource management - e.g. how long it takes for a particular vacancy to be filled - this information says very little about the way a department handles the recruitment process. It was therefore necessary to collect more than statistical information before judgments could be made about departmental practices and effectiveness. The information required for any one functional area consisted of a mixture of statistical information and examination of available records. In the majority of cases, a sample of line managers were interviewed during the monitoring process to obtain information directly from them. Although several departments employ professionally qualified personnel staff, these staff were usually seen only at the beginning of each monitoring exercise, to obtain basic data and their overviews of how the department operated. The variety of responses to questioning made for interesting comparisons within and between departments. Having gathered the data and relevant information from within departments this was collated in a way that was readily understandable by and accessible to councillors and officers alike. Concerns over specific shortfalls were expressed to the chief officers of individual departments, along with suggestions for improving their standards. The report for councillors provided an overview of the situation and areas of activity which required improvement were identified, along with recommended actions. Following debates among members, an approved list of required improvements was made available to departments for incorporation in their priority actions for the next year. Their success in implementing these improvements will be monitored in successive years.
U niversity of Sunderland
89
Comparisons The devolution of decision-making to line managers raised questions about the size and cost of the smaller personnel function that resulted. To make fair judgments about this, comparisons were needed with similar organisations elsewhere. In April 1990, when Berkshire began to gather information about departmental activities, it was difficult to obtain comparative information about other local authority activities, let alone the private sector, which would have provided the competitive comparisons sought. At that time, Berkshire did not know if adopting devolved accountabilities would significantly affect professional personnel staffing levels in comparison to other businesses. This question and many others were answered by use of the original APAC study undertaken by MCP Management Consultants. This showed that Berkshire's personnel staffing levels and costs as a proportion of permanent staff are significantly lower than those of other organisations in both the private and public sectors. Data made available through this and other subsequent studies have enabled the council to make an objective assessment of the impact that devolution has made, and continues to make, on its ability to meet service demands.
Professional Delivery Communication s Commitment Decisions Management Value
Staffing Developmen t Employee relations Organisatio n Reward Records Health and safety
Summary
This unit has considered the emerging debate about the role of HR in organisations.
90
U niversity of Sunderland
We have tracked the historical developments, and have noted that the idea of HR departments giving way to newly-empowered line managers is problematic. What happens to professionalism, expertise and coherence of strategy? We examined the nature of the so-called HR crisis and looked at the fundamental split. Should, and can, HR become strategic? What are the consequences for effective HR management? Like any function, HR needs to be able to demonstrate value added and adopt flexible structures be they centralised or decentralised, relating to the business situation. We examined the relative merits of devolution, decentralisation and outsourcing. We also looked at the emerging trend of HR Service Centres, personnel factories of shared services. At the heart of the debate is the role of face to face aspects of HR and the reality of being properly customer driven. We arrived at a new balance for HR via Ulrichs four perspectives for HRs role. What seems to emerge is a clear-cut role for HR, central rather than peripheral, if they can rise to the emerging professional challenge of policy and process skills. Finally we briefly looked at the evaluation of the HR function within an organisation.
REVIEW ACTIVITY
Now answer the following questions to refresh your knowledge of this unit: 1. What are the organisational and specialist changes that are likely to impact on the management of people? What are the problems that HR departments face in adjusting to the new agendas? Identify three key trends in the design and organisation of HR departments. How might they address issues raised in Question 2? How and why might HR departments set up methods of service monitoring? What advantages do audits offer HR departments in the management of people?
2.
3.
4.
5.
6.
Evaluate the impact of devolution and decentralisation on the formulation of an integrated human resource strategy.
U niversity of Sunderland
91
7.
What do you understand by the term multiple roles for HR? How might it overcome some of the weaknesses perceived of old operational Personnel and new SHRM from Unit 1?
Flexibility debate. Need for a new basis of managing people; systems to process. Rebuilding psychological control.
Answer 2 The problems faced by HR departments are:
The requirements for strategic and business thinking. A crisis of identity and confidence.
Answer 3 Key trends that you might have come up with include:
Devolution of functions. Decentralisation. Becoming strategic rather than operational. Developing audit and value for money indicators.
These trends might lead to a greater focus on business, moving personnel closer to the activity of the organisation and an evaluation of the contribution made by personnel. Answer 4
92
U niversity of Sunderland
The methods of monitoring might include service level agreements, or contracts with service suppliers. Personnel departments might do this to demonstrate service relevance, business focus and cost effectiveness. Answer 5 The advantages of audits are:
Legitimacy and credibility. Value for money. Effectiveness of service delivery. Relevance of service delivery. Basis for adopting service focus.
Answer 6 The advantage of devolution and decentralisation is in getting closer to the business (best fit) while the disadvantage is that services become fragmented and unintegrated, subject to short-term response, rather than longer-term development of organisation-wide competitiveness. Answer 7 Ulrich provides us with the multiple role model. It reflects:
Business focus, balancing management and employee interests. Change orientation, moving from a systems to a skills basis. The employee perspective, retaining employee interests.
References
The Strategic Managing of Human Resources, edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, 2004 (Key text for this module) Foot M. and Hook C. (1996) Introducing Human Resource Management. Longman.
U niversity of Sunderland
93
Guest D. (1998) Human Resource Management, Trade Unions and Industrial Relations in Mabey C, Salaman G and Storey J (eds) Strategic Human Resource Management: A Reader London Sage. Hall L. and Torrington D. (1998) The Human Resource Function: The Dynamics of Change and Development. London, Pitman Publishing. Torrington D. in Sparrow P. and Marchington M. (1998) Human Resource Management. The New Agenda, Financial Times, Pitman Publishing. Storey J. (1995) Human Resource Management; a critical text. London,Routledge. Ulrich D. (1997) Human Resource Champions Boston. Harvard Business School Press.
94
U niversity of Sunderland
Unit 3
Evaluate the strategic options available in recruitment and selection. Design and apply a human resource strategy.
Introduction
The first part of this unit deals with human resource planning and the structure and role of competence in the human resource system and the second with strategic options in recruitment and selection and the development of a human resource strategy. We shall consider a number of important issues. The first is human resource planning, labelled as such to reflect the qualitative aspect of diagnosing personal competence and skills. We shall then consider the structure and role of competence in the human resource system, moving on to consider how an understanding of competence can be used to improve the performance of recruitment and selection activities. We shall then draw together the knowledge that we have gained so far to develop a human resource strategy. Competence is at the very heart
U niversity of Sunderland
95
of such a strategy; it is from an understanding of the demand and supply of competence that human resource systems can be developed. Historically, personnel systems were designed first and without a firm understanding of the competence and capability that the business was trying to develop. We shall also consider the strategic issues in the recruitment and selection of people. We shall review the trends in recruitment practice and look specifically at how a deeper enquiry about peoples competence can enhance the validity and reliability of selection decision making. We shall review how techniques of recruitment and selection have been enhanced to cope with the challenge of competence. To complete the unit we shall look at the design, application and evaluation of HR strategy.
READING ACTIVITY
Please read Chapters 2 and 6 of your key text, The Strategic Managing of Human Resources, edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, which covers some of the subjects of this unit.
Computerised HR information systems. Closer links between the business environment and the
activities of HR managers.
96
U niversity of Sunderland
Substitute. Review new labour market sources. Act. Improve the research mix, organisational image and
working environment, restore employee turnover. Substituting and acting are the strategic responses addressed by human resource planning, while doing nothing and competing are tactical.
U niversity of Sunderland
97
ACTIVITY
Can you think of ways in which to balance the demand and supply of labour using the four responses, discussed above. We have suggested an action for an organisation under each of the headings. Try to write down at least one other under each of the headings in the space below. Do nothing/tactical (addresses demand) overtime Compete/tactical (addresses supply) recruit staff Substitute/strategic (addresses supply) retrain older workers Act/strategic (addresses demand) improve employee development
ACTIVITY FEEDBACK
These are our suggestions: Do nothing/tactical
98
U niversity of Sunderland
Substitute/strategic
- retrain older workers - reduce labour wastage - tap into new labour markets underrepresented groups.
Act/strategic
We have presented a view of why human resource planning might help us to form strategies, the point being that tactical or operational responses may in the long term be more costly in terms of repeat activities, for example, recruitment. More importantly, they may have a detrimental impact upon the capability and know-how of the organisation. This illustrates the point that the pressures are building within organisations to think in the medium to long term about the issues in an integrated way. The next question is how might we go about this. But before we do so, let us briefly look at professionalism in HR planning.
99
3.
This might be conceptualised using the following model, which illustrates how organisations can view the flow of people and skills into, through and out of the organisation. It can also be the basis on which decisions about reshaping the flows of skills and people can be made. Two scenarios follow the model to serve as illustrations.
Or ganisat ional E nt r y: S upply Or ganisat ional E x it Retirement Experienced/Expert
Mid-career
Early career
Post-training move
100
U niversity of Sunderland
Figure 3.1 represents HR flows for either the whole organisation or a segment of core skills/occupations under review. Scenario planning using HR flows is central to the process of human resource planning. The organisation must ask itself fundamental what if questions and model accordingly. We shall consider two scenarios: Scenario 1: Financial institutions operating in a newly deregulated environment may need to restrict the internal progress of staff without specific development objectives being met in terms of say, new product knowledge or skills in customer service. There may be a need to bring (buy) new staff in at mid-career level instead of the norm for the industry, which was promotion in early career. Under these conditions, the longer-term relationship of staff to the organisation may have to be curtailed where change is not possible. Hence organisational exit via redundancy should be planned for. The scope for internal progress will not be automatic but be based on performance and contribution. There will be more emphasis on horizontal job change rather than vertical promotion. Scenario 2: A manufacturing organisation that has traditionally relied upon hiring (recruitment) and firing when demand for production declines has relied on the availability of the external labour market. Faced with increasing competition for the right level of skills, the organisation could be forced to review this short-termist approach and move towards the practices adopted by the Japanese in plants around the world. These include a longer term focus on job security and employment, broader use of multi-skilling and horizontal flexibility and a focus on organisational skills rather than narrowly designed careers and jobs traditional to European employment practice. Organisations are becoming flatter with fewer stages or changes between levels. It is clear that organisations now require more flexibility, as job structures change, with demands for people to become more accountable. Horizontal job changes, career changes and organisational flexibility will all impact upon the decision-making process. For the purposes of this unit we will concentrate upon internal organisational analysis. Let us now look holistically at the model of how the planning process might operate.
U niversity of Sunderland
101
ACTIVITY
List at least four examples of data from the external and internal operating environment that you think will be of use in producing an effective planning process. We have given one example under each heading to start you off.
ACTIVITY FEEDBACK
You might have listed the following examples:
Quantitative INTERNAL ENVIRONMENT Number of employees and posts Levels or grades of jobs and skills Number of leavers, wastage rates Sickness and attendance figures Retirements Requirement location of key skills Internal development capability Graduate entrants
Qualitative
Skills mix of the workforce Attitudes and behaviours, for example, customers and clients, flexibility and specialist skills Labour market availability of key skills Competitive use of skills Education output Promotions Ratio of managers to staff
102
U niversity of Sunderland
Quantitative EXTERNAL ENVIRONMENT List of target universities for graduate recruitment Recruitment agencies List of multi-media channels for recruitment e.g. newspapers, internet, TV/radio, professional journals Market rates for resources in areas of skill shortage Acquisition targets for resource expansion
Qualitative
Appropriate specialisations, links to industry and reputation Specialisations and appropriateness to organisational requirements, track record Reach, readership circulation and readership profile
Knowledge and key competencies of human resources in acquisition target, and match with organisational strategy. Ease of integration
We can now pull the factors from the last activity into a model of the planning process. Such a process is made up of four steps: 1. Investigation and analysis The organisation must gather knowledge about:
U niversity of Sunderland
103
4. Decision-making The organisation must then make plans to balance supply and demand of skills. The influences will include skill levels, development and the cost effectiveness of accessing a wider skill base. The areas in which decisions will be taken include:
- recruitment - retirement and redundancy - selection and assessment - outsourcing - promotion and reward - development and retraining - organisation development and culture - the type of employment contracts - performance management - employee relations.
The model shows how investigation and analysis of four areas feeds into a forecast of the supply and demand profiles of skills. These in turn feed into the decisions that are made. If we take the financial services sector, including banks, building societies and credit/loan agencies as an example, using the above model we suggest that over the last 10-15 years the following picture might emerge:
104
U niversity of Sunderland
ACTIVITY
Using this analysis, what forecast might you have made if you had been in this sector (Financial Services)? What decisions might these forecasts have given rise to?
ACTIVITY FEEDBACK
You might have forecast:
Limited internal and external supply of the key skills. Requirement for more specialist expertise. Need for attitude changes. Need for flexibility.
In turn, this could give rise to decisions such as:
Recruitment specification changes. Deeper view of personal qualities required of staff. Flatter job structures. More internal development. New contracts. Redundancy. Reward for performance.
From the last activity feedback you might be able to see how the HR flows triangle could be fundamentally re-shaped in this industry. Because of deregulation and the expansion of competition for financial services that were previously protected, banks and loan institutions have faced demands for increased product ranges, more specialised
U niversity of Sunderland
105
products, better customer service skills, increased marketing activity and the need for culture change, and have encouraged staff to adapt to these changes. At the same time, the flow of staff from administration to commercial, technical and IT activities has meant that organisations have had to buy in more specialist services or create specialist service centres (such as telematic call centres), which in turn is changing how the work is structured and performed. At one level the challenge can be for more accountability and customer-led jobs, and at another it can reduce administrative jobs to a factory environment where they are closely structured, measured and monitored. In many sectors of the new economy, including Finance and Banking and IT, skills have moved from being administrative and routine skills to more complex competencies based around diagnostic and interpersonal skills and knowledge. This is an important qualitative recognition to add to the levels of knowledge captured about overall job creation and employment growth. Clearly this has important consequences for selection, labour market and developmental strategies. Key issues faced by such sectors are the need to focus on retention of key staff together with the allowance and possible encouragement of turnover on certain categories of employment (i.e. redundancy, early retirement and wastage). The training implications are about internal skills upgrading. From a recruitment point of view targeting external staff with the right knowledge and skills becomes critical. There are also employee relations implications such as the need to communicate the new expectations of staff and demonstrate support for the changes. This may require high level counselling and appraisal processes including outplacement for departing staff. Throughout this unit we have used terms such as skills, competence and attitudes but we must now develop a firmer analysis of them. Throughout the 1990s there was a growing awareness of the need to specify and categorise the core competences that may offer a unique competitive advantage. Most major organisations now engage in some form of competence analysis to underpin strategic decisions on people; for example, NatWest bank, Shell, IBM, BP and many others. This analysis may focus on managers or may extend to the whole workforce. Understanding core competence and emerging competence and the culture to achieve a higher performance is at the heart of HR strategy. Before we turn to ways of understanding and specifying competence, let us briefly look at professionalism in HR planning.
Professionalism in HR Planning
Needless to say, professionalism in HR planning is vital for organisational success. The first aspect of professionalism is understanding the customer, the customer requirements and providing customer satisfaction. As we have already noted, HR is increasingly viewed as a service; a service both to employees and to the business. As
106
U niversity of Sunderland
such, customer requirements need to be well understood. Delivering the right services to the customer at the right time, to the right quality and to the right cost must be the goal of HR. As we have already noted Human Resource Planning includes three stages: 1. 2. Reconciling future resourcing needs with future HR plans. Considering and applying HR policy so as to have an impact upon the flows of human resources in an integrated way. This includes the pattern of engagement of staff and their movement through the organisation and the stages of exit. Assessing the effectiveness of the HR policies in accessing, creating and using human resource capability.
3.
Professionalism is key to organisational success at each of the stages. Let us examine some of the contemporary issues in this context. In todays global business environment, the customer demands on HR are changing rapidly. From the point of view of the business, HR needs to understand the changing resourcing requirements of the business, flexibility in headcount in response to business cycles, the core competencies the organisation is trying to create and the culture it is trying to establish. HR has to understand the needs of a mobile workforce supporting a global organisation, the knowledge-based workforce the organisation is trying to nurture, the frequent re-structuring due to increased mergers and acquisitions activity, integration of new staff and so on. From the employee point of view, HR needs to clearly understand the increasing needs for workplace flexibility, distance and e-working, improved work-life balance, accessibility of HR operations (which can be effected at any time and from anywhere). Some of the evolving requirements identified above can be enabled by technology. For example, technology underpins mobile/home working and facilitates the accessibility of HR operations at any time and from anywhere. Yet it must be emphasised that technology alone cannot drive results, deliver customer satisfaction or deliver professionalism. Professionalism requires that HR practices be fair, open and transparent. Today, there is a legal obligation for organisations to ensure equality in the areas of race, disability, age, sexuality, gender and religion and belief. HR practices must ensure that equal opportunity regulations are adhered to by all levels of the organisation (guarding against discrimination). Policies and practices should cover recruitment, promotion, remuneration, working conditions, customer relations and the practices of contractors, suppliers and partners, Procedures must be in place to ensure that managers do not stifle or limit the promotion prospects of particular groupings or minorities, or discriminate in the selection of new recruits. Professionalism in this area requires the adoption of formalism in capturing customer requirements
U niversity of Sunderland
107
and selection criteria, and checking adherence against the agreed criteria. This applies to all aspects of HR practices including recruitment, selection, promotion, and separation. Professionalism is also enhanced by engendering, within the organisation as a whole, a culture of equality and respect. One way to promote this is to ensure workforce diversity training is provided to all levels of staff.
ACTIVITY
In 1997 the Ford Dagenham plant was in the spotlight for discrimination against Asian workers. The case received so much adverse publicity that the Ford president, Jacque Nasser, had to intervene. Read the short article on this case at the following website: http://www.diversityatwork.com/news/dec99/news_europe2.html Since the serious issues disclosed in 1997, Ford has made wide-ranging changes to restore its professional image and promote diversity in the workplace. Now read the article The Business Case for Diversity is Stronger than Ever by the Diversity Director, Ford Europe: http://www.hoggett-bowers.com/item.asp?txtID=11433 Another important aspect, which is often overlooked, is professionalism with respect to upholding the principles of freedom of association and effective recognition of the right to collective bargaining. Employees must be able to exercise their rights to freedom of expression, peaceful assembly and association, as well as a fair means of collective bargaining without discrimination, including the right to form trade unions and strike. It is incumbent on HR to incorporate these rights into organisational policy.
108
Underpin change. Profile people for their development in jobs. Underpin selection decisions. Focus education and training, and personal development
plans.
U niversity of Sunderland
109
Organisational competence
We have looked at competence in a general sense. But at this stage we must clarify what is meant by organisational competence, and HR competence. Increasingly organisations are focusing on core competencies and organisational competence. Core competence and organisational competence have become buzz words. So what exactly do they refer to? Core competencies are seen as giving an organisation its competitive edge, and in many cases is viewed as essential to its survival. The terms core skills, core competencies and organisations capability (or organisational competence) are related, but often misunderstood. An organisations core skills, core competencies and distinctive capability make up its strategic core. Core skills are associated with an individual, core competencies with a team, and the organisations combination of core competencies make up its distinctive capability. This distinctive capability of the organisation is referred to as organisational competence. At its simplest, a core competence is a unique capability that affords some type of competitive advantage to the organisation. It corresponds to a business process, and involves a combination of skills, functions, systems and knowledge. To determine if something is a core competence, one has to ask the question, Does it give the company a unique advantage over its competitors and help make the company profitable? It is strategically vital that the business, in partnership with HR, develop, extend, protect and exploit its strategic core (core skills, core competencies and organisational competence) to the full. It is organisational competence that enables an organisation to perform more effectively than its competitors, and offer unique advantage to the marketplace. Core competencies leading to organisational competence are also likely to be persistent and not readily replicable. Organisational competence is derived from an organisations people their skills, experience and knowledge; the HR competence. Increasingly, the HR competences that organisations are looking for are adaptability, analytical ability, life-long learning ability; skills that are persistent and applicable in a variety of business contexts. Today, and especially in sectors of the knowledge economy, greater value is being placed on generic skills that are highly adaptable to particular situations and roles, rather than very specialised skills. Thus in the professional grades, and particularly in the global environment, employers are looking for HR competencies such as:
110
U niversity of Sunderland
Flexibility: in moving from one role to another, mobility. Perseverance and determination: the ability to execute
and achieve successful outcomes. Additionally at the management levels HR competencies include leadership, cultural awareness, communication, motivation.
Meta-competences
These are the most general competences and include:
Literacy. Analytical capability. Creativity. Ability to communicate. Ability to co-operate. Ability to tolerate uncertainty. Negotiation skills.
These skills are important at all levels, but particularly for management. They are also important for adaptability and change. Many of them can come in part from education, but perhaps even more from heredity, upbringing, socialisation processes and work experiences.
U niversity of Sunderland
111
Industry competences
These competences are not tied to any one firm in an industry:
Intra-organisational competences
These are organisation-specific competences:
Knowledge about colleagues. Knowledge of aspects of the organisational culture. Knowledge of networks, alliances and communication
channels within the company.
112
U niversity of Sunderland
Typing or word-processing skills. Computing skills. Knowledge of accounting and budgeting principles. Craft and professional skills that can be applied across
industries. The educational system, vocational training programmes, apprenticeship arrangements and in-house training systems are the standard ways to achieve these skills.
Unique competences
These competences are firm- and task-specific:
Skills related to particular tools crafted in the firm. Skills in repairing tailored technology. Skills in operating specialised filing or data systems. Skills related to the maintenance of specific
organisational procedures. These skills are often connected with a unique aspect of an organisations core competences. By definition, these skills are generated within the organisation, and are often developed through in-house training or mentoring and perhaps especially through informal learning.
U niversity of Sunderland
113
Recent trends in organisations are to create leaner, more efficient management layers (flatter structures). A key feature of organisational strategy has, therefore, been to focus on management competencies and management developmental needs. The following 11 high-performance management competencies were identified in an article The kind of competence for Rapid Change, Tony Cockerall, (Personnel Management, 1989): 1. Information search Gathers many different kinds of information and uses a wide variety of sources to build a rich informational environment in preparation for decision-making in the organisation. 2. Concept formation Builds frameworks or models, or forms concepts, hypotheses or ideas on the basis of information: becomes aware of patterns, trends and cause/effect relations by linking disparate information. 3. Conceptual flexibility Identifies feasible alternatives or multiple options in planning and decision-making: holds different options in focus simultaneously and evaluates their pros and cons. 4. Interpersonal search Uses open and probing questions, summaries, paraphrasing, etc to understand the ideas, concepts and feelings of another: can comprehend events, issues, problems, opportunities from the viewpoint of another person. 5. Managing interaction Involves others and is able to build co-operative teams in which group members feel valued and empowered and have shared goals. 6. Developmental orientation Creates a positive climate in which individuals increase the accuracy of their awareness of their own strengths and limitations and provides coaching, training and developmental resources to improve performance. 7. Impact Uses a variety of methods (e.g. persuasive arguments, modelling behaviour, inventing symbols, forming alliances and appealing to the interest of others) to gain support for ideas, strategies and values.
114
U niversity of Sunderland
8. Self-confidence States own stand or position on issues: unhesitatingly takes decisions when required and commits self and others accordingly; expresses confidence in the future success of the actions to be taken. 9. Presentation Presents ideas clearly, with ease and interest so that the other person (or audience) understands what is being communicated; uses technical, symbolic, non-verbal and visual aids effectively. 10. Proactive orientation Structures the task for the team: implements plans and ideas: takes responsibility for all aspects of the situation. 11. Achievement orientation Possesses high internal work standards and sets ambitious yet attainable goals; wants to do things better, to improve, to be more effective and efficient; measures progress against targets. Thus flexible dynamic and organic organisations are producing new challenges and activities for managers, particularly in the areas of information collection, dissemination and assimilation. Furthermore, developmental needs of management takes place through observation, o appraisal (360 see later units) and simulated activity mainly through assessment centres where managers are placed in a range of group practical exercises to assess behavioural competence where the capacity to think and act is measured. Competency feedback is given to managers as to their progress against the organisations strategic competence. This is a form of strategic alignment of behaviour and attitudes critical to achieving the integration at the heart of the SHRM model. Competence feedback is then fed into individual personal developmental plans, and education and training provided where appropriate.
U niversity of Sunderland
115
competence, knowledge of organisational practice and professional know-how and skill. The eleven qualities are: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. command of basic facts such as goals and plans of the organisation, and product knowledge relevant professional understanding; technical, marketing and financial knowledge continuing sensitivity to events and being open to information analytical, problem-solving, decision-making skills social skills and abilities; interpersonal skills emotional resilience and the ability to cope with stress proactivity; the inclination to respond purposefully to events creativity: being able to come up with unique responses to situations mental agility, grasping problems quickly balanced learning habits and skills: being independent learners, the ability to think in the abstract; the ability to use different learning processes and a wide view of the nature of management self-knowledge; the skill of introspection.
11.
WH Smith model
This model is used to underpin graduate recruitment and development, and covers nine competences that are sought in each area are as follows: Written communication:
Communicates easily on paper with speed and clarity. Presents ideas concisely and in a structured way. Uses appropriate language and style. Grammar and spelling are accurate.
Oral communication:
Speaks to others with ease and clarity. Expresses ideas well and presents arguments in a logical
way.
116
U niversity of Sunderland
Shows skill in directing group activities. Has natural authority and gains respect of others. Capable of building an effective team. Involves all team members, gives advice and help when
required. Team membership:
Fits in well as a peer and as a subordinate. Understands own role and the role of others within a
team.
Can make forward plans and forecasts. Can define objectives and allocate response to meetings. Sets realistic targets and decides priorities. Devises systems and monitors progress. Makes good use of time.
Decision making:
Identifies degrees of urgency for decisions. Responds to situations quickly and demonstrates
flexibility. Motivation:
U niversity of Sunderland
117
Is reliable, honest and conscientious. Can cope with pressure and control emotions.
Analytical reasons:
ACTIVITY
Using the Pedlar & Burgoyne and the WH Smith Graduate Competence frameworks, complete a profile of your own level of competence development against each of the criteria. Try to identify specific evidence and examples from your working and personal life that illustrate your competence.
Selection decisions
In selection decisions, as we shall see, it is important to collect and assimilate various forms of evidence to improve decision-making. For example, a selection framework composed of assessment group activities, application forms, interviews and tests may be used as follows:
118
U niversity of Sunderland
This is best for observing skills of oral communication, leadership, team membership, planning and organisation, and decision-making. Also good for observing energy, enthusiasm, target setting, analysis and presentation skills.
Application form
This is best for assessing written communication skills.
Interview
This is best for assessing skills of oral communication, team membership, decision-making, motivation, personal strength and analysis.
Test
This is best for assessing decision-making and motivation skills and, if conducted verbally, oral communication skills and the ability to present a reasoned argument. Depending on the particular role for which selection is being undertaken, certain selection methods are more appropriate than others. For instance, when selecting call centre staff an assessment of telephone style/manner is essential. For an engineering apprenticeship, a numerical aptitude test might be best suited. Whereas, for management roles, assessment centre group activities are invaluable as they enable leadership, decision making, negotiation, motivation and presentation skills to be evaluated in a group context. As the process of selection becomes more complex, decisions have to be made more rigorously as we search for key competences that differentiate more successful strategic performance. Selection and assessment becomes a key tool for identifying talents and integrating and fitting them to the organisational purpose.
ACTIVITY
Why is competence analysis seen to be more beneficial today in selection than traditional approaches, and why might it be a powerful tool to assess the future direction of organisational change?
U niversity of Sunderland
119
ACTIVITY FEEDBACK
Competency analysis is based upon criteria sampling of actual job performance factors and, therefore, relates directly to the job demands. By determining both threshold and differentiator competence, organisations can track and monitor shifts of core, emerging and declining competence. This can then be assessed for individuals across the organisation or for individual career development and deployment.
So how do organisations assess competence? Competence is usually assessed by means of assessment centres, focused interviews (often acting as behavioural event interviews) and the job analysis process via the expert panels and selection decisions, and clearly the same techniques can be used for internal selection and development decisions. Increased competence profiling is being used additionally in reward decisions and will be seen to be at the heart of specifying organisational culture and change management objectives. Competence is at the heart of strategic decisions that influence the nature of the organisation capability now and for the future. A word of caution needs to be introduced at this point. Kandola & Whiddett (2000) have argued that to completely focus on competency-based selection is flawed. Commenting that in graduate recruitment the examination of competence out of the business context of performance may be misleading, they agree that it should not be the only basis of assessment. They also argue that a rigid interpretation of competence tends to restrict diversity of objectives in both selection and subsequent performance management systems. The 2000 survey of graduate recruits suggested 61% of recruiters were still using non-competence methods, a statistic that had not changed much over the preceding decade. Kandola & Whiddett also refer to Keenans argument for a competence approach, based upon objective standards, although he accepted that Management Charter Initiative (MCI) based standards tended to focus on minimum standards rather than differential strategies. Despite the criticisms a competence-based approach at the general level of HR planning is taking hold of corporate thinking.
Emotional Intelligence
In an alternative model of competence, Goldman (1998) identified 25 surface behaviours that emanate from five basic core capacities. These
120
U niversity of Sunderland
include self-awareness, self-regulation, motivation, empathy and social skills. Goldman concludes that emotional intelligence determines our potential for learning the [management] practices or skills. Critics are questioning the uniqueness of this approach and there is clear synergy with the Pedlar & Burgoyne model of competence or so-called key attributes. Woodruff (2001) agrees, reminding us that success based upon interpersonal skills and cognitive ability is critical to the resource based view of organisations. Clearly, competence and emotional intelligence overlap and are at the forefront of policies of acquisition and retention of talented employees. More recently emotional intelligence has been put forward as an alternative approach to measuring human behaviour as a basis for understanding what differentiates performance. We conclude that emotional intelligence is purely an extension of the competence argument that reinforces its importance rather than introducing anything distinctive. In the next section we move on to link competence with strategic options for recruitment and selection.
Recruitment and labour market strategy. Structure and content of assessment practice.
Recruitment strategies
An area of HR policy on which the identification of competence as a strategic formulation will place demands is the recruitment and labour market strategy. How then do we set up planning systems to achieve recruitment strategy? The labour market is changing. The effect of the EU in opening up employment across national boundaries has been demonstrated by the introduction of a wide range of international staff with medical functions in the UK. For many years, engineering and manufacturing, as well as professional, staff from the UK have been working in Europe. In recent years, recognising the severe shortage in specific areas such as
U niversity of Sunderland
121
IT and medicine, governments in Western Europe have been loosening immigration controls for people with sought-after skills. The use of flexible employment strategies such as home-working and teleworking has allowed new labour markets to be opened up, and part-time and flexible hours have introduced further labour market scope. The Internet has extended the scope for advertising and reaching potential employees. Each of these has strategic implications for recruitment.
Strategic approaches
Faced with uncertainty, Rynes & Barbour (1990) suggested three strategic approaches to the labour market:
Changing attraction practices. Changing inducement offered to applicants. Targeting non-traditional sources of applicants.
Changing attraction practices This involves a number of steps:
ACTIVITY
For each of these steps, try to identify a possible example: 1. 2. 3. Broadening channels of recruitment Changing recruitment behaviour Changing recruitment measures.
ACTIVITY FEEDBACK
You might have included the following:
122
U niversity of Sunderland
1.
U niversity of Sunderland
123
A sellers' market for knowledge workers. Applicant power to choose employers, reversing power
relations in selection.
124
U niversity of Sunderland
His ideas not only apply to knowledge workers, professional and highly skilled employees, but also to core workers in medical professions and administrative staff in certain large cities. Certainly globalisation confirms this trend. For example, ticketing functions for airlines can be completed in India, software applications can be developed in India or small, cheaper software houses. Even customer Service Centres can be relocated from high cost areas such as London to Sunderland, and to India, where Indians are trained to speak English with an American accent to suit Californian householders. There is much validity in Herriot's prognosis, but perhaps not for the reasons he suggested.
Recruiting quality staff. Objectivity and fairness. Cost effectiveness and high retention.
Connock (1991) proposed a professional market of recruitment aligned with marketing principles. Recruitment was to be based on the following principles:
U niversity of Sunderland
125
Market Research What does the prospective employee (customer) know and feel about your organisation? Awareness, favourability and familiarity indices were created for age and gender. Segmentation Segment the geographical areas of the job holder by occupation. Selling and targeting Prospective employees were set against the background of the business vision. Connock did this successfully by promoting Pearl Assurance to London workers to attract them out of the city to Peterborough. The promotion involved name awareness to corporate image with specific companies targeted at selected groups such as school leavers and housewives. Broader techniques of recruitment These include open days, poster campaigns and bus adverts. Jobs and skills profiles Wider access to competency/knowledge, skills and attitudes to allow staff selection. Recruitment support This includes:
Corporate image brochures, application forms and so on. Data on job contact and organisational context. Professional staff available to deal with enquiries within
published service standard. Selection Multiple systems to improve decision making but geared to job demands. Recruitment audit This would cover rates of candidate enquiries, destination review of successful candidates, benchmark data on recruitment project management, performance indicators for each stage of the recruitment process. For example:
126
U niversity of Sunderland
Total applications by media/meeting criteria. Cost per head per appointment. Satisfaction surveys from candidates and from personnel
on service support, etc. e-recruitment There are two facets to e-recruitment: the use of the Internet as a recruitment and media channel, and e-assessment to automate administration. For example, Cable and Wireless now processes invoices of temporary staff in the same way that it processes other goods and services. Carter (2000) cites the ability of Oracle to handle a pool of 5,000 candidates. Details of freelance workers can be handled more quickly, reducing selection and recruitment timescales by 50%. Organisations reportedly benefit from a 40% reduction in costs of authorising and submitting cost records with the attendant benefit of real information on hours and costs of temporary workers by project or contract. In the UK, Sainsburys has an e-procurement and e-HR management system across 428 branches. The system allows a direct link up with the Reed Employment Agency. Sainsburys also report that the integration of movement and HR has allowed more strategic devolution of HR strategy to line management.
ACTIVITY
Online psychometric testing might seem ideal; it is flexible and saves travel costs and time. Suggest at least two disadvantages of online testing.
ACTIVITY FEEDBACK
You might have thought of any of the following:
U niversity of Sunderland
127
Collusion between candidates or a candidate and a third party. Untrained people may start providing untried products. Control of the process and effective feedback on a non
face-to-face basis may be difficult.
The use of screening tests alone for shortlisting is still practised in the HR profession. However, structured telephone interviews, biodata tests and psychometric tests with interviews are already widely used to reduce candidate lists. e-Assessments also provide further opportunity, as we shall see in a moment. We need to balance the advantages and disadvantages, safeguarding the use of online tests and ensuring some of the strategic benefits of cost, speed, candidate flexibility, without compromising professional integrity and fairness. Proponents argue the low reliability of interviews and promote the speed, autonomy and wider access of potential employees to information on careers guidance, appraisal and development information. This allows more control over the process to support the 'sellers' market and power of the applicant predicted by Herriott. Albery (2001) argues that e-assessment allows further technical enhancement to services through the use of adaptive 'tests' where new questions can be generated in response to answers given. This test can be shorter whilst retaining accuracy. Retention strategies for untapped talent markets Organisations often focus recruitment on their experience of retention. Demographic pressures in the UK have reduced the number of school leavers, particularly as more people enter Higher Education. A review of skills and competencies has brought a reappraisal in some areas of the virtue of older workers in terms of experience, customer focus and retention. This is not a universally held view, as age and qualifications often still prevail. Women currently make up 45-50% of the workforce in the UK, but with traditional approaches to child rearing, organisations often lose highly trained staff for lengthy periods of time, or altogether. The options to avoid this include:
128
ACTIVITY
Suggest what key HR management considerations might be used to develop an orderly scheme that ensures take-up and promotes commitment and equity in scheme operation in terms of retention strategies. Try to write down at least two considerations.
ACTIVITY FEEDBACK
You might have identified the following: Eligibility criteria published:
U niversity of Sunderland
129
Other resourcing strategies often relate to school and college leavers so we find organisations following a range of strategies to recruit high calibre people:
Job Analysis
We have discussed the attention now being applied to defining requirements through the design of competence models. At this point we need to add that the process of job analysis must take place at two levels to ensure synergy:
130
incentive, dynamic and complex environment. It is at this point that we need to assess the new job and person competencies. One of the methods of assessing these competence changes is the critical incident method. Critical incident methodology involves the evaluation of important situations in an employee's working life to assess what happened, why it happened and what skills were involved in achieving the outcome. Examples of these important situations are team working and group decision-making. These situations can of course involve both positive and negative incidents. This methodology illustrates not only what is done but also why and how it is done as a basis for selecting key behaviours from staff. What is actually done can be compared with a template of desired behaviour. Try it now for yourself.
ACTIVITY
1. In the scenario identified above, where flatter, flexible team based structures are introduced, what key criteria might be important for recruitment and selection arising from the new culture and structure? Select five incidents in the last year when you did something well and five incidents when something went less well. (For example, a positive example of team working might be offering feedback.) For each incident answer the following questions:
2.
- What did you do, specifically? - How is this an example of effective/ineffective behaviour?
(Think about the personal competences model.)
ACTIVITY FEEDBACK
For the first part of the exercise you might have come up with some of the following:
131
Adaptability. Desire to improve. Self confidence. Team working skills. Accept responsibility. Broad vision. Seek performance feedback. Tolerance of change.
This will form key selection criteria.
Application form data. Biodata. Tests of aptitude and ability to perform specific skills. Personality tests. Pschychometric tests of ability, for example, IQ,
numeracy, verbal and spatial awareness.
Reference details.
Today the aim of selection is to align assessment more closely with the specific criteria and demands of the particular task. A strategic approach to assessment is generally associated with attempting to use specific skills and/or competences for assessment:
132
U niversity of Sunderland
Specific past events. What that person actually did. Why and how they did it. How they interpreted the outcome.
The candidate should be discouraged from 'we' statements and concentrate on 'I' target data to isolate their personal contribution. This type of interview involves the interviewer in a broad counselling style using plenty of why, how, what questions to isolate behaviour and reasoning. Sometimes the 'competence' is revealed and the candidate is encouraged to select an example. At other times, the competence is hidden and initial incidents are interrogated to ascertain core skills. In any event it can be somewhat threatening to a candidate to have to focus on the self only, and it can display a mistrust of the candidate, so a careful pre-briefing can be necessary to avoid creating the wrong impression!
ACTIVITY
Try it yourself. Try interviewing somebody against a competence profile to ascertain their past experience. Try it from the detailed competence and the hidden competence standpoint. Be careful to record the evidence carefully against the profile that you have highlighted. Try the WH Smith model. Be sure to record only what is said happened and what the person particularly did or said. Don't spend more than 10 minutes on this; results can be achieved in a 10 minute pilot interview.
U niversity of Sunderland
133
ACTIVITY FEEDBACK
There is no individual feedback to this activity but you may want to reflect on your findings. You will have built up an evidence base of behaviours that is probably superior to what a person says they would do. This type of hypothetical link may be useful to test knowledge; for example, how would you deal with an angry customer? It may not tell you as much about how they would react. Clearly the best way is to see them do it or simulate it, but this can be costly. The behavioural event, structured or focused, interview is a good way of improving the validation and reliability of the interview and at the same time focusing closely to strategic behaviour/competence derived from the business plan.
It is also important to focus on equal opportunities (EO) in selection as a legal and ethical issue, which may also:
Influence commitment and involvement of staff. Avoid legal sanction and the consequential reputation
problems. In other words, strategic recruitment and selection involves a consideration of the 'fairness' factor on business and ethical grounds.
ACTIVITY
What do you understand by 'fairness' in selection decisions? Note down in a sentence or two what you understand by this term and how it is achieved.
ACTIVITY FEEDBACK
Fairness is usually thought of as standard, consistent and transparent behaviour in assessing interview candidates. It might be achieved through any of the following:
134
U niversity of Sunderland
Confidentiality of information. Not trying to entrap or ask unfair questions that are not related to
the job.
Informing candidates of the process and outcomes. Treating candidates equally and consistently. Assessing candidates through ability derived from 'fair' criteria based
upon job demand.
The concept of 'fairness' in selection involves both the process and the content of the selection procedures. Many organisations now adopt very systematic procedures based around:
Job-related interviews that are behaviour focused Trained and accredited interviewers to ensure the core
skills of listening, observing, evaluating, collecting evidence, building confidence and empathy.
U niversity of Sunderland
135
Many organisations do not have the resources to sustain this level of rigour and others reject the apparent rigidity. Increasingly, the demands of external scrutiny and indeed building the basis of the employee relationship at an early stage through a demonstration of professionalism, is extending the range of such fair practice. Despite these practices, women and ethnic minorities remain under-represented in professional/management jobs in particular, and in many cases employment generally, and over-represented in fragmented or insecure employment.
Who takes responsibility for HR planning? What does Human Resource strategy looks like?
Administrative linkage, that is, non-strategy. One-way linkage; a flow of information down from
corporate planning to allow HR decisions to be made.
ACTIVITY
With Bullers levels in mind, who do you think is responsible for HR planning?
136
U niversity of Sunderland
ACTIVITY FEEDBACK
It seems likely that the collection and synthesis of data into forecasts is going to be led by a strong HR specialist working in close consultation with senior and line managers, particularly on the interpretation and meaning of the scenarios. It therefore seems logical that the creation of integrated business-led HR policies will be carried out by HR but with strong input, discussion and final agreement from senior managers from the business. Clearly, Board representatives need to present and lead the discussion and provide expert assessment of policy options against business objectives, and ensure a commitment to decisions and subsequent implementation.
Some commentators might dispute both the reality and desirability of such a model based on HR competence and the value of such planning. However, it does provide a way of utilising HRs professional skills and expertise, but in collaboration with managers from the business. This approach avoids more simplistic categorisation of responsibilities. In the end, it is not a question of who ultimately has the authority to make HR decisions, but the quality of the data, content and process of planning and the wider involvement of key stakeholders that matter.
U niversity of Sunderland
137
Develop and implement HR plans Use 4-task model to develop plans Implement HR policies & practices
Outcomes for stakeholders Shareholders and owners Employees Customers Strategic partners
Review, revise, refocus Business strategies and plans HR strategies and plans
Figure 3.2: The strategic management process and its implications for HR management.
CASE STUDY
Read the article below to discover some of the answers to What does HR strategy look like?.
138
U niversity of Sunderland
Putting People First a human resource strategy for health services in Wessex by Ken Jarold and Alex Selkirk THE AIM OF THIS STRATEGY This aim of this document is, therefore, to provide a framework within which health authorities can:
Effectively plan and control the size and mix of the workforce to
ensure that every employee is utilised fully and able to meet the challenges of work;
Attract, develop and retain good staff at all levels; Encourage understanding of business objectives and the need to
improve quality, effectiveness and efficiency;
Help maintain an informed and motivated workforce; Manage staff fairly and with displayed respect for each individual
employee;
Make full use of the freedoms which are now becoming available to
extend progressively the scope for flexibility in local determination of pay and other benefits for staff;
U niversity of Sunderland
139
To reduce the demand for staff. To improve utilisation. To compete more effectively in the labour market.
This action will encompass strategies for the education, training and development of staff and for the use of information systems. These actions must be guided by explicit and widely-understood personnel policies and by a continued commitment to equal opportunities in employment. In particular, action must be taken to ensure that health authorities deploy and motivate staff effectively and pursue methods of delivering care which make the best possible use of manpower. Manpower information systems will need to be developed further to ensure accurate and timely information is available to assist managers in controlling manpower. Manpower targets should be refined and developed. Turnover and absence rates should be set and progress towards achieving these monitored. There should be clear definitions of the roles and responsibilities of staff. Methods to measure performance will need to be developed and the use of Individual Performance Review should be applied more widely. Policies to encourage the retention of staff need to be researched, developed and implemented quickly; e.g., flexible working patterns and child-care provisions. The feasibility of improving and extending the benefits available to staff needs to be examined and initiatives pursued on the local determination of pay. Training and development strategies need to be refined and developed to ensure the potential of existing staff is fully utilised and people encouraged to
U niversity of Sunderland
140
remain in the Service to fulfil their career aspirations. The development of managerial and leadership skills is vital to the success of this strategy. Such skills will enable the NHS in Wessex to manage the changes emanating from the White Paper and prepare it for the challenges of the coming decade. THE NEED FOR CHANGE Staff: the primary resource of the NHS The NHS is a manpower-intensive organisation and is the largest employer in both the United Kingdom and the Wessex region. Some 43,600 people are employed by health authorities in Wessex. Labour costs account for around three-quarters of all expenditure and the effective delivery of services is heavily dependent on the goodwill and commitment of appropriately trained staff deployed in the right numbers to the right places. Traditionally, the labour market has been able to provide sufficient numbers of people to sustain expansion. Pressure to provide working conditions and practices which make the most effective use possible of staff have therefore been guided by financial rather than manpower supply limitations. The NHS recruits from a broad age and ability range, and people are deployed across a wide spectrum of professional disciplines in a variety of skilled and unskilled work (there are more than 100 different professions serving the NHS). However, large sections of the workforce are trained in what could be deemed to be specific health care tasks (medical, nursing and paramedical support functions). The NHS is the sole training organisation for many of these professional groups. Changing demographic factors The NHS faces the prospect of a continuing demand for more, and increasingly sophisticated, services which will intensify the pressures for additional skills and manpower. Between now and the year 2000, the number of people living in Wessex will increase to 3,181,000. This is a rise in excess of ten per cent and more than twice the national average. The numbers of elderly people those that require most health care will also increase substantially: a rise of 56,000 in those aged 75 and over and, again, an increase in excess of the national average. It is anticipated that the demand for acute services will increase by 30 per cent over the next ten years. However, the traditional sources of supply of labour to meet this increased demand are declining. By the turn of the century, the number of school leavers entering the job market in Wessex will fall by 25 per cent. Those with five O levels and two A levels, the category from which the NHS has traditionally recruited the majority of its workforce, will fall by 30 per cent.
U niversity of Sunderland
141
The fall in labour supply is exacerbated by the increase in demand for labour across the economy as a whole and nationally an increase of 2.2 million jobs is predicted by the year 2000. Competition for staff from other sectors of the economy will be vigorous particularly for trainees and for those with transferable skills but also for those trained in specific health service professions who are prepared to pursue alternative careers. The combination of these recruitment and retention difficulties with financial pressures makes it realistic to assume that, at best, it will only be possible to maintain the workforce at around its present level. It may be advisable to expect a reduction in the workforce, and the deployment and utilisation of staff must be planned accordingly. Such factors would be sufficient in themselves to justify a radical reappraisal of the way human resources are sought, utilised and developed. However, as an organisation concerned with the care of people in the community we must also ensure that the well being and motivation of the people who work for the Service our most important asset receives a higher priority. The Action Required Three kinds of action will be required: to reduce DEMAND for staff, to improve the UTILISATION of staff in post and to COMPETE more effectively in the labour market. Such actions are inter-related and none can be pursued in isolation. Therefore, to be effective, the Human Resource Strategy must be seen as an integral part of the overall business strategy. THE DEMAND FOR STAFF A reduction in the demand for staff will be achieved in the following ways:
142
U niversity of Sunderland
develop at an affordable pace. Consultant expansion programmes, for example, will need to be directed towards pressure points within the Service and be linked precisely to the developments outlined in short-term programmes. It may be necessary to restrict developments in some specialities until action has been taken to meet the shortfall in others. Waiting times should remain a guide to demand but they will need to be used in conjunction with other performance measures. Medical manpower targets for 1998 are now being produced and interim targets for 1993 will be issued during 1990. Manpower forecasts should also reflect the changes which are taking place in the composition of the workforce and the pattern of provision. This is particularly important within the nursing profession where students will have much of their service contribution replaced by support workers. Targets have already been set to ensure that registered nurses can help health visitors and district nurses meet workload targets, given the continued expansion of community services. The roles of staff should be subject to regular scrutiny and skill-mix review to avoid duplication and the use of inappropriate skills. For example, in high-technology areas, well-qualified nurses should be engaged in patient rather than technical activity. Also, it may be possible to reduce the demand for skilled staff in a number of professions by augmenting the role of the helper or aide. However, this assumption will need to be tested and applied only when it is of clear benefit. THE UTILISATION OF STAFF The improved utilisation of staff will come about by:
Ensuring that qualified staff are employed to maximum effect; Improved identification of the education, training and development
needs of individual members of staff to meet work objectives and to satisfy their personal career aspirations and by improving the use of training resources;
U niversity of Sunderland
143
Effective means of measuring and monitoring work performance will need to be developed and introduced further. For the medical profession, medical audit will have an important role identifying more effective working practices and use of facilities. Nursing standards provide the means to assess objectively the performance of nursing services and will help maximise quality and staff time. Increased emphasis should also be placed on the use of facilities which promote effective use of manpower; centralised surgical units, for example. Similarly, maintenance, closure, leave and locum arrangements should be carefully co-ordinated, with savings re-directed into priority areas. Overtime and absenteeism need to be monitored carefully and action taken to identify their causes and to reduce their incidence. The development of occupational health schemes should be given increased priority. Shift patterns and working routines should be devised which make the most effective use of staff and reflect peaks and troughs in demand more accurately. Staff time should also be used more flexibly and directed toward areas of greatest need. There is a continuing need to ensure that the right skills are in the right place to meet workload demands. The restructuring of the nursing workforce following the introduction of clinical grading is of vital importance. It should also allow DHAs (District Health Authority) to further consolidate training, increase the opportunities for clinical practice and improve the recruitment potential of the Service. Manpower plans should identify the number of staff required at each grade and formal development programmes should be instituted for newly qualified personnel. More high quality training in management should be provided for specialist staff, particularly doctors, the principal deployers of health care resources; management development programmes for middle level nurses should be more widely established, in order to improve their effectiveness in resource management initiatives; and clerical and administrative tasks should be carefully identified and carried out by non front-line personnel. Efforts to reduce the hours of junior medical staff should continue. More flexible rota systems should be introduced and greater use must be made of the staff grade. Whilst it is recognised that some groups of staff will have high turnover rates, such as junior doctors on fixed contracts, the causes of staff turnover will need to be clearly identified and action taken to eliminate negative factors. COMPETING EFFECTIVELY: THE SUPPLY OF PEOPLE If the NHS is to compete effectively in the labour market, it will be necessary to pursue action on a number of fronts:
144
flexible shift and working patterns and the employment of people working at or from home;
U niversity of Sunderland
145
appropriate number of training grades which also acknowledge service demands as well as career aspirations. The Education and Training Strategy for Nurses, Midwives and Health Visitors is now being implemented, resulting in a rationalisation of schools and the establishment of regional-self sufficiency in supply. A standard approach to the training of support workers as required under Project 2000 will need to be developed by health authorities, building on the work of the NHS Training Authority, and conversion and development courses for enrolled nurses should be introduced. A strategy for post-registration education has been devised to meet manpower requirements for more qualified nursing staff and the required numbers of graduate nurses will need to be assessed by mid-1990 and change implemented by 1991. THE MANAGEMENT OF PEOPLE In the 1990s, the NHS will be facing stiffer competition from rival organisations for good calibre staff. Many of these organisations will be able to offer more attractive financial rewards but the move towards more locally-determined terms and conditions will continue in the NHS. The RHA will encourage DHAs to develop a pay policy to make full use of the freedoms which are now becoming available, in accordance with the aim stated in the White Paper to extend progressively the scope for pay flexibility linked to local labour market conditions. However, pay should not be seen as the only means to reward staff or potential recruits: the Service must also develop a range of measures to support this process. Employment Practices Each authority in Wessex will be required to publish explicit personnel codes and policies which should identify the values, culture and action needed to ensure that the contributions of managers and staff are harnessed to the objectives of the organisation. Benefits The RHA will continue its work in the field of non-pay benefits with increased emphasis on staff as sole rather than prime beneficiaries. DHAs are encouraged to participate with the RHA in these initiatives as their involvement will improve the Services purchasing and negotiating position. Support at Work The RHA will examine the feasibility of: more flexible working hours and patterns of work; job sharing; creche and child-care facilities; and career break schemes, which may help open up new sources of recruits and help retain existing staff. Counselling The NHS is in a state of constant change. However, that envisaged by the White Paper will be particularly vigorous and comprehensive. The RHA has an ongoing commitment to the provision of counselling; the counselling of staff affected by change will be crucial to the future success of the Service. In some instances, external counselling may be appropriate. Individual Performance Review The initiatives above will be complemented by the promotion of a culture of shared understanding of
U niversity of Sunderland
146
business objectives, systematic feedback on achievement and a closer connection between achievement and reward. PR will be extended to more grades in the Service (ward sister/A & C grade 6) by the end of 1989/90. IPR will also become the principal method by which training and development needs are identified (a formal system for analysing the investment in training will be instituted by October 1990). Communication The morale, motivation and commitment of the workforce is dependent upon a clear understanding of the organisations aims, objectives and limitations. It is vital to engage in practices which develop rapid communication between all levels of the Service and to develop systems which convey easily accessible, consistent and unambiguous messages. All communication with staff should be conducted in a spirit of openness and honesty. Leadership To achieve these aims, it is essential to recognise the importance of acquiring strong leadership qualities at all management levels. Health authorities will need to invest more time and training in developing such skills. Managers will need to lead by example and give both purpose and direction in order to harness the energy and commitment which exist throughout the service. INFORMATION Developing information systems The successful implementation of this Strategy depends heavily on the effective use of information and information technology particularly at local level. Whilst much has already been done to introduce new manpower and personnel systems, greater efforts now need to be made to ensure that information is accurate, of high quality, timely and sufficiently widely available to meet the aims of this Strategy. All authorities should distinguish between operational systems which enable managers to monitor their own performance especially important for the delegation of responsibility to local level and those systems which are required to feed into the statistical network. These latter systems are those which need common definitions and coding structures and which should lead to the production of national and inter-regional information, not just on manpower but also on the relationship between manpower, activity and costs. It is of fundamental importance that action is taken now to ensure that suitable systems (manual or computer) are in place to help health authorities tackle the manpower and personnel issues of the 1990s. These systems should be designed to assist those who provide direct care to manage resources better and monitor quality and improvements in care. The types of information needed to help meet the key manpower and personnel issues outlined in this strategy are now described. They should not be viewed as comprehensive and instead are illustrative of the minimum required.
U niversity of Sunderland
147
Demand Reducing the need for staff and the Services dependence on highly-skilled personnel is related to the availability of staff in the labour market and to the control of unit costs, the latter being particularly emphasised in the White Paper. Information systems should, as a minimum, offer the following:
The setting and monitoring of targets for turnover and lost time
(including sickness and absenteeism), recording hours of work and overtime;
148
U niversity of Sunderland
Information systems should be designed to produce these indicators on a regular basis to all levels of management so that action can be taken when targets are not being achieved. Supply This strategy emphasises the importance of effective recruitment, education, training and employment practices. Information systems should, therefore, enable the following:
The monitoring of pay levels and local pay policies and the effect
they have on the ability of the Service to fill vacancies (this information, coupled with that on turnover, retention and vacancy levels, should help health authorities identify what changes in pay policy would be the most effective.) EDUCATION, TRAINING & DEVELOPMENT (For simplicity, the word training is used throughout this section rather than education, training and development)
Strategic aims The RHAs Education, Training and Development Strategy derives from its mission statement and embraces the following principles:
U niversity of Sunderland
149
Needs and priorities Predictions of manpower requirements for the next decade stress the need for staff to be prepared to:
150
U niversity of Sunderland
Use acquired knowledge and skills in rapidly changing circumstances; Perform multi-task operations; Work in multi-occupational teams and cross existing
professional/occupational boundaries;
Act in, and help provide and/or manage, an integrated service with a
clear understanding of its wider purpose. The general needs listed above provide a basis for examining/re-examining training needs within the Service. The prime responsibility for identifying these needs must rest with health authorities and with every manager in those authorities. The introduction of individual performance review marks a major step forward in establishing a systematic assessment and review of individual training needs. Plans should increasingly contain a standard for the number and type of staff who should have a specific qualification and the desired level of training, in order to perform a particular task (e.g. for accident and emergency departments, at least one member of nursing staff who has received specific A&E training at an approved course should always be on duty). The production of realistic manpower plans by each health authority is a first and fundamental step in the complex process of developing both a district and a regional overview of manpower needs, and therefore, training needs. It is imperative that manpower information on both wastage and turnover and other lost time is collected and analysed in order that manpower plans can be regularly updated. In respect of the regionally-managed training services, manpower forecasts have been based upon Summary Analysis of Strategic Plans projections and specific training and manpower surveys conducted on behalf of the Regional Training Council. Organisation The RHA is firmly committed to regional self-sufficiency and the devolution of training activities to the lowest practical management level in the organisation, including entering into training contracts where possible. These commitments have to be met within a coherent and recognisable framework across the region which:
Ensures job centred training; Makes optimum use of scarce training skills, knowledge and
expertise and is cost effective;
U niversity of Sunderland
151
Communicating examples of good practice across the region; Providing a point of reference and liaison with National
agencies particularly the National Health Service Training Authority. In terms of providing training, the RHAs involvement will be confined to those activities where:
152
U niversity of Sunderland
Funding The RHA is committed to the belief that it should aim to be self-sufficient in the supply of staff. It may not be feasible, however, to supply some types of training within the region and therefore collaborative arrangements with other training organisations may be required. Providers must:
Ensure they have a supply plan for each staff group; Identify for each service the number of staff that should have a
specific qualification or have received some sort of education and training (i.e., set standards for levels of training);
U niversity of Sunderland
153
ACTION 1. The RHA will consult formally with DHAs on this strategy with the aim of assisting DHAs to develop their own Human Resources Strategies during 1990, where they have not already done so. Each strategy should at least address the following key elements:-
2.
3.
The RHA will agree with DHAs a set of respective priorities for action, with target timings where appropriate and will co-ordinate initiatives around the region to avoid any unnecessary duplication of effort.
REFERENCE
154
U niversity of Sunderland
Jarrold, Ken and Selkirk, Alex (edr) (1992) Putting People First: a human resource strategy for health services in Wessex, Winchester, Hants., Wessex Regional Health Authority.
QUESTIONS:
What are the visions and values of the Health Trust? What are the SBI and SBO? What are the Corporate and Business Strategic Concerns? What are the four tasks in relation to Wessex? What are the key policy areas?
Reducing demand for staff. Improving utilisation. Competing more effectively in the labour markets. Demand, utilisation, internal/external supply, management of people
strategy, information systems and utilisation of staff-planning, HRD. What are the four tasks in relation to Wessex?
U niversity of Sunderland
155
Employee competence: management of people. Employee behaviour: not clearly specified but suggested in
Needs and Priorities under education, training and development.
Equal opportunities/retention: recruitment imaginative. Reward strategy: reducing turnover improved retention. Communication strategy to support change: education, training
and development including management development education strategy, job restrictions/definitions. Organisations that follow this approach clearly are trying to create a working relationship between the business requirements and the basis of people skills and activities that will contribute to the success of the organisation. We called this integration in previous units. However, you might have noted how such an approach might build confidence in the workforce and patients through the transparent communication of the HR aims and objectives. This form of direction-setting and identification of expectations of staff and the support that the organisation will offer may help to cement a sense of commitment and fairness in the employment relationship. We referred to the psychological contract in earlier units and this is an example of a step towards building this. Patients are likely to derive confidence that the workforce is well developed to do their work and are employed in efficient and effective ways to ensure value for the investment, a matter of wider interest to governments and the public who fund healthcare. In a private sector business these statements build confidence in the effective management of resources for quality and reliability which is, of course, of interest to customers and suppliers as well as staff. The public pronouncements of intentions raise expectations and are insufficient without careful implementation, as the non-fulfilment of the bargain may create a heightened sense of dissatisfaction. We could describe this as raising the stakes and in a sense this can both be a pressure and commitment to improve HR management once the intention is public but, of course, the risks are greater. We must also advise caution about the overly rationalistic view of organisations making explicit their intentions in changing times. If the environment is uncertain then such planning may quickly become redundant; constant change of intentions can confuse users and put up the risk of diluting confidence and trust in the management which is linked to the earlier point.
156
U niversity of Sunderland
That is why some strategists now are emphasising more flexible or emergent plans that are more adaptable, what we have referred to before as more general statements of direction or scenarios of the future. For employees, of course, these are rather less tangible and related to the day-to-day world of work that they experience. This will engender less interest and commitment if this is the case. However as a working plan for the organisation based on resource planning then it may have a more realistic framework for organisational decision-making, what we have perhaps referred to as the resource based view of HR strategy. The difference of approach is perhaps determined by the need to engage the whole workforce in the process of HR change. Alternatively, where the size of the organisation is large, more low key statements of direction and involvement of staff may not be feasible in terms of assuring consistency of implementation across the organisation or mobilising knowledge and commitment to change. Although the style and approach may differ, the imperative for a strategy is not diminished.
The above case study illustrates the possibility for HR strategy. It covers the relationship between human resources and business strategy. It offers a comprehensive strategic response or matching strategy as laid down by the concepts of Unit 1. The case shows how demand and supply issues are evaluated in a HR planning process. People management is placed at the centre of the business outcomes and key HR levers are identified as a basis for achieving the people outcomes. Strategic HR outcomes are recorded, for example employee commitment, leadership, flexibility and performance-based strategy, which we shall address in Unit 4. Competence is not central to this strategy, which is unusual, but we might infer the competences required in terms of skill enhancement and flexibility. This is a multi-task operation and a multi-occupational team-based approach. Of course, management competence is at the heart of the strategy. Finally, we see the level of integration being attempted from the business strategy to the HR response across each of the policy areas. There is much controversy as to the extent to which organisations actually produce a formal HR strategy and communicate it to employees. Large organisations, health care and public authorities including universities have widely engaged in the process. Critics have concentrated on the impact and reality of the plans and the degree to which they are implemented.
U niversity of Sunderland
157
Strategy formulation
Establishing vision and values
This describes the kind of company and its business priorities. This has important implications for the style and climate of the HR working environment. Schuler et al (2001) describe the Merck Pharmaceutical mission as the provision of superior product innovation to improve the quality of life focusing on ethics as well as shareholder returns. Barclays Bank in the UK has recently launched a campaign of size and strength but perhaps lost the sense of closeness to customer and service values.
Becoming more globally competent. Open through acquisition. Become more innovative. Enhanced customer focus and solution orientated.
From the business objectives emerge core competencies and then the skill/knowledge mix of people and numbers of people.
Capturing synergy between related businesses. Establishing investment priorities and steering resources
into opportunities.
158
U niversity of Sunderland
Interpreting changing marketing conditions. Devising approaches to competing successfully. Selecting competitive strategy. Responding to changing environments. Uniting initiatives across departments.
HR will be involved in numerous ways. For example, Schuler et al (2001) stress the importance of the following:
Strategy implementation
Developing and implementing plan four task model
The four task model amplifies in HR terms what we need to do for people. The four tasks are:
Recruitment, selection and internal career development. Training, development and corporate learning. Performance management.
U niversity of Sunderland
159
Compensation and reward. Health, safety and working environment. Employee relationships. Organisational change and design.
Having outlined what a HR strategy might look like we now need to consider how to evaluate it.
Strategic importance of HR in the organisation. Whether HRM practice in the organisation reflects best
practice.
Whether HRM practices support organisational goals. The extent to which HR policies and practices work
together to support the organisation goal.
160
U niversity of Sunderland
Assessment 360 approach Documentation, development plan and results Employee surveys of management commitment to performance objectives Clarity of objectives and feedback
(Source: Yeung and Berman B, 1997) Operational evaluation: outcomes Hiltops & Despres (1994) offer a basis of performance indicators that serve to complement our audit basis for Personnel Departments in Unit 2 as a basis for evaluating services, delivery and contracting purposes. Recruitment and Selection
- number of long term vacancies/total number of jobs - average length of time to fill jobs - proportion of vacancies filled internally - average time spent in a job or function per employee - measures of candidates satisfaction with recruitment
professionalism
161
- basic salary/total remuneration - number of salary grades/employees - incentivisation/basic salary - incentives/organisational performance pre tax profits - incentives / cost improvements.
Employee Relations
- number of resignations/headcount - average length of service - rate of absenteeism - levels of supervision/employees - level of grievances/disputes - participation in quality improvement activities - satisfaction with communications and consultation
channels
- total revenue per employee - headcount this year/last and periodically - part-time/outsourced staff to full-time staff - employment cost and expenditure - number of HR professionals per employee - age distribution of employees - service level achievement and satisfaction of HR
department. Operational evaluation: process This normally constitutes attitude surveys to track and monitor staff reaction and opinions to such things as:
- leadership style effective working relations - support and encouragement for training
162
U niversity of Sunderland
- satisfaction with job and terms and conditions - ability to raise concerns and have them effectively
resolved There are many more factors that could be included, but the basic aim is to understand behaviour, opinions and reactions to the working environment. We shall see the full importance of these later when we discuss the development of an effective learning climate as key strategic capability. From Unit 2, we can already see how an understanding of employee attitudes could be seen as critical to understanding the level and nature of employee commitment to organisational goals and indeed the level of commitment or nature of the psychological contract with the organisation. For example, we might use an attitude survey to assess commitment and identification with the service/product and customer needs and so on. We might also assess such matters as job interest and effort put into improving business processes.
ACTIVITY
Suggest at least two design and/or follow-up considerations for such an attitude survey.
ACTIVITY FEEDBACK
The important design and follow-up consideration for attitude surveys are:
Careful design and piloting with target audience. Consistent application yearly or bi-annually. Publish results benchmarking honestly. Following actions through cross-sectional groups.
U niversity of Sunderland
163
The important thing to consider with process evaluation is that the process in itself contributes to positive employee relations. The process, and the publication of the results and actions on the audit, symbolise a transparent and learning approach by management. It can be seen as a high risk strategy; once you have started you are to some extent open and at the mercy of employee opinion, however well or badly-founded these opinions are. But this approach is totally consistent with approaches toward the other key stakeholder in the business, the customer. It can be seen as representing a new deal with employees and perhaps suggesting a change in management style and a raising of the employee profile. This may be the way to achieve greater identity and commitment. The stakes have never been higher in the move towards achieving high commitment and high performance through culture changes. You might want to refer back to this when we discuss the principles behind the learning organisation.
Summary
This unit has introduced the importance of having HR Planning systems and processes in place to support HR Strategy. We have examined the broader context and information now used for planning and the links to human resource policy decisions. The depth and range of information to be collected is increasing as witnessed by the competence models. The importance of competence is twofold. First, it creates a common language by which managers can understand and make decisions about people requirements in a relatively consistent way. Second, it enables the key link to be made through which business strategies can be articulated in people terms, to enable HR strategies to be written. We have identified the components of HR Strategy and discussed the best of the key resourcing strategies to support its achievement, that is, recruitment and selection.
164
U niversity of Sunderland
REVIEW ACTIVITY
Now answer the following questions to refresh your knowledge of this unit: 1. Why is Human Resource Planning becoming of strategic importance within organisations? Identify three tactical and three strategic methods of improving labour supply. Identify three key areas of competence developments for yourself using one of the models provided in the unit. What other Human Resource Systems can competence models support and assist with the decision making process? Identify the main steps to HR strategy formulation and implementation. Outline the main strategic approach to recruitment. How can organisations improve the reliability and validity of recruitment? What are the internal/external resourcing strategies that organisations can use to enhance recruitment and retention?
2.
3.
4.
5. 6. 7.
8.
Answer 3
U niversity of Sunderland
165
This is a flexible question for you to answer in conjunction with one of the models in the unit, Pedlar and Burgoyne or WH Smith. Answer 4 Other systems that can be supported include:
- organisational restructuring - recruitment - skills utilisation - career management - appraisal, personnel development planning - reward management - culture change.
The competence model is the central feature of an integrated human resource strategy. Answer 5 The main steps in formulation are:
- establishing vision and values - focus on SBI and SBO - drafting strategic plan - corporate and business concerns in planning.
The main steps in implementation are:
- managing employee assignments and opportunities - managing employee competence - managing employee behaviour - managing employee motivation policy and practice alignment - recruitment and selection
166
U niversity of Sunderland
- training, development and corporate learning - performance management - compensation and reward - health, safety and environment - employee relations - organisational change and design review and evaluation - strategic education - operational evaluation - outcomes - processes.
Answer 6 The main strategic approach to recruitment is in:
- candidate-friendly recruitment - professionalism in recruitment and marketing the organisation - use of e-business recruitment - resourcing strategies retention of talent.
Answer 7 The reliability and validity of recruitment can be improved through more rigorous approaches to selection with:
U niversity of Sunderland
167
- competency-based application forms - structured fair recruitment and selection practice - wider use of simulation based upon job demands, for example
in assessment centres
References
The Strategic Managing of Human Resources, edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, 2004 (Key text for this module) Albery, R. (2001) Frames of Mind: How are safeguards built in?, People Management, 14 June. Atkinson, J. (1989) Four stages in demographic downturn, Personnel Management, August pp. 20-24. Bartram, D. (2001) in Albery, R. Frames of Mind: How are safeguards built in?, People Management, 14 June. Becker and Huselid (1998) High Performance work systems and firm performance: a synthesis of research and managerial implications, Research in Personnel and Human Resources 16(1), pp. 53-101. Bennison and Casson (1989) The Manpower Planning Handbook. Maidenhead: McGraw Hill. Bramham, J. (1994) Human Resource Planning, Wimbledon: Institute of Personnel & Development. Buller, P. (1988) Successful Partnerships: HR and Strategic planning at eight top firms. Carter, M. (2000) Contract Shift Featuring e-Procurement, People Management, 23 Nov.
168
U niversity of Sunderland
Connock, S. (1991) HR Vision: managing the quality workforce. Institute of Personnel Management. Fowler, A. (1990) Performance Management: the MBO of the 90s Personnel Management July edition Goldman, D. (1998) Working with Emotional Intelligence, Bloomsbury. Hammel, G. and Prahalad, C.K. (1994) Competing for the Future. Cambridge MA: Harvard University Press. Herriott P (1994) Candidate friendly selection for the 1990s, Personnel Management, 22 (2), February, pp. 32-35. Hiltops, J. and Despres, C. (1994) Benchmarking the performance of human resource management, Long-Range Planning, 27(6) pp. 43-47. Kandola, B. and Whiddett, S. (2000) Fit for the job?, People Management, 25 May, pp. 30-38. Kaplan, R.S. and Norton, D.P. (1992) The Balanced Score-Measures that Drive Performance, Harvard Business Review, January-February. Kotter (1982) General Managers, Oxford, Free Press. Nordhaug, O. (1993) Human Capital in Organisations. New York: Oxford University Press. OCreery, M.F. (1997) B824 Unit 9 Evaluating Human Resource Initiative. Open University. Pedlar, M., Burgoyne, J. and Boydell (1994) A Managers Guide to Self Development Maidenhead: McGraw Hill Rynes and Barbour (1990) Applicant Attraction Strategies: an Organisational Perspective Academy of Management Review, 15(2) pp. 286-310. Schuler, RS., Jackson and Storey, J. (2001) HRM and its links with Strategic Management in Storey, J. (ed) Human Resource Management. A Critical Text. Thomson Learning. Woodruff, C. (2001) Promotional Intelligence, People Management, January, pp. 26-29. Yeung, A.K. and Berman, B. (1997) Adding Value through Human Resources : Re-orientating Human Resource Management to Drive Business Performance, Human Resource Management Journal 36(3), pp. 321-35.
U niversity of Sunderland
169
Unit 4
Performance Management
LEARNING OUTCOMES
Following the completion of this unit you should be able to:
Introduction
One assertion that can be made about the strategic management of people is that the systems and processes are only a means to an end, to the achievement of organisational goals. In this unit we argue that to maximise the benefits of people management, the key factor is the integration of the HR systems. Performance Management Systems (PMS) are a key integrator by allowing objectives in a business plan to be fed into the rest of the HR systems that we encountered in Unit 1. We need to clarify what we mean by Performance Management Systems. Bevan & Thompson (1992) offer the following definition (adapted):
171
READING ACTIVITY
Please read Chapter 7 of your key text, The Strategic Managing of Human Resources, Edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, which covers some of the subjects of this unit.
172
U niversity of Sunderland
Despite the cautions, PMS have several positive qualities that distinguish them from previous systems such as Management by Objectives (MBO):
There is a mix of quantitative and qualitative objectives. There is a focus not only on system design but also on the
manner of implementation, that is, PMS are process/culture sensitive and as such, are flexible.
Distinguishing features
The features that make up PMS can be seen as a series of steps linked to an overall business strategy, as follows: 1. 2. 3. 4. 5. 6. objective setting ongoing review of objectives the development of personal improvement plans linked to training and development formal appraisal with feedback pay review a competence-based organisational capability review.
ACTIVITY
Imagine that you work for a university or college and you wish to introduce an integrated performance strategy and system. The strategic objectives might be oriented towards expanding courses for postgraduate students and addressing cost effectiveness in course delivery. The business strategy is to:
U niversity of Sunderland
173
Complete a market review of demand for courses. Establish a competitive view of regional and national course
provision.
Develop skills in writing distance learning materials. Develop coaching skills to support learners in using
independent teaching with the lecture-based system.
ACTIVITY FEEDBACK
The system may look like this: Step 1: Objective setting
174
Develop skills in writing distance learning materials. Develop coaching skills to support learners in using independent
teaching with the lecture-based system. Step 2: Formal appraisal
To reflect the practice and research into the model of tutoring. Establish networks of people inside and outside the organisation to
exchange ideas on distance and web-based tutorials.
Web design training in the use of technology. Revised professional updating to support new careers. Support career change as detailed below.
Career plan
U niversity of Sunderland
175
Personal/job improvement plan Career development plan Training plan Performance rating
Step Two
Formal appraisal
Step Four
Step Three
Pay review
Reflecting on your study of Units 1 and 2, you should note that key words start to reappear:
Integration of HR response to strategic demand. Integration of available skill, competence and attitudinal
supply.
176
U niversity of Sunderland
Clearly this is a highly formalised system and many organisations could not afford to engage in all these steps, particularly the separate development plans. The key features are:
The business led and linked objectives. The ongoing participation review process framed around
a clear management style of open feedback (see below).
Measurement of objectives. Appraisal decisions. Performance-related pay. Coaching and counselling staff at the job level to enhance
skill and learning capability.
U niversity of Sunderland
177
CASE STUDY
Read the following article on Performance Management: Performance Management: The New MBO? by Alan Fowler Management has always been about getting things done, and good managers are concerned to get the right things done well. That, in essence, is performance management the organisation of work to achieve the best possible results. From this simple viewpoint, performance management is not a system or technique, it is the totality of the day-to-day activity of all managers. But if the methods managers use to achieve results are left to their individual initiative, two problems arise: There is no guarantee that all the managers will work to a coherent set of organisational goals and priorities. Managers vary considerably in competence, so performance standards are unlikely to be consistent or universally high. As a result, the history of management consists largely of attempts to evolve managerial processes which, by systematising good practice, ensure that what all managers aim for and achieve is what the organisation requires. The recent emergence of the concept of performance management with its related formal systems which have already acquired the generic title of PMS is the latest in a long line of such attempts. Is this just the flavour of the month? Will these systems be any more successful than previous techniques particularly management by objectives (MBO), which PMS resembles quite closely? A broad review of past developments provides some clues. Several features emerge from a 60-year view. No single theory or technique has proved to be adequate by itself to secure a high level of organisational and managerial performance, and none has lived up to initial expectations; but most have had some lasting beneficial effect, however limited. There have also been two largely unrelated and sometimes opposing approaches, one concerned with work processes, the other with the human element with people. These two streams of development derive from what 1960s theorists described as the scientific and human schools of management. There are, of course, more complex and academically sophisticated categorisations of management theory, but from a practical viewpoint the two approaches of process-oriented or person-oriented techniques provide a sharper focus. In simple terms, the thinking behind the evolution of management techniques seems to be as described in the two boxes below.
178
U niversity of Sunderland
THE PROCESS APPROACH High performance is best secured by analysing the work which needs to be done to achieve a predetermined result, and then designing the most efficient sequence or method of work activities. In short, to find the one best way. There is an assumption that employees will follow this method because, from an analytically logical viewpoint, it is patently obvious that it is the best way of working.
THE PEOPLE APPROACH High performance can be achieved only through people. So, if the right people are selected for the right jobs in the right numbers, if they are trained in the appropriate skills, and if they are effectively led and motivated, then they will inevitably work well. There is an assumption that; by and large, competent, motivated people will evolve their own best methods of working.
Almost all management techniques and systems developed this century fall into one or other of these categories. Table 1 shows this in summary form. This is not an exhaustive list, and it does not include current developments in performance management or total quality, but it serves to highlight the historic contrast between the two approaches.
TABLE 1: CATEGORIES OF MANAGEMENT TECHNIQUES THE PROCESS APPROACH Work study Critical path analysis Operational research O&M PPBR (planning and review) Cost benefit analysis Job evaluation Statistical manpower planning Management by objectives (MBO) THE PEOPLE APPROACH Selection test techniques Training needs analysis Training techniques Joint consultation Industrial democracy Merit rating Quality circles Human resource planning Performance-related pay
Although most techniques concerned with process have been developed separately from those concerned with the people dimension and vice versa it would be going too far to argue that there has been a wholly rigid distinction. At least some of the systems which fall mainly into one category have some linkage with the other approach. For example:
Work study though essentially process based has been used for
incentive payment schemes. Such schemes reflect a managerial view that people are motivated by factors other than the sheer logic of a best method system of working.
U niversity of Sunderland
179
180
U niversity of Sunderland
Quality circles. Although the purpose of quality circles was clearly to raise quality or process standards, the system itself was founded firmly on theories of motivation through involvement an essentially people-based approach. Many organisations launched quality circles with great enthusiasm at the end of the 70s only to experience a fairly rapid decline in the interest and commitment of managers and employees. Some organisations achieved success and some quality circles have become firmly established, but this seems to have occurred in only a minority of cases. In an article in PM [Personnel Management] in February 1985 (Quality circles why they break down and why they hold up), Ron Collard and Barrie Dale commented on studies in which some 20 reasons for failure had been identified, of which company restructuring, employee turnover and lack of co-operation by supervisors and middle managers were the most common. [Now] a broader view is possible, and two main reasons can now be suggested. First, many circles were not compatible with company culture. Participative shopfloor working sat uneasily within hierarchical and authoritarian environments. Secondly, circles were introduced without changes being made to formal working methods and systems. In a wave of enthusiasm for harnessing the talents of their people, companies overlooked the need to reshape their processes for example, the procedures for making design or production changes. So ideas generated by the circles entered the formal procedures at an unconventional point in an unconventional way, and were then often lost or delayed by the unchanged formal system. Management by objectives (MBO) was the first attempt to systematise the whole process of management. It was certainly thought to be the answer by many of its proponents. Yet it too has fallen largely into disuse at least so far as the detailed system marketed by Urwick Orr, and its derivatives, is concerned. True, the basic idea has survived that if management is about getting things done it is as well to define what is required and review progress regularly, and it forms the basis of todays PMS. But MBO as one specific technique had expired within 10 years of its much publicised launch. Why? The answers are particularly relevant to PMS. First, the standard, packaged MBO system fitted the culture of a few organisations, but not that of many others. It required a highly structured, orderly and logical approach characteristics which were more compatible with traditional bureaucracies than with the opportunistic world of the entrepreneur. Few managers though many administrators are naturally as systematic as MBO required. Secondly, there was only limited recognition of the importance of defining the organisations corporate values and goals. The emphasis was on the role of the individual manager. One result was that objectives set in one department could be inconsistent with those of other parts of the organisation. Thirdly, schemes were often perceived by line managers as a centrally imposed additional task, Management development specialists often owned the system not the line managers who had to put it into effect.
U niversity of Sunderland
181
Systematic objective-setting consequently became a formal once-a-year exercise bearing little relationship to managers day-to-day decisions. An annual event could not keep pace with the rate and volume of change occurring between each years appraisal interview. In addition, there was an over-emphasis on quantifiable objectives to the detriment of important qualitative factors. And, finally, the system was administratively top-heavy. Form filling became an end in itself. Three general causes of failure can be drawn from this review. 1. People-based systems can rarely operate effectively without some form of process-based support. Being enthusiastic is not enough. In any but the very smallest of organisations, a framework of procedural systems is necessary to ensure that good ideas and desirable changes can be quickly and efficiently implemented. This is where the biggest risk exists for current developments in total quality management. A new-found enthusiasm for quality will almost certainly need support from major revisions to existing work processes, whether technical or administrative. It is not clear from some current total quality management literature that sufficient attention is being given to the process side of the quality story. The main emphasis, influenced strongly by Tom Peters frenetic evangelism, is on changing attitudes. But nothing turns enthusiasm more quickly into cynicism than the lack of efficient procedures to convey good ideas into practical action. 2. Process-based systems will fail if inadequate attention is given to the changes in attitudes or skills which are needed for them to operate effectively. This is not just a question of mounting a training programme. The question of ownership of the systems is also of critical importance. Far too often, new techniques are imposed from the centre and seen by busy line managers as unwelcome additions to an already heavy managerial load. Many appraisal schemes are perceived in this way as the pet projects of the personnel department a chore to be disposed of as rapidly as possible so managers can return to their real work. Both types of system will fail if they are incompatible with the organisations culture (its style, beliefs and values), or unless they are an integral part of a planned programme of cultural change. Frequently, however, new management techniques have been introduced without thought about their cultural impact. Highly structured work planning or staff appraisal schemes are injected into organisations whose whole style is informal and flexible. Or attempts are made to induce collaborative or participative working in one part of an otherwise highly controlled and status-conscious environment. In either case, the alien implant is quickly rejected. The recognition of culture is probably the most important single addition to management thinking in the last decade. Its application to the design and implementation of management systems is not yet firmly established.
U niversity of Sunderland
3.
182
Will todays performance management systems avoid the pitfalls of the past and achieve the integrated approach which should lead to success? As Table 2 shows, PMS shares many common features with MBO, even though some of the jargon has changed. MBO divided jobs into their key results areas principal accountabilities in PMS terminology. Both systems set objectives within each segment of the job; both distinguish between task-based objectives and personal development goals. Both require the identification of performance measures and the periodic appraisal of achievement against objectives. But, as Table 2 also indicates, there are some important differences, In full-blown PMS, the starting point is a definition of the organisations mission, aims and values a cultural feature not found in MBO. Corporate and divisional objectives are then identified which reflect or support the corporate mission. The objectives of individual managers (and then their support staff) are evolved similarly as part of a cascade of integrated goal and standard setting. Unlike MBO, which was generally limited in application to managers, PMS schemes are being extended to all staff. The whole process is far more cohesive and strategically focused than MBO and consequently stands a better chance of success. In most PMS schemes, too, there is a recognition that performance cannot be assessed solely by quantified measurement. Qualitative performance indicators are given full recognition, for example, by the use of customer attitude and opinion surveys. This, too, gives PMS a higher survival rating than MBO.
Table 2: MBO and PMS compared MBO Packaged system Applied to managers Emphasis on individual objectives Emphasis on quantified performance measures Jobs divided into key results areas (KRAs) Objectives set for each KRA Performance measures Task and personal goals Annual appraisal including discussion of new goals Most schemes used complex paperwork Schemes owned by specialists PMS Tailor-made systems Applied to all staff Emphasis on corporate goals and values Inclusion of qualitative performance indicators Jobs divided into principal accountabilities Objectives set for each accountability Performance indicators Task and personal goals Annual appraisal including discussion of new goals Some schemes have complex paperwork Schemes owned by line management
Another plus point is that there is no one packaged performance management system. John Humble deserves enormous credit for inventing MBO, but the selling of a single system by Urwick Orr led many companies to buy an off-the-shelf package instead of evolving an approach which best fitted their particular circumstances and style. Although some consultants such as Hay are very active in the performance management field, most organisations (often with consultancy assistance) are evolving their own tailor-made systems.
U niversity of Sunderland
183
Finally, PMS initiatives tend to be led by chief executives and top management teams, not by personnel specialists. Middle managers may still react against the imposition of a performance management system but with less vigour and much more caution than when central personnel was seen as the prime mover of an MBO scheme. PMS is becoming owned by line management. It would be unwise, however, to think that, because of these beneficial differences, PMS will take root as a permanent best way of achieving a high standard of organisational performance. Several contra-indications can be seen in a number of current schemes. In particular, within the appraisal process of PMS, some schemes are placing almost total emphasis on statistically measured task performance (the extent to which the manager achieves present goals) to the exclusion of broader, people-type issues of personal competence and development. It is curious that this trend is particularly apparent in a number of local government schemes where, in the past, the argument has been that many public service functions are not susceptible to quantifiable assessment. Some local authorities seem to feel a need to demonstrate that they can be just as macho as the private sector, and consequently consider it a weakness to pay any attention to behavioural or personal factors. Too much reliance is still being placed on objective-setting and review as an annual event. In todays fast moving world, any idea that effective performance management can be tied neatly to a single annual date is patently absurd. Far more effort is needed to build the fundamental principles of goal-setting, appraisal and supportive action into the ongoing and informal management activity. In short, what is needed is an attitudinal or cultural change not just the adoption of a largely administrative process. This potential cause of failure is exacerbated by another unwelcome tendency for schemes to become administratively complex. One public sector scheme now requires the completion of an eight-page appraisal form in accordance with the terms of a 48-page management manual a classic example of the process becoming an end in itself rather than being a practical aid to better performance. Schemes are being hastily introduced in some organisations, almost as a matter of fashion, without adequate thought being given to the practicalities of achieving the objectives which are being set. Both the process and the people aspects are being given too little attention. On the process side, managers are being encouraged to set collective and personal goals before procedures have been changed to aid implementation or adequate attention has been given to the resource implications. Managers go along with this initially, partly because there is a tendency in the first flush of enthusiasm for people to set themselves unrealistic targets. The chief executive in one scheme is known currently to be working towards eight broad objectives and 52 short-term goals, involving over 100 performance indicators. Some disappointment seems likely.
184
U niversity of Sunderland
Enthusiasm for total quality management has emerged separately from the development of PMS in some organisations. Two sets of processes then emerge, not wholly in mesh and potentially giving different signals to managers and employees about priorities and values. No confident prognosis is possible. Some schemes are likely to succeed and become, in effect, their organisations way of managing. The scheme a term which implies a discrete activity will become the company style. Others can be guaranteed to fail: their over-emphasis on the process, or incompatibility with the prevailing company culture, are the seeds of their own destruction. There is an opportunity here for personnel managers, provided they give up ownership of any particular system or approach and act instead as integrators and facilitators. (Fowler,1990)
QUESTIONS:
1. 2. 3. What does Fowler identify as the problems with MBO? What does he identify as the problems with PMS? What aspects does he think merit greater attention?
- isolated objectives - lack of ownership - overly formal, once yearly event - not embedded in development - over-emphasis on quantifiable objectives.
2. He also identifies the problems with PMS as:
U niversity of Sunderland
185
- what can be measured is what is done - lack of responsiveness to formalised objective setting,
inflexibility. 3. He advocates greater attention to:
- the fit of PMS with organisational culture - more flexible systems to support ongoing learning,
participation and development
- avoidance of overly formal recording systems - development of line manager skills: feedback,
coaching/consultancy, and support
Thus, Fowler advocates more integrated systems that flow from the work environment but critically reflect the style and interrelationships of employees. In other words, they are explicitly linked to fitting in with the desired organisational culture. You may recall the best fit model and the relationship of culture and structures, including job design. The SHRS principles rely heavily on attempting to manage and form effective corporate cultures. This in turn relies on attempts to align individual staff culture with organisational culture. The range of issues included within PMS, for example, reward, development and so on, and the style of delivery, such as involving or judging, will influence this culture. We shall resume these discussions later in the unit. Appreciating that people are strategic assets (intellectual capital assets), organisations are increasingly adopting the people approach. There is thus a shift for HR departments from ownership, management and control of people, to facilitating involvement and ownership of the scheme. PMS facilitates the strategic management of people by:
186
U niversity of Sunderland
Management style changes for line managers. Balance of team and individual goals. Balancing bottom line operation with organisational
process/qualitative focus.
The history of the organisation. Its management style. Its industrial relations tradition. Its size, formality and market sensitivity. The emphasis on reward and performance links. Performance versus development orientation/culture.
Some contrasting examples may help to explain these variables and their influence on performance management approaches. Example 1: Public authorities and governments Typically such organisations employ large numbers of people. The emphasis is on strong trade union representation and influence on performance of staff. Performance levels are shared with management and are often the subject of formal de-personalised negotiation and agreement. The development of highly formalised relationships, which are largely indirect, between managers and unions in terms of performance, tends to mean that these relationships are transactional and negotiable. This does not allow a flexible, dynamic interplay of ongoing objectives and review between managers and staff; that is, a performance and development culture. A regulatory environment tends to reduce the scope for this and sometimes it is a matter of mutual distrust. Consistency and transparency of treatment often lead to highly formalised systems of PM. Pay is often excluded, as this is a matter for separate collective negotiations. A PM system often amounts to a system of identification of training on limited objectives, except where management is seeking to use PMS, introduced with or without formal
U niversity of Sunderland
187
approval by staff and unions, as a means of securing greater corporate control. Example 2: Private sector IT company In this example, staff are paid individual salaries and unions are not recognised. Staff members are used to individual contracts and objectives being set by managers and being given feedback on those objectives. Formal review of performance is well established and staff members are used to personal and team objective setting in a fast moving business. Example 3: A small research and development dot.com company This will have a small number of staff with very flexible job boundaries. There is little time for formal planning, and day to day staff interaction, communication, and feedback from decision making are all very open.
ACTIVITY
Use these three examples to reflect on the following issues. Note down a brief description of each in the table below:
Example 1 How formal is the objective setting process? Are team-based objectives needed? Do objectives flow from the top down? How formal are the appraisal systems and related planning? What is the style of appraisal discussions and feedback? Are they linked to the pay system? What management skills and relationships are needed? Example 2 Example 3
188
U niversity of Sunderland
ACTIVITY FEEDBACK
Check your responses against ours below:
Example 1 How formal is the objective setting process? Are team-based objectives needed? Do objectives flow from the top down? How formal are the appraisal systems and related planning? What is the style of appraisal discussions and feedback? Are they linked to the pay system? What management skills and relationships are needed? Very No Yes Highly Probably formal No Line management skills formal situations Example 2 Fairly formal Yes Yes Fairly formal Fairly formal Yes Teamworking and team management skills needed Example 3 Informal Probably Not necessarily Informal Informal Yes Teamworking and team management skills needed
These examples should serve to illustrate the necessity of fitting appropriate PMS systems to the culture, history and organisational situations of companies. However, it is perhaps important to highlight at this stage how organisations are using PMS systems to act as catalysts for change. Two examples will illustrate the point and show the power of the SHRM system as an instrument of change management. (Recall from Unit 1 that one of the aims of a SHRM approach is about innovation and change.) A local government office was performance measured to improve efficiency and accountability for public resources under central government modernisation and efficiency drives. The office was moving from non-interaction on employee performance to individual objectives and accountability through the introduction of formal systems. A manufacturing company attempted to use a broader upward appraisal system and all-round feedback on performance (internal and external customer feedback; 360-degree appraisal) to improve flexibility and employee creativity. This company was moving from formal planned objectives to more flexible improvement orientation. These two illustrations show how organisations are attempting to use PMS strategically at two levels to achieve performance outcomes in explicit terms. For the local government it is the promotion of an efficiency orientation and accountability in the use of public funds. For the manufacturing company it is achieving both customer
U niversity of Sunderland
189
understanding and response. The first is to introduce a focus on performance, the second an emphasis on process relationships to improve flexibility. However, the second order of strategic thinking is to use PMS to change the culture. In the local government this means introducing an efficiency and cost mentality within staff perhaps more used to providing services on demand without much thought given to value for money. In the manufacturing example, where the cost and money focus is understood, staff are being encouraged to consider a wider agenda that differentiates a quality product. It is a more process-oriented view to encourage improvement and innovation rather than adherence to systems and procedure. It is encouraging greater awareness of the value of human interaction in product value rather than conforming to systems.
ACTIVITY
Using the two principal models of SHRM, best practice and best fit, identify the likely orientation of PMS in the light of the examples introduced above.
ACTIVITY FEEDBACK
Best practice models generally emphasise high investment in human resource development. Effective employee processes tend to be highly important. Therefore we might expect to see examples of the following:
190
U niversity of Sunderland
ACTIVITY
Take a few minutes to think about the basis of performance objectives. On what basis do you think they should be defined?
ACTIVITY FEEDBACK
You might have suggested some of the following:
191
Productivity/output targets. Achieving task objectives. Developing skills. Getting good customer feedback.
You should bear this feedback in mind as you now look at the nature and scope of objectives.
Develop competence (skill formation). Meet targets (operational demands). Create an appropriate corporate culture.
Objectives can be defined at three levels: productivity and output related, job-related, and person-related.
Reducing costs. Achieving sales targets. Meeting pre-set manufacturing volumes. Achieving percentage customer satisfaction levels on
service delivery.
192
U niversity of Sunderland
Main responsibilities and accountability achieved. Job description tasks met. Obligations and service relationships to internal and
external customers met. An example for a manufacturing manager might be the responsibility for the timely provision of production plans.
ACTIVITY
Suggest similar examples for:
ACTIVITY FEEDBACK
Our suggestions are:
Sales manager: achievement of specified sales targets. HR manager: provision of a cost effective recruitment service. Industrial relations manager: provision of timely and reliable legal
advice.
Learning and Development objectives should also be measured, as learning and development, contributes to better productivity, improved job performance and eventually a high-performance culture.
U niversity of Sunderland
193
Learning and Development objectives for the individual should be tailored to link directly with the skills and core competence requirements of the business, and to organisational development goals. Refer also to the section 'HRD in the context of Organisational development' in Unit 6.
Person-related objectives
These involve behavioural outcomes in terms of how the job is performed, for example, contributing to teamwork and quality activities, or communicating with customers. Differences in the way that organisations specify and emphasise targets often reflect the nature of the business and the culture of the organisation. Some organisations concentrate on the outcomes and deliverables, others on improving process capability, leaving relationships as the basis for achieving better performance. Hence, there are some common trends in the nature of the performance relationships:
194
U niversity of Sunderland
READING ACTIVITY
The creation and exploitation of intellectual assets is now viewed as a strategic corporate objective in today's knowledge economy. Knowledge management is vital to competitive advantage and market leadership. However, the biggest challenge in effective knowledge management is not the IT challenge but rather the human challenge. How do organisations bring about changes in individual behaviour and promote team-working? Read the article 'A primer on Knowledge Management' that identifies the challenges for organisations, its people and the role HR can play in bringing about change. http://www.acca.org.uk/publications/studentaccountant/57627
Although the individual work of organisational members is important, organisations must be careful to integrate employee activities. This has led to a new view of performance goals. MBO schemes tended to focus on the achievement of financial goals: profit, returns on investment, turnover, cost reductions, shareholder values and so on. PMS that fit the SHRM requirement are more likely to require broader factors. Use the next activity to think about what other measures might achieve a more effective integration of people related factors.
U niversity of Sunderland
195
ACTIVITY
Note down what factors, other than individual or financial, we can use in order to define objectives and measures.
ACTIVITY FEEDBACK
You might have noted any of the following:
Stakeholder views. Environmental issues. Quality. Customer satisfaction, workforce/process flexibility. Business process effectiveness. Market penetration. Lead firms.
You might ask why these other measures are relevant. In SHRM terms we are seeking to understand both what people do and how people work to ensure that we maximise the potential and knowledge of the workforce through a commitment-oriented strategy. SHRM values include building employee commitment and generally integrating employees, resources and stakeholders such as suppliers, customers and interest groups such as government and the public, as well as stakeholders in the traditional sense. To achieve this wider concept of integration, commitment and value alignment towards organisational goals, organisations have increasingly sought ways to promote recognition of these wider needs and indeed to measure these outcomes. One way that has been introduced is the balance scorecard technique, balance referring to the balance of stakeholders interests with a view to building a wider base of commitment. Organisations now recognise that the employee/
196
U niversity of Sunderland
employer or employer/shareholder equation is too narrow a level of analysis to address environmental pressures. We shall look again at this approach of using a wide range of performance measures and internal business process measures, which includes employee interests, as a way of broadening the strategic integration of staff values and attitudes.
CASE STUDY
Read the following short article which gives an explanation of the balance scorecard technique. Balancing the scorecard at Sears As part of its transformation under the new chief executive officer (CEO), Arthur Martinez, Sears believes that Compelling Place to Work, Compelling Place to Shop, and Compelling Place to Invest are three critical success factors that will in the long run sustain the success of the company. The logic is simple: by creating a Compelling Place to Work, associates behaviours will be changed in ways which, in turn, create a Compelling Place to Shop. As a result, customers are more likely to visit Sears again and thus be retained as steady clientele. Through repeated shopping by loyal customers, Sears then becomes a Compelling Place to Invest, as productivity and financial results both attract and retain shareholders. In order to make this model work, however, Sears understands that all senior managers must be evaluated on the basis of their performance on all three critical success factors, not just on financial results. Their bonuses should also be significantly tied to the measures in these critical factors. To ensure that all senior managers buy into this model, Sears has undertaken an extensive and comprehensive study to assess whether the model is in fact working as it predicts. In the first and second quarters of 1995, a Sears task force collected hard data from 800 stores. It collected 300,000 data points and utilised vigorous statistical tools to assess the strength of relationship among the three critical success factors: Compelling Place to Work, Compelling Place to Shop, and Compelling Place to Invest. The results, though preliminary, are impressive. Sears reported that for every 5% improvement in associates behaviours, customer retention was increased by 1.3%, revenues by 1.04%, and profit by 0.4%. What does this mean to Sears? It means that if Sears succeeds in improving associates behaviours by 5% (e.g. from 50% to 55%), its revenue will be increased by $300 million (Searss current revenue is approximately $230 billion)! It is also important to note that this enormous increase in revenue does not require additional head count or payroll, but simply an improvement in employee work environment. Moreover, line managers (not HR) are critical to the creation of such a positive work environment. The Sears example is distinctive as it not only translates soft business issues (people) into hard (financial results), but also identifies people as the driver of
U niversity of Sunderland
197
business growth and success. Based on the above logic and findings, the bonuses of all senior managers at Sears are now tied to a measure called Total Performance Index, of which 25% of the Index is based on Compelling Place to Work, 25% based on Compelling Place to Shop, and 50% based on Compelling Place to Invest. By restructuring the bonus system, Searss senior managers are encouraged to focus not only on the financial outcomes, but also on the process and capability that contribute to such outcomes. (Source: Yeung and Berman, 1997: pp. 325-8)
QUESTIONS:
How would you interpret the SHRM being attempted? How would you feel about this type of management communication as an employee? Note your answers to these questions in the space below the article. (Note that the mathematics of the article could be viewed in a different way.)
2.
We can summarise the expectations of organisations by a series of needs to be achieved as a basis of building commitment and behaviour flexibility.
198
U niversity of Sunderland
Customers require quality and service related to price. Employees require a healthy and rewarding place to
work, with security of employment or employability. By identifying measures to address these three key stakeholders, appropriate expectations are communicated to and understood by staff and a basis for empowerment and integration of activities is created. A useful way of representing this equation has been developed by Lynch & Cross (1995). See Figure 4.1. This model demonstrates the importance of the principle of a cascade of objectives, identification of broad measures and the integration of objectives at each level of the organisation. At the top of Figure 4.1 we see the organisation setting:
U niversity of Sunderland
199
Market
Financial
Flexibility
Quality
Delivery
Cycle time
Waste
Figure 4.1: The Performance Pyramid from Lynch RS and Cross (1995)
The remaining levels of the model relate to not only how effectively functional departments fulfil their roles in respect to the internal and external objectives but also how well the cross-functional business processes succeed in achieving appropriate delivery deadlines, waste reduction and co-ordinated services. This is a holistic and deep assessment of organisational effectiveness. It provides a broader basis to support a PM system beyond narrow departmental/functional objectives. We see the goals and values of the organisation driving the process at the top followed by a dual concentration of an external focus of the market and an internal focus of financial and cost performance. Such measures might include goals and values whose business definitions are the core values of the organisation:
200
U niversity of Sunderland
ACTIVITY
Before we move on to look at some of the supporting HR processes to achieve these HR outcomes, take a few minutes to reflect. Using the ideas in Units 1 and 2, and perhaps your own experience, try to identify some of the considerations and conditions that might lead to a more effective PM system.
ACTIVITY FEEDBACK
Some of the points that occur to us are:
U niversity of Sunderland
201
Management control over employee activity breeds resistance. Employment security should be emphasised as a result of
efficiency and productivity improvements.
202
U niversity of Sunderland
adjustment to objectives to counter the criticism that objectives set and reviewed annually do not fulfil two important aspects of the process:
That objectives should remain relevant and achievable. That the process of dialogue allows for relationship
building and coaching to take place. Before we look at different approaches to appraisal we need to think about the range of purposes that appraisal can fulfil. Use the next activity to do this.
ACTIVITY
Summarise the main purposes that you consider an effective appraisal scheme might fulfil.
ACTIVITY FEEDBACK
You might have thought of the following : (This feedback is adapted from Randell (1984).)
Evaluating performance Auditing Constructing succession plans Discovering training needs Motivating staff Developing individuals
to enable a rewards formula to be put into operation to discover work potential, both present and future, of individuals and teams for corporate replacement planning identifying gaps to be filled by formal training to clarify and offer feedback on standards and objectives advising on, conducting and explaining work methods to enable individuals to take responsibility for their own performance, training and development, and working relationships through feedback, dialogue and information sharing
This is a challenging list. However, these purposes will provide the basis for the design of the appraisal scheme, which is important to ensure that the PMS objectives are fully integrated with day-to-day
U niversity of Sunderland
203
work performance. Perhaps more importantly, the design will reflect the culture, style and maturity of workplace relationships. However, it is worth noting at an early stage, as we did earlier in the unit, that the design can often be used alongside PMS to signal a change in culture. For example organisations that do not have systems of appraisal or perhaps have partial coverage of professional staff, excluding non-management and/or professional staff, may use these schemes to intervene and control performance for the first time. Alternatively, where schemes are based on hard objectives and measures and emphasise accountability of staff, appraisal schemes can be rebalanced to ensure that more participation and developmental goals take precedence, to start to build greater employee commitment. You may recall the debates we had earlier in Unit 1 about hard and soft strategic HRM and appreciate how the design of the PMS and associated appraisal schemes can be adjusted to integrate these broader objectives.
Control orientation
The starting point and assumption is often that somebody up there acting as a controlling authority is saying that we need to stimulate effective performance and develop targets, offering reward for above average achievement. This is often perceived by staff negatively. The message is construed as forcing staff out or creating insecurity through subjective judgements. Control over lives and careers will be eroded. The consequence of this monitoring and control through feedback, which is further enhanced by working measures, tends to elicit the following responses:
204
Developmental orientation
The starting point is different. It is the need to inform, to leverage higher performance from control. The development appraisal does not start from the manager in control but the need to deal with the uncertainty in the mind of the employee. This is an employee who genuinely wants to know how they are performing and what the organisation thinks of their contribution and would, as a result, want to clarify their job role and enhance their career. The employee is addressing the matter for themselves. The situation moves from the employee as the starting point, not wanting to be told but helped through problems and limitations, whatever the source. The employee needs support to enhance contribution and the matching of their skills with organisational needs. This is the bottom-up, empowered view that, on the surface at least, is attractive, as the demand to develop and a learning climate are likely to evolve from such an attitude. The intended outcomes could be as follows:
U niversity of Sunderland
205
systematic reporting, information on performance and capability lies out of reach of lay decision makers, as it resides in the one-to-one relationship between manager and employee. It is also a highly skilled counselling approach that not all managers are well-equipped attitudinally to adopt.
CASE STUDY
Organisations are looking to introduce appraisal systems that reduce bias and scope for employee complaints about fairness, whilst encouraging challenging self-appraisal and openness to objective feedback that leads to individual and organisational development. Three examples of appraisal systems from Hewlett Packard/Shell, Nuclear Electric and BA are given in the article below: 360-Degree Feedback Under a 360-degree appraisal system, staff receive feedback from a variety of sources, such as other managers, team members, customers and subordinates. Benefits of wider feedback Advocates of 360-degree appraisal have reported a number of benefits over traditional appraisals. They believe that:
206
U niversity of Sunderland
For either developmental or assessment feedback to be effective, however, the company needs to ensure that it is constructive and is properly communicated to the employee. Two different approaches At Hewlett-Packard, employees have the option of including feedback obtained on a 360-degree basis as part of their performance evaluation. In this case, both the employee and the appraiser will gather feedback from managers, peers and customers before the appraisal. This information is used to provide a wider picture of performance. At Shell, 360 degree appraisals are used as an optional development tool that can be adapted to the needs of each business unit. In the case of corporate HR staff, eight people (four colleagues and four customers) were asked for feedback on an anonymous multiple-choice questionnaire. An external consultant was used to ensure confidentiality for the respondents and to facilitate the subsequent discussions with staff. The feedback was non-judgemental and provided topic for both personal and team development. Organisational culture Several companies [in this IDS study] commented that they did not feel their culture was currently suitable for 360-degree appraisal. This is because one of the key ingredients of success appears to be organisational culture. It works best in a system that is open and participative, otherwise individuals may be unwilling to provide honest feedback. (Source: Incomes Data Services, 1997:5) PERFORMANCE APPRAISAL AT NUCLEAR ELECTRIC Staff appraisal is for everyone in the company. Its about how we can jointly improve your performance. This guide will help you understand how the scheme works and how to get the most out of it. More detailed information and advice is provided on videos and in a self-help pack. These are available in the Studybase. The flow charts will take you through the main steps and may be useful as a checklist to your preparation. Your appraiser should be able to answer most of your immediate questions. Whats involved? Staff Appraisal is an annual discussion with your immediate supervisor. It provides an opportunity for you to review and assess your performance over the last year and receive feedback from your supervisor. It looks forward to agree standards, targets and training that will help improve your performance and achieve our business objectives.
U niversity of Sunderland
207
It also includes feedback to your appraiser on how you see their performance as a supervisor. Before your appraisal You will be given time to prepare so use it wisely. Think about what you want to talk about and how best to explain your views. When fixing the time and date for the discussion your appraiser will explain what you need to do and hand over the three forms. This is an opportunity for you to ask any questions you may have about the process. A description of the key areas of your job will appear on the main form. You are asked to comment on these, your performance over the past year and any ideas for improvement. You are also asked to write about your career aspirations and development needs. Think about the technical skill and knowledge needed for your type of work. Do you need specific training to help you do a quality job? On a separate form, to help with these thoughts, you are asked to consider your performance against a set of non-technical competences. These are common to all jobs and are considered important to achieving business success. Different jobs will require different levels for each competence and the form will be marked with the required level for your job as a reminder. The upward appraisal form will help you prepare to give feedback to your appraiser. Keep this form with you until the appraisal. The other two forms should be returned to your appraiser before the meeting. At your appraisal It should be a two way discussion so please consider the following points:
Be constructive in your discussion. Clarify what has been said and summarise in your own words. Agree competence levels and future actions. Agree the targets to be achieved. Record them on your action plan.
After your appraisal You get a copy of all the paperwork after your appraisers manager has commented, It is important for you both so keep a working copy of the Action Plan, so you both do what youve agreed to do. This will help you review progress during the year and be the starting point of next year's discussion.
208
U niversity of Sunderland
PERFORMANCE MANAGEMENT IN BRITISH AIRWAYS Introduction This file of guidelines and working papers is for your use as either manager or subordinate to help you manage performance throughout the year. WHAT IS PERFORMANCE MANAGEMENT? Performance Management in British Airways is about getting the important things done well. It is the way you keep track of:
How you are doing you regularly discuss progress and feedback
with your manager.
KRAs were agreed in line with the business plan and were reviewed
quarterly with the primary focus on BA performance enhancement.
U niversity of Sunderland
209
Planning and organisation. Judgement and decision making. Commitment and urgency. Flexibility and innovation. Strategic and business awareness. Communicating and influencing. Leading and motivating people. Application of specialist job knowledge.
Performance discussions are monitored externally to ensure consistency. Staff are introduced to a series of mutual benefits. For the individual it stresses clarity of expectations, strengths, feedback on results and the improvement in motivation and ability to independently gain recognition. For the organisation it stresses performance, team spirit, accountability, reduced errors and flexibility.
QUESTIONS:
Having read the descriptions of the Hewlett Packard/Shell, Nuclear Electric and BA appraisal systems, use the table below to rank as high, medium or low, the emphasis placed by each scheme on the purposes of appraisal.
210
U niversity of Sunderland
HP/Shell
Nuclear Electric
BA
Assessing performance
Pay related
Communicating expectations
Motivating staff
Developing staff
U niversity of Sunderland
211
Now try the next activity, also based on the three examples of appraisal systems.
ACTIVITY
Compare and contrast the benefits of the case examples provided in the previous activity. From your study so far answer the following questions in the space below: 1. Which of the appraisal systems adopts (a) a best fit and (b) a best practice approach to SHRM? How does culture and business strategy seem to influence these appraisal systems? Which of the systems emphasise control and which development? Do you consider that the variation in approach to appraisal addresses the underlying philosophy of SHRM towards interpreting HR systems and processes to achieve alignment with business strategic need?
2.
3. 4.
ACTIVITY FEEDBACK
1. You might have concluded that the Hewlett Packard/Shell and Nuclear Electric schemes were emphasising change of attitude and culture, and the concentration on employee satisfaction and process. The BA scheme is results- and task-driven reflecting the strategic perspective at the time.
2.
We can see that Hewlett Packard/Shell and Nuclear Electric have dual objectives in their appraisals: to engender performance enhancement but to do so through change of attitudes, commitment to improvement, experiential change and focus towards working with the organisation for success. BA has a shorter-term focus, performance driven and shaped by results. However, we should see these as contingent upon circumstances. BA indeed went through an earlier culture change progression. We can see the divide. There is a difference between Hewlett Packard and Shell, in terms of their schemes being more developmental, and BT being control oriented, reflecting the urgency of the immediate business environment.
3.
212
U niversity of Sunderland
4.
In all cases the appraisal is being used to shape attitudes towards strategic imperatives prevailing at the time. HR systems are the levers of change and at the same time reinforce the need and requirement to change through reward.
Let us now look at the specific design options that arise from these orientations.
Types of appraisal
Corbridge & Pilbeam (1998) offer a useful overview of the main types of appraisal, which include:
Top-down schemes
The most traditional form of appraisal, this emphasises both subordinate feedback and the lead on objective setting coming from the top. The problems often cited with this form are:
It stresses traditional organisational hierarchies. There may be a lack of impartiality, and favouritism. There can be a lack of full knowledge of the employee in
flatter structures, where the managers span of control may be wide. To counter these criticisms an independent reviewer is often asked to review the outcomes of top-down appraisal to help remove potential bias.
Self-appraisal
Self-appraisal is rarely used, as are independent forms of appraisal. It encourages greater ownership and participation in the appraisal scheme through self-reflection and helps ensure full preparation for the
U niversity of Sunderland
213
appraisal discussion. In an open environment it allows managers to shift from a directive, informing style to a counselling style, thereby assisting staff to form objectives and plans, moving from telling to selling to facilitating, which is seen as a creative and more effective level of satisfaction and ownership. We shall look at the core interview process below and the related skill clusters required to fulfil the objectives of the scheme.
Upward appraisal
Upward appraisal has been increasingly used to reflect the growing trend for organisations to recognise that they have a duty to provide effective working systems for employees. It is also predicated on a number of things, notably the internal customer relationship, and a shift in the hierarchical shape of organisations to more collegiate arrangements. Perhaps one way to represent this trend graphically is as follows. The first two models show the top down and self appraisal systems.
Management
Employee
Figure 4.2 illustrates model 1 consisting of top-down hierarchy with control of:
214
U niversity of Sunderland
Employee
Management
Figure 4.3 illustrates modified top-down control incorporating self-appraisal and upward appraisal of management practice and effective work systems. The arrows relate to the flow of communication and decision making and mark the levels of involvement in the objective setting and review process.
ACTIVITY
Imagine that you are designing an appraisal system and want to incorporate upward appraisal. Sketch a diagram of how the system might look, using a similar format to the figures above.
ACTIVITY FEEDBACK
Our diagram is shown on Figure 4.4. The triangle is now inverted, with management in a new relationship with their employees. Employees are seen as the lead deliverers of customer services. Management's role is to facilitate effective work systems in a new working relationship.
U niversity of Sunderland
215
Employee
Management
In upward appraisal, in a modest way, employees are invited to provide managers with a rating on such dimensions as effective communication, involvement in decision-making, clarity of objectives and goals, and so on. Often this rating is completed anonymously although more recent trends show managers conducting this process in staff focus groups as a basis for getting feedback on a range of management issues that impact upon staff.
Peer appraisal
Peer appraisal involves members of teams evaluating each other. One of the arguments for this type of system is the pressure to treat internal working relationships as internal customer relationships using similar feedback systems to external customer feedback techniques. As we saw when we reviewed the Personnel function, this method of feedback can often be further developed into full service level agreements. It is however complex to run in order to get the multiple channels working and assimilated. There are also sensitivities involved and careful development of staff is required in using such schemes. However, with the increasing uptake of team working, peer appraisal is a notional form of appraisal to use to expand non-hierarchical integrated HR systems.
Multi-directional appraisal
Also called 360-degree appraisal, there are key similarities here with peer appraisal. However, the key difference is that multi-directional appraisal deliberately sets out to collect data from outside the immediate team and often from external customer feedback. Its key advantage is to overcome the criticisms of impracticalities and lack of knowledge of a single appraiser. As we have seen, it can be complex
U niversity of Sunderland
216
and, of course, it does expose staff to potentially hostile views, which may be outside of their total control.
READING ACTIVITY
An illuminating example of how the scheme can be set up comes from the financial institution, JP Morgan. Read the article below: INCORPORATING PEER REVIEW IN APPRAISAL Performance management at the investment bank JP Morgan has at its head an unusual appraisal system. Each employee of the rank of officer (a term which covers the majority of employees) is required to ask up to five colleagues who have worked with him during the past year to submit confidential appraisals of his performance. In addition, anyone else in the company is entitled to submit an unsolicited appraisal on any other individual they have worked with and it may be positive, negative or a mixture of both. Such unsolicited appraisals cannot be given anonymously: the person co-ordinating the assessment has the right to discuss their views further with them, but the identity of the unsolicited appraiser is not revealed to the subject of the appraisal. The manager of the appraisees department collates the feedback, and summarises it in a document which also contributes his own assessment. This document is discussed with the employee, and forms the basis of a performance ranking on which promotions, pay rises and bonuses will be made. (Mabey et al,1998)
You may recall that 360-degree appraisal design schemes offer us the maximum availability of performance information from various stakeholders. Transparency of information and feedback aligns itself with parallel customer surveys that are now being applied to the internal integration of stakeholders.
CASE STUDY
Read the article below about 360-degree schemes: Circular Argument by Clive Fletcher, (People Management 1998) Multi-source feedback systems, usually called 360-degree feedback, have been adopted with such enthusiasm that they are now commonplace. They normally involve target managers being rated by subordinates, peers, bosses and
U niversity of Sunderland
217
sometimes customers, and examining how these assessments match up with their own self-ratings. The history of these systems is still a relatively short one, especially outside North America. Surveys on both sides of the Atlantic in the mid-1980s showed that about 10 per cent of US firms were using these techniques, compared with none at all over here. But since the early 1990s, 360-degree feedback has spread quickly across a range of public- and private-sector organisations in the UK. In what might be called phase one of 360-degree feedback, the emphasis was on its use as a development tool. It was usually applied in the context of career development workshops or as a one-off exercise for a group of managers. But there is no doubt that we are now into phase two, as more firms seek to use it as part of the ongoing evaluation of employees. In some cases, they are contemplating linking it with pay. This shift in emphasis from development to assessment is causing alarm among a number of professionals working in the management development field. So is it really something we should be concerned about? Before trying to answer that question, it is important to realise why organisations want to make 360-degree feedback part of appraisal. Mainly, this reflects the failings of conventional, top-down appraisals. They are often seen to be limited, because they reflect the perspective of only one person, and ratings have been shown to be prone to bias. Also, top-down appraisals too often seem to achieve little behavioural change. Including 360-degree feedback in appraisals seems to offer a solution to some of these problems. In theory, multiple levels and sources of data should lead to a more objective picture of an individuals contribution, strengths and development needs. It should consequently promote higher levels of trust in the fairness of the process. This, in turn, makes it more likely that some changes in behaviour will ensue. Quite apart from that, making the feedback part of appraisal gives it some teeth it sends a message to people that this is something that the organisation takes seriously: But things can go badly wrong. In the US, one study showed that half of the firms it surveyed that had implemented 360-degree feedback for appraisal had later dropped it. The potential problems are not hard to grasp. The first is that incorporating 360-degree feedback into appraisals may affect trust, which is necessary for the whole thing to work. People giving the ratings may fear some adverse consequences if they give negative feedback, or that the feedback may be misinterpreted by the individuals manager. The result would be lower-quality information, particularly from subordinates. Associated with this, target managers may become less ready to accept feedback if it has potentially damaging consequences. This scenario could lead to political game-playing. You might have subordinates asking for, say, a pay rise just before they give their assessments. And managers might be tempted to court popularity.
U niversity of Sunderland
218
The second concern is whether the ratings given in 360-degree feedback really are more objective than those of a traditional appraisal. The system undeniably gives more perspectives on an individuals performance, but are assessments by subordinates and peers any less prone to bias? There is evidence to support its use in appraisal. For example, data from a variety of organisations has indicated that appraisees are more satisfied with ratings from multiple sources rather than from one alone. But the research mostly tends to highlight the potential pitfalls. Shell lacking When the purpose of ratings becomes evaluative rather than developmental, up to 35 per cent of those giving the ratings change their assessments and the changes can be in either direction. This seems to support the notion that trust may be affected. The research findings are not reassuring in relation to accuracy, either. A study of a pilot 360-degree feedback system run at Shell showed that it was not measuring the competencies it was supposed to, and that it had other shortcomings in terms of its psychometric qualities. Fortunately, the same study showed that Shells newly redesigned system did work much more effectively. There is broad acceptance that 360-degree feedback can be a valuable developmental tool. Feedback of this sort has a potentially powerful impact, and the general view is that it is better to expose people to it as part of a development exercise before attempting to use it in appraisals. But the research findings should make people wary of grafting it on to appraisal systems. This is not to say that it cant be used successfully, but it does need to be handled with care. There are several issues that have to be addressed if 360-degree feedback is to be switched from a primarily developmental tool to a primarily appraisal tool:
U niversity of Sunderland
219
220
the dangers are clear to see. Developing and running such systems is not rocket science, but there is no excuse for not making some simple checks to see that they are working in the way intended, as opposed to merely finding out whether participants feel good, bad or indifferent about them (important as that might be). Examining the distribution of ratings by, say, checking whether the individual items on the form line up with the competencies they are supposed to, will reveal a great deal about the quality of the system. There are various other evaluation measures that can be taken, but they are more long term in nature. Many organisations are intent on making multi-source feedback part of the appraisal process. Many individuals who have been using feedback for development purposes have voiced alarm about this trend. This is perhaps justifiable, considering that some firms try to apply 360-degree feedback in this way without considering the implications. But while it can all go wrong, it does not necessarily have to. Given a professional approach (only some aspects of which I have mentioned), it is possible to make this kind of feedback a valuable input to performance appraisal.
QUESTION:
Summarise the key problems of the scheme. What does Fletcher advocate to ensure that the 360-degree schemes offer greater success?
Investment in decision time to address the completion. Keep feedback short and formal to avoid ratings fatigue. Balance 360-degree feedback with other traditional appraisal
techniques.
Developing the skill of the co-ordinator. Evaluate the distribution of ratings and ensure careful matches to
objectives and competencies set for staff.
U niversity of Sunderland
221
Watch out for the stress factor of such ratings and balance the
appraisal with other forms of appraisal.
The term 360-degree appraisal refers to the various sources of data: boss, peers, customers and reporting staff, in order to achieve a more comprehensive understanding of the performance relationships. Several features of the JP Morgan scheme are of particular interest, for example, it gives the appraisee scope for choice of information balanced by independent views. However, to emphasise constructive commentary, anonymity is not permitted. This is a careful balancing process that is necessary to provide an element of fairness to all parties and to encourage open and constructive dialogues. After all, appraisal should be formative and developmental, rather than destructive, to retain positive employee relations. Commitment, trust and involvement are desirable features of such schemes. A checklist of success factors for 360-degree appraisal is provided by Goodge (2000):
Link the appraisal to business strategy. Carry out a feasibility study to ensure this is the right
system for improving performance and that organisational conditions are favourable. Ask whether:
Pilot the scheme and use the results to adjust the process. Start where there is least resistance or where the process
can be introduced in a controlled way.
222
U niversity of Sunderland
Overtime to complete the paperwork. Vague objectives and inconsistent standards of objective
setting.
U niversity of Sunderland
223
satisfaction with their involvement in the process and the fulfilment of the outcomes, for example, developmental assistance. This is a form of operational evaluation discussed in Unit 2.
Summary
In this unit we have looked at the design of Performance Management Systems (PMS) and specifically at appraisal systems. The distinguishing features of a PMS include: the communication of a vision of the organisations objectives to all employees; setting of departmental and individual performance targets; formal review of progress toward these targets; review of outcomes leading to defined training, development, learning and reward outcomes; and evaluation in terms of improving organisational effectiveness and endorsing the use and value of human capability. We saw that it was necessary to fit appropriate PMS to the culture, history and organisation of the company. Central to the PMS is the process of setting and measuring performance management objectives. Key issues here are the nature and scope of the objectives, their link to corporate objectives and to individual and organisational capability resources. We looked in detail at employee appraisal schemes. There is a challenging array of possible purposes for such schemes and they may be designed with either a control or developmental orientation. We looked at various types of appraisal: top down, self-appraisal, upward, peer and multi-directional appraisal. Finally, we looked at some of the problems associated with appraisal schemes. There may be an absence of clear targets and performance assessment, a system not linked to reward, inconsistent or inequitable discussion. Appraisal schemes can be simplified when in skilled hands and they can evolve, once an effective interpersonal culture of appraisal has been established. You should now try the self-assessment questions before going on to the next unit.
224
U niversity of Sunderland
REVIEW ACTIVITY
Question 1 What are the key assumptions supporting PMS that enable it to support the achievement of SHRM? Question 2 How does organisational culture affect the design of PMS? Give two examples of how this would affect practice. Question 3 What is the key PMS principle that ensures the integration of individual and organisational objectives? Question 4 How would you adapt the design of your appraisal scheme to fit an organisation:
U niversity of Sunderland
225
The degree of formality of PMS schemes. The degree of management control exerted and employee
autonomy over performance objectives and measures.
226
U niversity of Sunderland
Systematic process of performance control. Clear articulation of performance strategy. Integration of performance throughout the organisation. Focus on results and people competence. Encourages learning and development. Helps the formation of a performance and unitary culture. Promotes a vision and an organisational response. Enhances objectivity and value added to related policy areas such as
reward and development. The disadvantages of PMS schemes could include:
The problems of clear measures and equitable objectives. The time and effort in operating the scheme. Emphasis on control at the expense of development. Managerialism and the effectiveness of unitary schemes. They can be more systems rather than people based. The ability to track and effectively measure aggregate performance
enhancement.
The effect of pay and reward levels can be divisive and a defence
mechanism. Answer 6 The key roles are as follows: Managers
U niversity of Sunderland
227
Communication of objectives. Formulating team goals. Consultative. Encourage development. Take and give feedback. Follow up development action. Co-ordinate service users feedback using the 360-degree
approach. Employees
Formulate personal objectives. Evaluate performance. Form self-development objectives. Give and receive feedback to/from managers. Contribute ideas to performance and enhancement of self and
team. HR practitioners
Monitor and evaluate PMS based on stakeholder use. Evaluate outcomes and process effectiveness. Review organisational capability as a result of PMS and design
policy action in HRD and recruitment.
References
The Strategic Managing of Human Resources, edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, 2004 (Key text for this module)
228
U niversity of Sunderland
Bevan, S. and Thompson, M. (1992) Performance Management in the UK: analysis of the issues. London: IPD. Corbridge, M. and Pilbeam, S. (1998) Employee Resourcing, Financial Times, Pitman Publishing. Fletcher, C. (1993) Appraisal: an idea where time has gone?, Personnel Management. Fowler, A. (1990) Performance Management: the MBO of the 90s, Personnel Management, July. Goodge, P. (2000) How to manage 360-degree feedback , People Management, 17 Feb, pp. 50-52. Lynch, R. S. and Cross, (1995) Measure Up! How to Measure Corporate Performance. Oxford: Blackwell. Mabey, C., Salaman, G. Storey, J. (1998) Human Resource Management: A Strategic Introduction, 2nd Ed. Oxford: Blackwell Business. Neale, F. (1991) The Handbook of Performance Management. London: IPM. Randell, G. A. (1984) The Basic Principles in Randell, G.A., Packard, P.M.A, Shaw, R.L.and Slater, A.J., Staff Appraisal, 3rd ed. London: IPM, pp. 11-60.
U niversity of Sunderland
229
Unit 5
Reward Management
LEARNING OUTCOMES
Following the completion of this unit you should be able to:
Devise a reward strategy for an organisation. Explain and evaluate how the reward systems can contribute to HR
led change strategies.
Introduction
Thinking about reward entirely within the performance management framework can be problematic, as reward in its broadest sense serves several purposes. For example, it has non-pay and intangible aspects that relate to motivation and recognition. This involves other areas of HR such as job design, structuring and development. These are dealt with elsewhere in the module. However, given our assertion about the meaning of strategy for HR, we must follow the central principle of integration. In this respect, reward system choices sit firmly within the performance relationship and it is under this heading that we shall address the reward choices available to HR strategists.
U niversity of Sunderland
231
READING ACTIVITY
Please read Chapter 8 of your key text, The Strategic Managing of Human Resources, Edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, which covers some of the subjects of this unit.
232
U niversity of Sunderland
Base of Rewards
The main choices upon which to base pay are:
The job a person does. The personal contribution they make within a job. The level of skill and knowledge that people have within
the job. In this respect it is about how people grow and develop within any given job. Traditionally, organisations have used externally acquired qualifications and have opted to place greater emphasis on either
U niversity of Sunderland
233
external market comparisons or internal comparisons through job evaluation of task performance. Increasingly, the emphasis on performance-related pay is based upon individual contribution within a job. Person-centred pay has been one of the central developments in pay policy in recent years, in order to achieve a better balance between the job demands and individual contribution. As organisations are required to respond to market forces, services and products, they require new skills and knowledge. Hence, several organisations have used skill based pay to encourage and support wider investment in training and development. So organisations have to balance the reward base between the following:
ACTIVITY
In the table below we have described some features of each of these reward bases. Take a few minutes now to note down examples of organisations that you may know or have read about in the business press that primarily rely upon each of the three dimensions. Try to give at least three examples of each.
Base Job based reward Often typified by larger organisations where internal equity between job grades is of particular importance and where large job families exist with multiple job holders.
Example organisation
234
U niversity of Sunderland
Person based reward Often associated with smaller organisations, where a small number of jobs exist or where each job has a distinctive job description and pay has to be individual. Alternatively, this can be found in larger organisations that are allowing part of the reward to be individual, to balance job and person to incentivise staff toward enhanced output or improvement to business processes as they respond to market forces. Skill based reward Organisations attempting to re-skill or introduce a major revision to products and services to serve the standard. Often used as a short-term increase based around defined modules and units of training that can be assessed and directly implemented into workplace practice.
ACTIVITY FEEDBACK
Our examples are as follows:
Job based reward Often typified by larger organisations where internal equity between job grades is of particular importance and where large job families exist with multiple job holders Person based reward Often associated with smaller organisations, where a small number of jobs exist or where each job has a distinctive job description and pay has to be individual. Alternatively, this can be found in larger organisations that are allowing part of the reward to be individual, to balance job and person to incentivise staff toward enhanced output or improvement to business processes as they respond to market forces. Skill based reward Organisations attempting to re-skill or introduce a major revision to products and services to serve the standard. Often used as a short-term increase based around defined modules and units of training that can be assessed and directly implemented into workplace practice.
manufacturing organisations privatised service utilities; gas, electricity and water SMEs IT and media industry financial institutions
manufacturing and engineering organisations based upon new products or production processes. organisations addressing multi-skilling and the establishment of functional flexibility strategies
U niversity of Sunderland
235
ACTIVITY
In the table below we have described briefly a number of forms of incentive. Some may be familiar to you, some not. Alongside each one note down briefly how you think each of these might impact upon (a) an individual employee and (b) management. You will find that the feedback to this activity is substantial; you are not expected to achieve all of its content in your brief notes.
Incentive Individual bonuses: additional pay for achievement of above average work. Non-specific criteria set.
Negative
Negative
236
U niversity of Sunderland
Profit related pay: normally based on achievement of pre-set after tax profit figure, a proportion of profit is allocated back to staff.
Positive
Positive
Negative
Negative
U niversity of Sunderland
237
Incentive Performance related pay (PRP) schemes: based upon the achievement of preset objectives normally linked to individual and functional objectives.
Negative
Negative
Share option schemes: award of options to buy shares at a future date, based on a preferential rate, or the award of shares in the company.
Positive
Positive
Negative
Negative
Piece work measured day output and time related pay systems: based on purchasing additional products or services (e.g. processing efficiency and accuracy in insurance organisations) in volume, cost or time-related performance criteria.
Positive
Positive
Negative
Negative
Added value-organisation wide incentives: based upon an equation involving the cost of producing goods and services and the sales income. A ratio is formed which can be the basis for improving the internal efficiency of working and thereby the ratio of costs. A set proportion of saving is paid back to employees.
Positive
Positive
Negative
Negative
238
U niversity of Sunderland
ACTIVITY FEEDBACK
Our thoughts are as follows:
Incentive Individual bonuses: additional pay for achievement of above average work. Non-specific criteria set. Impact on employee Positive This is essentially a gift from management on an ad hoc basis. The short-term effect is positive. Impact on management Positive Often seen as one off benefit, a good will gesture, a thank you for good service. Relatively cost-effective and non-recurring in the salary bill. Negative There is little long-term effect, as employees do not know how they can improve performance. Could be divisive if applied too narrowly between you and colleagues. Profit related pay: normally based on achievement of preset after tax profit figure, a proportion of profit is allocated back to staff. Positive New sense of ownership and alignment of your and organisational interest in performance. Negative Profit outcomes are some way from your own personal effect/reward activity. Negative Little long-term performance link.
Negative Does not focus on individual contribution to these targets; objectives/outcomes not sufficiently clear.
U niversity of Sunderland
239
Incentive Performance related pay (PRP) schemes: based upon the achievement of preset objectives normally linked to individual and functional objectives.
Impact on employee Positive Clearer sense of your personal objectives can be made, and better schemes promote links to wider organisational objectives, linked to pay outcomes. You might feel you can make a difference.
Impact on management Positive Often seen as a form of control over the amount and quality of work performed and offers scope to introduce standards of work. Targeting pay to defined and measurable outcomes is clearly strategically important. More successful in organisations that have developed a well-specified PMS and who are geared more to market forces and competition. Negative Impact or weight attributed to performance pay is often small and thus dilutes the motivational outcomes, although this is changing in many professional and senior management environments, where performance payments can often equate to 20-50% of earnings. The impact on organisational performance is also important as PRP is often seen as inflationary. Used controversially in organisations seeking to change culture and shift employee attitudes toward improved customer service and product quality, e.g. local government, health trusts and privatised services. Generally it is seen in those sectors as a form of control and the basis of unfair distribution of pay resources.
Negative You might be unclear about or prevented from meeting those objectives. You may feel that other peoples objectives are inconsistent or easier to achieve.
240
U niversity of Sunderland
Share option schemes: award of options to buy shares at a future date, based on a preferential rate, or the award of shares in the company.
Positive Creates a medium to longer-term engagement to the organisation. Often seen as supporting retention strategies within organisations with volatile and competitive labour markets. Promotes commitment and alignment to organisational goals. You may be more attuned to how well the organisation is doing. You might feel more inclined to stay with the organisation. Negative Share prices are risky and values change. You may not value non-cash awards and awards that are deferred and risky in transactional relationships. Difficult to see how your performance affects share value.
Positive Promotes longer-term view of organisations success and promoting share value and commitment. Good retention strategy.
Negative Less effective where the future involves downsizing and restructuring.
U niversity of Sunderland
241
Incentive Piece work measured day output and time related pay systems: based on purchasing additional products or services (e.g. processing efficiency and accuracy in insurance organisations) in volume, cost or time-related performance criteria.
Impact on employee Positive Clear effort/reward link, which assists motivation. You can see how your effort leads to additional reward. Negative Tends to promote individualistic ethic, which may benefit wider performance goals such as improving business processes. Runs contrary to teamwork and wider Total Quality Management (TQM) philosophies requirement. Difficult to disentangle your contribution in many forms of work especially professional services. Positive Enables you to focus on improving not only what you do, but also how wider organisational processes for completing tasks can be improved. It enables you to work in a team. It supports the TQM and Business Process re-engineering (BPR) culture. You focus on wider organisational objectives and costs. Negative However, the equation of input costs and sales is a complex accountancy exercise and includes factors outside your control, e.g. design changes or external pressures may have a disproportionate impact which reduces your commitment and confidence in the scheme. Generally, the performance period is lengthy, therefore the immediacy of employee efforts is small, e.g. 1-2 years effort. Base rates period and six months reviews to ensure representation performance data.
Impact on management Positive Pay is orientated for real measurable improvement and can create an outcomes culture.
Negative Wider focus of relating individual to organisation-wide goals are not easily met. Staff concentrate solely on what they are measured upon.
Added value-organisation wide incentives: based upon an equation involving the cost of producing goods and services and the sales income. A ratio is formed which can be the basis for improving the internal efficiency of working and thereby the ratio of costs. A set proportion of saving is paid back to employees.
Positive Can bring about improvement in business process costs providing effective support systems are in place that allow staff to participate in this improvement orientation, e.g. TQM, BPR, etc.
Negative A great many resources can be tied up in measuring the ratios, communication and explaining the results. Such schemes promote transparency of information about the business for staff, but the historical basing of costs may not be relevant for all businesses undergoing major product or service change.
242
U niversity of Sunderland
This review of the options available to build incentives into reward has revealed a number of important issues. We can summarise some of these as follows:
U niversity of Sunderland
243
ACTIVITY
Now consider your own views on the following statements. Indicate whether you agree or disagree with them.
244
U niversity of Sunderland
ACTIVITY FEEDBACK
This exercise has been about identifying your own attitude and values to reward against the following features of reward strategies:
Equity and group justice, which is internal. Market relatedness; external. Expectations of personal recognition. Expectations of results. Degree to which you see your own goals and values aligned with
those of the organisation.
U niversity of Sunderland
245
ACTIVITY
Organisations have to deal with these expectations and sometimes need to re-shape them as they see organisational and labour market priorities changing. This re-configuration takes place in the nine divisional areas that we have identified. Before we move on to look at the market aspects of reward, let us now look at the link between variable pay and different human resource outcomes. At this point we have attempted to demonstrate the potential links between forms of pay incentive to shape organisational behaviour and culture in HR outcomes that will benefit organisational performance. Using a scale of high (), moderate (), neutral (=) and negative () impact, note your views (in the table that follows) on the impact of each type on motivation, commitment, cultural change, quality, teamwork, competence and flexibility. (You may experience the dilemma that a feature is potentially both negative and moderately to highly positive. This is to be expected and is part of the careful decisions that HR managers must weigh as we saw in the concluding comment made in the feedback to the last activity. If this occurs, note down an organisation that illustrates this point and reflect on why this might be the case.)
Bonus
Commission
246
U niversity of Sunderland
Pay progression linked with the competences or skills people develop and use
U niversity of Sunderland
247
IMPACT
TYPE DEFINITION Motivation Commitment Team Group bonus Shopfloor payments related to output or time taken Payments to staff teams related to achievement of targets Cultural change Quality Teamwork Competence /skill Flexibility
Team pay
Organisational Profit- sharing Payments of cash or shares related to company profits Gain-sharing Payments of cash bonuses to employees related to added value increases Government -sponsored scheme in which pay is linked to profit with tax advantages Allocation of shares with opportunity to sell in future at higher price
Profit-related Pay
Share option
ACTIVITY FEEDBACK
Our responses are given in the table that follows:
248
U niversity of Sunderland
IMPACT
TYPE Individual Incentive DEFINITION Payments related to achievement of targets added to basic pay Rewards for success paid as a lump sum Payments for sales people based on a percentage of the sales they generate Motivation Commitment Cultural change Quality Teamwork Competence /skill Flexibility
Bonus
Commission
Performance- Payment related pay based on ratings of performance Competence/ Pay skill-related progression pay linked with the competences or skills people develop and use Team Group bonus Shopfloor payments related to Output or time taken Payments to staff teams related to achievement of targets Payments of cash or shares related to company profits Payments of cash bonuses to employees related to added value increases
Team pay
Organisational Profitsharing
Gain-sharing
Profit-related GovernmentPay sponsored scheme in which pay is linked to profit with tax advantages Share option Allocation of shares with opportunity to sell in future at higher price
U niversity of Sunderland
249
Market Position
Rewards are usually aligned with supply and demand in the labour market. Job categories with a shortage of resources will command a higher pay structure. Some large organisations have very complex pay structures based upon internal relationships of salary grading systems and pay rate. These can often be seen as important to sustain an internal sense of fairness in terms of job demands placed upon different job categories. From an internal job evaluation perspective, these relationships provide equity and the basis for what is called distributive justice. However, organisations are often faced with significant external turbulence within labour markets. For example recent trends include IT specialists, accountants, specialist insurance activities, electronics engineers and so on. Organisations often have to face paying what the market demands and to ignore internal fairness and relationships. Therefore, reward strategy needs to determine the following questions:
250
U niversity of Sunderland
Concept of market rate. Sources and methods of collecting data. Methods of presenting data to achieve appropriate levels
of analysis.
ACTIVITY
Before reading further, consider the following questions and note down your responses: 1. If you were trying to establish a market rate for a range of jobs, what factors would you need to take into account to achieve effective attraction and retention strategies in the labour market? What type of data would you need to collect? Where might you get the information from?
2. 3.
ACTIVITY FEEDBACK
1. Job matching factors include:
U niversity of Sunderland
251
- basic and variable (e.g. bonuses) elements of pay - total earnings including incentives, bonuses and valuation
of shares, stock and benefits
- pay movements; increases since last survey - pay increases, general increases and average increases on
merit or bonus elements 3. You might like to note some of the readily accessible sources of pay information:
- job advertisements and professional journals - published data in journals such as Incomes Data Services
and IRS Employment Review in the UK
But how do organisations collect and present what can be quite complex information? Normally organisations establish spreadsheets for
U niversity of Sunderland
252
internal job categories such as administrative staff, technicians, managers and so on. They select benchmarking jobs that can be tracked over time, and around which other jobs are slotted in terms of job demand hierarchies.
Presentation of data
HR professionals have been criticised for not being sufficiently analytical in their methods. The collection and presentation of data to improve decision-making is an area where HR needs to ensure that it can perform well. You will recall, from your earlier studies in statistics, the set of techniques you might apply to pay data to improve the legitimacy of HR decision-making.
CASE STUDY
First read the article below on salary surveys: How to design and run Salary Surveys People Management, September 1996. There are several reasons why information about other employers salary levels could be valuable. An adverse trend in staff turnover may be related to pay falling behind market trends; it could help to identify appropriate pay rates when recruiting staff to new types of job; or a trade union may be pressing for pay rises by quoting higher salaries allegedly offered by other employers. More generally, organisations need to be aware of comparative salary levels, particularly if they have a policy of maintaining pay at a set relationship to the market. There is a range of proprietary sources of salary data. Some are available only to subscribing organisations participating in surveys run by specialist consultancies. Others, such as the DfEEs annual New Earnings Survey, are published. Such sources can help to monitor salary levels and trends, but their wide coverage often makes it difficult to match jobs precisely. More focused salary data may be obtained through membership of a salary survey club a group of companies that have agreed to exchange information
U niversity of Sunderland
253
on a regular basis. If no such club exists, it might be worth approaching relevant organisations and suggesting one, although the initiating party is likely to be expected to handle all the administration of such a scheme. The format of this kind of clubs salary survey may have to be a compromise to meet the different needs of its members, and it may therefore not meet the full requirements of any one organisation. If suitable data cannot be obtained from any published, subscribed or club surveys, a tailor-made approach is necessary. This applies particularly when very specific information is needed, such as sales commission formulae and levels in a defined commercial sector. The first step is to decide precisely what information is required, bearing in mind that the response to an inquiry on one or two topics is likely to be far better than if respondents are asked to complete a long and complex questionnaire. It is tempting to add questions to a survey on the grounds that the resultant information might be interesting. For example, when researching the starting salary of newly qualified accountants, a finance director may suggest asking about the pay of accountancy technicians or the numbers of accountants holding different qualifications. The risk of a more complicated survey inducing a poor response to the key question must then be set against the possible benefits of a wider range of information. One of the principal issues in any survey is to decide how to ensure an acceptable level of data comparability. Both the organisations and the jobs must be matched carefully. When selecting participants, it is important to be aware that variations in company size and sector could make a significant difference to pay levels and practices. Senior management salaries, for instance, tend to be influenced by company size. So a survey in this field should either be restricted to organisations of a similar size or should also ask for basic data about, say, annual financial turnover or the size of the workforce, so that the scale can be identified. Salary levels or related issues, such as the use of bonus or commission payments, may also differ between industries or sectors. If your aim is to study the pay of directly comparable jobs in directly comparable organisations, participation will need to be restricted to companies known to be of similar size in the same sector, perhaps even in the same region. If there is a concern about losing staff to different types of organisation or different sectors, or if information is needed in order to recruit from new sources, the survey will need to cast its net more widely. Ensuring an acceptable match of jobs usually requires a compromise between complete accuracy and generalisations. There are very few jobs that are precisely the same in different organisations. A variety of work systems and supervisory arrangements may exist, even in jobs that appear, superficially, to be identical. Job titles can be particularly misleading. If the survey asks for salary data against its own detailed job descriptions, it may well be told that no such jobs exist
U niversity of Sunderland
254
elsewhere. A normal and more satisfactory approach is to prepare simple profiles that are based on real jobs but allow some flexibility (see panel). Participants should be able to match this profile with their own specific jobs, and they can then be asked to give salary details. It may help to add two boxes to the questionnaire. In one, respondents can indicate if the job they are matching is the same, or whether it is at a slightly higher or lower level of responsibility than that of the profile. In the other, they can show whether they are giving details of an actual job, or quoting the salary they would pay if they had a job of this kind. The next step is to decide what information to request, and in what form. Terminology is important, as a question asking simply for current salary may be interpreted in different ways by different respondents. Some may restrict their replies to basic salary and omit bonuses or individual performance payments. Others may quote pay ranges or grades, rather than actual salaries. If a picture of the complete remuneration package is needed, the survey must ask for data about each job under headings such as basic salary; additional payments included in monthly salary (performance pay, sales commission); and any additional periodic payments (annual profit or merit bonuses). A simpler approach is to ask for basic pay and total cash remuneration. Where pay varies, the questionnaire should ask for averages over a set period. The survey also needs to be clear about whether it is asking for details of actual salaries, as paid to current jobholders, or details of the salary grades or scales appropriate to each job. Each approach has its disadvantages. If a respondent organisation has a number of employees in one of the surveyed jobs, but has no formal pay scales or uses broad pay bands, a request for actual salaries may be answered with an average of actual salaries, the midpoint of the scale, or even a comment that there are too many employees on too many different salaries to provide data. A request simply for pay-scale data (minimum and maximum pay for each job) may be easier for a respondent to answer, but may not give a true picture. This is particularly the case if the pay scales are wide. The current trend towards broadbanding is resulting in pay scales with maxima as much as 60 per cent above their minima. So, a reply that the scale for a particular job is, say, 20,000-32,000 is unlikely to contribute much to a comparison of actual pay levels. It may be that most of the companys employees are paid the maximum for their grade but, equally, it may be only the top performers who ever progress to the upper part of the scale. For these reasons, some surveys ask for both actual salaries (averages if several employees earn different amounts for similar jobs) and salary scales although this can make the questionnaire too complex. The more specific the request for information, the more likely it is to obtain a useful response To encourage replies, it is advisable to guarantee confidentiality. It can also be helpful to telephone potential survey targets in advance, partly to discover whether they are likely to participate, and partly to check what type of salary inquiry they would respond to most easily and find most useful. Data collection
U niversity of Sunderland
255
should always be by questionnaire in, as far as possible, a multiple-choice, rather than a narrative format. It is common courtesy to supply prepaid envelopes for replies.
Example of profile job description Job: training officer, or equivalent title. Organisational context: an organisation with a service bias, private or public sector, with a workforce of between 500 and 2,500. Reports to: head of personnel, or head of training, if this is a separate function. Supervises: has no subordinate training specialists, but may have support of one or two administrative or clerical staff. Duties: prepares and delivers training material within topic areas and policies specified by, or agreed with, his/her manager. Discusses training needs with users and undertakes training needs analyses. Topic areas generally related to personal, people management and organisational skills. Tutoring mainly at supervisory and lower management levels. Experience: likely to be a graduate with at least three years personnel or line management experience.
QUESTIONS:
1. 2. 3. Why is a club better than other proprietary sources? What do we mean by data compatibility? How would you build confidence and support for the exercise?
256
U niversity of Sunderland
2.
Data compatibility means that organisations can carefully match job descriptions and responsibilities to ensure that effective job demands and salary levels are made for pricing jobs.
3.
Confidentiality is normally the main criteria to build club commitment. Protecting the anonymity of the parties in published data is important, particularly where the clubs do not meet regularly and data is collected on an occasional basis. Control, use and distribution of information cannot be so easily assured in this case. Integrity in data disclosure and clear and unambiguous comparative criteria will encourage value-added surveys and continued use by the parties. Flexible objectives and wide coverage of jobs and salary and benefit variables all add to the validity of this work.
Invite organisations to participate. Maintain confidentiality of data and widely circulate all
data for the benefit of those contributors. This is a central benefit for participants. Anonymity of organisations can be helpful in some cases where the participants are in a similar industry. This would be represented as for example: Company A, large
U niversity of Sunderland
257
Selection of factors. Selection of levels of factors. Determining the value of the factors points are usually
awarded in an arithmetic progression.
258
U niversity of Sunderland
Armstrong (1996, p.108) uses the following example showing points awarded to each of five factors at each of six levels:
Levels Factors 1. 2. 3. 4. 5. Knowledge & Skills Responsibilities Decision Making Complexity Content 1 50 50 40 25 25 2 100 100 80 50 50 3 150 150 120 75 75 4 200 200 140 100 100 5 250 250 180 125 125 6 300 300 200 150 150
Clearly from this example, each job or job family can be scored. In more complex schemes the main factors will be subdivided. Each of the five factors would need to have set criteria to enable a judgement to be made by the evaluators. Organisations can develop their own statements but there are a number of internationally respected and applied schemes that have a long history of successful use.
Effectiveness of JE
Before we leave this section, let us review some of the advantages and disadvantages of job evaluation more generally.
ACTIVITY
How would you react to having a job you were performing included within a job evaluation exercise? How would you have to be managed in order to gain your support?
ACTIVITY FEEDBACK
Your responses here are, of course, unique to you but you might have included some of the following points:
U niversity of Sunderland
259
- clearly published criteria for evaluation - transparent links between evaluation and salary level - opportunity to ask for a review or appeal where you
considered the job you were expected to do had changed or new responsibilities and skills emerge; for example, technological enhancement, greater responsibility for customer interface, more empowerment to make decisions and so on
The case for job evaluation would include the following points:
A reduced risk of pay discrimination. It should promote the SHRM values of commitment of
staff through confidence in decision making on pay.
260
U niversity of Sunderland
It can create a culture of working to job description. It measures the job rather than the personal contribution
contrary to wider aims of reward strategy.
U niversity of Sunderland
261
organisation has a number of product or service divisions, which may be performing in different trading conditions, local managers may be given discretion over the movement of pay for their staff or division. This same discretion may be applied to individuals on a performance-related basis. Whilst centralised determination offers the prospect of creating internal equity and the ethos of a strong corporate culture, it has the disadvantage that it is normally associated with standardisation of pay grades based on job evaluation. As we have seen, these can limit innovative and flexible responses to employee contribution within job performance. On the other hand more localised responses are normally associated with a more responsive business focus and the market. It also allows scope to reward creative behaviour and assist with retention of key skills and talents in a way that centralised or systems-based approaches can fail to achieve.
262
U niversity of Sunderland
ACTIVITY
From your experience and reading to date, what might be the key features of organisations that facilitate the reduction of hierarchy in pay structures?
ACTIVITY FEEDBACK
You could have suggested any of the following:
Flattened organisational structures. Enhanced team working. Flexibility between jobs. Multi-skilling. Vertical loading/empowerment of job holder skills and service
developments, and new job competence.
Individual contribution based upon performance. The market. An evaluation of job complexity.
There are a number of ways of creating a salary structure. The most typical for the purposes of illustrating trends in the strategic management of this element of the reward mix is a graded scale. The main features of a graded structure are as follows:
U niversity of Sunderland
263
1. 2.
Jobs are allocated a salary grade based upon an assessment of the three criteria above; contribution, market and job complexity. A salary grade or band. Jobs within a grade are broadly similar in demand. A band will contain important control features: a maximum salary, a minimum entry point, a target or market-point at the mid-range and a percentage range between the top and the bottom. Employees would need to obtain promotion to move from one grade to another. Each grade will have a relationship with other associated grades within the structure. For example, a salary structure comprising four grade or bands may choose to make each exclusive, where the top of the first grade is at or below the bottom of the second band and so on. More typically, however, bands overlap by a defined percentage in recognition of the added contribution of high performance in a lower category compared to a newer employee in a higher grade. The rate of salary progression within a band has been a subject of critical review in recent years. Traditionally staff would be allocated to fixed incremental steps, and would progress at annual reviews by defined points based largely upon service or seniority criteria. Today, salary progression is generally driven by performance (and is not automatic at annual reviews). Organisations have also adopted flexibility to accelerate increments to reflect higher performance or market pressures. Similarly, there have been trends towards taking out defined incremental points and allowing more managerial discretion over the level of progress through a band. This is not popular with trade unions who press for transparency and equity but is favoured by organisations wishing to develop a higher emphasis of individual accountability and more managerial control over pay distribution.
3.
4.
ACTIVITY
What would you assess the advantages and disadvantages of graded structures to be?
264
U niversity of Sunderland
ACTIVITY FEEDBACK
The advantages of graded structures include:
U niversity of Sunderland
265
Old Paradigm cost control job centred view collective orientation clear boundaries for decision-making clear pay relativity standardised/transparent system culture of standards and system
New Paradigm development/innovation decision centred view individual orientation flexibility of boundaries dynamic, changing relativities fluid/less transparent system culture of going beyond contract
Reward Mix
Pay is normally seen as the most central feature of the Reward Strategy. However, increasingly, employees in western economies are paying greater attention to certain deferred benefits such as pensions. As the cost of running occupational schemes grows with an ageing population, employers are beginning to shift away from providing lucrative and comprehensive coverage. How do we determine the level of investment between salary and benefits? What do we mean by benefits? How can organisations use benefits strategically? First let us try an activity to define what we mean by benefits.
ACTIVITY
Spend a few minutes listing as many reward-based benefits as you can think of.
ACTIVITY FEEDBACK
Compare your list with these. Armstrong & Murliss (1989, p.257-8) have identified six categories of benefits addressing different employee and employer needs:
266
U niversity of Sunderland
This list illustrates a number of useful points. In organisations, benefits are normally associated with promoting retention over a longer term. Pensions are a good illustration of this as the accrued build up over years of service rewards longevity of stay. Others are shorter term in focus and are deliberately aimed at younger staff and helping them adjust: financial assistance and work life balance questions. We also see the notion of the caring employer whereby the exchange for high performance and intensive work is recognition of the home interface. These debates are key to the rebuilding of the so-called psychological contracts that we discussed earlier in the module. Emerging from this we can see the basis of organisational decisions based upon benefit policies. For example:
U niversity of Sunderland
267
The choice made in terms of which benefits are included in the package and whether they are in terms of availability or value, helps give strategic orientation to benefit policies. One of the critical issues that particularly large organisations face can be expressed as two questions:
ACTIVITY
Indicate how far you agree with these statements by scoring them as follows:
Strongly disagree 1 I would be prepared to accept a lower basic income to achieve higher overall pay gained from performance incentives. I believe in making personal choices as to how I spend my income and therefore would prefer the company to maximise cash payments and keep benefits down to a minimum. I prefer to work for a company that provides protection for myself and family, and would be prepared to accept reduced overall cash to allow the organisation to provide these. 2
Strongly agree 5
268
U niversity of Sunderland
ACTIVITY FEEDBACK
There is no overall right and wrong answer to these questions. They reflect personality and cultural issues of preference. They do illustrate different perceptions and questions of the one size fits all approach to securing employee commitment. Organisations have to decide on a so-called clean cash (rather than a complex mix of benefits) approach to a more paternalistic approach. Organisations that prefer a harder performance orientation where careers are becoming less secure and more transactional, are tending towards clean cash and employee mobility. However, commitment and strong corporate cultures do not always emerge from this type of approach. Strong cultures, as we see later in the module, are associated with closely integrated values between the individual and the organisation and high performance. There is an ongoing reappraisal of work/life balance in Europe. This is partly brought on by a platform of legislation rights, but also partly led by an employer reappraisal of retention and psychological contracting. Broader based benefits policies do offer some advantages in this respect.
Purpose Tax advantage to employee Improve quality of work Attract staff Encourage loyalty and paternalism Assist termination and separation
Strategic intent: options/outcome Cost driven rationale, for example, clean cash Enhance quality and productivity incentives Employee centred commitment and securing long-term relations Psychological contract Employer and employee centred flexibility; redundancy and early retirement benefits
One further area of reward mix to consider is benefit flexibility. To what extent is it feasible to administer choice? How attractive is employee choice? At face value, giving staff choices and influences over their reward is attractive under the heading of involvement and motivation. From an employees point of view it does enable the cost of providing benefits to be fully recognised. However, there is an administrative cost to providing such flexibility. For example, there are administrative complexities in changing an employees pension contribution for 23 years to allow them to take extra cash. One overarching trend in reward and benefit is to harmonise benefits across all staff groups. Organisations that developed high status divides
U niversity of Sunderland
269
have generally rethought the divisiveness of this approach in situations where cultural alignment of values and commitment are the HR objectives. Japanese organisations first introduced cultural harmonisation to UK manufacturing in the 1980s with common car parking, catering and even the introduction of uniforms for office and shop floor staff. Today there are legal requirements to provide equal pay and benefits. A combination of management choice, societal values and legal imperative has brought about a major thrust toward harmonising benefits and reward amongst employees. The final differential is level of job performance and achievement. The general aim is to reduce attitudinal and role differences between employees and the organisational mission, and build an effective corporate culture.
Process Issues
There are two strategic issues here:
270
U niversity of Sunderland
ACTIVITY
Take a few minutes to write down your thoughts as to how staff might be involved in pay decision making. Try to suggest at least three ways.
ACTIVITY FEEDBACK
You might have come up with some of the following:
Membership of Trade Unions who negotiate pay. Consulted on job evaluation issues arising from job description. Mutuality in determining performance objective. Agreed training and development objectives leading to enhanced skill
based pay.
Organisations that offer greater involvement of employees in pay determination tend to do so where they are seeking to develop a high involvement culture in all aspects of human resource management. Examples are team based structures, high involvement appraisal schemes and related ownership of self-development, team based pay where peers contribute to the distribution decisions and so on. Closed systems tend to emphasise more hierarchical forms of management and control orientation. The parallels can be drawn with the style of approach and the sense of whether HRM is done to employees or whether the policies are aimed at leveraging high commitment, trust,
U niversity of Sunderland
271
flexibility and capability. Reward process is a key lever to support this development of results and behavioural outcomes.
CASE STUDY
This case study takes a controversial look at Reward Strategy. Read the article below, then in no more than 300 words offer your own view of trends in reward strategy, evaluating the proposition that Reward Management interventions do more harm than good. Pay per view, proposing the motion: by John Purcell, (People Management, 3 Feb. 2000) Research into individual performance-related pay (IPRP) in the UK over the past decade has failed to show that such systems have an effect on performance. Instead, the growing conviction is that a pay system can at best have no effect on performance, but, at worst, it will damage competitiveness. In other words, a bad pay system has the potential to do more damage than a good one has to bring benefit. The reality revealed by such research contrasts starkly with the claims made in conference brochures and popular books about the efficacy of new pay systems. This is an important issue. Why, for example, despite the evidence, does the government force IPRP into schools and other parts of the public sector? How can we explain the frequent failure of IPRP to lead to better individual performance, and what are the consequences?
272
U niversity of Sunderland
Most people in receipt of IPRP are in the middle range of performance. We can expect 10 per cent of staff to be in the top-performing bracket and 5 per cent to be in the poor-performer category. The rest, all 85 per cent of them, will get average awards that are similar to the going rate. Most of them have no prospect of getting into the top bracket next year, so the incentive is minimal. We could live with this if the outcome of the pay system were neutral, but often it is negative, costing more than any benefit achieved. In fact, few organisations know how much the pay system costs to run. Not only are there the direct costs of the pay clerk or specialist pay manager; there are also the indirect costs of time spent by line managers in day-to-day management of the system not to mention the amount of time employees spend talking about the inequities of the system. The more complex the pay system, the more it costs to administer and the less likely it is that pay objectives will be met. Take a skills-based pay system studied by my colleague, Annette Cox, in a small engineering company. Here there were eight attributes to be judged by the supervisor, ranging from skills to punctuality and willingness. These eight factors were weighted to produce a pay outcome. Nobody understood it. The fashion is to link pay systems to business objectives, cascaded down. This sounds good until you realise that, according to recent studies, well over half of employees, including some managers, dont know what these objectives are. All control systems distort behaviour that is what they are there for. Unfortunately, if a particular target is chosen, the tendency is to take your eye off other equally important aspects of performance. Line managers are frequently unclear about what targets to set for the coming year for IPRP, and some invent things or focus on pet topics. At a deeper level, the whole idea of linking pay to performance is based on two questionable assumptions. First, it perpetuates the illusion that companies are rational, top-down, directed organisations and that managers have the foresight to know what to do in the forthcoming year. This is the myth of the all-seeing boss. In reality, change is quicker and messier than that. Second, and even more worrying, is the belief that people need incentives to get them to behave in an acceptable way. Employees cannot be trusted, it seems. Economists have a lot to answer for with their assumptions that people will be lazy and self-seeking with guile unless there is a reward carrot (or the stick of unemployment) available. This is the foundation for most economic theories of reward. They never change, despite all the evidence that employees place much more value on non-financial satisfaction and the rewards of a job well done. Complex targets and poor line management administration cause problems with pay systems. Most of these centre on the lack of justice, both procedural and distributive. Once this is challenged, the first casualty is the employees trust in management and the system.
U niversity of Sunderland
273
The problem is that trust is at the heart of high-commitment management. So the damaging effect of a poor pay system spreads throughout the organisation and is likely to reduce commitment. In recent years, emphasis has been placed on the bundle of HR practices that help to drive organisational performance. These typically include job enlargement, greater employee discretion, involvement, relative autonomy and training and development. Combined, these factors are linked to improved performance. Where is pay in this? The Americans believe that at-risk pay" is central, but in the UK the picture is unclear. Stephen Wood, in his study of the ingredients of high-commitment management, found little connection with pay. This type of analysis of HR practices and performance is relatively sophisticated, and not heard of much in smaller firms, or even, it seems, in the Treasury. In these places there is a simple belief in the efficacy of variable pay. The real problem is that managers continue to introduce pay systems as a single-issue initiative, expecting the new pay system to alter behaviour and bring about cultural change. It doesnt, unless supportive behaviour is already in place. By themselves, pay systems do not change organisational culture. They never have. The old adage was that pay systems should be designed to fit organisational contingency. The modern idea, that pay systems can change organisations, is an unfounded, optimistic aspiration. None of this is an argument for never changing pay systems. They all deteriorate over time. Dan Gowler, a famous pay expert of the 1960s and 1970s, told me that no pay system can be effective for more than five years. So there is a need to constantly review pay systems. Just dont expect the change to build trust, commitment and motivation. I am not even against variable pay. But I do worry about the claims made for IPRP, particularly in the light of the time-consuming administration it requires, its complexity and the need to involve line managers. As another pay expert, Michael Armstrong, put it: There is immense scope for getting it wrong. Pay systems, like cameras and computer software, should be designed to be idiot-proof, easily understood, robust and easy and cheap to administer. Opposing the motion: Duncan Brown I agree that reward management interventions often havent had a positive effect on employee trust, motivation and commitment. Reward changes are difficult to implement, are often bad news for staff and are especially dangerous when based on simplistic assumptions about HR strategy and strategic fit. But there are very good reasons why a large proportion of companies are finding they have to change their reward schemes and I strongly believe it is better to intervene than do nothing. In my experience, the problem often lies not in the interventions themselves, but in how these interventions are made. So we should not be throwing the
274
U niversity of Sunderland
baby out with the bath water but rather, be taking steps to make these interventions more motivating and effective. When I started out as a consultant in the mid-1980s we used to do a lot of diagnostic reviews for clients. They produced thick reports with lots of analysis and change options, but often little change resulted. Today, we are in a different climate. The pace of change in economic and product cycles, social and technological developments is ever faster, and pay and reward practices are not isolated from these shifts. Towers Perrins latest study, in the summer, of reward management in 460 organisations across Europe found that 94 per cent had made significant changes in the past three years, and 98 per cent planned further interventions. They are using rewards to reinforce the achievement of business goals, and aligning pay systems with the needs of their changing organisations. This means being less hierarchical and more customer-orientated, team-based and focused on contributions. New ideas are being tried be it sharing all your takings in a day with employees, as Ikea did recently or introducing broad-based share options for employees, like Asda. Companies are looking for competitive advantage through their people. In an economy that is increasingly based on knowledge and service, and in which pay costs can often represent three-quarters of total operating expenditure, companies that do not invest that resource in the most effective way to reinforce their strategy will be overtaken by competitors that do. Take some examples from my work. There was the insurance company that paid its direct sales force through commission on product margins: difficult to change, I agree, when commission is an ingrained and long-standing part of the industry culture and ensures very high payments for high performers. But what about customer service? A disastrous year in the 1990s culminated in it being fined for mis-selling pensions, with commission-based pay schemes being identified as an important contributor. The new chief executive subsequently made it a top priority to reform this pay system, to focus on service and quality. Then there was the water company with 2,000 staff, 98 grades and over 100 separate pay allowances, which meant that water inspectors and technicians were earning over 50,000. It was difficult to change, but would you want to justify it to customers and regulators? So whats the answer? In the Towers Perrin study, 68 per cent of companies that restructured base pay and 84 per cent of those that linked pay and performance reported operating difficulties. These included ineffective employee communications, poor performance management and lack of support from senior management. I believe the solution lies in adopting a much more inclusive and evolutionary approach. As well as considering business strategy, organisational capabilities and long-term goals when we plan and execute our strategic reward
U niversity of Sunderland
275
interventions, we need to place at least as much weight on employees needs and values and the realities of organisational life in the short term. Support from employees and line managers, as research data shows, correlates more strongly with successful changes to reward than technical design variables. There are no quick fixes in reward, no perfect solutions, but there are improvements and genuine gains to be had. So my advice is to keep making the changes where you have to, but think them through carefully, and involve all levels of staff and management in that review process. Thats the route to trust, motivation and commitment in reward. Once changes are made, focus on their operating effectiveness and continue to monitor and improve them against their original goals. Think about how the skills and needs of line managers can be addressed and how the buy-in and genuine sense of involvement of all employees can be enhanced. Compensation and benefits managers might do well to remember Shakespeares advice in Troilus and Cressida: And all for love, and nothing for reward. St John Sandringham sums up the response from the floor The participants, HR specialists from household-name companies, found it difficult to disagree with either of the arguments presented by the researchers. They didnt press the motion to a vote, but there was a unanimous agreement that reward management interventions often are necessary. The consensus was that they need to be appropriate for the goals and culture of each organisation and its staff, rather than being based on simplistic and generalised notions of best practice and human motivation. Don Mackinlay of Cadbury Schweppes summed up the mood, saying: I agree with 98 per cent of what both of you said. Execution is the key. Reward is not the only lever, but you create problems if you dont get it right. You have to work on the whole HR bundle if you want to retain trust and motivate people." The results of John Purcells research and the negative effects of many performance pay systems were widely recognised by the practitioners, but no one could accept that the alternative was to do nothing. If you do nothing you lose the underpaid good performers, said Clive Wright of BOC. Others saw a constant need to re-design their reward systems. For example, Unilever was on a five-year cycle. We have to be seen by employees as responding to the real world and changes in the environment; Brian Dive said. Neil Foulger of Citibank saw the pace of change quickening and the range of attitudes widening. A laissez-faire approach was unacceptable, he said. Performance-related pay systems were being proposed in education and the next step for some firms would be to make even base pay variable. The participants were aware of their own perspective: Asking compensation managers to vote against intervention on pay is like asking turkeys to vote for
U niversity of Sunderland
276
Christmas, said Mark Chamberlain of Reuters. But they were full of ideas for making new reward systems work and explanations of why they often went wrong. No one suggested it was easy. Professor Chris Hendry of City University led the attack on factors that undermined the process: bureaucratic organisations that saw pay as a lever of control, chief executives for whom reward provided a handle, HR managers wanting to draw attention to themselves and consultants that needed a new product Their experience could be summed up as follows.
Do it for the right reasons: cost containment is not one of them. Align your system with the culture of the organisation: bonus
payments to sales people for achieving targets do work, but at other levels they might not be so successful.
Look at the whole bundle of rewards not just pay: people leave
because the job is not satisfying or interesting, or because they feel their boss is treating them badly.
Keep it simple.
Many agreed that involvement and communication were the keys to success. Rick Henson described how BOC was using a reward system designed by people from the shopfloor: It may not be very elegant, but there is pressure from the staff to make it work. Stephen Perkins, who is director of the Strategic Remuneration Research Centre and chaired the debate, concluded: There seems to be incredible naivety about reward. We need to think about reward in its broadest sense, and direct engagement with staff creates the right environment. The answer is not as black and white as it might seem.
U niversity of Sunderland
277
The key is to involve staff and align with the culture. This would
appear attractive but not always possible, as we have seen in the case of the best-fit and best practice divide. Clearly reward goes to the heart of the central tension within SHRM, and that is more of a reason to include it within the decision-making framework of SHRM. The conclusion would seem to be that more sophistication is required in reward planning rather than less.
278
U niversity of Sunderland
CASE STUDY
The next case study examines incentives and Employee Value Alignment Now read the article below. Developing interest and commitment to a share option plan incentive was a big step within an international environment unused to such arrangements. How was the success of the scheme explained by the author of the article? The Big Issue. By Arkin Anat, (People Management, 3 February 2000) A 98 per cent take-up for an employee share scheme is remarkable by any standards. In a developing country with no tradition of employee share ownership, this level of participation is extraordinary. Yet Eze Onyenro, head of HR for Reckitt Benckiser in Nigeria, was recently able to tell head office that all but nine of the 450-strong local workforce had signed up to the companys global stock profit plan. There has been a groundswell of interest in the plan in other countries where employee share ownership is virtually unknown. Around 45 per cent of the companys workers in Greece, for example, have signed up almost as many as in the UK, where support for employee share ownership forms a key part of the governments strategy for a stakeholder society. If take-up is a measure of success, weve been phenomenally successful, says Stephen Turley, director, group compensation and benefits, for Reckitt Benckiser, the company formed from the merger of Reckitt & Colman and the German company Benckiser last year. If another measure of success is pressure on us to bring in the plan where we havent yet introduced it, then again its been very successful. That being the case, you might expect Turley to advise other international businesses to roll out employee share schemes of their own. But he urges caution, arguing that no company contemplating a major restructuring should launch what is by definition a long-term benefit. The last thing you want to do is introduce a benefit that says to people we value you and wed like you to save for a three-year period, and then a year later find that the business needs restructuring and employees have to go, he says. Even without the threat of restructuring, an employee share scheme may not be appropriate. A company that wants to keep its administrative burden to a minimum or does not have a clear reason for promoting employee, share ownership should steer well clear, according to Turley. You have to think about what you are trying to achieve and what resources you are prepared to throw at it, he says. Senior managers at Reckitt & Colman knew exactly what they were trying to achieve when, two years before the merger, they decided to extend a long-established UK stock profit plan to the companys operations in the rest of
U niversity of Sunderland
279
the world. The company had historically operated as a collection of largely autonomous national businesses. But success in world markets now calls for a different approach. So, like many of its international competitors, the group began turning itself into a more cohesive global organisation. The stock profit plan provided both a tool for communicating this objective to employees, and one of the means of achieving it. The chief executive asked HR to create something that would facilitate more of a one-company vision, a global glue among all our employees across the world so that we would all move in the same direction and have our eyes on the same global objectives, explains Nigel Williams, global reward manager. Based on the save-as-you-earn model the commonest form of employee share ownership in the UK the plan allows people to save the equivalent of 5 to 250 a month for three years. At the end of that time, they have the choice of either taking their cash or buying stock at a 20 per cent discount of its market price at the launch of the plan. Those who buy stock will have the same voting rights as other shareholders although with the total employee share-holding capped at 2 per cent, there is no possibility of a worker takeover. While the firms employees in the UK save an average of 50 a month, in countries such as Nigeria even the equivalent of 5 represents a huge chunk of the typical employees monthly pay. But this does not seem to have dampened enthusiasm for the scheme. In India, for example, some of those who could not afford the 5 a month have clubbed together with members of their extended families in order to find the money. As Turley points out, this puts a huge onus on senior managers to ensure that the business prospers. Running an employee share scheme that could eventually cover operations in more than 40 countries calls for a level of technical knowledge that few organisations possess in-house. So Reckitt & Colman brought in specialists from Lloyds Bank Registrars to look after the administrative aspects of the scheme, including the processing of application forms. Another external supplier, Bacon & Woodrow, liaises with the relevant authorities in each country to gain clearance for the scheme and ensure that it complies with local regulations. Of course, these regulations vary, which means that the plan has to be modified in some countries. In France, for example, the savings period had to be extended from three to five years to ensure that employees would not have to pay tax on profits from any increase in the share price. Elsewhere, there are laws preventing employees from using the money they have saved through the plan to buy shares in a company listed on a foreign stock exchange. Where such a restriction exists, an alternative known as a stock appreciation right has been developed. This enables the company to gift to its staff shares of equivalent value to the profits they have made during the savings period. Explaining the intricacies of the plan and its local variations has not been an easy task. Turley admits that he and his team underestimated the amount of communication that would be needed. A video and a booklet distributed to every employee in each operation had to be translated into around 20 languages. Team briefings were also used to tell
U niversity of Sunderland
280
people how the plan would work. But the companys head office in Windsor was still inundated with queries from around the world. At times, Williams was receiving around 50 e-mails and faxes a day from local managers who had already been briefed. Other than this investment in communication, the plan has not proved expensive to run. While the centre bears the administrative costs, national businesses foot the bill for legal and tax advice and other costs linked to introducing the scheme. These local costs typically come to around 10,000 a negligible amount for a national subsidiary employing hundreds of people, but an astronomical sum for smaller operations. Since the aim of the scheme was to give every employee the chance to join up, the centre gives financial support to businesses that cannot afford the introductory costs. This happened in Austria, where the company has only four employees all of whom signed up to the plan. Participating employees cannot lose, since even if the companys share price drops, they can still take their cash tax-free at the end of the savings period. But will their employer also benefit? It is early days, as the plan has yet to be introduced in South America and several other parts of the world. But Williams is convinced that, where it is operational, the business is already benefiting, with feedback from Eze Onyenro and other HR managers suggesting that it is a useful recruitment and retention tool. Its harder to say whether the plan is also creating a one-company vision, but Williams hopes that an audit will eventually establish whether it has changed the way participants think about the business. Turley believes that the plan probably has made a difference. I wouldnt go so far as to say that it aligns employees interests with shareholders interests, he says. But it does reinforce the link between what they do in the business and what is happening to it at a global level" Business background: Reckitt Benckiser: Number of employees: 21,500 worldwide (16,500 of whom were formerly Reckitt & Colman employees). History: Formed in December 1999 from the merger of Reckitt & Colman and Benckiser, a largely German-owned business with headquarters in Amsterdam. Main business activities: Manufacture and sale of household cleaning and pharmaceutical products. Brands include Finish, Vanish, Dettol, Disprin and Lemsip. Value: Before the merger, Reckitt & Colman and Benckiser had a combined market capitalisation of 5,360 million. Management: In what has become a reverse takeover, all the top jobs in the new group have gone to people from Benckiser, the smaller partner. The new directors plans for the global stock profit scheme have yet to be announced.
U niversity of Sunderland
281
Conclusions
In concluding this unit let us examine a final case study which draws together some of the issues discussed.
CASE STUDY
Case study MPL Ltd by Angela Bowey, Alan Fowler and Paul Iles (Unit 10 Reward Management B884 Human Resource Strategies, 1992) (For reasons of confidentiality, a pseudonym is used for the company involved, and some inconsequential details have been changed to avoid identification.) MPL Ltd is a UK company involved in publishing and related services with 230 staff and a turnover in 1990 of about 30 million. There are three divisions:
282
U niversity of Sunderland
The exhibition and seminar divisions are roughly equal in scale and together account for the rest of the turnover and profit. The companys business plan anticipates that the magazine division will remain at about its present size, but that the exhibitions and seminar divisions will expand (and improve their profits) until together they account for at least 40 per cent of the turnover. Each of the three divisions can contribute to the others business. The magazines have given the company a good general reputation for quality and expertise in its specialist field. The journals can publicise the other divisions activities, but also draw on the seminars for editorial and news items. Exhibitions can be linked to many of the seminars and conferences. Some professional societies engage MPL for the production of conference reports and papers, the administration of their conferences and the running of exhibitions. MPLs organisational policy is to maintain as flat a structure as possible by keeping the number of managerial or hierarchical levels to four, and to facilitate the interchange of staff between divisions in order to develop a multi-skilled and flexible work force. The structure of the organisation is shown in Figure 5.1.
chief executive
managing editor A
finance director
exhibitions manager
conference manager
marketing director
managing editor B
news editor
features editor
art editor
production editor
sub-editors
reporters
journalists
graphic designers
production assistants
personal assistants to PA
The company has a mission statement to become the market leader for quality in its field and a defined set of core values. These include:
Technical and professional excellence. A scrupulous regard for the truth in its journalism.
U niversity of Sunderland
283
2.
To meet the organisational objective of building a flexible work force, there is a programme to ensure an interchange of staff between divisions and functions. For example, journalists move between news, features and production: other staff move between marketing, exhibitions and conferences. There are no salary grades staff are on fixed-point salaries, which are reviewed annually against three factors: 1. 2. 3. the retail price index and average earnings index the trends of competitors salaries individual performance.
Salaries for all below the Chief Executive are set, however, within three broad salary bands, which in January 1991 were: 1. 2. 3. operational staff: 8,500 18,500 senior professional/supervisory staff: 17,000 25,000 senior managerial staff: 22,500 38,000.
New staff are recruited into the bands appropriate to their jobs at an individual salary that has regard to:
Their experience and level of knowledge or skill. The external going rate for the type of job. The salaries of existing staff.
U niversity of Sunderland
284
In most cases, recruitment is to some point in the lower half of the relevant salary band. Each year, the company decides on a percentage for a general pay increase. This is based on:
The current and projected rate of inflation. Pay trends among competitors. To a limited extent, the companys financial position.
The policy is to keep pay levels in general about halfway between the median and upper quartile for comparable jobs in the publishing sector. MPL subscribes to a specialist survey service on salaries in order to monitor its pay in comparison with that of other companies. If the company is under financial pressure, cost reductions including redundancies will be effected before pay is held down. Similarly, if the company is doing well, this is reflected in profit bonuses and not by inflating salary levels. Having decided on an average percentage pay increase, this is applied differentially to staff, depending on the annual assessments of performance. These assessments take into account the extent to which specific objectives have been met, and factors such as the quality of relationships with colleagues and customers, effort and initiative. In 1990, the percentage increases for individual staff ranged from 4 per cent (for not wholly satisfactory performance) to 12 per cent (for outstanding performance). MPL believes in stimulating employees interest and commitment to the company. It does this partly by a very thorough information and communication strategy (newsletters, briefing groups) and partly by paying annual profit bonuses. A set percentage of its net profit is committed to these bonus payments. This lump sum is distributed to staff in proportion to their salaries. In 1990 the value of these bonuses ranged from about 750 to over 3000. Should the company make little or no profit (as it did in 1991 because of the recession), bonuses, too, will be much reduced or may disappear. All staff from the most junior to the most senior have exactly the same entitlements to such benefits as holidays and paid leave for sickness. Company cars (provided through a leasing company) are offered to all senior managers and senior professional and supervisory staff at two levels of leasing allowance. Staff wanting a more expensive car than can be provided by the appropriate allowance may choose to top up the company allowance. Operational staff receive cars only when they are needed for their jobs. MPL has recently decided to try offering a degree of individual choice in the provision of four benefits: cars, private medical insurance, life insurance and pensions. The principle is that, relative to an employees salary, the company is prepared to spend x in total on these four benefits. The employee can then choose, within this financial limit. The emphasis each benefit is given is his/her personal choice. In practice, the company is having to limit the degree of choice. For example, it is not possible to switch the whole cost of car leasing to
U niversity of Sunderland
285
additional pension benefit there are complex Inland Revenue and National Insurance issues involved. It has also become evident that limiting choice to these four benefits will not meet every employees needs or expectations. One senior manager has said she needs neither life insurance nor private medical insurance as her husband has excellent family cover from his employer. Also, she does not want a larger car or enhanced pension rights, so can she take the value of the benefits she does not require as an addition to her salary? Issues of this kind had not been resolved by mid 1991.
QUESTIONS:
1. 2. What are the major components of the reward system at MPL? To what extent does the reward strategy reflect the organisational structure? To what extent does the reward strategy integrate with the culture of the organisation? Critically evaluate the reward strategy at MPL
3.
4.
2.
3.
286
general approach to the benefits package, which does not for example award longer holidays to managers, may help minimise status differences and reinforce a group feeling. 4. There is, however, a potential weaknesses in the reward system. The salary bands are very wide, and staff doing broadly similar jobs may be paid significantly different salaries. Some of these differences might prove very difficult to justify against a legal claim for equal pay for work of equal value. Only the use of a bias-free, factor-based job evaluation scheme would eliminate that risk. As the company grows, and the number of sensitive salary comparisons increases, a more systematic and demonstrably objective method of setting individual salaries may prove a necessity.
This concludes our review of how reward strategy feeds into the performance management framework, offering us choices and flexibility in the strategic management of people. Figure 5.2 of the reward system illustrates the relationship of the different aspects and objectives of managing reward. The shaded section illustrates the areas necessary to form decisions that will make up a reward strategy and how this integrates with other aspects of the SHRM equation, in particular organisational performance.
U niversity of Sunderland
287
Business strategy
Personnel strategy
Reward strategy
Base pay
Employee benefits
Variable pay
Job evaluation
Pay surveys
Pay structure
Total remuneration Reward system management Improved individual/ team performance Improved organisational effectiveness
The diagram in Figure 5.2 is a variant on the SHRM model introduced in Unit 1. It demonstrates the importance of linking and integration at the strategic level and, importantly, horizontally across the HR system: financial reward, performance and non-pay processes. The model demonstrates the links between individuals and groups. It also shows the relationship of reward processes (evaluative surveys) and a holistic strategy built around the varied components: total remuneration, base pay, pay structure benefits and variable pay.
Summary
In this unit we have looked at the strategic issues in the design of reward systems. We have noted the importance that reward systems play in achieving organisational strategic objectives. We have identified different approaches to achieving performance related reward policies, and have examined the different components of the reward policy framework. We have also assessed the impact of external market factors and internal change, and have noted how these influence reward strategy. We have considered several practical applications of these issues through a series of case studies.
288
U niversity of Sunderland
REVIEW ACTIVITY
Question 1 Explain how reward strategies and systems can support the achievement of organisational objectives. Question 2 What would you include within a reward strategy for an organisation? Question 3 Give three examples of how reward strategies can contribute to HR-led change in organisations. Question 4 Explain what we mean by benefit strategy. Give three examples of how benefits can be used strategically. Question 5 Identify how external market forces and internal change may influence reward strategy options.
Performance orientated behaviour. Assist recruitment and retention. Support an improvement culture. Assist with merging of organisations. Build commitment to organisations and loyalty. Support structural change delayering/broad banding.
Answer 2
U niversity of Sunderland
289
You could include in your answer Lawlers nine points and the three strategic phases of evaluation/ranking, determining structure and pricing. Answer 3 You should have noted the following:
Performance culture. Commitment culture. Improving organisational flexibility. Supporting improvement/quality enhancement. Supporting organisational assimilation/management.
Answer 4 A benefits strategy explains how benefits can be used to secure commitment, loyalty or assist with engendering commitment through giving greater employee control and choice over their remuneration. The strategic variables are identified by Armstrong & Murliss (1989) and reflect a bundle of benefits that can be used to achieve organisational results and enable appropriate employee behaviour. The examples you may have come up with are as follows:
Enhance recruitment in tight labour markets. Assist retention of key staff. Influence culture change. Support organisational flexibility.
Answer 5 Market forces normally require a review of the internal versus external orientation of person comparison, stimulating a move to performance and incentivisation. However, we have seen certain pressures to improve work life balance as a recruitment and retention strategy. Internal changes have tended to support a shift towards a results orientation, although there is evidence of reward being used to support team based structures and processes.
290
U niversity of Sunderland
References
The Strategic Managing of Human Resources, edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, 2004 (Key text for this module) Armstrong M (1996) Employee Reward People in Organisations, London Institute of Personnel Management Armstrong M. and Murliss H. (1989) Reward Management: a Handbook of Salary Administration, 2nd ed London Institute of Personnel Management. Bowey A, Fowler A and Iles P (1992) Unit 10 Reward Management B884 Human Resource Strategies, Open University Committee on the Financial Aspects of Corporate Governance and Cadbury Committee (1992) Report of the Committee on the Financial Aspects of Corporate Governance: The Code of Best Practice London, Gee Study Group on Directors Remuneration (1995) Directors Remuneration: Report of the Study Group Chaired by Sir Richard Greenbury London, Gee ISBN 1860890121 Income Data Services in the UK (1995) Lawler, EE (1984) Pay and Organisational Development Addison Wesley, quoted in page 174 Employee Research Michael Armstrong IPP 1996. Lawler EE (1984) Strategic Human Resource Management, New York, J. Wiley, 1984 The National Institute of Economics and Social Research (1994)
U niversity of Sunderland
291
Unit 6
Recognise the problems of establishing a HRD culture. Explain the role of learning as a strategic process for change within
organisations.
Design effective learning and development strategies. Assess the recent trend towards e-learning in organisations.
Introduction
Learning and development, in the context of organisational development, is probably the area of highest strategic focus in HRM today. The purpose of this unit is to develop a strategic model of learning, development and educational activities within organisations. In today's knowledge economy the attraction, retention and growth of talent is fundamental to achieving competitive advantage and high performance. Organisations pursuing a high-performance culture recognise the criticality of Learning and Development in the context of the development of human capital and organisational capability more generally. It is widely recognised that an organisation's competitive edge and ability to succeed in the future is derived from its intellectual
U niversity of Sunderland
293
assets, and less so from its portfolio of products, services and offerings at any particular time.
READING ACTIVITY
As an excellent introduction to this unit and to appreciate the critical importance of Learning & Development in today's high-performance culture, read the following Accenture research report 'High Performance Workforce Study 2004' at: http://www.accenture.com/NR/rdonlyres/D55AA2A6-850F-4589-AADB-553 C10A7109D/0/Accenture_High_Performance_Workforce_Study_2006_v2.p df
In this unit we shall examine the key processes associated with the learning cycle and the basic ideas of how adults learn in organisations through education, learning and development. We will explore the broader purpose of development processes within organisations. We shall show how individual and collective developmental efforts at all levels can have a positive impact upon business performance and thus demonstrate the value of the investment in human resource development (HRD). This unit will focus upon mapping the inter-related factors that can define strategic HRD. These include:
Embedding learning within the organisations culture The processes and attributes of the learning organisation
as a strategic framework, not only to enhance the skill and expertise of the organisation, but also to support organisational culture change.
294
U niversity of Sunderland
READING ACTIVITY
Please read Chapters 12 and 13 of your key text, The Strategic Managing of Human Resources, Edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, which covers some of the subjects of this unit.
U niversity of Sunderland
295
2. 3.
Using HRD as a catalyst for change. This broadens the narrower, vocational perspective of HRD. Using HRD as a basis for competitive advantage in terms of the HRD content and the way it is delivered. This sees HRD as a means of integrating business planning with human capability, from recruitment activity and learning through to longer term career planning, as we saw in Unit 3. Creation of a learning environment as a way of focusing individual learning needs towards organisational learning objectives on a continuous basis. This involves the creation of the so-called learning organisation, where a range of self-development, team-based activities are utilised with the specific intention of enabling the organisation to challenge and improve work processes and outputs.
4.
The next activity helps you to explore and understand these purposes.
ACTIVITY
1. Take some time to define what you understand as the differences between learning, development and education. What examples can you identify under the four strategic purposes of HRM given above? Try to think of at least one for each. For example, addressing skills gaps might mean multi-skilling and training to achieve workforce flexibility.
2.
ACTIVITY FEEDBACK
1. You might have defined the terms in the following ways: Learning (or Training) refers to the methods of acquiring knowledge and skills determined by the employer in order to carry out current and future work. Development is a broader interpretation of any activity that contributes to the development of the person currently working within the organisation. This might include organisational development and cultural change processes brought about by experiential change. Education reflects a broader content and view of employee development over the working environment typified by MBA and
296
U niversity of Sunderland
related business and managerial programmes such as your BA Business Management. This is not work or person specific but environment specific. 2. The second part of this activity might have led you to start developing the learning, development and education equation against the four strategic purposes: Skills gaps: multi-skilling and learning to achieve workforce flexibility; management development to meet skill/attitude changes. Catalyst for change: cultural change programmes (see Unit 8) where organisations seek to change the ways employees think about their organisation; that is, commitment. Achieving competitive advantage: progressive training to cultivate high calibre applicants; advanced career development schemes, including job or career changes, to enhance retention and attraction. Creating learning environments: move away from formal courses to more person-specific development according to need; strategic secondment and projects for self-development; Total Quality Management (TQM) schemes to untap employee knowledge and knowledge dissemination; on-job structured development via coaching, counselling and mentoring schemes to develop the individual.
All these combined activities are aimed at releasing the potential (intangible) assets of the organisation and creating knowledge as a strategic asset. These processes need to be managed if we are to consider HRD strategically, but how do we recognise a strategic approach? Burgoyne (1977) provides a long-standing set of principles for evaluation. An approach to HRD is strategic if it follows these principles:
1. 2. 3.
Investment in VET and HRD contributes to the achievement of organisational objectives. Line managers are actively involved in the diagnosis of training needs and the monitoring of development activities of staff. VET/HRD is linked with other SHRM policies and procedures to achieve horizontal integration, discussed in Units 1 and 3.
U niversity of Sunderland
297
4. 5. 6. 7.
Learning and development is matched to organisational learning objectives and the learner groups. Employees are involved in, and own, the outcomes of the HRD needs analysis. Activities are relevant to their work. Senior managers participate in, and promote, learning activities to establish a learning climate. HRD becomes part of the organisational culture rather than being imposed upon it.
Looking at these principles graphically, Shepherd (1991) offers us a view of the relationship in Figure 6.1.
B U S I N E S S S T R AT E GY
SENIOR MANAGEMENT SUPPORT Principle 6: senior managers promote learning culture Principle 7:VET/HRD align with culture
INVOLVEMENT OF LINE MANAGERS Principle 2: active involvement in diagnosis, planning and monitoring
MOTIVATION OF TRAINEES Principle 5: shared diagnosis of training need and relevance of programme(s) chosen
QUALITY OF DESIGN AND DELIVERY Principle 4: programmes and processes match learning objectives INTEGRATION W ITH HRM POLICT Principle 3:VET/HRD have continuity with and mutually reinforced by other HRM policies
H U MA N R E S OU R CE S T R AT E GY
recruitment and selection appraisal and assessment reward and recognition career development
Earlier we noted four broad-based HRD purposes of strategic learning and development. Proponents of a strategic approach to HRD suggest that HRD processes are the cement that links SHRM policies and the achievement of business objectives. Strategic HRD (VET vocational and education and training that is applied development to the workforce experience) integrates employee attitudes to support organisational objectives via appropriately designed development
298
U niversity of Sunderland
relevant to employee needs, supported by effective managerial commitment. The target in Figure 6.1 is improved business performance. Through the alignment of development objectives with organisational needs (across four strategic purposes), behavioural skills and knowledge gaps are diagnosed and addressed in an integrated way. Courses, events, and work assignments are regarded as opportunities for development. Development is recognised as being more than courses. Managers and employees recognise the need for investment in qualifying courses (education) and broader developmental activity to address employer and employee needs. One might regard this as a mutuality of learning goals. Involvement, ownership and mutuality of the development equation reflect the wider engagement and integration of employee and employer values. HRD is a central process and the related system to support this includes appraisal, training needs analysis and feedback and transference of learning into the work situation. The wider SHRM processes are central in supporting an environment for learning.
ACTIVITY
What SHRM practices do you think might support a learning environment? Note down at least two.
ACTIVITY FEEDBACK
You might have mentioned:
U niversity of Sunderland
299
An alternative model of the strategic approach is the standard provided by the Investors in People (IiP) organisation. The IiP is a government-supported initiative to encourage the voluntary commitment of organisations to an enhanced level of learning and development activity in order to support business objectives. The IiP standard provides a basis for HRD development strategy that has been taken up by many organisations. Organisations that apply for the standard have to be assessed and regularly reviewed to ensure that they continue to meet this standard. The IiP standard has 12 indicators covering principles, planning, action and evaluation. Table 6.1 identifies the indicators and gives examples of evidence from an organisation that it is achieving the particular indicators.
Table 6.1 The IiP Standard Principles Commitment An Investor in People is fully committed to developing its people in order to achieve its aims and objectives. Indicators 1. The organisation is committed to supporting the development of its people. Evidence Top management can describe strategies that they have put in place to support the development of people in order to improve the organisations performance. Managers can describe specific actions that they have taken and are currently taking to support the development of people. People can confirm that the specific strategies and actions described by top management and managers take place. People believe the organisation is genuinely committed to supporting their development.
300
U niversity of Sunderland
Principles
Indicators 2. People are encouraged to improve their own and other peoples performance. 3. People believe their contribution to the organisation is recognised.
Evidence People can give examples of how they have been encouraged to improve their own performance. People can give examples of how they have been encouraged to improve other peoples performance. People can describe how their contribution to the organisation is recognised. People believe that their contribution to the organisation is recognised. People receive appropriate and constructive feedback on a timely and regular basis. Top management can describe strategies that they have put in place to ensure equality of opportunity in the development of people. Managers can describe specific actions that they have taken and are currently taking to ensure equality of opportunity in the development of people. People confirm that the specific strategies and actions described by top management and managers take place and recognise the needs of different groups. People believe the organisation is genuinely committed to ensuring equality of opportunity in the development of people.
4. The organisation is committed to ensuring equality of opportunity in the development of its people.
Planning An Investor in People is clear about its aims and its objectives and what its people need to do to achieve them.
5. The organisation has a plan with clear aims and objectives which are understood by everyone.
The organisation has a plan with clear aims and objectives. People can consistently explain the aims and objectives of the organisation at a level appropriate to their role. Representative groups are consulted about the organisations aims and objectives.
6. The development of people is in line with the organisations aims and objectives.
The organisation has clear priorities that link the development of people to its aims and objectives at organisation, team and individual level. People clearly understand what their development activities should achieve, both for them and the organisation.
U niversity of Sunderland
301
7. People understand how they contribute to achieving the organisations aims and objectives.
People can explain how they contribute to achieving the organisations aims and objectives.
302
U niversity of Sunderland
Principles Action An Investor in People develops its people effectively in order to improve its performance.
Evidence The organisation makes sure that managers have the knowledge and skills they need to develop their people. Managers at all levels understand what they need to do to support the development of people. People understand what their manager should be doing to support their development. Managers at all levels can give examples of actions that they have taken and are currently taking to support the development of people. People can describe how their managers are effective in supporting their development.
People who are new to the organisation, and those new to a job, can confirm that they have received an effective induction. The organisation can show that people learn and develop effectively. People understand why they have undertaken development activities and what they are expected to do as a result. People can give examples of what they have learnt (knowledge, skills and attitude) from development activities. Development is linked to relevant external qualifications or standards (or both), where appropriate.
Evaluation An Investor in People understands the impact of its investment in people on its performance.
10.The development of people improves the performance of the organisation, teams and individuals.
The organisation can show that the development of people has improved the performance of the organisation, teams and individuals.
11.People understand the impact of the development of people on the performance of the organisation, teams and individuals.
Top management understands the overall costs and benefits of the development of people and its impact on performance. People can explain the impact of their development on their performance, and the performance of their team and the organisation as a whole.
People can give examples of relevant and timely improvements that have been made to development activities.
A U.K. Strategic Model for Staff Development The IiP Standard (April 2000).
U niversity of Sunderland
303
The model is concerned with integrating and embedding training and education policies and processes within organisational life. It emphasises commitment from the top. We would now like you to use these models of the principles behind strategic HRD to review a working example.
CASE STUDY
The next case study concerns a building society. (Note: A building society considers that it performs the function of a bank. One of the key changes discussed is the process of demutualisation, that is, opening up the companys ownership to investors, making the companys performance acceptable to shareholders.) Read the case study question (below the case study) before you proceed to read the article. You may wish to keep the question in mind as you read the article. Hat Trick by Mark Whitehead. (People Management, 29th July 1999, p38 40) Remember the men from the Bradford & Bingley building society? Sturdy bowler-hatted City chaps oozing old-fashioned reliability, Mr Bradford and Mr Bingley were the kind of gentlemen to whom you would be happy to hand over your hard-earned cash. It would be as safe as houses. But the besuited partners were pensioned off not long ago when the society decided it was time to update its image. A combination of circumstances, triggered by the arrival of new chief executive, Christopher Rodrigues in 1996, led to a major upheaval with far-reaching implications for management and staff. At its Bingley head office, in the picturesque Airedale Valley of West Yorkshire, only a few miles from Bradford, and at more than 500 branches and estate agents scattered in towns and cities across the country, change was in the air. Of the UKs building societies most of which date back to the days when industrial workers needed a cheap way to house themselves the Bradford & Bingley is the second largest. And, as its 150th anniversary approaches, things are changing. The bowler hats, for so long the organisations trademark, remain. But now, in a newly-designed logo, they appear as a set of brightly coloured motifs with a somewhat surreal air. The new design says much about how the society now sees itself. In a radical programme of change, middle and top managers have gone through a rigorous development programme aimed at transforming the way the society operates.
304
U niversity of Sunderland
Many of the old core values remain, but new ones are being grafted on to make the whole operation more flexible, dynamic and customer-focused. We needed to do something quite radical, says Margaret Johnson, training design and development manager. Many of our customers treasured our traditional values of reliability and dependability. We knew that they trusted us more than the banks and other financial institutions. But with all sorts of new players arriving on the market we knew we couldnt survive as a traditional building society. We had to develop and modernise our management thinking and the way we operated. The roots of the revolution at the Bradford & Bingley go back to the great liberalising period of the 1980s, when the order of the day was to free up markets and offer consumers more choice. Mortgages, once the virtual monopoly of building societies, started to become available from banks and other financial organisations. As well as buying their baked beans and washing powder, shoppers in supermarkets could access savings and banking facilities. The telephone came into its own, with bank accounts and various other financial services becoming available down the line. Customers wanted quick, easy access to their money and mortgages. But change was some time coming at the Bradford & Bingley. Mr Bradford and Mr Bingleys pride of place in the societys advertising, and their images in its logo, continued until the early 1990s. More recently, the pressure mounted when diversification brought new challenges. The society decided to buy the Black Horse chain of estate agents from Lloyds Bank, and Mortgage Express, a specialist business-to-business operation. The number of Bradford & Bingley high street outlets doubled overnight to more than 500 and a completely new area of work albeit one closely linked to the societys traditional mortgage lending business opened up. Facilitating the smooth merger of the three organisations, so that managers and staff work together to maximum effectiveness, has been a central objective in the development programme. A third major challenge came earlier this year when the societys members voted by a substantial margin to demutualise and re-establish as a commercial company. As was the case at several other building societies before them, the move came in the face of advice to the contrary from the societys board, but the members were seemingly determined to take advantage of the potential windfalls. The final vote will be held next April and managers have accepted that demutualisation is likely to go ahead in about 18 months. All of these events confirmed the wisdom of the decision to call in experts to help managers and staff to deal with the changes ahead. In the first phase of the change process, a brief programme called People First was put into effect three years ago, using a mix of outside consultants and internal HR professionals, to challenge some of the old ways of thinking and prepare the ground for new ideas.
U niversity of Sunderland
305
More recently, two further programmes have pushed the process forward. About 260 middle managers underwent a three-day programme at Henley Management College aimed at developing their leadership skills within a changing organisation. Cranfield Business School was appointed to take responsibility for 76 senior managers in a five-day programme with similar objectives. In devising a seamless programme, consultants from the two institutions worked in partnership with Christopher Rodrigues; John Melo, Bradford & Bingleys HR director; Dawn Beadle, head of organisation development; and Margaret Johnson. Both courses started by examining, in ruthless detail, the context in which the society currently operates. These sessions, entitled Winning in a New World", aimed to reveal what was needed to be successful in todays competitive market place. The workshop sessions then examined the Bradford & Bingley and the way it worked. These sessions included, for example, senior managers explaining some of the societys financial facts and figures that most staff had previously been unaware of. The third and final phase of the programme involved intense scrutiny by individuals of their own strengths and weaknesses and those of their colleagues. This activity was based largely on a process of 360-degree appraisal and the results of Myers-Briggs Type Indicator questionnaires that were filled in by course participants in advance. Rob Davies, a visiting faculty member of Henley Management College and a director of Henley-based Interactive Skills, who helped to devise the courses, says the key to success was to involve people fully in the process. It was clear that it wouldnt work if you waited for the people to decide what needed to change, he says. The key message of the programme was that everyone needed to take responsibility for their own role in dealing with all the new challenges out there. The changes put in train were dramatic and it was to be expected that not everyone would welcome them. Some of our managers who are now in their fifties had been with us since leaving school and had always worked in the same way, Beadle says. It was the biggest change they had ever experienced in their working lives. They were being asked to completely change their orientation. There were three main reactions to the change taking place. Some people pretended that it was not really happening and that it would go away if they ignored it. Others went along with the new ways of thinking, but assumed that they could return to the old ways of working once the courses had finished and the fuss had died down. A third group embraced the change programme enthusiastically. Brian Wilkinson, senior audit manager responsible for the Bradford & Bingleys branches, has seen his role transformed. He had been thinking for some time about his departments function and decided it could do more to support the societys business objectives. Traditionally, the audit team was seen as a group
U niversity of Sunderland
306
of people who descended on a branch once a year, inspected the books and then disappeared. But it now spends about half its time in a consultancy role helping branches to achieve best practice. Wilkinson reasoned that the less time branch staff spend on dealing with errors and discrepancies, the more time they could spend dealing with customers, attracting and retaining new business and improving results. The new strategy quickly won full backing from senior management but, at the time, it was a big step to take. The timing of the Henley course couldnt have been better for me, Wilkinson says. I had been doing a lot of thinking about the role of internal auditing and I wanted to change things. We were seen as the financial police who held back the organisation with constant red tape, but I thought we were there to promote better practice which would in turn benefit the business. Henley helped me with my personal development, he adds. I had to come out of the comfort zone and bring my team with me. It gave me the confidence to do it. I thought I was taking a really big risk, but the more I talked to the organisational development team here and the people at Henley, the more I realised it wasnt such a big gamble. It was simply taking the first step that was difficult. Management structures have also changed. There had been a traditional hierarchy in which every member of staff worked to their line manager and up through a chain of command to the top. But now matrix management in which someone can work for different bosses at different times is more prevalent, particularly in the HR and IT departments. The whole project has been aimed at improving customer service, in line with modern research which shows that attracting and retaining customers has as much to do with the way they are treated as with the quality of the product on offer. Counter productive I went into a branch a couple of years ago with a question about my mortgage, Beadle says. The woman behind the counter went away with it and came back saying she couldnt do anything and that them at head office would sort it out. I nearly died I couldnt believe this was the kind of thing being said to customers. That sort of response would be much less likely now. One of the concrete results of the change programme is that the old divisions have been broken down. Now, head office staff apparently think nothing of contacting colleagues in the offices to discuss ideas, which at one time would have been virtually taboo. The new approach is crystallised in the customer value proposition adopted by the Bradford & Bingley and used as a central motif in the Henley and Cranfield courses. Far more concrete than many vision statements, it says simply: We help and advise our customers to find the right home and the right loan, to save for tomorrow and invest for the future, and to protect their families and possessions
U niversity of Sunderland
307
John Barker, head of the product management and general insurance department, sees the aim of the project as being to get the three newly-merged organisations working together. We had to decide how we were going to start working with these two very different organisations and get the projects to the customer, he says. We had to free ourselves from the straitjacket of saying: Were a building society because thats what weve always been. We had to say: Were a large organisation with a range of products and we have to provide the customers with what they want: It was a case of standing back and seeing ourselves as part of a team Barker found the last couple of days at Cranfield the most useful. We had to look at ourselves as individuals, he says. It was about realising what we were good at and not so good at, and how we could bridge that gap. Some came out as strong thinkers and planners, while others were better at the operational side. It wasnt about everyone being good at everything, but about all working together. It gave me some direction and options about how I could develop my career. One of the positive outcomes, Barker says, is that managers across the three merged businesses have continuing contact, meeting informally and regularly to discuss important issues and working out how best to further the business. This, he believes, is crucial to continuing success. Its not something we would expect to happen naturally, but if we dont, there are competitors out there who will. We now have a fantastic distribution footprint and weve got to make it work. Thats the challenge:
QUESTION:
See if you can identify the principles of strategic HRD at work and the extent to which a range of HRD development processes have been utilised in an integrated way to support the change process. Note these and link them to the Shepherd and IiP models by noting alongside each one the relevant principle number(s) (Shepherd) and IiP indicator(s). We have done one for you as a guide.
HRD Principle Skills gaps are addressed. Shepherd principle 5 IiP 1-3, 5-7
308
U niversity of Sunderland
HRD Principle Skills gaps are addressed. HRD assists with the merger and the alignment of organisational style and culture. The people first programme is an HRD programme to change attitudes and culture and to promote a learning climate. There is formal development of new leadership skills. Winning in the New World is an organisational development programme aimed at performance and attitude change. The 360-degree approach is critical to rich performance feedback and to the evaluation of whether training objectives are met. Individuals take responsibility for own learning and self development. HRD is at the centre of an integrated change effort, which goes beyond formal training activity. There is senior management drive from the top. There is line manager involvement. HRD supports organisational competence development customer value proposition. There is integration with other HR processes: appraisal, organisational structure, audit team, project team, career development.
Shepherd principle 5 7
6 and 7
2, 6-9
6 1
1, 9 6-7, 9-12
1, 3, 5-7
2, 7, 9 1, 4-5, 8-12
6 6 1 and 3 3
We have, thus far, established a broader strategic purpose for HRD that covers formal and more informal continuous processes. We have seen how it requires mutual commitment of resources and personal commitment from both senior management and individual staff. We have also seen how a broad-based planned approach is fundamental to organisational development processes.
U niversity of Sunderland
309
310
U niversity of Sunderland
READING ACTIVITY
Please read Chapter 13 of your key text, The Strategic Managing of Human Resources, Edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, which covers the subject of developing management capability.
The wider environment. The evaluation of learning and development. The value placed on HRD by staff.
U niversity of Sunderland
311
312
factor in employee motivation. However, the evaluation of the effectiveness of the learning and development can be hard to quantify. Generally the business case and effectiveness analysis will be undertaken prior to learning and development initiatives. Strategic organisations will also periodically compare the actual benefits vs. forecast benefits. The key measurements may be improvements in productivity, improvements in quality, increased sales wins, etc. However, a word of caution. Traditionally productivity has been measured at the individual level. But the shift in emphasis to a learning organisation and the promotion of team-based learning and knowledge collaboration, will not necessarily render benefits at the individual level but at a higher business level. Paradigm shifts in profitability can be achieved by the adoption of new business processes, knowledge-based collaboration and re-use of intellectual assets, which have only been made possible by embracing a learning culture by the organisation as a whole. Other quantifiable benefits may include new market sectors or reduced cycle times in sales and other business activities. It should, however, be noted that learning and development is only effective when the curriculum and learning initiative are appropriate and focused to business objectives and current culture. Often the volume of education days, the traditional basic measure of HRD success, does not address individual needs and many of the organisational prescriptions for training and development do not match workforce expectations. The Lucas case study below illustrates this point well.
CASE STUDY
Read the short case study below: The role of training in turnaround In the period 1985-8, Lucas has spent around 40 million per annum on training which was equivalent to about 2.5-3 per cent of its total sales revenue. This expenditure was viewed as an investment in that learning and development was being called on to act as a major agent of change. The in-company consciousness of the key role of training was high. It was not seen as a poor-relation, peripheral activity, but as a potent source of change. The highlights of the contribution made by training in this company are:
The highly evident top management commitment to it. Its role in developing and executing the competitive achievement
plans (CAPs) which every business unit is required to have.
U niversity of Sunderland
313
Question:
Why do you think the approach was not seen as successful by the shop floor staff.
314
U niversity of Sunderland
training was owned by the company and did not necessarily meet the needs of each individual. We will return to this point later in the unit.
A further consideration is that whilst some state schemes for technician training work well (for example, in Germany) and there is increasing evidence of wider access to management development, professional training and training to support change (for example, in the UK), the pattern is not uniform. Deeks (2001) reports that the CIPD survey of workplace training suggested that three-quarters of all manual staff received little or no structural job related training, despite critical changes to manual work reported widely in public organisations and service industries. The HRD 2001 survey also, more positively, showed that where organisations had chosen to adapt the UK Investors in People (IiP) Standard to support integrated strategic HRD, 90% of survey respondents concluded that:
U niversity of Sunderland
315
Despite these concerns can we find evidence of increased HRD activity? A few indicators in the UK may show positive results. For example, there is evidence that many (over 30,000) organisations have achieved the IiP standard. There is also evidence of increased investment in management development, in particular. Despite such increases in activity, doubts remain as to whether they are strategic in intention. Having looked at some of the problems that surround the establishment of a HRD culture, we now turn to a consideration of how organisations are seeking to embed training, development and education through learning.
The Role of Learning, Strategic HRD and the Learning Organisation Concept
In this part of the unit we explore how organisations learn and the benefits of becoming a learning organisation. We consider the interplay between the structures, cultures and organisational systems that can support learning.
316
U niversity of Sunderland
Learning
SHRM
Performance
Change
If organisations want to improve performance they need to develop the capacity to change, and learning is essential to this capacity. This diagram revises the central goals of strategic HRM that you saw in Units 1 and 2: the enhancement of performance in turbulent conditions, where change is central and learning is central to the process that facilitates change. SHRM is at the centre of the diagram because it is concerned with delivering the conditions under which learning can take place. Some commentators argue that the management of learning and of performance are closely associated. To explore this we shall look at the following important points:
The concept of the learning organisation. How such a model can be used in the practice of
managing learning and overcoming barriers.
U niversity of Sunderland
317
318
U niversity of Sunderland
Pedlar et al (1991). This is shown in Figure 6.3. There are five essential components of a learning organisation, and feeding into these five essentials are eleven processes and structural enablers. For example, a learning approach to strategy and participative policy-making enable the strategy that is the first essential component.
Information
Reward flexibility
Enabling structure
Learning climate L ear ning oppor t unit ies Self development for all
U niversity of Sunderland
319
Note the holistic approach to analysing and providing internal resource strategies to deal with, and respond to, the external influences, to provide an integrated approach to learning. Note also the relative absence of learning and development at the formal level within this model and the emphasis now being placed upon working and learning systems in the rebalancing of strategic HRD.
ACTIVITY
Now spend a few moments reviewing the LO blueprint expanded overleaf to include some explanation. Think about an organisation you have either worked for or read about. Spend a few minutes completing a quick diagnosis, scoring each of the eleven characteristics on a scale from 1 to 5, where 1 is low and 5 is high.
320
U niversity of Sunderland
Company regularly takes stock and modifies direction and strategy as appropriate.
All members of the company take part in policy and strategy formation.
Managerial acts
Information technology is used to create databases and communication systems that help everyone understand what is going on.
Systems of accounting, budgeting and reporting are structured to assist learning. Accountants and finance people act as consultants and advisers as well as score-keepers and bean counters. The financial system
Everyone feels part of a department or unit responsible for its own resources. 4. Formative accounting
3. Informating
You can get feedback on how your section or department is doing at any time by pressing a button. We really understand the nature and significance of variation in a system, and interpret data accordingly. Information technology is used to create databases, information and communication systems that help everyone to understand what is going on and to make sound decisions.
Departments see each other as customers and suppliers, discuss and come to agreements on quality, cost, delivery.
Each department strives to delight its internal customers and remains aware of the needs of the company as a whole.
The basic assumptions and values underpinning reward systems are explored and shared.
6. Reward flexibility
Alternative reward systems are examined, discussed, tried out. Flexible working patterns allow people to make different contributions and draw different rewards. We are all involved in determining the nature and shape of reward systems.
5. Internal exchange
Departments speak freely and candidly with each other, both to challenge and to give help. Managers facilitate communication, negotiation and contracting, rather than exerting top-down control. Departments, sections and units are able to act on their own initiatives.
U niversity of Sunderland
321
Roles and careers are flexibly structured to allow for experimentation, growth and adaptation.
Appraisals are geared more to learning and development than to reward and punishment. Departmental and other boundaries are seen as temporary structures that can flex in response to changes.
It is part of the work of all staff to collect, bring back, and report information about whats going on outside the company.
All meetings in the company regularly include a review of whats going on in 8. Boundary workers our business environment.
7. Enabling structure
We have rules and
We meet regularly with representative groups of customers, suppliers, community members and so on to find out whats important to them. There are systems and procedures for receiving, collating and sharing information from outside the company.
We receive regular intelligence reports on the economy, markets, technological developments, sociopolitical events and world trends and examine how these may affect our business.
People from the company go on attachments to our business partners, including suppliers, customers and competitors.
9. Inter-company learning
We participate in joint learning events with our suppliers, customers and other stakeholders. We engage in joint ventures with our suppliers, customers and competitors, to develop new products and markets.
If something goes wrong around here you can expect help, support, and interest in learning lessons from it.
People make time to question their own practice, to analyse, discuss and learn from what happens.
We use benchmarking in order to learn from the best practice in other industries.
Differences of all sorts, between young and old, women and men, black and white, etc. are recognized and positively valued as essential to learning and creativity.
When you dont know something, its normal to ask around until you get the required help or information.
11. Self-development People here have There are lots of opportunities, materials and their own selfresources available for learning on an open development access basis around the company. budgets they decide what Self-development resources training and are available to external The exploration of an individuals development they stakeholders. learning needs is the central focus of want, and what to With appropriate guidance people are appraisal and career planning. pay for it. encouraged to take responsibility.
Source: Pedlar M. et al (1991). The Learning Company: A Strategy for Sustainable Development, 2nd edition. McCraw Hill Publishing Company. Pp 26-27.
322
U niversity of Sunderland
ACTIVITY FEEDBACK
Your scoring will be unique to you and the organisation that you have chosen. A score of 40 or more probably denotes that the organisational practices are moving towards a LO. A score of 20 or less suggests either an ad hoc or fragmented approach to learning.
ACTIVITY
The LO concept and practice has attracted criticism. What problems have you found in any organisations that you have worked in or know well, in successfully implementing the LO model? (You may want to look again at the jigsaw in the last activity)
ACTIVITY FEEDBACK
From your work to date you might have noted the following problems:
Managers skills and ability to provide the conditions and support for
learning, for example, providing opportunities for coaching and counselling.
323
More recently, Burgoyne (1999) has responded to criticisms of the LO model by stressing that the key features are:
The organisation must create its own development tools. Interests of stakeholders must not be in conflict. Issues of ownership of competence and intellectual
property must be addressed.
324
U niversity of Sunderland
approach that will embrace organisational structures, cultures, decision making, developmental and work-based processes and, within this, contribute to the strategic HRD model we introduced earlier. We shall explore this by looking at:
The design of effective learning activities. The role of the manager. Structure and culture to support learning.
The learner experiments and applies the new ideas to working experience. This is the central proposition for continuous learning. Honey & Mumford (1982) developed this model by associating with each stage an individual learning style or preference for learning:
U niversity of Sunderland
325
conclusions for as long as possible. Their motto is caution. They enjoy observing other people in action.
Goals of Learning
The goal of learning can be depicted as shown in Figure 6.4. The top block of Figure 6.4 represents the purposes of strategic HRM:
326
Interview skills
Operations training
Outdoor development
U niversity of Sunderland
327
Instrumental Presuppositions A body of knowledge to be taught. Emphasis on the subject matter. We are part of a wider system, which is ultimately knowable. Trainer role Trainer is expert. Trainer is responsible for success. Distant trainer-learner relationship. Nature of development Practice deduced from theory and then applied. Emphasis on specific acquisition. Formalised learning methods, which are predetermined. Close-ended assignments with grades and comment. Nature of learning systems High entry standard. Power and control lie with providers. Rate and standard of progress visible and closely monitored. Formal qualifications (and perhaps membership of an elite). Identify leading practitioners.
Experiential Talent, ideas, views to be drawn out. Emphasis on the learner. We evolve our own purpose/identity in an unbounded system. Trainer is facilitator/coach/a resource. Learner is responsible for own development. Close relationship with trainer and other learners. Formulate own concepts and perfect own skills through trial and error. Emphasis on general application to life (and work, if appropriate). Self responsible for learning using resources available. Open-ended experimentation with personal feedback. Entry open and voluntary. Power and control widely dispersed. Pace and direction self-regulated quality of experience is proof of progress. Learning open-ended and ongoing. Honour past students.
Table 6.1: Characteristics of the two policies of learning. Source: based on Handy (1976)
This model demonstrates the shift from traditional teaching, to a learning approach whereby the learner has more control over the selection, pacing and sequencing of learning according to need and experience.
328
U niversity of Sunderland
ACTIVITY
Think of your own career to date. What value have you and your employer(s) placed on training and your own self-development? In your current situation are you responsible for your own learning and development?
The principles of learning that we started with introduced us to the level of control and ownership by the organisation and the learner. The proposition made is twofold. First, that if organisations are to develop the full potential of staff knowledge and skill, then more learning needs to take place and this needs to take place close to the work experience of the learner. Second, organisations need to encourage a comprehensive range of learning activities to fulfil the wider instrumental and experiential purposes of HRD. Learning needs to be top down and bottom up.
CASE STUDY
Read the article below and as you read consider the question of what the key features are that the effective manager needs to consider. How Managers Can Become Developers by Alan Mumford (Personnel Management, June 1993) The manager of a hotel is called from his office. An angry customer has complained to the receptionist that he had been interrupted in his bedroom three times in the space of half an hour by a cleaner, the housekeeper, and someone checking the minibar. The manager takes his new deputy with him an interesting experience for you and they both listen while the customer repeats his complaint. The manager goes through the reasons why three different employees arrived in such a short space of time: It is, of course, part of our policy of providing excellent service. The customer departs, still expressing dissatisfaction.
U niversity of Sunderland
329
The hotel manager and deputy return to the managers room. The manager sits behind his desk, blows out his cheeks and says So how would you have handled him? A great deal of management development occurs in this way. An unplanned experience, a question from one manager to another, a discussion reviewing facts and opinions, a decision about what to do in a similar situation. Potentially these are all the elements of an effective learning cycle. There are some other things we know about this kind of experience. First, managers constantly claim that they learn from such experiences. Secondly, they rarely recognise at the time that they are learning, they think they are simply managing. Thirdly, they may not have been introduced to the idea of a complete process in which the elements of learning are balanced. Finally, and most significant, helpful interventions by the boss are all too rare. There are three main developments in the increasing provision of work-based learning for managers. Although they overlap both chronologically and in terms of content, they have been action learning (Reg Revans), the learning organisation (Peter Senge, Mike Pedler, John Burgoyne, Tom Boydell), and the competency approach (Richard Boyatzis). The shift towards work-based learning has occurred in part because of the powerful intellectual contribution of such people, but an even more important driving factor, perhaps, has been the demands of consumers for valid and relevant development. In fact, the three parts of the theoretical drive towards work-based learning coincides with the accidental reality of informal development stressed in the hotel scenario above. Not only are they all centred on learning from real work, they all demand that management development should succeed in putting life into an old management responsibility. If we accept that managers have a major responsibility for developing those who work with them, all the themes demand a major effort from those managers. In the UK the competency approach adopted through the Management Charter Initiative with its emphasis on applied prior learning or crediting competence will require successful intervention by bosses in a form which has not seriously been tackled in most organisations. The stimulus provided by the theories mentioned above, and the demand from managers for effective help with their development, mean we have to combine three elements to produce an effective management development system: Self-development: A recognition that individuals can learn but are unlikely to be taught, and that the initiative for development often rests with the individual. Organisation-derived development: The development of those systems of formal development beloved of personnel and management development specialists.
330
U niversity of Sunderland
Boss-derived development: Those actions undertaken by a senior manager with others, most frequently around real problems at work. Formal management development systems insist that managers appraise, identify development needs, and provide time and money for people to attend courses. These are valuable and necessary processes through which we try to balance the often frantic pressures at work with more effective and planned attention to performance and development. These formal processes could certainly be improved and extended. The significance of the case I am making can be assessed in at least two ways. If my analysis of the three major current themes of management development is accurate, how far do current formal schemes effectively provide the enhanced role of the boss in developing others? A slightly different form of test could be applied by looking at the resources currently devoted to helping managers to help others to learn. If we add up the days devoted to designing appraisal schemes and to running courses on effective appraisal, and compare that with the time devoted in most organisations to how managers can assist in the development of others, the disproportion is staggering. Some organisations run courses on how to be an effective coach or mentor. Useful though these can be, they all too often give managers the idea that the process of developing others is something which is added on to management as a special activity, not an integral part of the process itself. There are a number of things we have to do to enable managers to develop others more effectively including establishing why it is important, giving them a better understanding of the learning process, and developing the skills involved. The starting point for managers must be the managerial situation which provides the opportunity for development.
U niversity of Sunderland
331
the project group the director calls this person in and says: I would just like to talk over some of the things that are happening on the group. How do you think things are going? These examples, like the hotel case with which we began, contain some recognition on the part of the boss (or, in the last case, the mentor) that the work situation offered an opportunity for learning. Unfortunately such examples are relatively rare, and that is why our first concern in helping managers to help others learn must be with helping them to recognise opportunities, and then to use them more effectively. The big 0 Managers and, sadly, some management development advisers think too often in terms of what I call the Big 0: We have this splendid chance for you to move from sales into marketing. Even more to the point: We are moving you to work for Jane Smith instead of John Brown. You will find she is a quite different sort of manager. Presenting individuals with this kind of opportunity is usually better than not providing them with an opportunity at all. However, we need to give much more detailed attention to exactly what kind of learning opportunities are likely to exist within the Big 0. What new experiences will be on offer? What are the differences in the work? Who are the new and different people the younger manager may encounter? The best way to help managers to help others is to get them to start by considering the kind of experiences from which they have learned. The following exercise has the advantage of being both simple and immensely productive: Identify the two most helpful learning experiences you have had, and the two most unhelpful. Once the general ground of learning from experience has been established, it is possible to go to a more specific exercise: Think of an experience of being helped by another manager. What was the experience, and what did the other manager do to help you? It is possible to ask people to do these exercises without any stimulus or suggestion of what they might consider. An alternative or supplementary approach is to give them a list of situations in which a manager can offer assistance to others. The list is lengthy but includes learning from a new project, membership of a task force, confronting difficult colleagues and reviewing completed tasks. The crucial point when helping managers to recognise such opportunities is to get them to consider first the activity or the situation, and not to ask them to think initially about learning opportunities at all. Managers think in terms of activities, not learning opportunities!
332
U niversity of Sunderland
It is often a discovery for managers that things they have considered purely as work activities are learning opportunities as well. Like the Molire character who discovered he had been speaking prose all his life, they can be helped to see what they have always taken to be natural work can be used also as a creative learning opportunity. Our main concern must be to facilitate learning through our understanding of real work in the managers world, rather than attempting to impose separate management development processes. Take the following examples:
U niversity of Sunderland
333
behave in other aspects of their managerial life, it also provides immediate practical examples through which a manager can be encouraged to work. Wrong emphasis Perhaps this is why some formal management development processes have not worked as effectively in the past as we would have liked. We have put too much emphasis on planning ahead, and not enough on enabling managers to use, understand and then build on their past learning experiences. Once managers have been engaged in helping to interpret, re-interpret and better understand their past work experiences, they can be encouraged to help others to go through the same process. Beyond this there lies the rosy future of better identified future learning opportunities. In a sense there is plenty of anecdotal evidence that the kind of approach suggested here can work. Some managers have always given time and attention to the development of their subordinates. The question is not whether some managers do it naturally, but whether we can encourage more managers to do it, equally naturally but with some previous encouragement and thought. My experience on this is hopeful. I find managers are intrigued, stimulated and enjoy the kind of activities described here. Again comparisons can be drawn with appraisal training. All too often this is approached by the management developer with a firmness of purpose only equalled by the unwillingness of managers to participate. The situations and processes described here recognise and build on things which managers are aware of, rather than imposing something which is all too often outside their experience and their sense of commitment. Managers develop others for a variety of reasons. Sometimes the formal system instructs them to do so. Sometimes they expect to reduce problems by increasing the ability of their subordinates to handle problems on their own. Nor should we ignore less self-centred reasons. For at least some of them what I call the principle of reciprocity occurs. Managers like helping to develop others not just because of the direct return in the sense of performance, but because they get a glow of satisfaction from having helped someone. The task of helping managers to develop others does not have to be as difficult as management development systems have seemed to make it, if we base our guidance on using real situations, rather than contriving special management development processes. References Mumford, Alan. Management Development: strategies for action, 1PM, second edition, 1993. Honey, Peter and Mumford, Alan. Manual of learning opportunities, Honey, 1989.
334
U niversity of Sunderland
The lessons from the hotel scenario in the case study: indicate that
work situations offer opportunities for learning.
Managers need to seek out opportunities for learning. Three overlapping processes are self-organisation (the little o),
organisation-derived development and boss-derived development (the big Os). They give comprehensive learning coverage for the LO, but organisations prefer the big Os. More attention needs to be paid to the little os.
Effective manager behaviour to support individual and organisational learning can be summarised as follows. Effective managers:
Draw out the strengths and weaknesses of staff. Reward risk, experimentation and questions. Continuously identify learning opportunities. Devote personal time to coaching and counselling
activities beyond the annual review.
Involve staff in organisation problems. Listen, and encourage staff to implement their own
development needs.
U niversity of Sunderland
335
The third factor in developing effective learning processes is the supporting structures and cultures.
ACTIVITY
From your knowledge of organisational structure and culture write down at least three of the trends in organisational structure that might, in your view, stimulate an effective learning culture.
ACTIVITY FEEDBACK
You might have included any of the following:
Flexibility: multi-skilling and broadening job design. Flatness; removal of management layers, more control. Empowerment: closer to customers, widening of responsibility
and experimentation.
Self-organisation: learning through doing. Lateral communication: opening up vertical and horizontal
sources of information.
336
U niversity of Sunderland
Most of these structural innovations now require a range of employee behaviour (culture) of which the following are examples:
Empowerment, taking responsibility. Being proactive and responsive. Being flexible and prepared to learn and adapt. Sharing information and knowledge. Generating new ideas, share opinions. Participating. Working beyond contract.
Thus organisational behaviour that goes beyond the role and procedure-based features of traditional bureaucracies is essential to establish an effective learning culture. This is one of the biggest challenges faced by organisations. Having explored the processes that might support the creation of a learning organisation, our next step is to think about the development of a strategic HRD policy.
U niversity of Sunderland
337
High Pattern 1 Intermittent Level of visible training and development Pattern 2 Institutional Pattern 3 Integrated
High
The strategic management of HRD/VET suggests that the first challenge is to invest in formalised training, such as formal courses, both internal and external, and training day targets; moving from pattern 1 to pattern 2 in the diagram. As line manager commitment increases, so does the visible level of training programmes. This moves the organisation from intermittent, non-strategically aligned activity to institutionalised training, where investment and planning are clearly visible. The second level of challenge is to move the organisation from pattern 2 to 3 where a lot of development work is decentralised and devolved, but still working towards the fulfilment of integrated organisational and individual objectives using a mix of processes, as we discussed earlier in the unit. In the integrated pattern, line manager commitment is at its highest but the visible level of training decreases as people take more responsibility for their learning and development. You may find the HRD audit a useful tool for assessing the current status of training or for planning an HRD strategy. The HRD audit framework can be used to probe more deeply into strategic purpose, into the level of integration of training and learning activities into organisational culture, whether intermittent/fragmentary (pattern 1), institutional/focused (pattern 2) or fully integrated (pattern 3). Note that in the checklist the second pattern has been sub-divided into a more operational, situation-specific pattern (formalised) and a more strategic pattern (focused).
338
U niversity of Sunderland
HRD audit checklist Fragmented Purpose 1 Why is HRD initiated? To address specific problems. No necessary link to organisational goals Seen as a cost; to be cut back or eliminated in hard times To feed wider human resource plans To support wider organisational strategy and decision-making Seen as an investment and departments carry their own developmental budgets Seen as a way of cultivating attitudinal change and leadership to facilitate organisational growth Personal development needs met To contribute to the way the organisation forms and implements its policy HRD is interwoven with everyday experience and financed accordingly A way of creating a mentality whereby each persons business is the whole business A way of tapping individual creativity to enhance innovation, motivation and competitive advantage Formalised Focused Fully Integrated
One of a number of other developments and structural tactics with which it is linked Seen as an essential weapon to stay ahead of competitors
Process 5 When does HRD happen? Training is piecemeal and tactical Training programmes are linked in some way to individual needs HRD is an approach rather than a programme, focusing on individual career structure Wide range of developmental activities designed to meet personal learning goals HRD arises from a network of informal interactions, and is therefore continuous and personal All work activity is HRD, with built-in potential for personal development and organisational learning Everyone, through review, reflection and learning from everyday experiences
U niversity of Sunderland
339
Involvement in activities, with learning being logged and possibly reviewed with mentor/coach Main responsibility for development lies with line manager
Skills, knowledge and attitude acquired in job role indivisible from HRD Every functional manager is a general manager ... and responsible for their own and others development
Programme 10 Where does HRD happen? Training takes place out of the work environment Training mainly off-the-job, with some on-the-job Increasing amount of on-the-job development Everyday experience is reflected on, conclusions drawn and new ideas tested People encouraged to take constructive risks learning is turned into action
12 How is HRD delivered? (a) Style Training is directive using formal delivery methods Trainers deliver in classroom setting Wider range of training styles Generally non-directive unless for acquiring knowledge Trainers adopt a wider role as HR consultants At all levels a ceaseless search to improve things to introduce beneficial change
(b) Staff
Trainers require more skills in a broader range of courses More use of organisation-base d material (e.g. company case studies)
(c) Content
340
U niversity of Sunderland
(a) By trainees
Training perceived as a reward at best or a waste of time at worst as helpful development of the individual
More sceptical the training system felt to be obsolete or irrelevant to individual/ organisational needs Training success stories rewarded by the organisation
Organisation seen as a learning company, constantly monitoring and learning from its internal and external environment Organisation regarded as a classic training ground by recruits and competitors
ACTIVITY
You should now try to apply the audit checklist to your own organisation or to one that you know well. What is the current HRD landscape of your chosen organisation?
As we stated above, the IiP Standard (reproduced with the permission of the UK Department of Employment), combining top down commitment, planning, action and evaluation, provides a sound framework for building an organisational HRD strategy. Organisations signing up to the standard are regularly audited and assessed against the criteria. All employees are eligible to be audited in the following broad terms:
U niversity of Sunderland
341
CASE STUDY
Read the article below, in which Sloman reviews the new platforms for learning, e-learning. E-learning: Forewarned is Forearmed by Martyn Sloman (People Management, 5th April 2001) Readers who know their Old Testament will recall the writing that appeared on the wall at King Belshazzars feast. The message indicated that the Babylonian leader had been weighed in the balance and found wanting and that the days of his kingdom were numbered. Today the writing is on the wall for training professionals. Like the unfortunate Belshazzar, we are being weighed in the balance as the e-learning revolution transforms the context in which we work. Our kingdom may not be obliterated by the Medes and Persians, but the warning is clear: we will not be able to add value to the modern economy and our own organisations unless we develop new ways of thinking and working. Fortunately, many training professionals are already doing just that. Among the organisations I studied while researching my latest book, there are plenty of examples of good practice. Perhaps the most impressive is Motorola
U niversity of Sunderland
342
University, an early adopter of learning technology that is well on the way to making half of the training it delivers available outside the classroom. CERN, the European Organisation for Nuclear Research has chosen a different, but equally appropriate, approach, using bought-in content and e-learning to develop an extended international community. Closer to home, Ernst & Young, my previous employer, recently undertook a significant e-learning pilot using Leap (Learning environment for accelerated performance), a system developed by its US arm. Around 150 UK-based employees registered for a session outlining the firms approach to e-business. The participants accessed the 90-minute training session from their desks through their PCs, using both an intranet address and telephone number. They also had the opportunity to send questions and receive immediate answers through an e-mail facility built into the site. There was a universally positive response to the question: Would you participate in another desktop learning session? All the evidence suggested that the participants saw huge potential in making such tuition instantly available anywhere across the country or even the world. Ernst & Young, like other e-learning pioneers, is a knowledge-based organisation whose staff are comfortable with IT. Other organisations face greater difficulties and many have fallen into the obvious trap of focusing on the functionality of the technology rather than on how people use it. Unfortunately, trainers arent very good at sharing their failures no one has yet offered the sort of conference paper parodied below. So how can they avoid these failures and exploit the tremendous potential of e-learning? A helpful start is to distinguish between what could be described as hard and soft technology. The conference paper you will never see Gareth Holmes is training manager of Lakin Scott Golding, a manufacturing company employing 3,000 people on three sites. In 1999 cost pressures led the company to switch from predominantly classroom-based training to courses delivered through CBT and, later the corporate intranet. The result was chaos. In this session, Holmes will describe how:
- many of the soft skill modules available on the system were used
once and found to be both trivial in content and difficult to access;
U niversity of Sunderland
343
344
U niversity of Sunderland
One part of the training managers traditional role, the monitoring and evaluation of resources, will continue to be critical. But the arrival of e-learning means that time, rather than spend, is becoming the most critical issue. Time for individual learning competes with other organisational demands, and these are constantly growing. Demand for better work-life balance is also increasing, yet the ability of the connected economy to deliver training any time, any place threatens to intrude further into individuals personal time and space. Time, therefore, is likely to become the focus of training evaluation. This does not mean that expenditure on training no longer matters. Investment decisions (increasingly concerned with buying technology-based systems) must of course be analysed rigorously. But e-learning calls for a new type of decision making. The traditional resourcing decision facing training managers was straightforward: courses were costed and budgets set on the basis of these costs. With e-learning, the investment decision is a project decision: an initial investment is required that will lead to ongoing savings. Fortunately, there is considerable experience of such costing in IT departments, and it is to them that training managers must look for guidance. It is not only the training manager who has to heed the writing on the wall. The roles of those who develop and deliver training are also changing. It is possible that three functional specialisms will emerge: design, delivery and learner support. In its 1998 report Models for Learning Technologies, Roles, Competencies and Outputs, the American Society for Training and Development (ASTD) identified eight roles for implementing learning technologies, its term for e-learning. These reflect the emerging functional distinctions. They include the designer, who determines content and learning methods; the implementor, who works with technical staff to provide logistical support; and the instructor, who facilitates learning either in a live broadcast or a high-tech classroom. The first of these roles clearly fits into the design function, while those of implementor and instructor would be part of the delivery function. Then there is the organisational change agent, described in the ASTD report as someone who helps an organisation to adapt to new technology and see its value and benefits This role embraces learner support, the third specialism in the emerging distinction. But it is important to note that thinking and practice among US organisations is far less advanced in the softer areas of learner support than it is among their European counterparts, where a strong tradition of softer interventions gives trainers a real chance to take a leading role. None of this is to say that classroom-based training, the core of the job or consultancy portfolio for many CIPD members, is doomed to extinction. For the smaller training consultancies, traditional delivery methods may even enjoy a renaissance. A standard piece of advice to businesses operating in the new, connected economy is give your product away free; make your money through services. Basic training content could, on this basis, become a commodity with the premium gained from effective customisation of delivery especially in the classroom. Put another way, for small training consultancies,
U niversity of Sunderland
345
the future may lie in high touch (one-to-one or group delivery) rather than high technology. Overall, training professionals need to develop new ways of thinking. For too long the e-learning agenda has been driven by those who created the technical opportunities. It is essential that those who will manage their implementation respond appropriately. The potential gains from doing so are enormous. We can take comfort from the fact that, although the writing is indeed on the wall, our situation is not as dire as King Belshazzars. According to the Old Testament, he was slain on the night of his feast. CERN opens door to virtual classroom There can be few organisations better placed to introduce web-based training than CERN, the European Organisation for Nuclear Research. It was there in the early 1990s that a team headed by Tim Berners-Lee, building on earlier developments in IT, invented the World Wide Web in effect, the publishing arm of the Internet. The 6,000 physicists who share their time between their home universities and CERN are computer-literate and accustomed to learning independently, as are many of the employees in the organisations Geneva headquarters. Yet only a few of the 200 internal training sessions that CERN runs each year in subjects ranging from office administration to software engineering are currently supported by e-learning tools. Because we are a public, non-profit-making organisation, I havent had the resources to promote this activity, says Mick Storr, head of technical training. I decided to make this available and, bit by bit, the highly motivated people are starting to use it and telling their friends. Its spreading by a process of osmosis. While this tentative venture into web-supported technical training relies on content provided by external suppliers, CERN has been working on a second e-learning project that will exploit its own lecture and seminar programme. Developed in collaboration with the University of Michigan, this makes CERN lectures, together with any supporting visual materials used by the lecturers, available online. Ultimately, everyone attending these virtual classroom lectures will be able to watch them in real time and interact with the lecturers. This already happens in some parts of the world, notably Finland. But it is in developing countries, where universities may not have the academic resources that CERN has at its disposal, that this project could have the biggest impact. Storr, who was closely involved in the development of the web, is convinced that electronic learning will take off. One of the best ways that the web can be used is for education and training, he says.
346
U niversity of Sunderland
QUESTION:
Having read the article, note down the positive and negative features of e-learning with respect to developing a comprehensive HRD strategy and learning organisation.
Accessible development. Self-paced learning. Devolved and decentralised learning. Time and space flexibility for learning. Best used and currently used mainly for knowledge acquisition. Learning design skills increase for development. The learner, not the trainer, has control over the pace and timing of
their learning.
Self development emphasised. Growing use of Internet supports wider learning networks.
The negative features of e-learning include:
Control of design centralised and relatively inflexible. Interaction and experiential development not highly focused. Provision of learner support may place increasing line manager
demands over professional trainers.
U niversity of Sunderland
347
It assumes a generic content to meet all needs; one size fits all
approach.
CBT fragmentation and lack of strategic competence focus. Investment is more focused on the technology. IT decisions predominate over the softer learning needs.
The key points to note for the implications for the learning organisation are the inherent learner-centred aspects such as self-paced learning, devolved informal learning and the scope and flexibility of learning within a supporting environment. Self-development and the creation of learner-centred networks are emphasised (boundary working, scanning and so on). The downsides of a fixed curriculum, emphasis on the technology and education/training focus impinges on the broader experiential development needs, introduced alongside the experiential/mature but less visible development agendas. However, the mix of media and flexibility of timing of delivery may create a more flexible and creative approach to formal training and development. The intention of learners has not been directly addressed and many providers now recognise the need for synchronised and asynchronised learning opportunities that add a fourth dimension to computer-based training (CBT)/HRD activity, reducing the time and space divide.
It should be noted that for self-development and e-learning initiatives to be successful in an organisation, individuals should be motivated and encouraged to the see the value and benefits of self-initiated and constant learning. This, in itself, may involve a culture change. It is therefore critical to have management support for e-learning as a vehicle for professional development in the organisation. Unlike the more conventional forms of face-to-face training (where there is an instructor and an assessment of learning on completion), e-learning programmes are self-driven. Thus they add little value, unless the individual is highly motivated and accepts responsibility for learning.
Summary
This unit has attempted to define a broader purpose for HRD, that of providing a clear strategic contribution to the organisation. The emphasis shifts from training toward development. The unit sets down the principles that define HRD and sets them within the wider context of organisational and HR strategy. We have presented
U niversity of Sunderland
348
concepts and practices of the learning organisation as a potential all-embracing approach to individual and organisational learning, and as a way of embedding and raising the profile of HRD in fulfilling the strategic purposes of development. We have discussed the nature and importance of the design of learning activities, and the pivotal role line managers, alongside professional trainers, have in the process. The concluding article on trends in the development of e-learning suggests a further specialisation and polarisation of trainer roles into design, delivery and support aligned to their traditional advisory and diagnostic role of organisational needs. We have introduced a framework for HRD policy developed through the HRM audit checklist and the inclusion of the UK Department of Employment, IiP Standard. This emphasises the centrality of HRD in SHRM and the comprehensive policy-making requirements now needed to support dynamic organisational change. In this, learning is the criteria and the defining process that offers the opportunity of real innovation, creativity and the release of employee capability.
REVIEW ACTIVITY
Question 1 What are the four key purposes of a HRD strategy? Question 2 From your work on the units to date, what are the factors that are demanding closer attention to HRD in organisations? Question 3 What do we mean by the terms adaptive and generative learning in organisations? Question 4 What is a learning organisation? Why might it offer a more strategic approach to HRD? Question 5 How do you define the managers role in supporting learning in organisations? Question 6 Define the three goals of learning. How do they relate to the strategic purpose of HRD?
U niversity of Sunderland
349
Question 7 What sort of organisational structures would you recommend to support a learning organisation? Question 8 Define the key activities that need to take place to support a HRD strategy?
To address skills gaps for both individuals and organisations. To act as a catalyst for change. To provide a competitive advantage in terms of the content
and delivery of HRD.
Performance: output and upskilling. Competence enhancement. Culture change. Speed of response. Building new work relationship within and between
organisations.
350
U niversity of Sunderland
Globalisation.
Answer 3 Adaptive learning relates to incremental improvement, building on existing knowledge. It is typified by models of continuous improvement such as TQM. Generative learning relates to transformational processes, where the basic principles are questioned and revised thinking the unthinkable. It could be said to be the defining quality of a learning organisation. Answer 4 Pedlar et al's (1988) definition of a learning organisation is one that facilitates the learning of all its members and continuously transforms itself. The blueprint for such an organisation is contained in the model of the 11 attributes, which reflect a strategic approach:
A learning approach to strategy. Participative policy-making. Information used for understanding. Formative accounting and control. Internal exchange. Reward flexibility. An enabling structure. Boundary workers such as customers and suppliers act as
environmental scanners.
Inter-company learning. A learning climate with help and support when things go wrong. Self-development opportunities for everyone.
Answer 5 Senge (1990) uses terms such as designer and teacher and creative tension. Mumford (1982) offers a more practical list of roles that managers perform to support learning. Effective managers:
Draw out the strengths and weaknesses of staff. Reward risk for experimentation.
U niversity of Sunderland
351
Continuously identify learning opportunities. Devote personal time to coaching and counselling activities
beyond the annual review.
Involve staff in organisation problems. Listen, and encourage staff to aim and implement their own
development needs.
Answer 6 The three goals of learning are the acquisition of knowledge, situation specific skills and self-development. Knowledge and situation specific skills provide competitive advantage, and self-development can create a learning climate and act as a catalyst for change. Answer 7 The structures to support a learning organisation should be:
Flexible, with multi-skilling and broad job design. Cross functional with teams and an enhanced flow of
communication.
Flatter with fewer management layers. Lateral communication to open up vertical and horizontal
sources of information.
Lean in terms of the business processes. Include aspects of total quality management, such as quality
circles. Answer 8 The key activities are:
Clear explicit policy linked to business strategies. Commitment from the top of the organisation.
352
U niversity of Sunderland
Targets for action at the individual, team and organisational level. Setting clear investment pattern for training, development and
education.
Set clear criteria for allocation and responsibilities. Evaluation at each level to ensure the rate of the investment and the
transfer of learning effectively into workplace practice or knowledge.
References
The Strategic Managing of Human Resources, edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, 2004 (Key text for this module) Argyris C & Schon D (1978) Organisational Learning Reading, MA, Addison-Wesley. Burgoyne J (1999) Manager Learning Development BACIE Journal. Vol. 3 No. 9. Oct. pp. 158-60.) Deeks E (2001) CIPD Survey shows manual staff are poor relations in work placed training People Management 19th April 2001 French,.W. & Bell, C. (1999) Organisational Development Prentice Hall, New Jersey Handy C (1976) Understanding Organisations Harmondsworth, Penguin Honey P & Mumford A (1982) Manual of Learning Styles Janis I.L. (1972) Victims of Groupthink, Boston, Houghton & Mifflin IiP (2000) A UK Strategic Model for Staff Development Kolb D et al (1974) Organisational Psychology: An experiential Approach Prentice Hall, New Jersey Lant J.K. , Milliken F.J. & Batra B. (1992) The Role of Management Learning & Interpretation in Strategic Persistence & Re-orientation: An Empirical Exploration. Strategic Management Journal 13, pp 385 608.
U niversity of Sunderland
353
Mabey C, Salaman G & Storey J (2nd ed.1992) Human Resource Strategy Oxford, Blackwell Mabey C, Salaman G & Storey J (1998) Human Resource Management: a Strategic Introduction Oxford, Blackwell Mumford A. (1980) Making Experiences Pay Maidenhead, McGraw-Hill. Pedler M, Boydell T & Burgoyne J (1988) The Learning Company Maidenhead, McGraw-Hill Pedler M, Burgoyne J &Boydell T (1991) The Learning Company: a Strategy for Sustainable Development London, McGraw-Hill Senge P (1990) The Fifth Discipline: the art and practice of the Learning Organisation London Century Business Shepherd D. (1991) Personnel Assessment, Shepherd Associates. Within B884 HR Strategy. Storey J. (1992) Developments in the management of Human Resources Oxford, Blackwell Willie E. (1990) People Development and Improved Business Performance! Ashridge Management Research Group , August.
354
U niversity of Sunderland
Unit 7
Introduction
Industrial relations in Britain has undergone significant change over the last 20 years. These changes have been less pronounced in Europe but, nevertheless, pressures there have instigated some change. Similarly industrial relations in the US has seen major change, as international barriers brought about by globalisation begin to affect the commercial landscape and industrial base of market economics. In line with the environmental shift, there has been an internal shift in many organisations with respect to HRM as we have seen in the preceding six units. SHRM, where it has been deemed to be practised in a coherent way, sits uncomfortably with the traditional forms of industrial relations. The original proponents of SHRM based upon a corporatist view saw SHRM as an alternative to industrial relations (IR).
U niversity of Sunderland
355
In many cases they attempted either to de-emphasise IR as a strategic variable that dominated boardroom thinking or to introduce the term employee relations (ER) into the agenda as a management-led function rather than a union- or employee-led function. ER was suggested as a more sophisticated and strategy-led approach. This was seen by some managers as the only term that should enter boardroom thinking. It was argued that traditional, adversarial IR, as some would see it, should not be linked to business decisions.
READING ACTIVITY
Please read Chapter 14 of your key text, The Strategic Managing of Human Resources, Edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, which covers some of the subjects of this unit. You may also wish to refer to sections of Chapters 3 and 15.
356
improves the quality of dialogue and understanding in the workplace. Unions have always supported wider dialogue to improve relations, preferring to retain their role at the organisational level through Joint Consultation, and more recently through works councils. Unions have accepted employers rights to develop direct employee communications, employee involvement and various attempts to develop higher employee commitment and motivation. Initially suspicious that this was a way of by-passing unions and securing productivity gains at their expense, trade unions, particularly those in the private sector who have recognised the need to develop enterprise success for long-term job security, have been willing to support multi-level change in employee relations.
U niversity of Sunderland
357
countries. The Advisory Conciliation and Arbitration Service (ACAS), was introduced to support individual and collective labour management processes. Both employers and unions rejected legal interaction preferring the historical voluntarist approaches. The winter of discontent heralded a major shift during the 1980s in that the Thatcher government was elected on a platform that included doing something about the unions. IR had been at the centre of politics and a major source of conflict in both the public and private sectors; IR was in the hands of politicians. IR was strategic in the sense that it dominated managers ability to organise business. Unions saw it differently, certainly in large industries where they felt that employees required a strong voice and presence to equalise the bargaining power of employers, who were trying to break down significant union influences on output, remove trade group control over work practices and reduce the value of terms and conditions of employment in times of significant retail price inflation. The response of the Thatcher government was to embark upon a widespread programme of privatisation of major industries to allow market forces to regulate labour relations. Economic recession was dealt with by large-scale closures, redundancies and industrial restructuring away from old uncompetitive industries. New service industries and smaller high tech manufacturing businesses replaced them. Union membership declined, as unions found it harder to organise in smaller fragmented industries. Laws protecting trade union rights to strike and organise were restricted. New industries were created where the culture of belonging to trade unions did not exist and unions would argue that employers ruled by fear, in that employees were explicitly or implicitly pressured not to join unions for fear of losing their jobs. Arguably, employers now had more power and choices available to them in the management of people. How would they exercise this power? The 1990s have witnessed a greater polarisation of IR. By 1998, in establishments employing over twenty-five people, 47% had no union members and only 45% recognised trade unions for any form of collective bargaining. Membership had fallen to 7.8 million people (Torrington et al, 2002). Guest (2001) suggested that a distinctive split existed between the public and private sectors. In the former the culture of trade union membership remained high. In the private sector ...management were firmly in the driving seat... (Guest 2001). However, commentators have suggested that in both sectors these figures belie significant changes in the relationships between employers, unions and individual employees. Even where union membership has remained high, management has sought to introduce parallel, or in some cases replacement, ER practices to shift the balance from collectivist to individual employee/management relations, for example, direct communication rather than through representatives. Also there has been a shift in the range of issues that managers have been prepared to discuss with unions.
358
U niversity of Sunderland
The labour government of 1997, through legislation in 1999, has attempted to rebalance management and union relations by allowing collective bargaining to be introduced where the majority of employees choose. Hence, agreements to recognise unions for bargaining have once again grown marginally now that recognition of unions is not a management decision alone. The 1999 legislation is supported by a raft of EU legislation enhancing full-time and part-time employee rights and determining rights to consultation, information and protection where businesses change ownership. The gradual enhancement of the social platform of rights, including the various Human Rights Acts, has significantly influenced the scope for management choice. The 1980s and 1990s saw managers take the lead in responding to market pressure through the greater direction and use of the following to make businesses responsive:
Part-time employment. New technology. New lean working practices. Downsizing. Outsourcing functions. Enhancing flexibility, structurally, in terms of skill
acquisition and cognitively, with respect to flexible mindsets and approaches to learning. All these have diminished union and employee control. Perhaps in the new century the tide is again changing, as union membership shows signs of increasing although nowhere, as yet, to the level of pre-1980. Increasingly EU directives impact employment matters in the UK. These span a number of areas including regulation of working time, equal employee rights for part-time and full-time employees, rights of employees in employment transfers. Additionally the following EU directives are to be implemented in the future:
Horizontal Amending Directive. European Company Statute: Employment Involvement. Equal Treatment in Employment and Occupation. National information and consultation of employees. Amendement of the 1976 directive on equal treatment of
men and women in employment and vocational training. Refer to the following DTI website for further details of the above directives to be implemented:
U niversity of Sunderland
359
http://www.dti.gov.uk/er/europe/directives.htm Recent legislation on employment relations, Employment Act 2002, covers a raft of family-friendly rights, covering increased rights for men and women through new maternity leave, adoption leave, flexible working arrangements for parents etc. The Employment Act 2002 also covers dispute resolution in the workplace, improvements to employment tribunal procedures, including the introduction of an equal pay questionnaire, provisions to implement the Fixed Term Work Directive, a new right to time off work for union learning representatives, work focused interviews for partners of people receiving working-age benefits and some data sharing provisions. HR professionals need to be aware of wide-ranging changes which took effect in 2003/2004:
New provisions in the Disability Discrimination Act. Conduct of Employment Agencies and Employment
Businesses Regulations 2003.
ACTIVITY
Before continuing, reflect for a moment on your own attitudes to union membership. 1. What do you consider to be the benefits and disadvantages of trade union membership? What is your impression of trade unions?
2.
360
U niversity of Sunderland
ACTIVITY FEEDBACK
a) You might have included some of the following as benefits of trade union membership:
- dissatisfaction/distrust of management intentions - protection from job loss and redundancy - protection from unfair management decisions - a response to pressures by employers to reduce terms and
conditions in response to productivity pressures
- membership equalises power in employment relations - provides legal and other employment advice - companies dont represent an employees best interests.
Your list of disadvantages might include:
- the company would hold union membership against the employee - some people dont believe in unions; they are very negative to
change and growth. b) The second part of the activity is a matter of your personal opinion but you might like to consider how media coverage influences your choice and value systems. Are unions portrayed positively? What is your reaction to this portrayal? You might like to reflect on whether your reaction would be different under condition of IR and ER work practices.
U niversity of Sunderland
361
Trade unions in the UK have made great efforts in the last 15 years to improve their public image and attractiveness to a society that generally has adopted the spirit of the individual and the customer, community loyalty having widely, although variably, diminished throughout the UK.
ACTIVITY
What attempts have you seen by trade unions to improve their attractiveness for membership and improve their image?
ACTIVITY FEEDBACK
You might have noticed improved services to members in the areas of:
- information - legal advice and support - secondary services such as financial advice and various product
and service discounts
- support for training - support for productivity agreements - support for New Industrial Relations see below - support for employer initiatives; ER providing union presence is
maintained
- acceptance of business unionism recent employer support - assistance and support for response to skill shortages and
recruitment problems
362
U niversity of Sunderland
- positive support for European initiatives - co-operative bargaining and support for assistance and external
support.
363
Proponents of best fit SHRM might use this as a case for questioning the best practice view of SHRM and continue the rather tenuous relationships IR and ER have within the SHRM paradigm. IR/ER has often been regarded as potentially divisive and therefore acting as a barrier for organisations trying to practise SHRM, where alignment of individual and corporate values is seen as the central issue for integration. Membership of TU suggests commitment to third party organisations and value systems. Nevertheless, collective bargaining eventually resolved the dispute and the parties are again working together at UPS.
European trends
High commitment practices and universalistic approaches to IR have always been less in evidence in Europe. Brewster et al (2000) place most European countries firmly in the contextual paradigm whereby the relationship between managers and employees is strongly influenced by the society in which organisations operate. So we find UK and US models of HRM have undergone significant critique in Europe. Even the HR terminology gives us an insight into the values placed on systems. Flexibility is often regarded as atypical work by the European Commission and vulnerable work by many trade unionists. HRM tends to retain a national ethos rather than organisational ethos. However, European models are under considerable pressure to change, witnessed by recent mass trade union demonstrations in Italy (March 2000) in response to government rather than organisational management pressures. A EU Commission Report (1995) states that high level of labour inflexibility and unemployment are obstacles to growth. Brewster et al (2000) highlight the increasing level of flexible working across Europe, Japan and Australia, particularly in the area of short-term and fixed term working. Only 50% of European workers (CRANET 1999/2000) have full-time permanent jobs. What is the impact upon workplace ER? Brewster et al (2000) highlight the continuing divergence of collective versus individualised communication between Europe and the UK. As we have seen, individualism is one of the key features of a move towards SHRM in most models, even where a collective tradition exists. Brewster et al draw upon the CRANET survey of 1999/2000, which compares individual, written, verbal and collective forms of communication. High levels of collectivism were particularly apparent in Denmark, Netherlands and Scandinavia, where representation channels were still of significance. This is an interesting reflection, as works councils begin to become more important within ER systems. The Brewster et al study provides an important insight into, and offers valuable evidence of how, communications are being used to support changes in the management of ER. Brewster et al offer a view that individual forms of communication can be seen as alternative to, rather
364
U niversity of Sunderland
than replacing, representative channels. We could also add that the amount of management-led communication does not always equate with being effective or valued from the employee perspective. Employees can regard management- dominated media with scepticism. However, a walk around many workplaces reveals a wider diversity of decentralised information about organisational and team performance, which tends to be a matter of employer and management debate on action rather than mediated through trade unions. Before we leave our review of trends in the wider environment of ER, we should note some of the features that distinguish European ER from those in the UK, Japan and US. Most notably, in Europe you find the following:
U niversity of Sunderland
365
ACTIVITY
We have listed the key features of the changing contract of employment below. Alongside each one note what effect, in your view, these features will have on ER. We have done the first one for you as a guide.
Effect on management/employee relations or management/union relations Fragmentation of work; less likelihood of joining union and social isolation of employees Home-working and career mobility leads to individualisation of ER
Globalisation
366
U niversity of Sunderland
ACTIVITY FEEDBACK
You might have noted the following, which is not an exhaustive list:
Effect on management/employee relations or management/union relations Fragmentation of work; less likelihood of joining union and social isolation of employees Home-working and career mobility leads to individualisation of ER
Move to smaller businesses less ability to organise labour Move to smaller number of large global businesses concentration of labour and enhanced employer power Globalisation and internationalisation of union movement Pressure from low cost/low union membership producers to reduce costs
Support for union and employment rights EU support for social partnership Legal platforms of human and employment rights Union role and EU Government role in securing rights Power of unions within EU and nation states to control multinational companies
Individualised consumer societies Image and media coverage of unions Organisation of employees across national and virtual boundaries
Globalisation
Multinational corporate dominance (MNC) Increasing business pressures in cost/innovation Power of MNC to shift capital away from union-orientated nation state to low cost producers Pressure to be customer and market responsive puts pressure onto extensive consultation and collective bargaining World Trade Organisation unites the possibility of universal labour and employee rights across trade blocks
U niversity of Sunderland
367
Managing ER
The continuing conceptual problem we are faced with for SHRM is as follows. ER is characterised by an attention to the conflicts of employer/employee interests. It deals with governance and the distribution of power between the parties, as contained within collective agreements and the collective bargaining process. It deals with sanctions and areas where either party can veto the others decision-making power. This is a rather different agenda and intention from that of the SHRM corporate agenda. We will argue below that these tensions always lie beneath the surface, and that consensus has to be earned and legitimised through a combination of effective management practices with respect to ER and may, within the organisational life cycle, require a more collective orientation to secure trust and consensus. We now focus on the management strategies for ER. In this part of the unit we will look at:
Possible models of the management of ER. A holistic view of the strategic framework for managing
ER.
368
U niversity of Sunderland
Out er Cont ex t Economy and Society I nner Cont ex t Sector Organisational ownership Legal environment
ER practice
Organisational size
Systems perspective
Management strategy Conflict resolution and negotiation process Employment Relation Practice
T.U. strategies
Employee expectation
Storey (1998) goes on to stress the importance of management choice as a function of the degree of regulation and the source of the procedures and rules to shape that choice.
U niversity of Sunderland
369
Minimally regulated
ACTIVITY
Imagine that you are in the position of having to make some decisions about the management of ER in an organisation. Spend a few minutes listing the decisions you might have to make.
ACTIVITY FEEDBACK
You might have come up with the following:
Should we recognise trade unions for collective bargaining? Should we channel communication to employees mainly
through the trade union or through direct forms to employees?
How far should we bargain with or consult the trade union? Do we need a distinctive ER strategy to secure commitment of
the stakeholders or can we subsume individual relations within the wider SHRM?
370
U niversity of Sunderland
Systems actor
In this model managers seek to maintain stability through a framework of institutions, processes and rules through which the organisation can respond to the environment.
Strategic actor
Management can exercise purposeful discretion or choice in making decision (goals and strategies) in relating IR strategies and business strategies.
Agent of capital
Market laws of the capitalist system constrain management to a view of labour as a factor of production, cost and efficiency. The method of legitimising its authority to the workforce will vary according to market circumstances, for example, direct control, joint determination of rules or responsible autonomy. These models have resonance with our strategic response and fit of SHRM and contingency-based fit given varying market circumstances. For example, management may adopt the following approaches:
U niversity of Sunderland
371
These models imply a variable SHRM/ER strategy over time (best fit). Proponents of best practice would advocate the longer-term benefit of partnership and commitment to union and employer through high investment in ER practices to build trust, transparency and confidence in management strategies to deal with market turbulence. This approach is a variant on the new psychological contract debate in Unit 2 where we considered the new deal based upon reduced employment security, whereby commitment is rebuilt around providing support to staff through the transitions. In ER terminology this might mean:
Extensive communication of business results. Mutual obligation to workplace improvement. Enhanced flexibility through training. High consultation in work practice changes. Mutual discussion/negotiation of job terms to support
change. Of course, the choices managers make will be dependent upon the contextual limitations of the wider environment and also on their own preferences: for example, the prevailing leadership style (direction-empowering), market objectives (globalisation, centralisation, decentralisation of barriers to decision making) and the wider beliefs and values about ER. One of the first key strategic decisions organisations often take is whether to recognise trade unions for collective bargaining over the determination of terms and conditions of employment and matters of performance. Use the next activity to focus on the example of the recognition of trade unions.
ACTIVITY
In addition to the traditions, customs and practices of their location, region or nation state, managers are not isolated from their communities and value systems. Managers often believe that unions are a necessary check and balance and provide for equitable relations. Unions, like charities, do good work for vulnerable employees. After all, most managers are employees as well! If you were a manager what might you consider the advantages and disadvantages associated with dealing with trade unions to be?
372
U niversity of Sunderland
ACTIVITY FEEDBACK
Pragmatically, as a manager you might hold the following positive views about unions:
They provide a good basis for easy communication. The union as manager of discontent takes on responsibility of the
manager.
Unions are good at securing commitment from staff. Union-mediated agreements have a strong basis for securing
commitment or consensus in certain labour markets.
Slow down ability to change. Compromise a key area where managers are experts and should
make the decisions.
Make organisations uncompetitive. Are political, with objectives outside of the workplace that do not
always fit with organisational objectives.
Increase bargaining power of staff and increase costs. Reduce legitimate management prerogative as delegated by
shareholders.
However, recurrent themes of the unit and module are that responsibility is more widely spread between stakeholders both inside and outside the organisation. We have discussed the need to embrace a wide network of interests covering community interests (public and private sector), shareholders, suppliers and customers, employee/unions, governments, and the importance of
U niversity of Sunderland
373
self-managing employee teams to secure the availability of core competence. All these necessitate an individual management choice but also an integrated strategy to fit the context as well as organisational strategies. Salamon (2000) suggests that management choice is mediated through three types of rationality. Here Salamon is attempting to determine why and on what basis management might choose to deal with trade unions in a collaborative way as opposed to resisting them. This is central for organisations in deciding whether they wish to develop the strategic approach. We have looked at internal and external pressures influencing strategic choice; now we are looking at the mindset of the managers themselves. The three types of rationality are:
CASE STUDY
Read the next article from Legal and General. Keeping Watch Case Study: Legal and General by Digby Jack, David Pottinger and Peter Reilly (People Management, 14 September 2000, p.38-40) To what extent do organisations and employee representatives ever sit down and discuss their motivation for entering a partnership deal? Moreover, how often do organisations review their employee relations, especially if they have made a conscious change to the arrangement? There is a natural tendency to sail along, believing all is well. This is fine until you run into an iceberg. Some organisations are very positive about partnership, seeing it as a practical approach to employee relations that allows management to facilitate organisational change. Other companies would define partnership more in terms of creating a set of shared values and gaining employee commitment to common goals in a way that allows the business to prosper and the workforce to benefit.
374
U niversity of Sunderland
For trade unions, there is the chance to be better informed and more influential on strategic business matters. More specifically, unions have sought to win undertakings from employers on matters such as employment security or training. But there are critics who see partnership as an illusory concept. Those on the left of the political spectrum say it leaves employees unable to defend their interests against the interests of capital. They fear that unions, far from gaining influence, will be co-opted by management into their projects, effectively neutralising any chance of opposition. Critics from the right would argue that partnership hampers managements ability to manage or, as the president of the CBI, Sir Clive Thompson, believes, that it may even provide a Trojan horse through which unions could gain undue influence. The partnership concept does look flimsy whenever an agreement breaks down. Were the recent troubles experienced by the high-profile partnership of Rover and the T&G anticipated, or did they emerge suddenly to the surprise of one or other of the parties? One obvious way of minimising the chances of this happening is to monitor the partnership closely. This is what Legal & General and MSF did in April. The two had first agreed their deal in 1997. All in the same boat The objectives of the partnership agreement between Legal & General and MSF are:
U niversity of Sunderland
375
opportunities. Given the importance of pay, the company undertook to provide MSF with market data and to consult on any issues that emerged. The agreement also committed management to give representatives training and facilities that would enable them to perform their union functions properly. Both parties expressed the view that joint communication was the preferred route, but recognised that this would not always be possible. Similarly, there was the intention to use informal methods of dispute resolution and to talk at the earliest possible stage on all matters of mutual interest. Management accepted that it would not always have all the answers. After three years, how did this agreement look? Members of the companys HR team and both full-time and lay union representatives gathered at a specially convened JEPF to review the situation. Peter Reilly from the Institute for Employment Studies was also present as an observer and occasional contributor. The meeting examined why the parties had signed the deal, what problems had arisen and what improvements could be made. In 1997 both sides had got tired of dancing the pavane, as John McCarthy, Legal & Generals HR director, had described the ritual way in which pay rounds were conducted. Little was achieved that could not have been accomplished in half the time. We all felt that this sort of unnecessary verbal fencing discredited everyone involved. Legal & General had seen advantages in having a strong union that could represent staff interests effectively. This would facilitate greater employee flexibility and acceptance of change, which remain key business objectives. In a similar vein, MSF had recognised that a changing world needed a new approach, with different solutions in employee representation. It also had the specific objective of halting a decline in membership. The unions leaders felt that partnership might be a mechanism that would demonstrate the value of trade unionism to employees more effectively. Both the company and union had also been looking beyond the confines of the organisation. Legal & General felt that confirming a partnership agreement would go with the grain of British industrial relations. And there was the prospect of new consultative structures, if the government were to sign up to the European social chapter. In business terms, the proposed stakeholder pensions and partnership at work were seen as compatible concepts. MSF also acknowledged the changing political climate. It felt that being in a partnership arrangement had given it a chance to contribute to the TUCs work on labour relations. The opportunities that partnership offered included:
376
U niversity of Sunderland
Positive public relations. A rebranding of the union to attract new members. Having the right people focused on the right issues. The development of an adult relationship in which company and
union could move in the same direction. There were difficulties to be faced in the review. One key issue identified was that not all managers seemed to understand what partnership meant. This presented itself as failures to involve union representatives in employment matters, or of being reluctant to give them time off work to carry out their duties. And some managers, rather than encouraging union membership, were hostile to it. There were problems too with the union representatives. A partnership role was more demanding of them in terms of knowledge and skills. Were all of the representatives able to meet this challenge, even after training? If they werent, the inequality in expertise between them and managers could undermine the relationship and cause both parties to retreat to their entrenched positions. There were also concerns about the views of employees. On the one hand, MSF didnt like the idea of freeloaders non-members who would enjoy the benefits without paying the subscription fees. But there were also those who complained that the union was too close to management and that there was a lack of bite in negotiations now that traditional bargaining had gone. Looking to the future, some anxieties were expressed over whether the partnership would be able to handle big strategic changes such as a takeover or major downsizing programme. Equally unresolved was whether their arrangements would remain compatible with any new legislative imperatives on consultation and communication. Both parties were confident, though, that if an exceptional situation were to arise, the relationship established through the partnership deal would provide an excellent platform for immediate, high-level discussions. Although specific problems were difficult to anticipate, the partners would not be starting off from a defensive or adversarial position. All parties agreed that training was an obvious place to start in order to strengthen the relationship. A significant investment had already been made, but it was thought that improvement could come from:
Undertaking more joint management and representative training. Working harder on business awareness for MSF representatives. Ensuring that both managers and union representatives understood
the meaning of partnership, the behaviour that was associated with it
U niversity of Sunderland
377
(even supporting this by incorporating accountability for partnership values into managers key responsibilities), and MSFs role.
378
U niversity of Sunderland
to start thinking business. This seems to encapsulate exactly what social partnership is all about.
QUESTIONS:
1. How far were the management models mentioned earlier fulfilled (systems actor, strategic actor and agent of capital)? Which of these models seem most prevalent? (This, you may recall, was the extent of the choice managers choose to exert in managing ER and the extent to which they include market control in their approach.) 2. What, in your view are the advantages and disadvantages of a partnership approach?
- clear focus on business agenda - clear roles and responsibilities defined through joint training - ER supports response to change in the political, economic and
social environment. Strategic actor Management demonstrates a purposeful set of choices to raise the profile and strategic value of ER based upon a set of values: integrity, trust, right/responsibilities and a balance between individualism and collectivism. ER is not left to a cycle of power and coercion depending
U niversity of Sunderland
379
upon the economic or market conditions alone. There is a clear strategy based upon synthesis and values. Agent of capital Management has to be guided by the model and ensure that the ER systems are responsive to business objectives. However, market circumstances are considered to be addressed better through partnership than through adversarial options. 2. The advantages of partnership here seem to be demonstrated in the expectations and opportunities presented. In short, it holds out the prospect of a more collaborative, unitary and best practice approach to SHRM, where employee/union member values are brought more closely into alignment. However, it is about developing effective relationships over time. The risks are clear from the case study and may be summarised as follows:
380
U niversity of Sunderland
ACTIVITY
Below are listed the principal features of partnership. Refer back to the article in the last case study, re-reading it if necessary, and note down how these features of partnership were fulfilled in the context of the model introduced earlier in the unit. Success of the enterprise Building trust and greater employee involvement Recognising the legitimate role of partners Employee security-company flexibility Sharing success Informing and consulting staff Representation of employee interests
ACTIVITY FEEDBACK
You may have noticed the following: Success of the enterprise
- subjects broadened at the JEPF - acceptance of change - clearer focus on business objectives.
Building trust and greater employee involvement
- opportunities offered by partnership - trust through better information, training and assistance to adapt - positive public relations.
U niversity of Sunderland
381
- collective bargaining to joint employment policy forum - monitoring the agreement jointly - a form of HR evaluation survey of opinion.
Employee security-company flexibility
- employee flexibility and willingness/confidence to change - business awareness forming - high level union involvement in company strategy to reduce
insecurity Sharing success
- acceptance of change - better recognition of management decisions - faster decision-making - more staff involvement and control.
Informing and consulting staff
- representatives given training in their role - encouragement by management of employees to join the union - strong union with effective representation.
The criteria you have been working with provide what many commentators believe to be the basis of a new relationship for organisations, unions and employers. This is the basis of partnership that we shall discuss later in the unit. We have tended to see IR as a traditional change limitation model, whereby employers try to contain unions within a framework of regulation, to control conflict and regulate how terms and conditions are determined. These are normally seen as operational not strategic. ER, as we have seen, marks a
382
U niversity of Sunderland
new positive shift, to drive the employer agenda through individualistic and direct relations with their staff; for example, communication, involvement and so on. Partnership perhaps offers a third way that addresses a combination of needs: regulation, governance, commitment, low conflict and progressive agendas built around purposeful development and growth. You will be asked to reconsider this later in the unit.
Style Traditional
Paternalist
unions unnecessary, high commitment/performance management system, alignment of employees with business objectives union recognition, union consultation as a basis for securing commitment of staff; right to manage preserved, move from IR to ER IR practice where commitment is legitimised through collective agreements; union may veto management decisions, high emphasis on rules and procedures no common approach; varies according to life cycle of organisation and the shifting power between unions and managers; non-strategic
Consultative
Constitutional
Opportunistic
Table 7.2: ER and Management Styles, Source; Purcell J and Sissons K (1983, p.112)
The paternalistic, consultative and constitutional styles tend towards a strategic and planned approach, as they rely on a clear specification of rules and procedures on such matters as bargaining, conflict resolution, employee communication and so on. Let us extend this analysis a little further by looking at these strategies along the primary axis of a decision between an individualistic or collective approach to ER. See Figure 7.2.
U niversity of Sunderland
383
Individual as a resource
Sophisticated consultation
Individualism
Paternalism
Modern paternalism
Employee as cost
Traditional
None (unitary)
Adversarial
Co-operative
Collectivism
Figure 7.2: Individualism vs. Collectivism in ER, Source: Storey and Sisson (1993, p.47)
The vertical axis represents an organisations preference, and perhaps also an employees preference, for individual, contractual ER options. The vertical axis also shows the perceptions organisations have about the individual and the emphasis they place on investing in the employee. This, you will recall, is a central issue in best fit/best practice, hard/soft approaches to SHRM. We see here how this manifests itself in ER choices. The horizontal axis represents increasing levels of collective organisation of employees into unions and the strategic response of management. This is the basis on which ER strategies can be aligned to the prevailing history and expectation of staff, unions and employers or can indeed reflect the basis of strategic change in approach to ER strategy. The authors plotted the movements that can be seen in the trends in IR/ER management as depicted by the models. This shows a range of options from doing without unions and seeing employees as a cost with little real strategy being adopted, to developing effective ER. We see the emphasis of operational responses based upon determining rules and procedures for containing and institutionalising relations. You may recall the 27-points model comprising so-called Personnel and SHRM approaches. The table shows progressive best fit approaches to ER based on advanced forms of management communication and involvement practice. This takes us through the cycle of choices offered by Salamon, from agent of capital, systems actor to strategic actor respectively.
384
U niversity of Sunderland
Strategic Variables
We have now located the generic options available. We must now turn to the decisions that contribute to a strategic management model. We are discounting agent of capital and systems actor strategies as not really offering us a realistic route if we are trying to develop SHRM. However, it must be recognised that in some businesses certain features of the systems actor (stylised rules and procedures) may be necessary to secure the commitment of and acceptance by staff. We shall concentrate on the strategic actor approach. In this part of the unit we shall look in more detail at four aspects of the strategic management of ER:
U niversity of Sunderland
385
to some extent, Japanese practice although of course unions were national rather than company unions. Electricians and engineering unions were keen to enter such agreements, as they felt it made sense for their skilled members, to ensure higher wages and benefits. Industrial or general unions in the UK, with traditions of representing lower or semi-skilled employees, were more wary of such deals, tending to prefer social goals that transcended the workplace; for example, minimum earnings rates. Nevertheless, with the steady reduction of unions through amalgamations, most unions have experimented with such agreements.
Sole bargaining rights for a single trade union. No strike agreements; extended provision for negotiation
and arbitration (independent body examines the relative merits of the case under dispute).
386
U niversity of Sunderland
example, one to two/three year agreements; ideal in times of stable inflation. Not all aspects of the so-called NIR might be implemented, and the third Workplace Industrial Relations Survey of 1994 was sceptical about the uptake of such packages. However, whilst full no strike deals were rare, and sophisticated arbitration was unusual, there was wide uptake of the remaining conditions. Where multiple unions existed on a brownfield site, unions were required in many cases to form a single table for bargaining, where it was up to them to achieve inter-union consensus. Multiple union conflict had been a major problem of the 1970s and 1980s. These agreements were the subject of wide experimentation in UK-owned plants such as BP Chemicals, and Honeywell Control Systems in Scotland. The Industrial Relations Services report of 1997 (62 p5) records that 60% of surveyed engineering companies had undertaken restructuring supported by integrated ER system change. These changes involved continued recognition of unions and restructuring into multi-skilled cellular teamworking with non-union mediated TQM processes to support performance enhancement. The major shift that took place between the late 1980s and late 1990s was a movement to enhance employment security measures alongside the longer term agreements. Early recognition agreements under NIR banners were essentially a reawakening of employer interest in using ER as a strategic and planned tool to achieve business improvement objectives. Seeing ER used to underpin a strong corporate culture in start-up sites gave traditional employers hope that a turnaround in attitudes and behaviour might be achieved, to support culture change legitimised by unions. Many employers had decided that strategic change through HRM principles would either be unworkable or take too long to implement. NIR offered the prospect of broadening the scope of ER to support strategic objectives. So for example, whereas most collective bargaining centred on employee interests such as pay and conditions, employers wished to include flexibility of working practices, performance enhancement and so on. In this way ER could be seen to be added to the SHRM business objectives and fit the strategic paradigm. With the waves of manufacturing and white collar service redundancies in the late 1990s, SHRM and NIR were both flagging in achieving the desired outcome. The objective then shifted towards securing employee commitment by offering job security. We saw in Unit 3 the tension of securing commitment without job security. Such groundbreaking agreements were pioneered in two UK organisations. Incomes Data Services (1997) demonstrate how, first, British Airways negotiated three year agreements with one of the largest industrial unions, the Transport and General Workers Union. The agreement included a pay freeze (no increase) in exchange for job security for ground staff for the duration of the agreement. The business strategy was made transparent for staff: save 20 million to cut costs to compete
U niversity of Sunderland
387
and invest in new aircraft and equipment. A similar agreement, which covered five years, was negotiated at Blue Circle Cement: job security in exchange for work practice efficiencies, flexibility and business process restructuring. The company agreed to restrict outsourcing of work along the lines we saw in the USA at UPS. These are good examples of using ER/IR collective agreements based upon carefully specified recognition arrangements to integrate ER and business strategy.
CASE STUDY
Read the article below In Place of Strife? by Gregor Gall and Eila Rana, (People Management, 14 September 2000) Gregor Gall June 6 was a watershed for trade unions in UK it was the date from which applications for statutory union recognition under the Employment Relations Act 1999 (ERA) could be submitted to the Central Arbitration Committee (CAC). But the day itself was purely symbolic because, in the years before the ERA became law, the industrial relations landscape had already begun to change. Despite the serious criticisms that unions make of the ERA, it has clearly helped to revive their fortunes. There have been 748 recognition agreements listed on my database since 1995. From 1995 to 1998 between 80 and 100 new recognition deals were signed annually, bringing 100,000 workers under union recognition over the four years. In 1999, a further 260 were signed. So far this year, more than 100 have been concluded, bringing another 150,000 workers under union recognition. But not all the data on deals signed gives the number of workers covered: my own research suggests that one could safely double these numbers to 500,000 workers. Among the recent scalps have been Virgin Atlantic, Barclaycall, Tilbury docks, Chunghwa electronics, Newsquest newspapers and United Parcel Service. The turnaround is impressive, although hardly an earthquake when compared with the decline of trade unionism that went before. The 1998 Workplace Employee Relations Survey shows that the proportion of organisations with union recognition fell from 53 per cent in 1990 to 42 per cent in that year. The Labour Force Survey records a similar decline in the proportion of workers covered by such agreements. This stood at 49 per cent in 1993, but had dropped to 43 per cent by 1998.
388
U niversity of Sunderland
These figures illustrate the scale of the task facing the unions, although they exclude the recent growth. Allied with the increases in union membership recorded since 1998, the new deals could start to reverse the decline. The TUCs Trade Union Trends surveys, coupled with my own information from unions, reveal more than 600 current campaigns for recognition covering 500,000 workers. In 170 of these cases, covering around 80,000 members, unions have already recruited more than half of the relevant workforce the proportion that can trigger automatic recognition under the legislation. Successful high-profile campaigns featuring household names could boost future campaigns. And, of course, although unions are seeking voluntary deals, they can threaten employers with the CAC. But this is not only a numbers game. To HR practitioners, the kinds of new deals being signed and where, by whom and under what conditions are also important. They will influence not only the conduct of industrial relations in those organisations themselves, but also the behaviour of other organisations. Before considering these questions, it is worth noting that the rise in recognition agreements is more than just the product of the ERA. The Labour government has helped to engender a climate in which many employers are less inclined to behave unilaterally, and this has legitimised a union role in organisations. The act is itself part of the changed industrial relations environment. Increasing numbers of employers are realising that there is a positive business case for dealing with their workforces through unions, and that it is more efficient, effective and democratic than treating employees as a collection of atomised individuals. Many organisations have been persuaded to sign voluntary deals, aware that they may be better able to influence their content by reaching an agreement in a more comfortable, unpolarised and lower-risk environment. Such employers also realise that delay could leave them facing more serious, and more credible, recognition campaigns as the unions become more active in recruiting and organising. Partnership is in vogue at the moment. But of the 748 deals on my database, no more than 150 describe themselves or have been described as partnership agreements. This is somewhat surprising, because there is pressure to sign such deals and they receive disproportionate media coverage. Even among those that are described in this way, few comply with the TUC model for partnership, which includes principles covering job security, openness and the quality of working life. For most people, partnership is a vague term that may describe the atmosphere in which the deal is struck, or the relationships between negotiators, rather than its content. Most deals are, in terms of content, standard recognition agreements covering rights of information, consultation, representation and negotiation. This is partly because of the influence of the union officers who help to draft them and partly because employers prefer to stick to statements of fact rather, than to produce wish-lists with vague promises on issues such as job security.
U niversity of Sunderland
389
It follows that so-called sweetheart agreements negotiated with a single union and featuring no-disruption clauses and compulsory arbitration are also uncommon. Around 40 are known to exist, including some signed by the AEEU and the T&G. There has also been a small but significant number of non-traditional deals stipulating that bargaining should be conducted through company councils or staff forums on which there may also be representation for non-union members. There is evidence of 30 to 40 such cases, including GB Airways and Monarch Airlines (both with the AEEU) and Eurotunnel (T&G). Often this results when a company adds union recognition on to its existing consultation procedures. These may or may not be described as partnerships. Five main unions account for the lions share of new recognition deals. In descending order, these are the GMB, T&G, AEEU, MSF and GPMU, so it is unsurprising that the vast majority of deals are in manufacturing rather than less-organised sectors. Deals have also been struck in areas where there is residual union strength or presence. This strategy of concentrating on the easiest targets makes sense to the unions, which are reluctant to waste scant resources trying to crack overly hard nuts. Noteworthy exceptions are not-for-profit organisations and charities, road haulage firms and air transport companies. Campaigns in call centres, retail and business services have also had some success. Among these was an agreement at Barclaycall and deals between the GMB, Unison and Capita for outsourced BBC work. Where recognition campaigns do occur, they are primarily the result of approaches by workers (members and non-members) to a union for help in resolving a grievance. Unions are also looking at unrecognised workplaces where they have existing pools of members. Cold calling on workplaces, by leafletting from outside or attempting to recruit the employer first and then members, is rare. Campaigns normally comprise meetings, propaganda, publicity in local media, servicing members and agitating around issues. Recognition is applied for when membership is in excess of 50 per cent. So far unions have lost only one of the 50 or so ballots that they have contested involving Virgin Atlantic staff other than pilots. (see Eila Ranas article). But the picture for unions is not all rosy. First, there is the issue of the union-busters. American anti-union consultants are touting for business in the UK. More significant is home-grown anti-unionism, in the form of substitution, including company councils or forums, open-management techniques and suppression. The latter covers dismissals, victimisation, harassment and spying. Second, there is inter-union competition, which wastes their resources. Employers that wish to muddy the waters can play off one group against another in a bid to find tame unions a tactic that has been used in call centres, electronics and transport. So far the TUC and the STUC have kept a lid on what could become a rerun of the 1980s union rivalries, but trouble is never far from the surface. That said, neither are employers having it all their own
U niversity of Sunderland
390
way. Those using company councils to deflect interest in trade unions often find that councillors become willing advocates of recognition. Harder tactics can create martyrs who become rallying points for the other workers. Manzour Chaudhary, the owner of the London-based Pricecheck supermarkets, conceded recognition last year following the dismissal and demotion of several staff, who then became the focus of the recognition campaign (see Eila Ranas article). Overall, the situation is much improved from the unions point of view, but only time will tell whether they can use this bridgehead to regain further ground. On the basis of the 1976-1980 experience, when ACAS could require recognition but was rarely used, we shouldnt expect the CAC to be directly involved very much. Rather, its influence will depend on the shadow that it casts. Eila Rana Whether its the calm before the storm or a permanent change in relationships at work, no one yet knows. But union recognition legislation seems to have brought about an amiability between management and unions that has surprised all involved. Unions seeking recognition are finding that many of the doors that they once pushed in vain are falling open. Managers whose knowledge of unions is derived from the horror stories of the past are discovering a degree of helpfulness from the other side that they had never anticipated. Although Gregor Galls research shows that most recognition agreements are not partnerships, employers and union representatives who spoke to PM agree that there has been a welcome spirit of co-operation in drawing them up. The proposition unions are putting to employers is different from what it was a generation ago, says Robbie Gilbert, chief executive of the Employers Forum on Statute and Practice, a body set up to lobby over the detail of legislation. More are approaching companies with an offer that seeks to provide workforce representation in a way thats not necessarily going to make life disruptive for the employer. They are asking: How can we work with you? Weve been surprised at the extent to which the voluntary approach seems to be the dominant one. Unions are approaching organisations informally to talk to them about recognition, rather than banging in a formal request under the legislation. This is to be welcomed. Very few cases have gone to the Central Arbitration Committee. Gall points out that recognition claims have focused on the softer targets, either in traditionally unionised sectors (see panel) or in sectors with no union experience. Among the latter are a number of voluntary organisations. MSF is expected to sign an initial voluntary agreement with NCH Action for Children, a national charity, this month. Negotiated jointly with public-sector union Unison, the deal is significant because the charity has never recognised trade unions throughout its 131-year history.
U niversity of Sunderland
391
Two years ago, its joint consultative committee a forum comprising managers and staff expressed concern about the way that the committee was working and suggested that matters could be improved. Earlier this year, the charity called in an independent consultant to run staff workshops explaining the options available for employee representation. A subsequent staff ballot revealed overwhelming support for recognition. On a 45.5 per cent turnout, 79.8 per cent voted for recognition and 92.8 per cent chose a joint agreement with MSF and Unison. The senior management team had wanted to establish a works council but, with such a clear mandate from staff, the charity has approached union recognition positively. John Monks [TUC general secretary] has been saying for a long time that the new way is the right way, says Janice Cook, the charitys director of HR. Trade unions have worked hard to move towards the partnership model. It doesnt mean youre not going to have conflict, but if you have a strong partnership agreement underpinning that, youll work through it. Cook welcomes the more intelligent, collaborative, non-bureaucratic approach taken by unions. But at mental health charity Scope, a similar claim for recognition fell on stonier ground. A staff survey in 1997 revealed that 66 per cent were in favour of recognition, but it drew only a 17 per cent response rate. Without a clear mandate for recognition, managers opted for a works council. But Marie Taylor, assistant director of personnel, says that it would have been easier to recognise a union. Scope may review its decision in the future. MSF has also recently signed a voluntary recognition deal with the National Lottery Charities Board (NLCB). A postal ballot of staff revealed that 90 per cent were in favour of union recognition on a pretty good turnout, according to Stephen Bubb, the boards former HR director. Bubb once a union man himself was determined not to involve the unions when NLCB was founded in 1995. Today he is a convert to recognition, a living testament to the change in the UKs industrial relations climate. In the early days of setting up NLCB, I preferred to do things myself without having to negotiate things with a union, but I did pay the price for that, he admits. We didnt get the buy-in and the communication or the feeling of involvement. As an employer, the NLCB has got above-average terms and conditions, but staff never had the same satisfaction that they would have got had they won them through hard-fought negotiations. NLCB already had a staff forum but, according to Bubb, MSF brought more professionalism to the process. We saw the union as a positive part of our communication channels with staff, he says. Organisations that dont see unions in that way are losing out. Unions have moved on and they do recognise the importance of a different, partnership approach. And Bubb admits that the organisation would eventually have been faced with a recognition claim. Far better to take the initiative and earn Brownie points, he says.
U niversity of Sunderland
392
Richard Bransons Virgin Atlantic airline is another company that has taken the bull by the horns. It headed off the possibility of a CAC-enforced staff ballot by arranging its own through the Electoral Reform Society. The only group to give clear backing for recognition was the pilots. Branson, who had spent two years politely declining requests from the British Air Line Pilots Association (Balpa) for recognition, has now begun talks. But requests from other unions for similar discussions have been turned down. Balpa officials believe the ballot result vindicated their softly-softly approach. We didnt think it would be sensible to take any sort of action against Virgin, says Keith Bill, communications officer for Balpa. We knew the legislation was coming along and we would rather enter voluntary agreements because we find you get more out of them. The Virgin Atlantic press office declined to comment. A tougher battle for recognition was fought by the T&G with a small supermarket chain in north London, Pricecheck. It involved dismissals, demotions, pickets, boycotts all the paraphernalia of old-fashioned confrontation. But even here, relations between the union and management have apparently improved since a deal was struck. Dave Turnbull, the unions regional industrial organiser for catering and retail, says that the staff, including some store managers, approached the T&G for help in a claim for premium payments for working on Christmas Day and other bank holidays. At first, proprietor Manzour Chaudhary rejected the idea of unions. I will not recognise any union, he was quoted as saying. If staff dont like it, then they dont have to work here. Seven ringleaders among the 100 staff were either dismissed or demoted, including T&G shop steward Iftakar Ul-Hak. The T&G started tribunal proceedings and mounted a boycott campaign, picketing shoppers outside Pricecheck stores. Eventually, Chaudhary settled the tribunal cases out of court and recognised the union. We have quite a good relationship, Turnbull says. He tells me he doesnt know what he was worried about in the first place. Turnbull believes that the tribunal cases, the boycott campaign and the looming recognition legislation prompted Chaudharys change of heart. Employers like him, with no experience of dealing with unions, have seen things like the miners strike on television, but have no idea what a normal, day-to-day relationship between employers and unions is like, he says. Its not confrontational but about improving communications and protecting our members. Its not a big deal. Chaudhary was contacted by People Management but was unavailable for comment. Gilbert agrees that many managers have over-hyped unions. He says that half of todays managers have never dealt with unions and that their views are coloured by memories of the 1970s.
U niversity of Sunderland
393
The principal characteristic is probably one of ignorance or even fear, Gilbert says. An awful lot of people are unaware of the legislation and its potential impact. We are talking about Thatchers children. They havent needed the industrial relations skills that featured so strongly in the 1970s. Companies have a dearth of people with the experience and understanding of unions to manage these relationships efficiently. Geoff Armstrong, director-general of the CIPD, believes that some managers concerns about the return of unionisation are justified. Over the past two decades, he says, many managers have become more democratic and inclusive in their approach to employees relations, yet too many union representatives are still stuck in their old ways. An awful lot of people say: We like what John Monks and Ken Jackson say. But the reality is that our union reps are still resistant to change, Armstrong says. Employers are genuinely fearful that, if they had to revert to collective bargaining and the sorts of practices involved with union recognition, they could not act fast enough to anticipate and respond to changing customer needs. Such fears may prompt organisations to try to keep unions out. But, as Gall points out, attempts at union-busting can backfire. Northcliffe Newspapers, the countrys third-biggest regional newspaper publisher, saw union membership among its journalists rise after management distributed allegedly anti-union leaflets. People were saying: I dont want the company telling me what to do; I will make up my own mind says Jeremy Dear, national organiser for newspapers at the National Union of Journalists (NUJ). Ken Thompson, director of employment affairs for Northcliffe Newspapers, says that the leaflets were a response to information distributed by unions. We do not believe that recognising any trade union would benefit our employees, he says. It is our job as managers to communicate directly with our staff. Of the 10 regional newspaper publishers that the NUJ has approached with a request for recognition, only Northcliffe has responded in such a way. Dear admits to being surprised at the co-operation the union has had from Newsquest, whose American parent firm, Gannett, has been involved in high-profile industrial disputes in the US. After overwhelming support for union recognition at two of its main titles the Telegraph and Argus in Bradford and the Oxford Mail Newsquest has drawn up an agreed procedure for managers to follow if approached by a union. We think Newsquest looked at the legislation and issues such as high staff turnover, and made a business decision that it was probably in their interests to begin talking to the NUJ, Dear says. I think they have been pleasantly surprised that the process has gone as smoothly as possible. The NUJ is working on around 15 voluntary recognition deals, but it has vowed to take Northcliffe to the CAC if no progress is made.
394
U niversity of Sunderland
But, while the new legislation is helping unions to gain a foothold in previously inaccessible organisations, some managers think that the old language of collective bargaining, recognition and ballots is undermining employee relations. The language that hangs around the new law is old-fashioned and probably frightens people, especially small and medium-sized employers, says Lesley James, CIPD vice-president, employee relations, and a member of the DTIs partnership funding panel. My personal experience and view is that unions have a place, but that the agenda for them needs to get modern and the language needs to get modern. Tilburys watershed Tilbury docks earned its place in union history during the dispute that followed the abolition of the National Dock Labour Scheme in 1989. Hundreds of dockers were dismissed and it took four years for them to win their unfair dismissal cases in one of the UKs longest-running tribunal cases. So the re-recognition agreement struck this year between Forth Ports, the docks current owner, and the Transport and General Workers Union, has a special significance to the union. Graham Stevenson, T&G national organiser for transport, describes the Tilbury agreement as a watershed. The new deal came about after Forth Ports, a major operator on the east coast of Scotland, bought Tilbury in 1995. The firm was less hostile to unions than the docks previous owner and had long-standing agreements with the T&G elsewhere. After a gap of almost five years, during which attitudes on both sides at Tilbury changed, the new deal was negotiated. We see a stable relationship with the unions as a benefit to the company and customers, says Alexander Morrison, director of personnel at Forth Ports. But we needed a period of time to establish ourselves, assess the situation, draw up a proper agreement and reassure our customers. Stevenson says that the company had some reservations at first. Tilbury had a reputation for militancy and the management team that originally derecognised the union was still in place. About two years ago it became clear that there would be union recognition legislation, he says. An agreement at Tilbury was merely a matter of time. With Forth Ports signed up, the T&G is now targeting independent companies that operate on the companys land at Tilbury.
QUESTIONS:
1. What is the strategic business case for developing voluntary recognition agreements with trade unions?
U niversity of Sunderland
395
2.
How does the TUC (the national body representing all trade unions in Britain) view partnership arrangements? How might this be different from the employee perspective? Evaluate how employers are attempting to secure more effective union relations without alienating or turning non-union employees towards trade unions. What are the adversarial trends that are developing to defy the new legal provision? What is the new union proposition to employers? Does it appear to fit with the attitudinal and behavioural alignment organisations are seeking? In your view have unions and employers arrived at a mutual stakeholder view?
3.
4.
5.
2.
3.
396
U niversity of Sunderland
employee skill in developing solutions to and ownership of business problems. It is hard to conceive of value alignment and shared values emanating from this. We saw in Unit 6, and will see again in Unit 8, the importance of experiential learning through developing effective work relations. The same applies to ER and indeed the effective process of ER, be it through participation, negotiation or joint consultation, is especially important in developing an effective corporate culture. This is sometimes forgotten, as corporate culture proponents tend to see culture as a matter for managers and individual ER. 4. The growth of anti-union consultants, the development of tame unions and more coercive tactics are being used as ways around the union claims for recognition. Inter-union rivalry for members still exists, as even unions have generated a business mentality of membership, revenues and survival. The so-called beauty contests of the 1980s, whereby unions bid for recognition contracts, have not entirely disappeared. Employers are still suspicious that once recognition is established, unions will be under pressure from members to secure greater influence as depicted in the 1970s. Employers are impressed by a more flexible and less bureaucratic (procedural and rule bound) approach. Professionalism in organisation and presentation has been the union watchword. Union communication skills are being seen as a positive benefit for managers putting the business case to staff in a legitimate way. However, not all managers or union representatives have the collaborative competence of the TUC/union leaders, and this will be an area for SHRM style development by both parties.
5.
Collective bargaining
The second of our strategic variables is collective bargaining. As we saw earlier, collective bargaining was seen as the very essence of the IR/ER process. The institutions and procedural agreements determining the bargaining unit, bargaining level stages and bargaining rituals, were pivotal in UK IR, whereas European states had well-defined state support roles and the US focused more on detailed collective agreements. Collective bargaining defined IR. We have seen how unions have been encouraged to operate as one union within each organisation to avoid rivalries. We have also seen that where multiple unions exist, to represent different categories of staff, a single table agreement is frequently used. We should also note that in Britain, and increasingly in Europe, the level of bargaining is shifting from national, regional and industry level to the level of the enterprise. This is a two-fold shift:
397
398
U niversity of Sunderland
ACTIVITY
Note down what you consider the disadvantages of decentralised bargaining might be.
ACTIVITY FEEDBACK
You might have noted that the disadvantages could include:
The costs of conducting collective bargaining. The risk of fragmentation of either management or union resources.
Unions have found themselves less able to organise members, and organisations may be picked off by unions who are able to exert more power over a single company rather than over multi-employer groups.
U niversity of Sunderland
399
conditions of employment. The concept of market rate is viewed with suspicion. Here we see a reinforcement of the cultural and contingent factors supporting reward strategy in Unit 5, which can substantially influence management choice. Industry or multi-employer agreements have advantages for both employers and unions:
400
U niversity of Sunderland
respond to skill demands. A clear example of this tension has been met by the national engineering union IG Metall, in negotiation with Osram in Angsburg in the late 1990s (Marsh, 1997). Marsh highlights Osrams threat to transfer production to Italy without changes to working time and shift working, including weekend working to improve productivity. Osram highlighted the need for a more flexible plant, as opposed to regional agreement to address productivity, customers and specific plant technology issues. The deal exchanged flexibility for job security. The agreement kept the German business unit ahead on productivity despite high flexibility, and lower cost plants had already been identified in China and Britain. The agreement reached was done so by circumventing national agreements. As we can see, both employers and trade unions are making key decisions about the use of collective bargaining, and the size and level of bargaining to underpin wider strategic goals. Employers are weighing up the relative advantages of securing commitment through bargaining as a form of participation against the risk of delay and resistance to change. However, collective bargaining is still a key component of ER/IR strategy. The willingness of the parties to co-operate on bargaining by including a broad agenda is at the heart of the benefit of placing ER as one of the central features of SHRM in certain environments and contexts. The agenda includes employers needs to restrict costs, enhance flexibility and willingness to change and employees needs for security, continued employability through training and a voice in business decisions.
U niversity of Sunderland
401
To fulfil the wider function, that is distributive and governance, collective bargaining needs to deal with the following:
Conjunctive: coercive through the use of power. Co-operative: concessions are exchanged. Transactional: acceptance and distribution. Integrative: seeking commonality of purpose, problem
solving. You will see that the styles of bargaining and negotiation can be related to our strategy models identified by Storey & Sisson. In other words, these perceptions underpin the wider intended strategy of the parties. The style of bargaining or bargaining culture is important in developing the concept of partnerships and integration of values. Bargaining style can contribute to the culture change and learning-based approaches that have been discussed in Unit 6 and that will be consolidated following the completion of this unit. Clearly, an integrative bargaining style builds relationships and trust. The parties will be receptive to open sharing of information and open analysis of issues and problems. This will build aligned values and objectives. Transactional relations and co-operative bargaining retain the essential differences of the parties but establish principles and rules for reconciling them. This develops our understanding of the Personnel and SHRM approaches from the 27-points model.
402
marginal importance as a tool of involvement. That brings us to more practical tools of involvement. Rather like the goals of learning, education (consultation) is rarely enough to fulfil wider skills and experiential development objectives. Education and consultation are essentially top down and management-led, which will not necessarily engender employee commitment through involvement in change (see Unit 8). Learning requires a greater mutual engagement and empowerment that can be facilitated in part by more effective ER systems. Hence, management strategies have focused on moving union and employees away from macro-level information exchange (which in developmental terms has limited utility in transferring into job performance) and negotiation, to job level and enterprise level performance. The parallel with the HRM agendas is again apparent. As with skill specific and experiential development, work-level involvement and participation are more likely to engage employee capability and develop performance cultures towards business aims. Hence, the priority given by employers to this form of employee involvement to enhance learning development and value alignment. Employee involvement and participation are key activities to bring about workplace partnerships. However, as we saw above, they can also be used by managers to develop more individual ER strategies that negotiate partnerships. How should we define involvement and participation? Salamon (2000:369) again offers a useful definition: ...The terms involvement and participation are used...to cover all processes and institution of employee influences within organisations (including joint consultative and collective bargaining). However, it is perhaps better to see involvement as enhancing the support and commitment of employees to the objectives and values of the organisation, and participation as providing employees with the opportunity to influence and take part in organisational decision making. This definition firmly makes the link between involvement and participation and wider SHRM principles. It is not so much about securing ER peace and job satisfaction. It is about aligning values, securing influence and commitment, and we might go on to suggest developing the competences and resource capability. It takes ER away from seeing the human resources as a cost of production to viewing it as a resource capable of development. Reviewing the strategic framework, it draws us up the scale on an individual and collective level. We can now summarise methods that organisations have used to enhance involvement and participation at a consultative, collective level. These are:
U niversity of Sunderland
403
Industrial democracy
Designed to put worker representatives on the Board of Directors in the 1970s to democratise the workplace, the experiments never really worked and do not really match employees, unions or market-led economies. Managers felt constrained in decision-making, unions felt uncomfortable in being incorporated into management functions, whilst the whole process became a largely bureaucratic extension to company-wide consultative processes. The pressures to involve staff and engage them in participative policy making and workplace involvement have been brought about by a number of SHRM related issues. From managements view these are to:
Secure commitment of staff. Develop and utilise knowledge and capability. Align behaviour and values. Empower staff in delayered organisations. Empower staff and operate with fewer staff. Break down dependence; the them and us mentality
and culture.
Being treated as equals in the wider society. Opportunities to develop and grow within the
organisation beyond status and position.
404
U niversity of Sunderland
also emphasise the relevance of I&P to employees as something close to their work experience and something they can reasonably influence.
Works councils
Works councils are a relatively recent introduction to the ER/IR agenda. They have been introduced by an EU directive as a statutory means of supporting co-operative relations between employers and employees/unions, to enhance organisational performance. The compliance rate is variable. Councils or voluntary agreed alternatives have been developed within the statutory guidelines. The European Works Council (EWC) Directive provides for EWC or other agreed information and consultation procedures that may include collective bargaining with recognised trade unions, to be established in any multi-national organisation with at least 1,000 employees, including at least 150 in each of two member states. Management or union (or 100 employees) may initiate the request to form an EWC. The minimum standard is:
U niversity of Sunderland
405
Conflict resolution
The final strategic variable is conflict resolution. At the individual level grievance procedures (employee orientated) and disciplinary procedures (employer orientated) provide a framework of governance or rules by which matters will be dealt with. It is a set of procedural rules to ensure that conflict is handled in a transparent way and that each party recognises the legitimacy of the other to raise matters of concern and have them dealt with fairly and openly. Establishing grievance and disciplinary procedures is based on the premise that a structured system of handling of conflicts and disagreements will achieve a number of positive outcomes as follows: 1. Procedures enable employees to channel disagreements into structured discussion and provide a framework of rights to have a disagreement properly heard. In this way it is hoped that disagreements do not tend to create long term damage to the employment relationship. Procedures provide confidence within the employee relations system between the parties, empowering them to resolve their differences without recourse to industrial action such as strikes. Procedures provide a basis for internal government within an organisation; each party is given rights, power is divided where management has agreed or has been obliged to recognise a trade union for collective bargaining purposes. Both parties will seek to establish collective agreements for bargaining over the work practices, and terms and conditions of employment. However, the parties may disagree. You will have noted in your earlier studies that in employee relations unions may sometimes act as an intermediary between the employee and the employer; this is collective relations.
2.
3.
The key issues for our discussion of how choices about conflict resolution fit into our development of a strategic perspective on managing employee relations is built around two central issues: 1. First, procedural rules, as we saw in Storeys 27 points of difference between Personnel and HRM, tend to place pluralist (that is, power sharing with different interest groups such as unions) and the institutionalised management of conflict within a non strategic framework. The Personnel and IR approach, Storey suggests, tends to draw organisations into an emphasis on procedures, labour management as an end in itself, and decision making is slow through extended procedures. More importantly, it maybe geared towards compromise and power sharing rather than business led outcomes. Storeys model places extensive emphasis on industrial relations procedures as the antithesis of the SHRM outcomes of speedy customer-focused decisions,
406
U niversity of Sunderland
flexible organisation structures and work practices based upon a clear corporate culture based upon continuous empowerment. 2. Second is the extent to which organisations develop effective procedures and methods for building internal consensus and resolution of conflict. Traditionally, European models of employee relations have differed concerning the degree to which managers and internal union representatives have prioritised the need to resolve issues internally or rely on external apparatus to support achieving industrial harmony. Organisations tend to draw up collective dispute resolution procedures that eventually end, leaving either party, if still not in agreement, to resort to independent action. A union may elect to ballot members for a strike or ban on overtime working. A company may chose to implement a pay award or a new working practice despite there being no agreement.
U niversity of Sunderland
407
partnership within the so-called New Industrial Relations since the 1980s. Organisations have a key interest in minimising or eliminating industrial action, damaging to the business, and at the same time enhancing management control. As we have seen, individualising direct employee involvement strategies and enhancing line manager authority are key issues. How have organisations attempted to further reduce the scope for strikes? Some organisations have experimented with one or more of the following, including them within a package of measures to develop comprehensive understanding with trade unions rather than allowing piecemeal decisions to be taken. Having a package of ER measures is at the heart of the strategic approach. Some examples of packages or bundles of related and mutually reinforced policies are identified below.
408
U niversity of Sunderland
Nissan in Sunderland). Organisations that had a long history of working with unions, often in adversarial conditions, such as British Airways and Blue Circle Cement, attempted to experiment with these practices to build more effective employee relations based on partnership rather than conflict. It has proved more difficult on sites where lengthy histories of industrial conflicts exist. All pursued similar attempts to engage and embrace unions within management decisions about change through comprehensive extended agreements. From the perspective of our discussion on conflict two elements of the so-called new style employee relations are important to note.
409
best case that recognises these needs. Such a process is felt to emphasise the importance of the internal processes and culture of dialogue. Hence the inclusion of pendulum arbitration has been encouraged as a means of last resort conflict resolution within a package of new style employee relations aimed at consensus building, providing a realistic view of business need and employee rights to a voice and involvement in business developments. This concludes our review of how mechanisms of procedures for the resolution of conflict might be adapted into an SHRM template and be integrated more effectively to ensure that organisations that are faced with the need or choice to engage with and develop a business led approach to employee relations may do so whilst avoiding the apparent disadvantage of the old style industrial relations, which in SHRM commentator eyes did not support the development of effective business strategies.
Partnership agreements
We have been building up to defining what we mean by partnership for some time. In the UK, the Involvement and Participation Association (IPA) launched a project in 1992: Towards industrial partnerships: A new Approach to Relationships at Work (IPA 1992). The document was endorsed by a joint body of employers and trade union leaders. The document identified three commitments and four building blocks. The commitments were:
Parties subscribe to the success of the enterprise. Building trust and greater employee involvement. Recognising the legitimate role and responsibility of the
parties. The building blocks were:
410
U niversity of Sunderland
bargaining and dispute resolution. These are important steps. Unions have to shift their ground from promoting social goals and employee rights to promoting the prime needs of the enterprise in a market economy. Employers have to share power effectively in certain areas whilst retaining managerial rights. Their commitment is not to a variable approach to employees based upon power in the market but in long-term engagement. The Blue Circle and British Airway agreements are close embodiments of these mutual partnerships.
ACTIVITY
In what ways does partnership support the goals of SHRM?
ACTIVITY FEEDBACK
You may have noted the links to the four SHRM activities of flexibility, quality, integration and customer responsiveness, and generally the performance enhancement goal. Partnership enshrines the need to make jobs and organisational processes flexible without unreasonable union interference, providing managers involve, communicate intentions to and fully develop staff for changes. Enhancement of quality and innovation are firmly in the organisational domain of decision making to meet customer needs. The shift from personnel, rules and procedures to HRM can do responsiveness is apparent.
However, there are other important aspects of partnership. It promotes a shared vision, aligns values and promotes consensus in a stakeholder context. Employees are legitimate stakeholders (balanced scorecard technique) alongside customers and shareholders. The alignment is not achieved exclusively through management practices but more substantially through joint collaboration.
U niversity of Sunderland
411
ACTIVITY
Spend a few moments matching ER practice to partnership principles and building blocks. For each item in the list below, suggest an example of ER practice. We have done the first one for you.
Principles Success of the enterprise Trust and involvement Legitimate role of the parties Building Blocks Employee security Maximum flexibility Shared success Information and consultation Representation and voice Business objective priority BA/Blue Circle
ACTIVITY FEEDBACK
Principles Success of the enterprise Trust and involvement Legitimate role of the parties Building Blocks Employee security Maximum flexibility Shared success Information and consultation Representation and voice HRM & job guarantee Productivity agreements, multi-skilling Organisation-wide bonuses, profit share Works councils, team briefing, etc Collective bargaining, joint consultation Business objective priority BA/Blue Circle Sharing information, participation in TQM, etc Recognition agreement NIR
412
U niversity of Sunderland
The list in the last activity provides the one example of the key HR levers that can provide effective integration of the partnership approach. The original conceptualisation of HRM is often used in a more restrictive way, to denote individualistic ER operating without unions, as a unitary policy outlook focusing on employer and corporate culture. A broader best fit approach emphasising stakeholding, mutuality and alignment of values based on balancing interests, seems to offer more promising prospects whereby SHRM is not marginalised in environments that support collective ER as an alternative to or in parallel with individual ER. SHRM, therefore, might be seen to have wider business relevance. Certainly the WIRS 4 survey data would support this view. SHRM can, therefore, represent broader interests than those of management. Under these conditions Ulrich (1997)(see Unit 1-2) sees a full spectrum of HR interventions covering Business Partner, Administration (Policy and Reward Practice) Expert, Change Agent and Employee Champion. Sceptics may argue that this is still social manipulation and the incorporation of union objectives and purposes.
CASE STUDY
The article below represents the changing nature of workplaces and the growth of new key labour markets, which have largely been outside the organisational scope of trade unions. It considers whether the typical workplace offers us the opportunity to practise SHRM in a strategic sense. The case also illustrates some of the pitfalls of adapting SHRM and integrating effective ER strategy. As you read this case you might like the following question: 1. What are the tensions demonstrated in modern employment environments between SHRM practices and employee relations?
Case study Comeuppance Calling by Seamus Milner, (The Guardian, 26 November 1999. Source: Salamon 2000) This weeks walk-out by thousands of BT call centre workers the first ever nationwide strike in the fastest-growing sector of Britains much-vaunted flexible labour market will have come as a rude awakening to those who imagined such confrontations to be an anachronism in these engine-rooms of the post-industrial economy. Faced with an unexpectedly effective campaign of disruption and alarmed that its customer service workers new-found industrial confidence might prove catching, BT managers, are now deep in talks with the Communication Workers Union about how to address its members grievances.
U niversity of Sunderland
413
But their discontent which is focused on a 19th century management style, impossible targets, stress and understaffing, rather than pay goes to the heart of the way these white-collar factories operate. Damned as the sweatshops of the 21st century, call centres are in reality the logical extension of the Fordist production methods of the early 1900s to the frontline of the emerging 24-hour service economy. They represent the apogee of the time and motion theories of industrial management pioneered by Frederick Taylor 100 years ago. As Sue Fernie, research fellow at the London School of Economics Centre for Economic performance, puts it: The possibilities for monitoring behaviour and measuring output in call centres is amazing to behold the tyranny of the assembly line is but a Sunday school picnic compared with the control that management can exercise in computer telephony. In the archetypal call centre of the late '90s, thousands of mainly women workers sit in serried ranks in giant hangars, answering telephone inquiries to a predetermined script in relentless succession and under perpetual supervision, each call and its duration recorded, each visit to the lavatory carefully rationed. Companies such as BT are prickly about what they regard as one-sided stereotypes. But given that a key rallying point in the current dispute has been the threat of disciplinary action if workers fail to complete every call within 285 seconds, it is scarcely a surprise to discover that one popular software package used by a call centre management is marketed as Total Control Made Easy. ... it has been, the combination of the impact of integrated computer and telephone technology, the falling cost of long-distance calls and availability of low-cost labour in areas blighted by industrial decline Leeds, Liverpool, Sunderland, Glasgow and now Belfast are the industrys hot spots that has fuelled the call centre boom of the past decade. Banking and financial services led the way, but now call centres are increasingly becoming the crucial contact point between producer and consumer in every imaginable service industry, from travel information to tax advice, holidays to health services, and are now spreading to the public sector. ... The consensus is that there are now about 250 000 call centre agents, as head-set operators are known, working in Britain, accounting for nearly half of the European market. BT, Sky and First Direct the first bank to operate entirely without branches are the biggest players in the field and the largest call centres, in Scotland, employ upwards of 4000 people. ... Contrary to industry mythology, most call centre workers are full-time staff and around half are covered by union-negotiated agreements, though some employers are aggressively anti-union. Salary rates range from 8-17 000, the finance union Unifi says, with the majority in the 10-l3 000 range roughly half national average pay and heavily dependent on performance bonuses. But staff turnover is notoriously high and sickness rates are said to be double the average for the finance industry. The stress and tedium means 18 months is
U niversity of Sunderland
414
the average length of time in each call centre job and in some cases annual turnover can be as high as 80%. With a tightening labour market, employers have been forced to jack up pay and improve conditions to attract new recruits. Some are now even providing on-site jacuzzis. But, despite its meteoric growth and the added impetus of the Internet, most observers believe the call centre will turn out to be only another way-station in an accelerating industrial revolution. With further call-switching to lower labour-cost centres abroad, the expansion of e-commerce and rapid advances in speech recognition technology, call centres are eventually likely to start closing as quickly as they opened. The OTR Group, a communications consultancy, recently forecast that automation would eliminate 40% of all call centre staff within the next five years. But BT believes that will prove exaggerated. People will still want human contact, a spokeswoman says.
High work performance; measured and monitored outputs. Assembly line office working to ensure productivity and
performance measures are met.
High evaluation of performance. Standardised role behaviour trained in via the induction process. Emphasis on cost minimisation. High dependence on performance incentives.
SHRM problems:
U niversity of Sunderland
415
High recruitment and replacement costs. Competitive wage markets between call centres. Poor leadership and ER.
Call centres have grown rapidly during the 1990s and the early part of the new millennium, employing large numbers of staff within high unemployment areas of the UK. Since the article in the last activity was written, call centres, often the derivatives of large blue chip organisations, have reviewed ER practice. Wider management training exemplified by the University of Sunderland Service Manager Certificate for an international insurance organisation, together with a wider range of employee involvement strategies, have alleviated some of the tensions raised by the article. However, the case is still relevant in highlighting potential weakness of the SHRM principles: hard (employee as a cost) versus soft (employee as a resource) strategy. Before we leave the theme of partnership we should briefly review the key employee process embraced within the involvement and participation family. They are critical for underpinning the criteria of partnership.
416
Partnerships supporting SHRM. Quality standards for the customer. Community involvement; recruitment to reflect local
community.
Job security and flexibility bargaining. Financial participation in SHRM by employees. Commitment to develop workforce skill.
Marks places stakeholding and partnership at the heart of the UK competitiveness agenda. In a sense, it is a knowledge economy manifesto. He reinforces the message by linking the TUC position to the OECD research showing that employment tenure (service) is strongly linked to employer and employee commitment to training, development and SHRM development. Clearly Marks, the OECD and UK governments over a period of nearly ten years regard SHRM intervention, including a core role for ER, as central to delivering economic, organisational and individual success. We end this unit with a case study.
CASE STUDY
Read the case study below, and as you read reflect on the following case study questions: Mindful of Powercos dual strategy of shaping employee relations arrangements to the circumstances of its regulated distribution and supply business and its non-regulated businesses (in particular electrical appliance retailing): 1. Consider the policy choices facing managers in devising new arrangements for staff representation, including trade union recognition, bargaining and consultation arrangements and the role of workplace union representatives. Consider how the company might take maximum benefit of the opportunity to carry out a major overhaul of pay and rewards. Attention should focus on the means by which pay systems and structures might be re-modelled and also the steps to be taken to link pay with measures of individual, team and business performance.
2.
U niversity of Sunderland
417
3.
Consider how the company might amend its working time arrangements in order to respond to its goal of enhanced customer responsiveness and service quality.
Changing employee relations at Powerco by Hamish Mathieson, (McGoldrick 1996) Introduction The following case is concerned with the employee relations policy choices faced by managers in a regional electricity company. The creation in 1990 of 12 privatised regional electricity companies (RECs) in England and Wales set in motion changes in the organisational and cultural context framing the management of employee relations. Prime elements in the new context are the introduction of competition, pressure to reduce operating costs and the companies perceptions of themselves as separate businesses in which meeting shareholder and customer expectations are accorded high priority. The case focuses on decision making in three key areas: bargaining and consultation arrangements, pay systems and workforce flexibility. Back to the case The essential tasks of the industry are the generation of bulk electricity in a network of power stations, its transmission via the high voltage National Grid, and its ultimate distribution and supply to consumers on a local basis. Prior to the passage of the Electricity Act 1989 which triggered the privatisation process the industry was structured (at least in England and Wales) on the basis of a vertical separation between the upstream generation and transmission activities undertaken by the Central Electricity Generating Board (CEGB), and the downstream distribution and retailing functions fulfilled by a collection of regional area boards. The industry in Scotland, on the other hand, demonstrated full vertical integration of generation, transmission and distribution functions undertaken by two regional electricity boards. An analogous arrangement applied in Northern Ireland. So far as England and Wales are concerned, the post-war pre-privatisation era, set in train by 1947 legislation nationalising the industry and further legislation a decade later, was characterised by two important features. 1. There was little competition. Successive governments prioritised continuity of supply and capital investment in hardware ahead of measures to enhance competition. Moreover, the prices charged to consumers by area boards were heavily influenced by the tariff terms upon which the monopoly generator, the CEGB, sold bulk electricity to the boards. Some commentators likened the relationship between the CEGB and the area boards as one of domination and subservience. The industry was production-driven. The statutory duty to keep the lights burning and meet demand from the consumer rested with the CEGB. As a consequence the industry became engineering-led and also acquired a reputation for extensive procedural bureaucratisation.
U niversity of Sunderland
2.
418
None of this, however, should mask the sustained expansion and success of the industry in terms of capital investment, technological change and productivity growth. The 1989 Electricity Act has brought substantial changes in the organisation and operations of the industry. In introducing the governments plans for the industrys privatisation the Secretary of State for Energy declared that his proposals were aimed at transforming a producer-dominated industry into a consumer-led industry. This has subsequently entailed the break-up of the CEGB and the creation in its place of three competing power-generating companies in England and Wales National Power, Powergen and Nuclear Electric. In Scotland, the successors to the integrated area boards are Scottish Power and Hydro-Electric, together with the nuclear generator, Scottish Nuclear. Privatisation also created 12 regional distribution companies in England and Wales (the RECs), whose powers and responsibilities significantly exceed those of the former area boards. They exercise control over the transmission grid through joint ownership of the separately constituted National Grid company; they are able to buy bulk electricity from whichever generator they wish; and they may enter the field of generation themselves. The RECs operate under a public electricity supply (PES) licence which places upon them the statutory obligation to meet demand formerly held by the CEGB. Compliance with the terms of the licence, which also requires the companies to separate different businesses (distribution, supply, appliance retailing, electrical contracting, telecommunications, etc.), is monitored by the Director General of Electricity Supply (DGES) at the Office of Electricity Regulation (OFFER). A principal role carried out by the DGES the Regulator is to supervise the prices charged by the RECs to their customers for the distribution and supply of electricity in which they have regional monopolies. These so-called regulated businesses are responsible for the management and operation of the physical distribution network in the franchise area and the purchase of electricity from generators and its sale to consumers respectively. Taken together the distribution and supply businesses may typically account for 90 per cent of profits with the non-regulated activities (appliance retailing, electrical contracting, telecommunications, etc.) accounting for the rest. Several implications arise from the regime imposed as a result of privatisation so far as the RECs are concerned. 1. Decisions by the DGES to cut the future allowable level of prices the RECs may charge their customers for electricity are likely to affect the companies projected income and profits levels. Consequently, managers are under pressure in such circumstances to cut operating costs and increase efficiency to compensate. A strategy of diversification involving expanding non-regulated businesses may also be chosen as a route to top-up profits.
2.
Although the RECs are less exposed to competition than the generators by virtue of the regional monopolies in their distribution businesses, they nevertheless face competition for the supply of
U niversity of Sunderland
419
electricity to non-domestic large consumers of which there are estimated to be 50,000. A further spur to competition is the plan due to be realised in 1998 allowing domestic electricity customers to choose between alternative suppliers. 3. The responsibility placed on the RECs to meet demand by their holding of PES licences requires managers to be vigilant in ensuring responsiveness to customers and quality of service. To this end the DGESs brief includes monitoring the companies efficiency in dealing with customer requirements. Company managements cannot ignore the fact of their companies stock exchange quotation; sensitivity to shareholder and City expectations and, since April 1995, the possibility of take-overs and mergers, act as a stimulus to management practices which never lose sight of the bottom line.
4.
Employee relations in the industry Employee relations in electricity supply have been characterised by sophisticated collective bargaining and consultative machinery, stability and relative industrial harmony. In many respects the arrangements introduced following the legislation nationalising the industry in 1947 and surviving until privatisation mirrored the classic Whitley pattern. Negotiations were conducted at national, i.e. industry, level in four separate collective bargaining machines covering different sections of the workforce. These bodies were made up of senior members of the electricity boards together with senior trade union officials. They were:
420
U niversity of Sunderland
addition, there were formal disputes procedures with stages at local, district and national levels plus arbitration and a parallel three-tier union-based machinery of consultation. Several important outcomes resulted from such arrangements. 1. Collective agreements tended to be highly formalised and comprehensive in scope, given the intention of their framers that the terms would apply to the complex circumstances and eventualities of an entire industry. The strong commitment of the employers to a centralised, collective model of industrial relations entrenched the trade unions while also concentrating union power in the hands of full-time officials. This together with the tendency of the disputes machinery to refer issues upwards removed a stimulus for workplace union organisation. The arrangements delivered benefits to both parties: employers achieved significant changes in working practices, reductions in manpower and productivity improvements with remarkably little union resistance through industrial action. Employees experienced pay and conditions terms which were superior to the norm in many cases. The role of central government cannot be overlooked, as ultimate paymaster to the industry and being directly responsible for keeping the lights on, given the potentially devastating industrial strength of the power workers. Balancing these roles ensured that political influence in the industrial relations affairs of the industry was always present whether in blatant forms or via backstairs whispers.
2.
3.
4.
Overall, however, the traditional pattern of employee relations management conformed closely to the good employer model in which collective bargaining and widespread union recognition was central. The trade-off for union recognition was an expectation of union co-operation in issues such as increasing productivity and in introducing new working practices and new technology. This was largely delivered. The advent of privatisation The fragmentation of the industry into 19 separate companies after privatisation has provided an impetus and a vehicle for change in the management of employee relations. As companies respond to the post-privatisation marker-oriented climate in which they are responsible for their own destinies, managers are faced with a range of employee relations issues and choices:
What is to be the mix between individualism and collectivism? How is bargaining and consultation to be conducted? What reward systems are to be introduced?
U niversity of Sunderland
421
422
U niversity of Sunderland
In sum the business priorities in the core or main businesses are to retain and build on the traditional base by a combination of cost reduction, increased efficiency and improved standards of customer service. The non-regulated businesses A second plank in company strategy is to vigorously pursue the exploitation of potentially profitable opportunities in non-regulated business areas. Such an approach is designed to reduce the dependence of Powerco on profits from the regulated business, particularly at a time in which it will be increasingly exposed to competition in these traditional markets as a consequence of the decision to permit domestic consumers to buy their electricity from competitor power companies in 1998. A major element in the strategy for the non-regulated sector of activities is the expansion of electrical appliance retailing. The company inherited a string of high street electricity showrooms from its predecessor area board but has since embarked on an ambitious strategy of opening up out-of-town superstores located in retail parks, a number of which are outside its heartland area. Moreover, Powerco has acquired additional such stores plus a number of high street shops from another REC, again geographically remote from company HQ. Plans have been announced for further expansion. As a result of such growth almost 60 per cent of sales come from superstores, and the losses in electrical retailing chalked up in pre-privatisation days have given way to growing profitability. This turnaround in fortunes has been against a background of intense competition and PES licensing rules which prohibit the cross-subsidising of retailing operations by the much more profitable distribution business. A key factor has been the employment of managers from the retailing sector who have sought to change the culture from being an arm of a state-owned industry to a free-standing business which can compete with the established giant electrical goods retail chains. In addition, however, staff have been subject to a pay freeze on basic rates for the past year. Powercos retailing operations are less well unionised than the core business around 50 per cent of staff are in membership. Membership has been falling following privatisation, particularly as a result of the companys expansion into the poorly unionised superstore sector. The vast majority of union members are in either the AEEU, covering groups such as delivery drivers and after-sales service staff, or in Unison which organises shop sales staff. The share of total membership is two thirds to Unison, one third AEEU. While Powerco continues to recognise unions for bargaining purposes in its high street locations it has yet to follow suit in respect of its retail park stores. The survival of the retailing business would seem to depend to a large degree on an aggressive market-place presence and sustained pressure to drive down costs, which inevitably focuses on staff deployment and pay, given the labour-intensive nature of the operation. Powerco maintains a contracting business which undertakes a range of industrial, commercial and domestic electrical work and has recently added to its portfolio the supply of double-glazing and cavity wall insulation. Trading conditions have, however, been very difficult on account of recessionary
U niversity of Sunderland
423
conditions in the construction industry and in the housing market. The company has wielded the scalpel and staff numbers have been reduced by 20 per cent as part of a restructuring exercise. This has returned the business to profitability following several years of losses. The contribution of a 36-month pay-freeze and an increase in the length of the working week from 37 to 41 hours negotiated with the AEEU the union which represents the mainly electrician membership must also be noted. In addition, new staff have been recruited on terms and conditions negotiated nationally for the electrical contracting industry. Nevertheless there is no room for complacency and continued progress depends on tight control over costs (especially labour costs which comprise two thirds of a typical contract), competitive pricing and quality of service. Two other businesses have recently been started, telecommunications and gas, in order to exploit the liberalisation of markets in telecoms services and in gas supply. These are at an embryonic stage but are expanding rapidly. Finally the company has made its first foray into electricity generation via a number of investments and joint ventures in environmentally friendly generation schemes at home and abroad. A significant percentage of staff in these businesses have personal contracts. Employee relations in POWERCO The employee relations inheritance At the time of privatisation, Powerco, in common with the other regional electricity companies, depended upon the long standing national collective bargaining arrangements for the orderly determination of pay and conditions. Pay bargaining, therefore, took place against a background of pay data relating to national trends, supplied by the employers industry association (the Electricity Council, later Association). Four separate bargaining groups existed: industrial workers (ranging from unskilled labourers to skilled time-served craftsmen), professional engineers, clerical and administrative staff, and managers. The resulting highly detailed and prescriptive agreements were designed to try to minimise the risk of disruption to electricity supply in what was seen as a single vital industry. Industry agreements, however, each of which had a different annual review date, did not provide for an integrated pay structure or common terms and conditions across the bargaining groups. Nor did they specify common procedures for handling disputes, grievances and disciplinary matters. Instead each agreement contained its own grading and pay structure; consequently Powerco inherited a pay structure with, in total, nearly 30 grades and over 200 salary points. Moreover, agreements varied in relation to the length of pay scales measured in terms of the number of salary points, in degrees of overlap and in minimum and maximum salary levels. Salary ranges within grades also tended to vary in width. In addition, there were differences in staff entitlements in relation to holidays, in standby, call-out, meal and car allowances, in travelling expenses and in premium payments for overtime and shift working. Some of these disparities gave rise to rankles among the industrial staff in particular centring on what they saw as their inferior status in comparison to the professional engineers. Tension between the craftsmen and the engineers also surfaced in respect of
U niversity of Sunderland
424
work demarcation; for example, engineers guarded their right to authorise the isolation of power lines prior to work being undertaken by manual staff. Craftsmen felt that such duties were well within their competence range. The ensuing restriction on the ability of top-graded craft workers to move into areas of work traditionally the preserve of professional engineers impeded the progress of workforce flexibility. More generally technological change has tended to remove some of the traditional rationale for the strict classification of the workforce into manual, staff and professional categories. The vulnerability of the traditional pay determination structure to claims under the equal pay for work of equal value amendment to the Equal Pay Act has been demonstrated by a series of legal cases and other claims against electricity companies, including Powerco. NALGO (now Unison), which represents the majority of female staff who are concentrated in the clerical and retail sales grades, claimed that pay inequities were sustained by the operation of the separate bargaining machines. This led to comparisons being made between jobs in the clerical structure, and those mainly undertaken by men in the industrial pay structure in which the grades have both shorter numbers of salary points from bottom to top and higher minimum and maximum salaries. The success of the union campaign has been reflected in a series of favourable reports from independent experts and also the verdict of an industrial tribunal that the jobs compared were of equal value. As a result the company is anxious to avoid further equal pay claims. Several other significant features of the traditional collective bargaining arrangements may be mentioned. 1. Progression within grades was related to service; although progression was dependent on satisfactory service, the absence of explicit criteria meant that failures to progress were a rare occurrence. The salary scales specified in the pay structures applied throughout the company as a unified entity; thus the pay rate and other terms and conditions of employment of a person, in a given grade, would be identical whether he/she worked in electricity distribution or retailing. All national agreements fixed the basic average working week at 37 hours; they also specified, however, that these hours would be worked on a rigid day-working pattern, Monday to Friday. Any time worked outside the 9 to 5 pattern attracted overtime payments. Senior managers and engineers had their pay and conditions determined collectively. The national negotiating machines spawned separate local (district and in-company) joint management/union works, staff and technical staff committees whose role was to police the operation of the national agreements, dealing with such matters as working schedules and shift rotas. A company-wide Joint Consultative Council including reps from all unions met to discuss non-negotiating issues ranging from welfare matters to technological change.
2.
3.
4.
5.
U niversity of Sunderland
425
Management and Unions The traditional pattern of employee relations in Powerco accorded trade unions a central position. This derived in part from the unions strong claim to representativeness of staff interest based on very high membership levels. It also reflected prevailing management attitudes, however. A culture of almost automatic consultation with union representatives characterised relations; thus prior to negotiations management would tend to quietly consult union negotiators about its proposals, to gauge reactions. Communication of these proposals to the wider membership was left to the discretion of the unions. Following the conclusion of negotiations the results would be communicated to the workforce via a joint management/union communiqu. Another reflection of management style was in relation to the facilities afforded to shop stewards: the procedural agreement provided that time-off would be granted in relation to electricity industry industrial relations business, thus allowing facilities for attendance at cross-industry union meetings and geographical mobility in the local district. In individual workplaces, such as depots, shop stewards had the freedom to represent all union members irrespective of their possible employment in different divisions of the organisation. Privatisation and new employee relations strategies Powerco is moving to devise employee relations strategies in order to facilitate its business objectives. The companys priority in an increasingly competitive market place in all its businesses is to continue to be profitable by developing a more commercial approach and by becoming more customer-service oriented. The cost, quality and productivity of staff are identified as the major factors in remaining competitive. Moreover, the company is concerned to adopt strategies which match the particular product and labour market circumstances of the core distribution business on the one hand, and the developing non-regulated businesses on the other. In common with all the other RECs, Powerco has given notice to the trade unions of its intention to withdraw from national bargaining arrangements and move to company bargaining. The move is justified by the obsolescence of national bargaining in a situation in which the company is an independent business in competition with others in the industry (and elsewhere). The advantages are seen to lie in the customising of pay and conditions to business objectives and local markets, the streamlining of bargaining machinery and pay structure and the facilitation of greater workforce flexibility. The move is also seen as an opportunity to overhaul joint consultative arrangements. The company has recently restructured its personnel function. A new Personnel Director has been appointed at the slimmed down corporate centre with responsibility for developing human resources strategies. Each business has in turn set up its own personnel office with responsibility for day-to-day policy implementation. Apart from the strategic move to devolve bargaining, the personnel function has recently made public the framework of Powercos employee relations strategies in other important areas. Among these are:
426
which are sufficient to attract, retain and motivate staff. In addition to market rates, pay and benefits arrangements will be based upon flexibility, equity and objectivity, merit/competence-based progression and the relation of reward to business performance. Salary adjustments will henceforth be subject to periodic review of company performance and ability to pay, external salary data on the employment market, and pay claims submitted by the trade unions.
- single table bargaining - decentralised bargaining to meet business unit needs - partnership agreements to address performance, flexibility and
work practice issues
U niversity of Sunderland
427
- reward base: job to person/skill - create incentives: team, SBU targets as well as individual
performance targets
- expand and improve appraisal feedback system - enhance management skill in performance management.
U niversity of Sunderland
428
3.
Working time arrangements need to embrace aspects of flexibility, which might include:
Summary
Our starting position for this unit was that IR/ER might not fit the SHRM paradigm. This might seriously limit its appeal and utility. Investigating the components of, and values behind, IR/ER and partnerships arrangements reveals that significant benefits and options are available in securing employee commitment, flexibility and performance enhancement through the careful selection of appropriate and well-matched ER strategies. So, far from discarding ER from the strategic appraisal, managers within defined limits include ER firmly within the strategic model to shape attitudes, behaviour and organisational culture. In studying this unit we have addressed the significant environmental and historical as well as cultural issues that shape the ER landscape and influence management choice. Not least amongst these influences is the mindset of managers and their perspective on whether ER is a viable and legitimate area in which to devolve powers, or whether market and business objectives should prevail. As we saw in Unit 2, Ulrich (1997) would advocate the employee champions role in HRM as an important agent of strategy. Ulrich probably had in mind the need for managers to lead on ER as an alternative to unions. However, as we have seen, SHRM is shifting from a more straightforward integration of employee interests with those of the organisation and its shareholders to a more sophisticated integration of various stakeholder interests within and across organisational boundaries through the customer, community and employee value chain. This unit has attempted to address the option of using this more complex level of integration to secure wider commitment. This unit, and in particular the discussion around partnership, could be said to mark a major step in strengthening the validity of SHRM, giving greater weight to the best fit approach, and indeed offering breadth of relevant
U niversity of Sunderland
429
coverage of the best practice modes of SHRM, previously seen as the domain of non-union or non-collective oriented organisations.
REVIEW ACTIVITY
Question 1 What are the primary constraints on management decision making in IR/ER? Question 2 What are the primary strategies and operational choices available to managers? Question 3 Recommend and differentiate a preferred IR/ER management style to meet SHRM best practice, SHRM best fit and SHRM resource-based view (RBV) objectives. Question 4 What are the main ER practices that will support the achievement of SHRM? Question 5 Identify three distinguishing features of New Industrial Relations and partnership agreements. Question 6 How can ER strategy achieve cultural change within organisations?
430
U niversity of Sunderland
Single union/single table. Extended compulsory arbitration. No strike/no disruption. Broad based consultation. Defined and limited bargaining. Emphasis on tasks based involvement.
U niversity of Sunderland
431
Core principles and building blocks. Enterprise success. Trust and involvement. Legitimate role of parties. Employee security. Maximise flexibility. Informing and consulting. Representative and voice.
Answer 6 ER strategy can achieve cultural change within organisations if staff are involved in problem solving and participation activity that empowers and develops self-development capability, which in turn enhance learning potential and experiential change.
References
The Strategic Managing of Human Resources, edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, 2004 (Key text for this module) Bassett P. (1986) Strike Free, London Macmillan Brewster C., Mayhew W & Morley M. (2000) New Challenges for European Human Resource Management, London, Macmillan Cranfield Network (1999) CRANET survey on European Human Resource Management Cranfield University Cully M., OReilly A. and Millward N. (1998) Workplace Employee Relations Survey: First Findings London Department of Trade and Industry Deary S. and Ireson R (1999). The impact of industrial relations climate, organisational commitment, and union loyalty on organisational performance:
432
U niversity of Sunderland
a longitudinal analysis, Proceedings of the Academy of Management Conference Chicago Illinois . Delaney and Huselid (1996) The impact of human resource management practices on perception of organisational performance, Academy of Management Journal, 39 (4). pp949-69 Dorrington US (1983) High Performance Work Practices and Firm Performance, Washington D.C: US Government Policy Office Green, Madison and Wilkinson D (1996) Trade unions and training practice in British Workplaces CER Discussion Paper No.278, London: LSE Centre for Economic Performance) Guest D, Mckenzie, Downey K and Patel A (2000). The employment relationship, the psychological control and knowledge management: Securing employee trust and commitment. Proceeding knowledge management: concept and controversies 9-10 Feb 2000. Guest D. (2001) Chapter 6 Human Resource Management. A Critical Text: Thomson Learning. Incomes Data Services (1997) Report No7, London, IDS. Involvement and Participation Association (1992) Towards Industrial Partnerships: a new approach to relationships at work. IPA. IRS report (1997) Jackson SE and Schuler, RS (2000) Managing Human Resources: A Partnership Approach 7th Ed South-Western College Publishing Inventor Thomas Publishing Group. Labour Market Trends, various years Certification Officer Annual Reports. Lawler E E. (1984) Pay and Organisational Development Addison Wesley. Marks J. (1998) General Secretary, UK TUC. Marsh P. (1997) A Shift to flexibility Financial Times 21st February. McGoldrick A (ed) (1996) Cases in Human Resource Management, London, Pitman Publishing Purcell J and Sissons K (1983) Strategies and practice in the management of industrial relations in G.S. Bain (ed) Industrial Relations in Britain Oxford, Blackwell Salamon M (2000) Industrial Relations Theory and Practice (4th Edition) Harlow, Pearson Education
U niversity of Sunderland
433
Sparrow P and Marchington M (1998) Human Resource Management: The New Agenda Financial Times, Pitman Publishing. Storey J (1998) B824 Managing Employment Relations Unit 5 Open University Storey J and Sisson K (1993) Managing Human Resource and Industrial Relations Buckingham, Open University Press. Torrington D, Hall L & Taylor S (2002) Human Resource Management, Harlow, FT-Prentice Hall Ulrich D. (1997) Human Resources Champions Boston, Harvard Business School Press.
434
U niversity of Sunderland
Unit 8
Diagnose and evaluate the need for culture change in organisations. Evaluate the nature of different change strategies to suit different
strategic business contexts.
Design a planned framework of organisational change. Evaluate and design effective SHRM interaction to support
organisational change strategies.
Introduction
As the process of change continues to accelerate, change management is a fundamental competency needed by HR professionals. Today organisations are increasingly focusing on creating a high-performance culture to compete effectively in the knowledge-based and globalised business environments they operate in. Creating such a high-performance culture often involves a paradigm shift in organisational thinking, working practices and in the behaviour of its people. HR is the stabilising influence and change champion in bringing about this shift.
U niversity of Sunderland
435
READING ACTIVITY
As an introduction to this unit, read the article 'An Overview of Change Management' at the BPR Online Learning Center website: http://www.prosci.com/change_management_overview.htm Note the two perspectives of change management; organisational change management and individual change management. Both are areas of strategic HRM focus.
This unit will introduce ways of approaching complex change and managing that process. The term we shall use to discuss a range of analytical task and change management strategies is organisational development (OD). However, OD is more than a set of techniques employed by managers to attempt to change the attitudes and behaviour of staff toward corporate objectives. It not only describes methods that managers can use but also sets a philosophy, a value system in terms of how change should be managed. So we must review a number of aspects of managing change as follows:
An assessment of culture and the possibility of change. The assumptions behind change in organisations and an
introduction to change strategies.
READING ACTIVITY
Read Chapter 9 of your key text, The Strategic Managing of Human Resources, Edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, which covers some of the subjects of this unit.
436
U niversity of Sunderland
ORGANISATIONAL CULTURE
ORGANISATIONAL CLIMATE
MANAGEMENT DEVELOPMENT
I MP R OV E D OR GA N I S AT I ON A L P E R F OR MA N CE
EMPLOYEE COMMITMENT
MANAGEMENT OF CHANGE
ORGANISATIONAL CONFLICT
We shall discuss in depth in this unit the aspects of culture and the management of change. Before moving to this a brief word should be included on other contributory aspects (for further information go to Mullins L, Management and Organisational Behaviour (1999) 5th edition Financial Times. Prentice Hall. Especially chapters 22 and 23)
Employee climate
This can be described as the intersection of people to organisations and employee to the manager relationship. This is made up of several interactions; personal and organisational goals, formal structure and its impact on behaviour, the process of management decision making, conflict resolution and communication in terms of securing commitment and goal alignment, leadership style, etc.
U niversity of Sunderland
437
Employee Commitment
a b a b
Informed
Involved
Pride
Trust
II
c Sharing in success
Authority
Dedication
III
c Competence
Figure 8.2 Three pillar model of commitment (Martin P, Nicholls J: Creating a Committed Workforce).
Organisations still need to build on loyalty despite the difficulties of markets that still push organisations to greater workforce instability through such measures as flexible outsourcing and divesting activities as we saw earlier in the module, take-overs and mergers, etc. Each impacting on the sense of identity of employees and the sense of willingness to contribute to the organisation and its improvement so prized as flexible learning, performance and quality orientated behaviours. Drennan (1989 'How to get your employees committed', Management Today, October pp121-9) suggests several prerequisites to this including clear goals and direction, clear focus on team work,
438
U niversity of Sunderland
management time on developmental activity, visible and continuous communication of goals and feedback on progress. All factors that integrate our performance and learning models of organisations introduced in this module.
Organisational conflict
There are contrasting views of conflict. Mostly organisations determine conflict as destructive and seek to minimise or suppress conflict as damaging. This could, from an employee relations perspective be seen as a unitary view whereby common interests prevail. Alternatively organisations can view conflict more positively as a creative and innovatory force. Organisations subscribing to a stakeholder viewpoint (i.e. inclusive of different internal and external interests) and actively promoting diversity might see different viewpoints as a good basis for learning and change. Organisations are often criticised for creating cultures that exclude certain types of people or viewpoints. How organisations view grievances raised by staff is often a good indicator of this culture. Those organisations that create the impression in staff that to use a grievance procedure suggests failure and is not the done thing' may find it difficult to surface real attitudinal views as a basis for change. Those that are able to have a healthy engagement with grievance procedures and have managers skilled in surfacing and dealing with conflict are now regarded as possessing advanced skills for organisational change as we shall see below. The identification of sources of conflict and the confrontation through problem solving and high involvement strategies are important change management skills. The rationale being that organisations should focus less on performance reducing compromises and avoidance, but focus on diligent processes of resolving through evaluation of information and involvement of staff in the outcomes. Employees may not always like the outcome but the objectivity of the process may go a long way to improving commitment to the result and reduce resistance. Confidence in organisational governance procedures is an important element in building trust and commitment - a key commodity in effective organisational change.
Management development
In the previous units we have discussed the important role of the manager in SHRM. Indeed it has been seen as a critical role in embedding SHRM practice. In Unit 6 we introduced the role in terms of learning. In Unit 3 the role pivoted around the performance enhancing relationship. The manager is able to bring about and or consolidate change is becoming ever more important. Such managers have to move beyond relying on positional or traditional professional expert models to manage effectively in the 21st Century. Becoming a leader as opposed to the more administratively geared person (i.e. making existing procedures work ) to providing a wider and longer term view a set of vision, values and missions and to be able to sustain the organisation around these. To be able to create an environment that encourages and
U niversity of Sunderland
439
promotes flexibility, organisational capability growth and creativity accords well with the resource based view of SHRM we introduced in Unit 1. The manager as coach and counsellor are also important functions to get the best from staff and build their trust, confidence, capability and commitment. The manager is now expected to be skilled in the art of facilitation whereby he / she can move the organisation forward through continuous improvement. The skills behind Total Quality Management, Business Process Re-Engineering, EFQM (described above), Kaizen practice in Japanese organisations all require the deployment of such energy and skills . We have discussed the role of competence in organisations above. The importance of creating effective models of organisational management competencies is a critical task for HR planners and career planners whereby job related profiles and individual competence profiles are carefully drawn up to reflect the strategic behavioural priorities we saw in the first unit. The methods of developing effective managers , emphasising the personal competencies follows a rather similar pattern to the broad goals of learning we saw in Unit 6. The main focus being continuing professional development strongly led by the individual ownership. Whilst management education can be formerly trained via MBA programmes and short courses we see an increasing concentration on learning through doing ; special project based work both within and external to the organisation that is formally set up for development. Job rotation and strategic job moves within the career system are other ways to broaden management staff to the challenges of change. Many international organisations use international placements and development projects to enhance the cross cultural and strategic management competence of staff to survive and prosper in global markets for example.
440
U niversity of Sunderland
knowledge management is key to the demands of fast global responsiveness. Knowledge management requires effective collaboration, adoption of a learning culture, flexibility in the workforce and global teamwork. Teamwork not only within the organisation but also with its strategic partners the supply chain, customers and stakeholders. This is what delivers strategic advantage. These demands can only be met within an appropriate organisational culture and with effective management of change. HR plays a key role in this strategic context. Organisational development, through the establishment of appropriate organisational culture and change management, is critically dependent on HR leadership and in the integration of SHRM functions to reflect OD goals. Refer back to Unit 6 and in particular the section on 'HRD in the context of Organisational Development'. At a high-level the role of HR in organisational development will include:
U niversity of Sunderland
441
Management of restructuring and downsizing. PMS and Appraisal schemes that measure not only
individual performance but also teamwork and customer satisfaction.
442
organisations with the status and reputation as a leading choice employer amongst world-class candidates. 'Employer of choice' organisations are designated as such, because of their positive working environment characterised by compensation, corporate culture, benefits and training. 'Employer of choice' organisations attract talent and retain key employees. They provide employees with an attractive and fulfilling working environment that balances work life with personal life (work-life balance), they provide an environment where employees feel valued and respected. Perceptions of a positive environment is also greatly influenced by an organisation's track record in the area of ethical standards and corporate social responsibility.
READING ACTIVITY
Visit the 'What makes a great place to work' section on the Great Place to Work Institute website at: http://www.greatplacetowork.com/great/index.php Read about the Institute's best place to work model, and the business benefits, financial results, cultural dimensions relating to employer of choice organisations. Also read the feedback from employees from such organisations.
ACTIVITY
Many countries are facing difficulties in recruiting and retaining civil servants, particularly in high skilled areas. To help governments enhance the competitiveness of the public sector and improve its image and attractiveness, the OECD is helping governments in transforming the public sector into an Employer of Choice. To this end the OECD conducted a project on the "Competitive Public Employer" in 2001 by examining the issues across a number of OECD countries. Read the OECD overview report which addresses the problems, challenges and proposed resolutions at the following website: http://www.oecd.org/dataoecd/37/29/1937556.pdf Also, read the country case study relating to Denmark: http://www.oecd.org/dataoecd/37/9/1937604.pdf Many of the issues addressed are applicable across a number of industries, and are not just confined to the public sector.
U niversity of Sunderland
443
In particular, consider the motivational factors cited in the Denmark country case study, and assess the relevance and importance of these motivational factors to your own work situation. In your view, what would it take to transform your company into an Employer of Choice (if it isn't one already).
ACTIVITY FEEDBACK
The motivational factors you would have identified as being relevant from the Denmark study, and the steps you would take in transforming your company into a better working place would depend on the unique circumstances of your company. But wherever your organisation is on the scale of becoming an Employer of Choice (or indeed it may already be an Employer of Choice), organisations should always strive to do better and seek ways of further motivating employees in achieving common organisational goals.
Ethical dimensions
Organisational development also has an ethical dimension. It requires ethical sensitivities in issues relating to equality, diversity management, flexible labour, voluntary and involuntary employee separations resulting from restructuring and down-sizing, performance management and rewards. The pull from the business may often be in conflict with employee welfare, and HR's role is in fairly balancing the conflicts and taking an ethical stance. HR also plays a vital role in establishing an ethical organisational culture by communicating codes of ethical conduct, providing training in ethics, monitoring compliance to ethical standards and managing compliance.
READING ACTIVITY
Read Chapter 4 of your key text, The Strategic Managing of Human Resources, Edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, for a detailed coverage of ethics and strategic human resourcing.
444
U niversity of Sunderland
Workforce diversity
An important role for HR in organisational development is the promotion of workforce diversity. Leading organisations are now focusing on diversity as an asset to be leveraged, and not as something to be managed or paid lip service to. Such organisations view workforce diversity as adding richness, synergy, and, most of all, business value. Accepting this point, and gaining its acceptance in others, is perhaps the most essential leadership competency for leveraging diversity. It is a key part of organisational development. Without this competency, no organizational diversity effort can have a lasting positive impact. Prioritising workforce diversity requires the setting of diversity objectives including cultural awareness and acceptance, work/life balance, integration of people with disabilities and the advancement of women, and building a diverse management team. Managers, in particular, should be made aware of the value of workforce diversity and the enormous business benefits of capitalising on the skills and talents inherent in all segments of the community.
U niversity of Sunderland
445
Culture
Having examined the role of HR in organisational development, let us now focus on culture. In this section we will look at:
- culture and organisational performance - the components and levels of culture, focusing on the
models of Bate (1992) and Hofstede (1980)
446
We shall look at these ideas more closely in due course. Interest in culture emerges mainly from two traditions in managerial studies:
3. Framework for management action 4. Main factors involved in shaping behaviour 5. Management task with respect to labour 6. Nature of employer-employee relations 7. Conflict
U niversity of Sunderland
447
Dimension Strategic aspects 8. Key to organisational relations 9. Initiatives 10.Corporate plan 11.Speed of decisions Line Management 12.Management role 13.Key managers 14.Communication (usually referring to communication from employers to employees) 15.Standardisation 16.Prized management skills Key Levers 17.Staff selection 18.Pay determination 19.Work conditions 20.Labour management 21.Relations with trade union representatives 22.Job categories and grades 23.Communication 24.Job design 25.Conflict handling 26.Training and development 27.Foci of attention for interventions Table 8.1: continued
HR
SHRM
Transactional, working within procedures Personnel and industrial relations staff Indirect, e.g. through joint-consultation mechanisms
Transformational leadership, working to bring about change General/business/line managers Direct from management to individual employees, without going through a consultation procedure or trade union-recognised mechanism Low; for example parity not seen as an issue Facilitation, involving employee support and encouragement
Seen as a specialist, marginal activity Through job evaluation and related to standard grades Negotiated as and when needed Collective bargaining contracts Regularised through provision of facilities and training of trade union representatives Many Restricted flow Division of labour Many temporary truces Controlling access to formal courses Personnel procedures
Integrated, key task for the organisation as a whole Related to performance, sometimes team performance Harmonised with overall business strategy objectives Use of individual contracts Marginalised with the exception of some bargaining-for-change models Few Increased flow Teamwork Handled through managing culture Developing learning organisations Wide ranging cultural, structural and personnel strategies
448
U niversity of Sunderland
You should also note the close relationship that structural control, co-ordination and job design can have as an influence on culture, particularly through:
Standardisation of jobs and flexibility of job and thinking. Formalisation of communication channels and flows. Division of labour between departments or teams. Terms and conditions and the degree of rules and the
ability to work beyond contract. Each of these factors influences employee behaviour and attitudes towards the organisation. These attitudes are formed around the organisations intention to constrain behaviour through externally determined rules, or autonomy allowed through flexibility. This will have a marked impact in the sense of commitment of staff and sense of ownership.
ACTIVITY
Spend a few moments noting your attitude and beliefs about the following statements concerning organisational culture. Rate them on a scale from 1 to 5 where 5 represents a strong degree of agreement with the statement and 1 total disagreement.
Statement 1 1 2 3 4 5 Sharing feelings at work improves performance. The organisation should identify individual blame when performance drops. The organisation should place great emphasis on making people accountable for their performance. Managers are primarily responsible for initiating decisions and solving problems. It is better to trust past success and build on that, rather than introduce radical change. q q q q q 2 q q q q q
Rating 3 q q q q q 4 q q q q q 5 q q q q q
U niversity of Sunderland
449
Statement 1 6 7 8 9 The best way to be effective is to concentrate on your own work and not to interfere with, or get involved with, others. Competition between individuals and groups is inevitable and in the long run, healthy for performance. It is better to carefully plan and assess risk than to respond when it arrives. The workplace is a place to perform and be rewarded rather than a place to develop social relations. q q q q 2 q q q q
Rating 3 q q q q 4 q q q q 5 q q q q
ACTIVITY FEEDBACK
The purpose of this exercise was to develop your understanding of ways of diagnosing culture and workplace values against two well-known indices of culture. The first is that of Paul Bate (1992) who identified a relationship between organisational culture and effective organisational problem solving. He devised a model of culture based upon the following:
Unemotionality Depersonalisation Subordination Conservatism Isolationism Antipathy The extent to which personal relationships are explored and evaluated, the ability to surface and resolve conflict. Avoidance of blame culture and the impact on problem solving and performance enhancement. The degree of accountability, empowerment and involvement of staff in management functions. Receptiveness to change and to learning and experimentation. Personal and group territory and willingness to develop interdisciplinary/agency/organisation problem solving approach The degree of adversarial relationships: unitary/plural and alignment with organisation goals. The primacy of corporate or stakeholder interest and the integration of people with strategy.
These can be used to build a consensus of what the prevailing organisational culture is or what the organisation would like the corporate culture to be.
So how can we define culture? It has been described as a pattern of shared beliefs that influence or determine behaviour. These shared beliefs can operate at two levels: the formal statements of values often
450
U niversity of Sunderland
propounded by the organisation, plus the implicit and preferred ways of doing things. Theorists argue that the alignment of the formal and informal values is a source of competitive advantage. It is a big if as to whether organisations can fully harmonise employee attitudes; herein lies the organisational challenge. The models of Bate (1992) and Hofstede (1980) are ways of describing attitudes and behaviours that permeate organisational life. The diagnosis and management of culture is about understanding and trying to influence behaviour to secure superior commitment and flexibility and enhanced performance.
ACTIVITY
The business values listed below have appeared frequently throughout our study of the strategic management of people. Evaluate each of them using Bates criteria for judging culture. We have made our own suggestion concerning the first one as a guide. Entrepreneurialism You might consider this has a negative rating on conservatism. Entrepreneurialism is about development and experimentation. Enterprise Culture of customer orientation Continuous improvement Market orientation/sensitivity Teamworking Empowerment Involvement/commitment/participation Partnership
U niversity of Sunderland
451
Individual performance accountability Commitment Flexibility Collective and group orientation Learning
ACTIVITY FEEDBACK
Our suggestions are as follows. Entrepreneurialism You might consider this has a negative rating on conservatism. Entrepreneurialism is about development and experimentation. Enterprise Enterprise suggests performance enhancement, avoidance of blame culture, going beyond contract in the 27 points terms (as per the 27 points in Table 8.1). It is anti-conservative. Culture of customer orientation A culture of the customer is reflected heavily in antipathy, where the primacy of the stakeholder is seen as high; for example, low antipathy/high empathy for corporate considerations. It is high in empowerment to satisfy the customer. High personal involvement means low depersonalisation. Continuous improvement This represents a receptiveness and enthusiasm for change (low conservatism), high accountability and willingness to accept responsibility, that is, low dependency/subordination/inflexibility/commitment. You may like to reconsider the original perceived benefits and outcomes of SHRM. Market orientation/sensitivity Market orientation/sensitivity and responsiveness can all be scaled on the depersonalisation, subordination and conservatism measures. Teamworking This emphasises unemotionality. On the one hand, we want team members to be able to deal with feelings and relationships (this is important for learning, change commitment and so on) in an objective, unemotional, natural way rather than let it be destructive. On the other hand, commitment is about emotional engagement with wanting to do better, go beyond contract. We need team members to take empowerment and ownership in self-managing,
U niversity of Sunderland
452
organising teams, be receptive to learning (conservatism) and avoid isolationist or adversarial relations. Most public and private sector organisations are stressing the importance of inter-agency/community co-operation and supplier relations are also emphasised in the private sector. Empowerment This is key to commitment, performance enhancement and learning, and therefore measures depersonalisation, subordination, conservatism, isolation and antipathy. Involvement/commitment/participation Involvement, commitment and participation are terms used frequently to describe valued employee behaviour and the focus of HR polices. The cultural definitions issues from empowerment above all apply. Partnership This was emphasised in Unit 6 as a value set associated with employee relations. It reflected a set of behaviours in the collective relationships of organisations. Antipathy/isolationism are ways of measuring the extent to which these are achieved. Individual performance accountability The emphasis of the individual employees obligation in the employment relationship is at the heart of much of the original, pre-stakeholder, view of SHRM, and is American in origin. It is reflected in many of cultural orientations: independence, ownership, go-beyond-contract, individual rights in development and so on. Commitment Commitment reflects mutual commitment of the organisation (SHRM inputs) and employee in terms of knowledge, contribution to improved performance and so on. We saw in Unit 7 how partnership attempts to bring about both individual and collective commitment. Again, commitment is implied explicitly and implicitly as a behavioural capability under many of Bates headings. Flexibility This is another core SHRM value. It is more than the structural flexibility that you have encountered in, for example, jobs, skills, and organisations (the Atkinson model). It is cognitive and attitudinal flexibility of employees and managers (see the previous comments on unlearning). Again, flexibility underpins personal relationships in unemotionality, and performance enhancement in depersonalisation. Employees need to be personally engaged rather than seeing work as to be endured. Employees need to be receptive to change and adjust to corporate needs in a partnership orientation rather than an adversarial way. Collective and group orientation Generally SHRM has advocated individual and team behaviour. Collectives and groups can be embraced but on clear terms that are established for the integration of employee relations within SHRM, that is, primacy of partnership and the integration of corporate and stakeholder interests low antipathy.
U niversity of Sunderland
453
Learning This is the key to unlocking the intangible assets and knowledge in the organisation, an essential behavioural attribute or mindset. It underpins each of the cultural frameworks offered by Bate. In SHRM terms, it is the key to performance and change, the cultural key.
454
Hofstedes index produced some interesting results highlighted by some stark international differences. For example employees in the USA show:
Low power distance; egalitarianism. Low uncertainty avoidance, willingness to take risks. Very high individuality; individual accountability. High masculinity, with performance/individual/
competitive orientation. On the other hand, Far East and East Asian employees demonstrated a tendency towards:
High power distance; hierarchy and seniority. Higher uncertainty avoidance, for example, with an
emphasis on low risk taking.
U niversity of Sunderland
455
ACTIVITY
Thinking about what we have done so far, note down, against these headings, some of the implications for SHRM policies.
Power Distance (PDI). Uncertainty Avoidance (UAI). Individualism (IDV). Masculinity (MAS).
ACTIVITY FEEDBACK
You might have noted the following implications:
Power distance
Structure of empowerment is problematic for cultures with high PDI. Employees will find it unacceptable to share power and accountability; expectations vest these issues in appointed managers.
Uncertainty Avoidance
High UAI scores may lead to problems with flexibility where rules and procedures fit the culture for decision making. UAI implies responsive decision-making rather than high emphasis on procedure to deal with uncertainty. SHRM philosophy, as we saw in the 27 points of difference, is predicated upon individual understanding of action and responsiveness. This will be harder to achieve in cultures of high UAI.
Individualism
Again high IDV scores may limit scope for involvement and teamwork. Individual competitiveness can work against co-operative and collaborative teamwork.
Masculinity
High MAS scores may impact on a culture of performance relatedness and high individualist measures. High MAS is often associated with a culture of the individual. Collectivist society may de-emphasise the cult of the individual and personal success so SHRM that concentrates on personal contribution may find it difficult to achieve results, for example, performance-related reward.
456
U niversity of Sunderland
It is important for human resource managers to appreciate how culture impacts upon HR policies and how employees react to them. Some of the implications for SHRM from Hofstedes work on organisation culture are:
PDI: Managers will need to consider job design and clarity of decision making structures; authority of managers in mechanistic versus organic structures. UAI: Risk taking and achievement level are affected by this feature. IDV: Problems might arise when Western theories concentrate on personal needs fulfilled. Maslows (see Level 2 HRM) self-actualisation at work versus group or teamwork favoured by Japanese management systems. MAS: Managers will need to consider how the concept of competition affects staff here, as many models of performance management rely on a competitive attitude, although learning-based models allow for a different view. The question to ask is whether staff will be motivated by empowered structures and jobs. The assumption in Western countries is that more empowerment will lead to more satisfaction and performance. PDI may moderate this assumption or indeed eliminate its validity.
Appraisal is not widely used in Far Eastern management and has not always transferred well into, for example, Chinese cultures. It cuts across the concept of face by challenging individual competence. It suits economies that stress accountability and managerial authority and has been increasingly adapted (360-degrees upward approval) to allow for increasing standing in power distance measures in western management/employee relations. You might like to think how you could adapt the design of appraisal to allow for these PDI measures. Career frameworks are also influenced here. For example, in the UK individuals are more likely to change organisations in one career, whilst in Japan individuals are likely to stay longer in one organisation whilst changing occupations, although we have seen changes in this model. These are influenced by beliefs about loyalty, individualism and the self-fulfilment of needs we discussed earlier. PDI: High power distance might suit more control and directive appraisal systems that are increasingly challenged in western economies. UAI: Risk or improvement behaviour outside of strict job definition encouraged by development-led appraisal would be considered dangerous by some cultures. IDV/MAS: Here managers will need to reflect on the extent to which individual or group objectives will be accepted.
U niversity of Sunderland
457
Reward strategy
PDI: Managers will need to reflect on the use of service and seniority factors in structures rather than performance; transparency of reward and degree of hierarchy of structures is important in terms of acceptability by staff. UAI: Innovation and entrepreneurship reflected in reward could be a factor that influences staff sense of justice in the reward equation. Innovation as a behaviour may be seen as risky and reward will not be supported. IDV/MAS: includes performance related pay against team or organisation-based systems of additional reward; a key factor in influencing acceptance and alignment with employee needs. The key is the degree of formality and transparency, and the extent to which individuals will pursue competitive and individual goals and be motivated by such reward systems or see them as contrary to a felt fair system based upon equity.
Development
PDI: emphasis on formal training versus learning and self-development in the workplace. Central here is the perception of the managers role in the process. You might like to review the Unit 5 outcomes. High PDI will favour formal systems of training that reflect levels within the organisation. Self-development and development that crosses job and authority lines will be resisted. UAI: Planned and unplanned, or propensity to learn from everyday events and the whole area of the learning climate and the willingness to take responsibility for learning and seeking opportunities for learning and control over the learning process. IDV/MAS: Ownership and self development are key here, but also the perception of learning and development as a reward and linking to a career outcome might also influence policy decisions.
Employee relations
This is an important area to consider from a cultural perspective. IDV: The individualism and group or collective issue is important when considering the role and recognition of unions. You will recall the widely different levels of membership density in different national systems at one level. PDI/UAI: This will influence the style of employee relations in terms of the level at which some bargaining takes place (centralised or de-centralised, national versus local bargaining). It may also influence the degree of interest in formalised procedures for resolving disputes or consulting and communicating with staff.
458
U niversity of Sunderland
survive some difficult working problems. The group, in other words, has a strong sense of history that binds the members together. Of course, this might be the achievement of a key organisational event or something of greater importance to the group than the wider organisations. Strong cultures are often associated with positive values. For example, the shared experience and effective internal adaptation of working methods that members accept can often lead to higher levels of performance. Indeed in discussions about so-called high performance work teams, the ability of the group to agree on the task and to develop group maintenance functions such as the ability to resolve conflict become effective in self organisation and self management. However, teams and groups can develop a source of invincibility that leads to group thinking (Janis 1972) where the group is no longer able to innovate and question its performance satisfactorily. This then is the crux for strong culture: its diminished ability to adapt and change. However, a dilemma exists. Weak cultures are associated with shifting membership with few shared experiences, with little alignment or commitment or shared values. Arguably it will be easier for organisations with weak cultures to shape their cultures and change their focused and corporate viewpoint, but can we see this as a basis for high performance? So the paradox is that strong organisational culture, if it is aligned with corporate culture, leads to the possibility of high performance and high employee commitment. However, once established these strong cultures will be difficult to change.
ACTIVITY
Note down in the grid below some examples of organisations that have strong cultures and that you believe have been undergoing management-led culture change.
U niversity of Sunderland
459
Organisation/industry
Pressure to change
Cultural shift
ACTIVITY FEEDBACK
You might have listed a wide range of organisations but the following are typical:
Pressure to change Privatisation/cost efficiency Community orientation Need for more accountability for resources
Manufacturing industries
Product centred
460
U niversity of Sunderland
We should be aware that organisations wishing to change culture are trying to do so against values and assumptions focused nationally, organisationally, regionally, ethnically, occupationally and internationally.
ACTIVITY
Reflect for a moment on your own experience and answer the following questions. 1. Think of a time when you have adapted your day-to-day behaviour or action to what you believed your friends/family/colleagues would prefer it to be, even though it was not your preferred position. How did you feel about it?
- You didnt mind because it meant that you didnt enter into
conflict and it kept friendship alive or was the easier option.
U niversity of Sunderland
461
2.
Think of a time when you were challenged on (i) a significant decision that you had taken, for example, a decision you felt it was your right to take, or (ii) a principle that felt important, for example, your feelings about cheating on a colleague. What did you feel about this challenge? Should employers expect you to work during hours outside of those presented by the contract of employment? Which of these is nearest to your view?
3.
ACTIVITY FEEDBACK
There are no right and wrong answers here. These are mindsets that reflect your view as to the most appropriate relationship between employees and organisations and, essentially, individual preference as to whether and how to adapt your behaviour. However, in answer to the first question, you might naturally have been more ambivalent about changing your behaviour where your (deeply-held) value system was not being questioned. This is exactly the culture change issue at stake in organisations. The deeper the need for organisational change, the more likely it is that it will challenge individual roles. Therefore, either the power and pressure to change from the organisation must be greater, or the level of assistance from management to see the need for and to value the change must be stronger.
Etzioni (1988) made the point that there were three employee cultural orientations to employment achieved through structural design:
Coercion: I have to work for the organisation. Economic: I work at a transactional level; wages for
job-defined output.
462
U niversity of Sunderland
U niversity of Sunderland
463
Most of us can visualise what a positive organisational culture is. Thus far, we have learnt about ways of defining it. The basic issues and challenges HR need to consider are:
How do we develop committed employees? How do we develop their potential and identity with
enhancing personal and organisational improvement?
Change Management
In this section we will look at:
Change management strategies and their impact. The organisational development process. The lessons to be learnt from change management. The role of change agents.
464
U niversity of Sunderland
CASE STUDY
The article below produces a clear agenda to assist with effective change. Read the article and, in the grid printed after it, identify the best practice activities that are recommended and for each of them, suggest which HR policy levers would best support them. Vision only works if communicated by Antony Aitken and Ian Saunders (People Management, 21 December 1995) Many people claim to know about change, and yet too many projects are still managed badly. Over the past 18 months, Transition Partnerships has carried out research to discover what people actually do during the different stages of a change management programme. We wanted to know why it was that some companies manage change successfully and others do not. The research focused on those changes that are either triggered by, or are in some way related to, information technology. We were interested in discovering the views of specialists in different disciplines and concentrated on line management, human resources and IT. A questionnaire was created in three versions and 400 sets of these were distributed. This led to 152 individual responses from 63 separate organisations. We also carried out 22 additional interviews. By describing two of the projects and highlighting some of the best-practice ideas that emerged from the research, it is possible to give the flavour of its results. It should be pointed out that our sample may be biased in favour of success, since people tend not to talk about their failures. One contact refused to contribute, saying: Not likely. The project was a disaster! So, what factors led to successful change? In line with other research, a notable theme in our interviews was the need for active commitment from the top. It was clear from the examples of outstanding performance that a large part of their success was due to the vision and leadership of top management. At least four multi-million-pound projects failed to realise their potential benefits because of a lack of vision among senior managers. The need for the personnel function to take more of a lead was another issue that emerged. Only one-third of HR managers, and fewer than one-sixth of line managers, reported that HR change management experts had been responsible for the planning and implementation of change.
U niversity of Sunderland
465
With some notable exceptions, HR contributions to the projects were limited to specific and obvious personnel issues, such as changes in remuneration, management of job losses, revisions to job descriptions and industrial relations. Given that most HR directors and managers would like to describe themselves as business partners with line managers, there was a notable absence of strategic HR input. In several cases, line and IT managers seemed puzzled that we wanted to speak to HR about the change. This seems to imply that HR professionals are too reactive, despite wide acceptance of the view that managing change, whether or not it involves IT, is essentially about people. There are many opportunities for HR to lead aspects of the change, and the need for greater input was underlined by comments by our interviewees about the key factors that they felt influenced change: communications, education and training, involvement in the project by the users of IT systems, organisational learning, and planning and timing. The strongest, most consistent message from the research was the need to put more emphasis on communications. This was mentioned 95 times by our 152 respondents. One manager commented: I suggest that [change] is about better communication and timeliness of communication, ie, making sure people are kept up to speed. Often those who are implementing the change assume that those who are not know what is happening without being told. Even those who put a lot of effort into communications often reported that they had not done enough. At an early stage, making people aware of plans was seen to build commitment and to help people understand the purpose of change. Two-way communication was encouraged because it improved the process of change. Seventy-six per cent of line managers said that they made changes in the light of important feedback. One commented: Listen to operator feedback. Be big enough to redirect change. However, 20 per cent of HR managers believed that the feedback process was not always effective. Education and training was seen to be another key factor. When asked what helped and what hindered successful change, all managers named this as the most important helpful factor. One organisation that felt it had got it about right said it had invested five days for each of the 2,000 people involved in the first year of the change programme. Another had used a cascade method, training a group of people from each depot as trainers, who then trained everyone else for three to four days using real-life simulation. Training, like communication, was used to build commitment, to give people an understanding of the whole picture, to encourage change in working practices and to sustain the change and nurture survivors after a period of redundancies. While the systems requirements were usually driven by business needs, users appeared to have very limited input at the design and modelling stages and were often overridden by technical considerations. However, most respondents felt that once the design and modelling stage was complete, the user had little chance to influence the system. So why bother to ask the user at all, if not at the early stages? User involvement, however, was markedly higher at all stages of in-house, rather than third-party, IT developments.
U niversity of Sunderland
466
The opportunities for successful change to spread through the organisation were apparent in many of the projects. Forty per cent felt that integration of the elements of change had been important to success, and over half said that the change would be sustained and further developed by understanding and handling the impact of change on other areas. Forty-six per cent believed that they would be exporting successful change to other areas. The research report contains nearly 100 tips. It has enabled us to prepare questions that we believe senior management teams must answer if they expect to achieve injury-free change in realistic time. In addition to the need for improved communications and training, these questions include the following:
Do you have a clear reason and focus for the change? Is the outcome
measured in relation to your business objectives?
How well do you understand the degree of change? Just under half of
the sample recognised they were re-engineering the business.
Can you alter the way that things are done? Of our respondents, 51
per cent reported that their organisational culture, power politics and existing systems obstruct success.
Do you fully exploit IT? Only 5 per cent were sure that they did
although 56 per cent gave what could be described as a positive response.
U niversity of Sunderland
467
HR policy lever
468
U niversity of Sunderland
Stakeholder
focus on style of HR implementation via an explicit HR strategy and change strategy clear alignment of HR policy goals on skills competence, performance and style (learning and change)
U niversity of Sunderland
469
Change management assumptions Assumptions about intentions of change Is change Exceptional or endemic? Threatening or desirable? Deviant or normal? Implications Arrangements made for scanning, filtering and responding to signals for change Behavioural readiness to do things differently Cultural responsiveness to do things differently Implications Perceptions about the rightness, speed, scope and pace of change strategy Attention given to historical, cultural and political (internal and external) contexts Arrangements made to cater for systemic repercussions Implications Allowances made for differing versions of change process Credence given to different choices and evaluation of change outcomes Extent to which differing views, predispositions, ideologies explored and understood
Assumptions about implementing change Is change Controllable or controlling? Rational or relational? Discrete or multifaceted?
Assumptions about interpretation of change Is change Directional or reciprocal? Managing people or managing meaning? Problem-solving or pattern-seeking?
Table 8.2: Change Mangement Assumptions and Implications. Source: Mabey C et al. (1998).
We will explore this framework in the next two activities, first looking at assumptions about the intentions of change.
ACTIVITY
1. If change is seen as threatening, how would you as a manager interpret this? If change is seen as normal, how would you as a manager react?
2.
470
U niversity of Sunderland
ACTIVITY FEEDBACK
1. Your response will be unique to you but you may have concluded that the readiness to support change would be low and therefore the resistance will be high. You will need to work hard at the need through education and careful involvement of staff to gain commitment. You may also have to use your resource power to overcome resistance or indeed use both on different types of resistance. If change is seen as normal then people are likely to be ready for change and are unlikely to offer sustained resistance. Adjusting the culture is unlikely to require anything more than normal management processes of communicating the requirement. Few special forms of diagnosis, scanning or filtering of information to assess impact are likely to be necessary.
2.
ACTIVITY
What are your likely considerations as a manager if implementation is:
Controllable? Multifacted?
ACTIVITY FEEDBACK
The implementation is likely to be fairly speedy and directive. Some
systems may be set up to deal with any resultant pressure.
U niversity of Sunderland
471
structures and so on, sustained and involving to gain full control over staff and the system.
This framework addresses the need for a contingent approach depending on the key management questions of:
Willingness and readiness to change. Ability to change. Degree of resistance to change. Pace of change. Direction and scope of change. Degree of involvement of people in change process and
the speed and quality of change, instrumental to internalised value changes.
472
U niversity of Sunderland
Determine the future state W her e do we want t o be? Managing the transition 5. Targets for change 6. Implement change and developmental activities Diagnose the present state W her e ar e we now? 2. Assess outer and inner context 3. Gather data 4. Gain involvement 7. Evaluate and reinforce change 1. Agree organisational purpose and mission
U niversity of Sunderland
473
Determine the future state: where do we want to be? Agree organisational purpose and mission: step 1
The first stage, agreeing the organisational purpose and mission, is determined by the trigger for change. The following activity might help us determine this, and the type of change we require. Internal triggers for change could be:
Restructuring of business units and job structure. Quality improvements. Revised service levels. Development change. Product innovation.
External triggers for change could be:
474
U niversity of Sunderland
The economy. Suppliers availability/quality. Government policy. Competition existing/new entrants. Customer needs/expectations. Shareholder perspective. Public opinion. Legal environment. Media concerns and values. Technology. Market and product innovation.
Inner context
Skills and knowledge of people and their adaptability. Culture and relationships. Learning ability. Flexibility and work methods. Business process efficiency. Structures and job design. Competence.
Step 3: Gathering data
U niversity of Sunderland
475
NOW TASKS
FUTURE
STRATEGY
WAYS OF WORKING
DO FEEL THINK
Price (1987) introduces an interesting way of ordering the data gathering process. The data collection cube (Figure 8.4) suggests that we need to understand strategic pressures, emerging and core tasks that add value, and the association of attitudes and culture that will achieve these. In other words, it addresses the what and how aspects of employee contribution. An example is as follows:
Strategy Level of response (Pugh); System change, for example, Business Process Review
Relationships
Formal management style or informal and open Mechanistic/ prescriptive or organic and flexible
Target change
Ways of working
Target change
The OD process demands that understanding peoples perceptions and feelings will help us to judge their likely reaction to our intended change, which will inform us of the likely issues we need to address in the strategy.
476
U niversity of Sunderland
Also, we should not forget that in order to achieve the full benefit of this analysis, we are not dealing with facts and information alone. The degree to which we involve staff in this process sends other messages about our intentions and perhaps signals our management approval to change our style. Step 4, gaining involvement through the investigation, demonstrates this point. Step 4: Gaining involvement The OD approach, as we saw in the unit on learning organisations, is to advocate a participative approach where the speed of change permits. Therefore, how we conduct the diagnosis will, it is argued, affect the overall outcome of the change itself and commitment of staff to the outcomes. In itself the process of involvement and participation is likely to send cultural signals about what the organisation wants from its staff and how it wants them to behave and perform. So how can we best maximise the involvement of staff in the diagnosis of the present state? Pugh (1993) identifies six rules for maximising involvement in the change process:
477
benefit of the individual and the organisation. The gathering of data, surfacing these issues and including them in the diagnosis, is critical to the success of the change process.
478
U niversity of Sunderland
Behaviour (What is happening now?) Organisationa l level General climate of poor morale, pressure, anxiety, suspicion, lack of awareness of, or response to environmental changes survey feedback, organisational mirroring
Structure (What is the required system?) Systems goals poorly defined or inappropriate; strategy inappropriate and misunderstood; organisation structure inappropriate centralisation, divisionalisation or standardisation; inadequacy of environmental monitoring mechanisms. change the structure
Context (What is the setting?) Geographical setting, market pressures, labour market, physical condition, basic technology change strategy, location, physical set-up; culture
Inter-group level
Lack of effective co-operation between subunits, conflict, excessive competition, limited war, failure to confront differences in priorities, unresolved feelings intergroup confrontation (with third party as consultant), role negotiation
Lack of integrated task perspective; subunit optimisation, required interaction difficult to achieve redefine responsibilities, change reporting relationships, improve co-ordination and liaison mechanisms
Different subunit values, life style; physical distance reduce psychological and physical distance; exchange roles, attachments, cross-functional groups
Group level
Inappropriate working relationships, atmosphere, participation, poor understanding and acceptance of goals, avoidance, inappropriate leadership style, leader not trusted, respected; leader in conflict with peers and superiors process consultation, teambuilding
Task requirements poorly defined; role relationships unclear or inappropriate; leaders role overloaded, inappropriate reporting procedures redesign work relationships (socio-technical systems), self-directed working groups
Insufficient resources, poor group composition for cohesion, inadequate physical setup, personality clashes change technology, layout, group composition
Table 8.3: Pugh OD matrix with possible change interventions (in italics)
The matrix is a useful audit tool to meet the inner/outer context for change. It can also be used as a blueprint for planning the levels and orientations of a change strategy. Change can be effected in one of three ways:
Top down
U niversity of Sunderland
479
Bottom up Horizontal/sideways.
The first two approaches are self-explanatory. The third, horizontal/sideways change, relates to change initiated and promoted by teams of people at different levels of the organisation. The approaches are characterised by the following strengths and weaknesses:
Strengths Top down change control power and resources fast pace clarity of objectives Weaknesses non-ownership resistance low commitment may not have best answer stakeholder interests
Bottom up change
ownership high commitment able to cope and adapt drive objectives empowerment/learning capacity new style of managing
slow pace dilution of objectives inappropriate compromises in major change shareholder and external interacts ignored
Horizontal/sideways change
broader commitment new teams/fresh start power at all levels symbolises new partnership and style of managing
seen as peripheral groups by-passes existing managers and power structures staff isolated/alienated from colleagues
Before outlining steps 57, a word of caution. Many well intentioned change programmes have not produced change. Why? The most common reasons for failure are:
Over reliance on programmes how flexible are they? Reliance on forward training. Paradox of top-down directive change versus creating
the climate and conditions for change.
Problem of overly corporate cultural view. Failure to address fully issues of co-ordination,
competence development and building commitment.
U niversity of Sunderland
480
U niversity of Sunderland
481
Characteristics Rapid change Dismantles traditional values New culture is non-complex Top-down, monitored Detailed plans/actions
It can ... lead to a strong, integrated culture suit a situation where simple source of authority
But It usually ... mobilises dissent is politically naive lacks skills, breadth of support leads to crisis or change
(B) Conciliative
Reasonable, quiet Slow grafting onto new values Deals with means not end Collusion, not confrontation Continuous development
loses sight of its radical intent gets seduced back to status quo
(C) Corrosive
Based on power and control Uses informal networks Unseen manipulation High participation Act first, legitimise later
(D) Indoctrinative
Planned, programmed Explicit learning process Socialising Unified, logical framework Advocates one world view
Table 8.4 : Generic Model 1, Approaches to Cultural Change, Adapted from Bate 1990 in Open University (1992) B884 Human Resource Strategy, Unit 5 P140 141.
Bate (1990) identifies some possible advantages of change approaches. In fact, change strategies will need to employ a mix of approaches to deal with different employee responses and particularly with respect to the pace and direction of change. Generic model 2 Moving from a meaning and values based interpretation of change and its outcomes to a more specific model of change strategy we have Kotter and Schlesingers (1979) model, which we have termed Generic Model 2. Refer to Table 8.5.
482
U niversity of Sunderland
Commonly used when ... there is a lack of information or inaccurate information and analysis the initiators do not have all the information they need to design the change, and others have considerable power to resist
Advantages Once persuaded, people will often help implement the change People who participate will be committed to implementing the change, and any relevant information they have will be integrated into the change plan No other approach works as well with adjustment problems Sometimes it is a relatively easy way to avoid major resistance
Disadvantages Can be very time-consuming if many people are involved Can be very time-consuming if participators design an inappropriate change
people are resisting because of adjustment problems some person or group with considerable power to resist will clearly lose out in a change other tactics will not work, or are too expensive speed is essential, and the change initiators possess considerable power
It can be a relatively quick and inexpensive solution to resistance problems It is speedy and can overcome any kind of resistance
Can lead to future problems if people feel manipulated Can be risky if it leaves people angry with the initiators
Table 8.5: Generic Model 2, Change Strategies, Source: Kotter and Schlesinger, 1979
ACTIVITY
In the grid below we have suggested a strategy associated with bottom-up change, in the form of a sequence of steps. Match each step to the relevant approach from the two models given above. (In Bates model you might find that more than one approach matches a stage, or that none match.) We have done the first one for you as an example.
U niversity of Sunderland
483
Bates model
Communicate need in broad terms Provide information to enable evaluation Establish focus groups or project teams to be involved in clarifying and understanding the objective Seek agreement of key stakeholder Considerable HRD effort to allow for greater understanding of behaviour and skill change which helps minimise resistance due to skills gaps above Replace and remove personnel who refuse to respond to changes after earlier steps
Step 4. Step 5.
Step 6.
ACTIVITY FEEDBACK
Communicate need in broad terms Provide information to enable evaluation Establish focus groups or project teams to be involved in clarifying and understanding the objective Seek agreement of key stakeholder Considerable HRD effort to allow for greater understanding of behaviour and skill change which helps minimise resistance due to skills gaps above Replace and remove personnel who refuse to respond to changes after earlier steps
B B/D
Step 4. Step 5.
B/C B/C
4 3
Step 6.
A/C
484
U niversity of Sunderland
ACTIVITY
Spend a few moments identifying what the key HR policies might be that contribute to change and what impact they will make. (Hint: you might like to review the HR planning framework and the question of demand and supply of skills and competence.)
ACTIVITY FEEDBACK
Education Communication Could range from the enhanced flow of vertical and horizontal information (27 points model) within and between teams, management team briefing to the full range of learning tools, knowledge and experiential learning. The HR technique here might include quality programmes, self-managing teams, specified project groups and even more formal consultative activities with trade unions. The Royal Bank of Scotland has used focus groups to look at customer service improvement. British Aerospace uses cross-functional teams to examine product quality issues. Changes to more participative management approaches seen under learning and PMS frameworks have been adapted in the mid-Essex Authority and Royal Bank of Scotland. Recent trends toward voluntary introduction of Works Councils for communication, organisational performance information for staff and to discuss changes affecting staff, are symbolic of changes toward more formal partnership involvement. The job level changes reflect some of the changing working styles facilitated by structural changes and the encouragement of more flexible cultures. Counselling methods as a way of tackling individual and group insecurity when change is important. Getting people to confront and develop solutions, supported by training, can, as we have seen within developmental
U niversity of Sunderland
485
appraisal models, be powerful as a means of empowering staff and taking ownership of change. Facilitation and support Teambuilding activities can often be seen as a cornerstone of building effective working relations. Getting the inter-team behaviour right (decision making, problem solving, conflict resolution, idea generating and so on) and inter-team behaviour in terms of service and supply relations. Many of the recent changes to UK health and social care have been geared towards effective inter-agency working, so that we achieve so-called joined up Government. Teambuilding along the lines of the Hampshire example has become central to achieving change through revising procedures and patterns of staff interaction from information sharing, inter-group working to form new collaborative cultures. There can be individual contract changes or change can be legitimised through collective agreements with unions. We could also include within this framework, inter-department service level agreements. (Unit 2 personnel department examples.) These are sometimes written formally with performance measures or perhaps as more informal expectation agreements of service. Replacement is usually the generic term used here. The term can cover recruitment criteria being amended to bring a different profile of people (for example, banks moved from an administrative culture to a marketing culture in new recruits). It could be the redesign and configuration of jobs requiring new skills, supervisors to Team Leaders, for example, emphasising from authority to leadership skills. It can also be more direct: redundancy and early retirement of staff who do not fit the emerging profile of competence and supportive attitudes for change. Reward factors, as we have seen, can elicit new organisational behaviours, performance perspectives, sense of equity and justice in the distribution of reward all impinge upon the culture of the organisation (See Unit 5).
Coercive methods
CASE STUDY
Let us now look at a change programme managing the transition, worked out using OD process in a real life setting.
U niversity of Sunderland
486
After having been through the case study, you will be asked to apply OD to your own organisational setting. First read the following example of OD from Hampshire County Council (Note the case study is interspersed with material relating this case study to other aspects of this module or to new areas of teaching relating to this unit. Where this is done, the text is shown in italics.): Example: Hampshire County Council OD is a process based on change. It relies on re-educative strategy through experiential learning. Hampshire County Council used a range of role-playing and simulation exercises to bring about a change in the way people thought about their roles and services in the surveyors department, linking performance directly with the culture of the organisation. Hampshire County Council surveyors department engaged in a process of simulation and role play to consider attitudes to and belief and values about change. To become more business focused, the first stage of experiential development involved role-play in the following stages. Employee groups completed the following tasks:
487
488
U niversity of Sunderland
How did the consultants gain a real life perspective of what the culture was like at Hampshire County Council? Only so much can be gained from off-site exercises and their advice needed to be based on a rich diagnosis of status and information to set targets for change. Much data can be collected from surveys and questionnaires but the consultants in the Hampshire case believed this was not enough. They developed the practice of gaining a better insight by forming a cultural snapshot. HAMPSHIRE COUNTY COUNCIL, THE STORY CONTINUED Lisney & Allen (1993) take this a stage further and show how development processes take place at Hampshire County Council, which are an excellent example of the process consultation and OD process in practice. Managers with an engineering background in particular want abstract concepts translated into concrete images. Many staff, too, found it easier to describe their perceptions of the department in graphic rather than abstract terms. Staff were asked to draw pictures in answer to questions. One question asked of staff was to draw a picture of working life. One staff member drew a picture of a ship being tossed around in rough seas with managers not on the bridge looking ahead strategically but sheltering down below. This was a vivid way of gaining insight into employee feelings and perceptions of management style. Another metaphor for the method that was adopted was that of a holograph: a three-dimensional picture you can walk around and view from different angles. Each employee is part of this picture, but each sees it from a different perspective. Ask just one person to describe the scene and a two-dimensional picture will result. Talk to staff throughout the department and the sum of their perceptions creates the rounded image. The plan, therefore, was to interview a cross-section of staff and supplement this by direct observation, all to be undertaken by the external OD specialist to ensure the assessments were not unwittingly biased by too close an involvement in the change programme. The observational element consisted very simply of standing in corridors, looking at what was going on, loitering with intent to understand. Interviews involved staff from every level who responded to an introductory letter which explained the exercise, stressed that it was voluntary, and guaranteed confidentiality. Each interview took over an hour, was friendly and non-threatening in style, encouraged staff to speak freely about the department, and had three stages. In the first stage the emphasis was on familiar ground: a description of the persons work, significant people and typical working incidents. Next, interviewees were encouraged to describe the department as they thought a visitor might see it. The final stage went deeper and sought meanings behind the way things were seen to be done. Interviewees were invited to describe their perceptions of the department by drawing pictures, a technique that produced a rich and illuminating range of metaphors. When the interviews were completed, the consultants task was to identify the common themes that represented the shared culture of the department. These perceptions could be reported back to top management without breaching the
U niversity of Sunderland
489
confidentiality of individual participants. Idiosyncratic and isolated individual views were not reported. Vivid impression Some of the metaphors derived from the interviews were included in the consultants report and gave managers a vivid impression of how the staff saw the department. The results of the first round of interviews also provided a benchmark against which to set the outcome of the next years snapshot. One of the most striking features of the first snapshot was that the department was perceived by its staff as insular and compartmentalised, a closed train with non-connecting carriages, as one employees picture described it. There was confusion about the departments primary objectives, an important issue for a management who wished to achieve a common understanding across all functions of key values and priorities. Source: Lisney & Allen(1993). Particular points to note about this process are:
Cross-sectional samples of staff were involved. Confronting perspectives and impact of behaviours as a basis
for developing attitudinal change.
QUESTIONS:
With the example from Hampshire County Council in mind, think of your current organisation, or a previous organisation that you have worked for or one that you know very well. 1. 2. 3. 4. What does it feel like to work in the organisation? How would you define the management style? How are you involved in workforce decisions? How well-informed are you about organisational objectives?
490
U niversity of Sunderland
So far we have identified and categorised what we mean by organisational culture and its relationship with organisational performance. We have introduced a number of techniques for diagnosing the culture we have, and the corporate culture we believe will fit the future business strategy. We have identified a range of change strategies that, used in a sustained way, are likely to bring about cultural/attitudinal change. HR policies are at the heart of achieving and learning to change, and reinforcing desired behaviours. This has been an important part of the unit in mapping the strategy for culture change and the relationship with SHRM policies and processes. Let us now turn to a more practical application of this.
CASE STUDY
Read the case study below : Organisation development in British Telecom by Colin Price and Eamonn Murphy A good deal of attention has focused, in recent years, on excellence as a desirable goal for organisational zeal (and, indeed, passion!), and on the Japanese and American companies who have shown the way by sustaining very high standards over many years. Inevitably the implication of much of the research has been despite the carefully expressed caveats of the various authors that one can achieve similar successes by imitating the most attractive characteristics of these top companies. The plain fact is that success is only likely to result if the desired future state of the organisation is visualised with sufficient clarity and the hard work of getting closer to it is done each working day by the managers and staff who are committed to a shared vision of the future. This article describes the methodology, results and lessons learned from the management of an organisational change programme which has concentrated on this less glamorous and more painstaking approach. The Organisation British Telecom Western London District (BTWLD) is a major operating unit of British Telecom employing over 6,000 staff and having a turnover of several million. BTWLD provides telecommunications services to both residential and business users over approximately one fifth of the area of Greater London. The District is structured in a relatively traditional way, having a District Board and Divisions within the District for Business Systems, Consumer Products, Network Business, Marketing, Finance and Personnel/Support Services. The need for change BT has been subject to radical change over the last few years. Those changes include privatisation, liberalisation and deregulation; increasing competition
U niversity of Sunderland
491
and significant technological advances. In response to these changes in the external environment BT has realised the need, and grasped the opportunity, to change its own internal environment. Change programmes have been initiated company-wide to improve: quality of service; customer response time; ease of customer contact; management control of cost; etc, etc. These programmes have focused primarily on the systems of management and have produced some quite outstanding results. However, the attitudes, perceptions, skills and core behaviour of staff are subjects which the centre of BT have left largely as the province of local management. In order to get to grips with these fundamental characteristics of the organisation, BTLWD has initiated an Organisation Development Strategy. Making the connection The first steps in the OD strategy were taken by the Board of the District (then called an Area) calling in consultants from the BT Management College to help them get a feel for where we should be headed. This request for help resulted in a series of two and three-day residential workshops for the Board, where they asked themselves the question shown in Figure A.
The where are we now? question was answered by the Board analysing, in some depth, data gathered by the consultants through extensive individual interviews, group interviews and questionnaire application. The data was collected from all levels of management, together with representative samples of employees. The results were certainly interesting and produced quite a stimulus for change. The dimensions of organisation culture that gave greatest cause for concern were:
492
U niversity of Sunderland
U niversity of Sunderland
493
mirrored in the behaviour of Board members and their senior managers. The characteristics must be evident in: a) deeds and not just words this means the use of personal time in being seen to participate actively. willingness to take the initiative in developing the programme rather than waiting for cues from consultants the ownership of activities must lie with management if lasting change is to take place.
b)
2. Real not feel. In change programmes that are concerned primarily with perceptions, attitudes and emotions there is a great temptation to measure success by counting smiles on faces. Smiles are all very well but they are only of value to the organisation if they are turned into more output, better customer service or decreased cost. 3. Dont tinker. In a large organisation the strength and reinforcement capabilities of culture can be extremely powerful. Tinkering around at the edges, changing the odd policy here or improving relationships there, is unlikely to work. The force of change has to be pretty substantial to break the mould. With these criteria in mind the Organisation Development Strategy was designed. The main activity areas within the strategy cannot be described fully here but are summarised in Figure B.
G. Regular climate surveys E. Employee involvement programmes C. Communications programmes B. Objective setting
494
U niversity of Sunderland
a)
Team Building has generally followed the action research model data collection on an inter- and intra-group basis, feedback to whole teams and actions arising out of the energy created as a result of feedback. The Finance division, for example, were able to take a long hard look at how they were meeting the needs of the business and local managers and established a sufficiently clear focus to provide a more customer orientated service in a short space of time at a point where it was particularly valuable for them to be able to do this (devolved budgets, increased local autonomy, etc.). Objective-setting programmes have proved difficult to evolve in practice. The clarity provided by the McKinseys 7-S model was useful in the initial stages to demonstrate how difficult it was to achieve common understanding from District General Manager down to first line managers about the goals of the organization. Eliciting meaningful detail from the existing Business Plan such as it was and cascading this down to managers was a near impossible task. It was all too evident that the business was only just beginning to think in terms of real goals. The level of detail was woefully inadequate. We found it useful to start a simultaneous upward movement in the goal setting programme, looking closely at the actual day-to-day priorities of first line managers and using the insights gained to change, reshape and redefine agreed goals. In addition, we are now concentrating on specific managers situations, seeking to perfect the feedback mechanisms which are, or should be, in operation to help them get results. The success gained from these studies can then be duplicated for the benefit of managers in equivalent situations across the district. Communication programmes have included team briefing on a monthly basis, an audit of the other communications systems (internal post, electronic mail, etc) and the development of a quarterly video magazine which has sought to keep staff informed of major developments whilst retaining a lighter element (competitions on improvement suggestions, etc). Skill development has concentrated on the training of first line managers in the technique of resource management, enabling them to prove to themselves that significant monetary savings can be achieved in a relatively short period typically three months or so. In addition to the skills of these managers in handling their interpersonal interactions, those of their staff in customer situations are also being developed. Higher level managers have been trained to carry out a support and reinforcing role in order to progress these projects and ensure that training needs are identified and addressed.
b)
c)
d)
The last three items of our fishbone on Involvement, Inter-Divisional Forums and Climate Surveys take us to our current present state. Our strategy is to provide more opportunity for front line staff to become actively involved in the change processes. A particular problem area is the way in which the boundaries between different divisions or departments can become significant barriers to organisational effectiveness. A causal factor for many of these problems may well lie in the cultural legacy from the past over-bureaucratic division of work
U niversity of Sunderland
495
processes, clear divides between work hierarchies, etc but little genuine progress can be made until large numbers of staff become committed to the changes. So far only small numbers have been involved in workshop events and climate surveys. These surveys suggest that much more work needs to be done to make the necessity for change more evident and the opportunity of involvement more real. The next planned step is to hold a series of interactive seminars with the District General Manager during which the current business realities will be discussed and staff will have the opportunity to explore the implications for them and their work. So is it working? The OD programme does seem to have been of significant help so far. Evaluation results from each activity show extremely positive results, subjective evaluation from senior managers is overwhelmingly positive, and commercial performance is well up (coincidence or causal?). But the real test of success is being capable of responding to continual change in the environment. We are not at that stage yet. We are getting there. One thing is sure though that the organisation and the consultants have learned many lessons from the strategy. Here are just a few:
496
U niversity of Sunderland
stages many senior managers will want to be non-committal: lets try it and see. This is fine to start with. Stop and rethink if it goes on.
The installation of a steering group who can grasp the right moment
when refreezing can happen when enthusiasm is still high and workable strategies have been established to take the next few practical steps is one way of refreezing. In our case this group consists of several line managers who are located in key operational situations in each division across the District.
U niversity of Sunderland
497
QUESTIONS:
1. 2. 3. 4. 5. What are the principal inner and outer context factors? What are the principal forces for and against change? What principal types of change are used at work? What were the appropriate change strategies? What lessons can be learnt from this case in relation to your prior work on Unit 6? At the point where the case stops, how successful had the organisation been in your view?
6.
3.
There were major changes in the telecommunications industry to reduce costs and improve customer services in the face of de-regulation. Changes were essentially devised by management in what might be described as a complacent culture. A balance of
498
U niversity of Sunderland
transformational and incremental processes could be justified to achieve the goal. 4. We can see a broad range of methodologies utilised which we would expect to see covering human process and behavioural interventions and the introduction of reinforcing HR practices to signify style change; for example, communication and performance management and management skills development in new leadership styles. Systems are geared to assist with the change of attitude and reinforce desired business behaviours. We see top down leadership, which is normally associated with successful change. The process interventions addressing the sources of conflict team and performance feedback within and between teams are important aspects of the attitudinal unfreezing process. You will have reinforced you views on the relationship of the purpose of change in achieving business objectives. You will have reviewed how a sustained mix of change strategies are necessary combining communication, education, participation and HR systems, and how such changes are used to unfreeze and reinforce planned change. The case illustrates the need to address resistance through behavioural interventions at the individual and group level. The complex and dynamic relationship of consultants during a change programme is well illustrated by the case and the role of the internal management. A range of factors supporting successful change is identified. So what are the problems faced and lessons learnt with this programme? The lessons learned by the consultants and managers give us an indication. One of the key points would be keeping a sense of direction over long periods and overcomplicating change for employees. This is where a frequently cited criticism comes in, that is, the use of jargon and gimmicks which are cynically received by employees. Starting with change at the top is clearly important but an over reliance on this can create a top dependence when you want to build commitment and empower staff. It is important to consider the need for bottom up involvement and commitment in change. Similarly the lessons of the case demonstrate the great possibilities for slipping back and over dependence on consultants, which becomes apparent when the consultants start to stand back and the level of line manager ownership is fully tested. The client needs to take ownership of the change and related implementation as soon as the recognition and commitment has been achieved. 6. It is also questionable how far success could have been achieved without more coercive interventions in terms of removing some of the managerial blocks managers who could not or would not change. Lack of clear goals and objectives were hampering the full implementation of the business culture and, of course, this would give doubters the opportunity to question the validity and use of the planned change. We should also be careful in attributing too much change to relatively short run rational interventions. The real changes are likely to be achieved through a sustained pattern of changed
U niversity of Sunderland
5.
499
business context and efforts by new manager behaviours and positive employee responses from a critical mass of staff.
Step 7: Evaluate and reinforce change You may have gathered already that however problematic culture change may be in organisations, success is likely to emerge from two important factors:
Carefully planned design of strategy. Importance of the process; how we implement to secure
involvement and commitment to change, and to promote the individual and collective need to change. What distinguishes HR-led change from project-based change is the OD philosophy that supports change. It assumes that change is not only technically complex, but requires a high degree of emotional involvement in the process. It also assumes that the problems are complex and unbounded. Bounded problems tend to involve:
Clear priorities. A clear problem. Available data. Limited people involvement. Limited timescale. Clear issues.
Unbounded problems however tend to involve:
Varied interests. Unclear problems or no clear solutions. Not knowing what needs to be known. Uncertainty. Complicated and contextual issues.
HR issues and problems tend towards the unbounded. To address the complex issues of problem resolution, how we implement change becomes as critical to the success as the selection of
500
U niversity of Sunderland
strategies. Returning to the Pugh matrix, we can look at the planned activities again. Mabey and Pugh (1997) identify five characteristics of OD: 1. It is a broad, sustained, medium- to long-term approach. It is multi-method, linking environmental factors with internal change. It draws on the findings and methods of behavioural success, utilising a range of sociological and psychological techniques that underpin organisational behaviour to form the core of OD consultancy skills. It is process-orientated, rather than goal-orientated. How OD is carried out is likely to have a critical influence on success; it is not just a means to an end. Due to its complexity an enabling facilitator is normally required, either from outside the organisational social system or a HR specialist. It is imperative, as we saw in Unit 2, that HR specialists display a range of social skills to be able to diagnose and draw out underlying behavioural/cultural issues that can be then confronted by individuals and groups. It is participative. It is not formulaic, and due to the emotional engagement required of staff and the scope for resistance to and impact upon organisational outcomes of low commitment, imposed solutions rarely achieve success.
2.
3.
4.
5.
OD is designed to address the employee reaction to change. Figure 8.5 illustrates how people might go through the cycle of coping with change:
Stage 1 denial
Stage 2 defence
Stage 3 discarding
Stage 4 adaptation
Stage 5 internalisation
performance
self-esteem
From an organisational point of view, failure to manage change, or indeed employees capability to deal with the change, has significant
U niversity of Sunderland
501
implications. At first, performance will deteriorate more than would normally be associated with changing peoples level of skill or learning a job. Self-esteem and commitment will also deteriorate and, indeed, as we see above, resistance or alienation through denial and defence may magnify this effect. The decline in the level of performance is going to be much less in terms of amount and timescale where an employee feels supported and is committed to trying to change. Examples are:
502
ACTIVITY
Learn about the EFQM model by visiting the EFQM website at: http://www.efqm.org/model_awards/model/excellence_model.htm The EFQM model can be a powerful tool for participative feedback and policy making. Organisations have choices in using the techniques at all levels and using it as a basis for setting change agendas and setting project and team goals. It also provides a useful ongoing index that can be reviewed on a regular basis with full feedback from the results. This fits the notion of organisational survey and benchmarking, as this can be compared across organisations.
Individual intervention, group activities, inter-group activities and organisational activities should all be vital elements of an organisation's HRD initiative. Students are asked to refer back to Unit 6, and, in particular the section on 'HRD in the context of organisational development' where we established the criticality of learning and development.
U niversity of Sunderland
503
ACTIVITY
What constitutes success? a) Based upon your studies to date, write down a list of recommendations you might make to an organisation that had requested your services as a change consultant. How would you convince them that engaging your services might lead to sustained change?
b)
ACTIVITY FEEDBACK
a) You might have come up with a list containing the following factors for the facilitation of successful change management:
- top level commitment - widespread acceptance of the need to change - early successes well communicated - long term sustained view - considerable pressure for change internal and external - accepted crisis - multiple methods of change; multi-faceted approach - well-informed staff - clear change goals and clearly communicated culture and
competence
504
U niversity of Sunderland
- you are independent and can therefore gain the trust of staff. - it is easier for you to collect soft behavioural data that staff
may not divulge to management.
- you are less reliant upon people within the organisation for
your future work success, therefore you can develop a more objective view.
External change agents can help to surface information that remains difficult for internal change agents. They offer a broader perspective on change strategies and are independent of internal interest groups. We end this part of the unit by looking at the role of change agents in the diagnosis and implementation of change strategies.
505
So far we have implied that to be able to gain trust at all levels of the organisation, an external facilitator may be necessary. We have also implied that an external facilitator may also be critical in helping the organisation, including its senior managers, to understand fully the complexity and nature of the change required, the unlearning that we discussed in Unit 5. Indeed, the ability to give feedback and alert senior managers to their need to change behaviour can only be done from outside the organisation. In most change situations such as introducing new budget systems, introducing new capital equipment or a marketing campaign, the project sponsor and the expertise are clear. This is not so with culture change where management may equally be part of the barriers to change.
ACTIVITY
Spend a few minutes considering the relative merits of using the following types of people for leading change projects. Note down the possible advantages below each heading.
Line manager
External HR consultant
506
U niversity of Sunderland
ACTIVITY FEEDBACK
You might have suggested the following advantages:
Human resource specialist Understand internal human resource systems and how they link Awareness of business plans and priorities Regular, wide-ranging contact with organisation stake-holders
External HR consultant Wide, comparative knowledge or human resource strategies in other organisations Can contribute an objective perspective Can use expert status to solicit views widely in the organisation
Credible and successful role model (usually!) Vested interests in human resources because judged on people performance Close relationship with staff promotes concern for their development Awareness of (and immersion in) local and organisational culture
Knowledge of techniques, frameworks, models to help unlock impasse situations. Fresh insights, ideas can be catalytic
Author of human resource policies delineating roles and responsibilities; specialist expertise in diagnosis and delivery of human resource strategies
As was hinted at in the earlier British Telecom case, the reality is that a partnership exists. Organisations require internal support and require external project management skills to take up ownership of the change after the consultancy intervention. Very often consultants are criticised for telling the organisation what it already knows, charging a lot of money and walking away unaccountable for the outcome! This unit will hopefully allow you to appreciate the skill of a consultant, who helps the organisation to find out what it knows or doesnt know, which may have been deeply hidden. External consultants can help the organisation to unlearn (Unit 6). Also the consultants skills extend to helping the organisation to agree, decide on and implement the solution. No wonder the organisation can argue that they did it and wonder at the value of the consultant! It is arguable that without the facilitating skills, the organisation would not be where it is. We have noted the importance of change agents, and the invaluable role external consultants can play. However, it must be emphasised that,
U niversity of Sunderland
507
whether external consultants are used or not, as facilitators of change, change must be championed by senior management to be successful. In unit 6, we established the critical role that line managers play in supporting and enabling a learning culture; a learning culture being a close ally of change management. Line mangers should view themselves as internal change agents and vital role models. The importance of management development to enable managers champion change should not be under-estimated. Refer back to Unit 6 and the section on 'HRD in the context of organisational development'.
READING ACTIVITY
Refer again to Chapter 13 of your key text, The Strategic Managing of Human Resources, Edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall. Note, in particular, the three management development typologies advocated by Alan Mumford: Type 1: informal managerial - accidental process Type 2: integrated managerial - opportunistic proceses Type 3: formal management development - planned processes
Summary
This is a wide-ranging and important unit for the module. This unit focuses on one of the central pillars of SHRM, the ability to assess and mobilise intangible assets (culture) towards more effective organisational performance. It is central to the development of long term organisational capacity to change. It is not just about changing the organisation, but allowing the organisation to learn the skills of client-driven change. This is a core competence for any organisation. The unit is also crucial to the core focus of SHRM, that is: 1. 2. the ability to integrate HR activity to meet organisational objectives to combine a holistic approach to HR based upon policy, design and effective processes of implementation that build flexibility and commitment into employee relations.
More particularly, we have considered the various perceptions and assumptions about change and established sources and resources for
508
U niversity of Sunderland
resistance based on ability to cope, values and the distribution of power in organisations. We have developed an appreciation of how culture is formed and the opportunities and limits to change based on the strengths and depth of culture. The examination of strong and weak cultures offered an insight into organisational performances. The unit has provided a range of change strategies to deal with a variety of topics of change. Whilst appreciating some of the limits to the possibility of culture change, we have built frameworks to manage change. The participative contribution of OD and its relationships with SHRM have been explored and we have noted the centrality of HR policies and procedures, and the importance of the knowledge of organisational behaviour in achieving change. We have two review activities to conclude this unit; first a case study and then some review questions.
REVIEW ACTIVITY 1
This first review activity relates to a case study which helps us review the practical implications of change and the relationship to SHRM. This is a lengthy task and you will need to set aside an hour or so to address the issues. It will involve you in drawing down material from all aspects of the unit. Read the case study that follows. Then imagine that the Council has asked you to act as a consultant to review progress to date. In particular: 1. The Council asks you to consider the value of an employee attitude survey as an instrument for assessing the effectiveness of the change programme. The Council asks whether you feel that the change programme has been successful or not. Particular attention should be given to the criteria involved and the time-scale. The quoted observation of Goodman and Dean may be instructive in this regard. You are then asked to review the steps involved in the introduction and implementation of the programme, with a view to identifying any possible errors or weaknesses (the contents of Table 1.1 may be useful in this regard). We end the case with the two options facing the Council. Which approach would you recommend they use, and why? Taking a longer-run perspective, what recommendations would you make concerning where next for the Council? Here you might wish to consider the ideas of Beer and his colleagues or those advocated by the proponents of learning organisations.
2.
3.
4.
5.
U niversity of Sunderland
509
CASE STUDY
Source: Martin G and Beaumont P (1996) Organisational Change and Human Resource Management: Progress to Date? in McGoldrick A (ed) Cases in Human Resource Management Pitman Publishing Introduction The organisational culture metaphor has been of growing importance in illuminating the processes of organisational change (Morgan 1986, Brown 1995), although it is not without its critics (see, for example, Anthony 1993). The increased popularity of this perspective has had two major effects. First, there has been an enhanced recognition of the fact that the processes of organisational change involve much more than simply changing formal organisational structures; and second, changes in human resource management practices (HRM) have almost invariably been an important dimension of the change programme. Background to the case The latter development, however, has not been without its controversies and debates. Initially, attempts to produce organisational turnaround via a new or changed set of HRM practices produced considerable debate regarding what were the individually most powerful levers of change, and in what particular order or sequence they should be used for maximum effectiveness. For example, were changes in compensation/reward practices a more powerful source of change compared to replacement and promotion within the ranks of management (Beaumont 1993, pp 50-1)? More recently, this debate has entered a new phase, with important questions being asked about the overall approach to or model of the change process. The traditional model of change consisted of the following key elements:
One sought to change the whole organisation. The process was top-down and led by senior management. The process involved three, distinct sequential stages:
unfreezing, change, and refreezing.
510
U niversity of Sunderland
the theory goes, lead to changes in individual behaviour. And changes in individual behaviour, repeated by many people, will result in organisational change. According to this model, change is like a conversion experience. Once people get religion, changes in their behaviour will surely follow. According to these researchers, successful organisational change requires a fundamentally different model, namely a much more decentralised, incremental process of change which begins with (and then spreads out from) change initially based in new, small and isolated parts of the organisation which have good potential market prospects and where some naturally occurring change is already underway. A complementary set of ideas emphasises the need for the development of learning organisations, which are essentially programmes for continuous rather than one-off change and which place organisational and individual learning at the heart of the change process. According to Pedler and his colleagues, the learning organisation or company is one which facilitates the learning of all of its members and continually transforms itself (Pedler et al, 1991). In short, a wholly new approach to organisational change, involving new assumptions, stages and processes, is advocated by both of these groups and researchers. However, many individuals remain wedded to a more conventional approach to change. This may be because they are committed both by their values and positions to the central tenets of the traditional change model (i.e. focus on the organisation as a whole, senior management-led, and stress on the need for attitude change), although they acknowledge that effective change does not always result. Their explanations for this outcome are more likely to emphasise certain management errors in the change process, rather than shortcomings in the model itself (Dawson 1994). These errors may derive from a variety of sources: too much is attempted too quickly; certain issues do not receive the priority attention which their importance warrants; steps are missed out; the influence of organisational politics, etc. In Table 1.1 we list some researchers views of the necessary elements of a successful change process which frequently do not receive the management attention they warrant. This short discussion has highlighted two points. First, many organisations remain committed to the traditional type of change model, and second, in many of these organisations effective and sustained change does not result from the change programme. What remains unclear, however, is the reason for the latter result. Is it because the basic approach or model is inherently flawed, as Beer and his colleagues have argued, or is it that the potential of the model has not been realised through a poor implementation process in which mistakes are made or steps missed out? The present case study should be seen in the context of this important, ongoing debate over models of change and the role of HRM. The material presented falls into three parts. First, the organisation and its strategy is described. Second, the aims and methods of the change programme are introduced. And third, some evidence of the impact of the programme of change is presented. Readers are then invited to act as consultants to the organisation with a view to identifying the reasons underlying the results of a change audit undertaken two years after the change programme began, and providing some advice to the organisation concerning where next?.
U niversity of Sunderland
511
A receptive context for change together with the managerial ability to create the climate for change Establishing a sense of urgency by creating the necessary level of tension within the organisation for change and assembling a powerful group of individuals to lead the change Creating a vision which, though it may be imprecise, should nevertheless help direct the change effort Using all possible means to communicate the vision deep into the organisation and ensuring that managers walk the talk to demonstrate the new kinds of behaviours Empowering others to act by removing structural blockages to change and encouraging risk taking and non-traditional ideas and activities Using deviants and heretics to critically evaluate existing practices and bring in fresh ideas Planning for and creating short-term wins to encourage long-term persistence with the change initiatives Reinforcing changes in culture through changes in structure and changes in reward systems Finally, being patient and persistent as major changes in culture and structure may take many years to bring about. Sources: Pettigrew, AM (1990) Is corporate culture manageable? in Wilson, DC and Rosenfeld, RH, Managing Organizations; Text, Readings and cases, London, McGraw-Hill. Kotter, JP (1995) Leading change: why transformation efforts fail, Harvard Business Review, Mar-Apr, p 61
The local authority: The Leadership Plan Early in 1993 our medium-sized Scottish local authority (which we refer to as the Council) embarked on a large-scale cultural change programme, which involved changes in leadership styles and the introduction of HRM practices such as briefing groups, quality circles and teamworking arrangements, designed to bring about a listening culture which involved a greater organisational sensitivity and response to the users of the Councils services. The Council employs just over 3,000 people in the city, making it one of the largest employers in the region. It is organised on the principles of semi-autonomous divisions, each with its own director; in addition there are a number of departments that provide central services (e.g. personnel, finance, IT). Union density in all divisions is high, with manual workers belonging to the TGWU and GMB, and white collar workers belonging to Unison. National-level collective bargaining operates for all divisions, with COSLA (the Scottish Local Authorities Employers Association) being heavily involved. Table 1.2 provides some more detailed information concerning employment numbers throughout the Council. This programme was portrayed in the Councils published literature as a direct response to the larger economic problems of the area which involved a declining population base (197,000 in 1971 to 172,000 in 1992), a substantial
512
U niversity of Sunderland
decline in manufacturing employment, a relatively high rate of long-term unemployment and a relatively low rate of new firm formation. However, two other influences were also important. The first was connected with the reorganisation of local government and the moves towards unitary authorities in Scotland during 1995-6. The region had previously been served by three district authorities and a regional authority. Legislative changes introduced in the early 1990s, together with a subsequent decision taken by the Scottish Office, set out to reduce these four authorities to three by 1995-6. This reorganisation inevitably resulted in competition between the existing authorities in the region for both power and jobs over the period leading up to 1995-6. The Councils new Chief Executive introduced the change programme in 1992 on the basis that not only would it improve existing organisational arrangements which were not thought to be sufficiently customer-oriented, but that it would also place the Council in a much better position in the eyes of the Scottish Office. The new Council, it was hoped, would act as a pacesetter and role model for the others and, in doing so, would enhance the career prospects of the staff whose jobs were threatened by the reorganisation. The second additional influence was legislation extending privatisation to local authorities, particularly the Local Government Act of 1988 that required local authorities to put many of their services out to public tender (CCT). This had the effect of opening up services which they had previously had under direct control to competition with private sector organisations and also of creating separate divisions within local authorities between those who acted in a client role and those who acted as a contractor. Thus large employing divisions like the parks department and housing department (see Table 1.2) were split into a client subdivision and a contracting subdivision (a DSO or Direct Service Organisation).
1 Central support services Administration (149) Chief Executives office (26) Finance and computing (96) 2 Divisions Housing (5250) Cleansing (9467)* Public works (646)* Architects, planning and quantity surveying (154) Economic development (81) * These are the major divisions employing manual workers which have been subdivided into client and contractor (DSO) departments. Libraries, art and museums (247) Leisure and recreation (233) Parks (316)* Chief engineers (49) Environmental health (16) Personnel (20) Management services (17)
U niversity of Sunderland
513
To meet these challenges, the administration of the Council developed a broad vision or mission statement to put the heart back into the city; the tangible steps along these lines included advance factory building, housing and environmental improvements. Within the larger context of this strategic response (the Leadership Plan) the Council specifically committed itself to (i) maintaining the Councils record in winning CCT contracts, (ii) improving the Councils accessibility and responsiveness via effective communication with citizens and service users, and (iii) ensuring that the Council lives up to its mission and values established in the Leadership Plan. The Leadership Plan, which was formally launched in March 1992, set out the mission and values framework identified by the Council as a core element of its vision to create a strong and vibrant regional centre which attracts and retains people (see Table 1.3 for further details). The leadership strategy, which was developed by a group of officials with the assistance of a management consultant, had the following objectives:
Change from a talking and blame culture to a listening culture. Introduce a corporate planning system. Introduce performance measures. Introduce policies and systems reviews to involve the elected
members, employees and citizens. There was a great deal of emphasis in the Leadership Plan on the importance of HRM and the need to change the people culture with particular emphasis being placed on communication/common language and consistency.
514
U niversity of Sunderland
Mission We shall lead the way to new horizons for the city of..., where the quality of life makes people proud to stay Values 1 Communications We value openness, honesty and understanding in all our communications. We recognise communication as a positive two-way process which is sensitive and responsive to the views of others. 2 Change We value innovation and recognise the need for continuous improvement. We recognise that our actions affect others and we value their right to consultation. 3 Organisation The Council values the culture of a caring, listening, developing organisation which adapts to change. We value the acceptance of authority and responsibility at every level. 4 5 Recognition We value the recognition of achievement. People We will show respect and consideration for everyone and the environment in which we live. We value the attainment of fairness, dignity and equality. 6 Individual We value the development of individuals and will support them in reaching their full potential. We value individuals knowledge of what is expected of them and their freedom to discuss ideas and views. 7 Team We believe we can only achieve our goals for the city through teamwork. We value team-building and the fostering of loyalty. 8 Mission and values We value our mission which puts the people of the city at the heart of our actions on which we will be judged. Table 1.3 The Councils mission and values statement
The organisation change programme The first step here was the development of a heuristic framework of key competencies (the mission and values wheel; see Table 1.3) to identify, develop and assess attitudinal and behavioural changes in management and staff throughout the organisation. Using the services of the management consultants, a benchmark survey was undertaken in the period December 1992 to March 1993. This benchmark questionnaire was issued to all Council staff/employees and was designed to evaluate the extent to which staff/employees identified with the Councils mission, and how they felt about existing organisation problems, internal communications, individual development opportunities and training, and the way people were treated, managed and recognised. The response rate to this initial survey was some 42 per cent. Furthermore, a leadership working party, consisting of the nine Chief Officers and chaired by the Head of Corporate Planning, was established to steer and progress the programme. The basic aims here were to maximise external publicity and internal involvement in the programmes. To these ends a
U niversity of Sunderland
515
series of public, corporate and departmental launches were held over time involving presentations, the distribution of documentation and question/answer sessions. The second step in the change programme involved a variety of policy/practice initiatives concentrated in the two-year period from March 1993 to March 1995. These were essentially as follows: 1. Delayering. A policy decision was taken to ensure that there were no more than five levels of management between the Chief Executive Officer (CEO) and employees. This involved stripping out between one and three layers of management in all divisions dependent on their size. The delayering has been achieved through non-replacement of managers as they left or retired rather than through compulsory redundancies. Business planning. This was introduced into all divisions of the Council with each department within the divisions required to produce an annual Action Plan. These were to be linked to the five-year corporate planning framework. All Chief Officers attended full-day workshops on each of the following: leadership, mission and values, business (or leadership) planning, and performance indicators. Training and development. Over 700 managers and team leaders attended a series of seminars on action-centred leadership (three days); communication and delegation (two days); problem solving and time management (one day each). Team briefing and teamworking. Team briefing was introduced into all major divisions, and each department was encouraged, with the help of facilitators, to develop high-performance work teams which would involve empowering staff at all levels. Leadership improvement proposals. A major programme of employee empowerment was introduced through an elaborate structure for encouraging improvement proposals. These arrangements involved employees being able to make job-specific, divisional or organisation-wide suggestions which would be either implemented immediately or passed on to higher levels of management for consideration. This approach was to be assisted by departmental facilitators and a Leadership Improvement Proposal Steering Group. Targets were set for the programme with the aim being to have each employee on average submitting two proposals per year by 1995-6.
2.
3.
4.
5.
Finally, it is worth noting what the change programmes did not involve. Changes in reward/compensation arrangements were absent from the programme, and the degree of change in organisational structures was very limited, at least, beyond that of delayering (see Eccles 1994, pp 204-17). In summary, we have a large-scale, though fairly conventional organisational change programme of the corporate-wide, senior management-led, attitude-change type. The question then becomes, what has been its impact?
U niversity of Sunderland
516
The initial leadership strategy document had undertaken to audit the changes every two years, and in 1994 the first such assessment was undertaken.
The assessment exercise: Key Findings The key findings presented here arise from the staff/employee audit undertaken in late 1994. In considering the findings presented, the following points should be noted. This assessment was undertaken by a group of academics, rather than the original management consultants involved in the change programme. The questionnaire developed by the academics included many of the same questions used in the original (1992) benchmarking survey so that comparisons over time could be made. However, some additional questions (mainly biographical ones) were included, in order to facilitate examination of any revealed differences across the workforce as a whole (see Table 1.5). The response rate to the questionnaire in 1994 was 64 per cent (compared to the 42 per cent in the original benchmark survey) although this varied considerably between divisions. In general, a low response rate came from the manual-dominated divisions (e.g. public works 30 per cent, parks 55 per cent), with much higher return rates coming from the white-collar divisions (e.g. housing 78 per cent, planning 80 per cent). For reasons of space, the full set of tabulated responses to all the questions asked cannot be presented here. However, some of the key findings obtained for the Council as a whole are set out in Table 1.4. In considering the significance and implications of these findings it is worth noting the following observation (Goodman & Dean 1982, p 229): An act is not all or nothing; it may vary in terms of its persistence, the number of people in the social system performing the act, and the degree to which it exists as a social fact. The problem in some of the current literature on change is the use of the words success or failure. This language clouds the crucial issue of representing and explaining degrees or levels of institutionalisation. Most of the organisational cases we have reviewed cannot be described by simple labels of success or failure. Rather we find various degrees of institutionalisation. In interpreting the results of any employee attitude survey there are a number of points which should be borne in mind (Beaumont 1993, pp 165-74). First, such a research instrument can, by definition, produce only a snapshot involving a single-point-in-time set of results. Second, complex, multi-dimensional constructs cannot be probed in any in-depth, qualitative fashion. Third, the overall levels of satisfaction obtained are particularly sensitive to the precise wording of individual questions. And finally, there is likely to be considerable variation in the answers between different parts of the workforce. In general,
U niversity of Sunderland
517
for instance, women workers and older workers report relatively higher levels of satisfaction a result which has been attributed to their (lower) levels of expectation. Such variation was certainly a feature of this survey, with some key findings being reported in Table 1.5.
1.
Overall job satisfaction The overall level of satisfaction ranged between 75 per cent and 63 per cent (depending on the particular question answered)
2.
Organisational commitment The levels of identification, involvement and loyalty appeared relatively high. For example, 60 per cent articulated an active pride in the Council, only 14 per cent would not recommend a friend to work for the Council, and 77 per cent agreed with the statement that, In my work, I like to feel I am making some effort not just for myself but for the Council as well.
3.
Leadership improvement programme Eighty-eight per cent of staff were aware of the programme, 41 per cent claimed to have made suggestions for improvement, although only 30 per cent felt that the scheme had been a major factor in encouraging them to make suggestions.
4.
Recognition of achievement In general staff/employees felt that their views were listened to and their achievements recognised by supervisors and managers, but not by senior management.
5.
Change and innovation In general, employee satisfaction with the level of consultation, communication encouragement of new ideas and ability to question decisions has, if anything, declined over time.
6.
Teamworking Perceptions concerning effective teamworking reveal a decline overtime, with little sense of team spirit between managers and workers in departments being reported.
7.
Individual development The growth in the content and quality of training is noted and approved of, although dissatisfaction exists concerning longer-term career development and the performance of managers as coaches.
8.
Communication Compared to the benchmark surveys, no significant improvement in information flows within departments are reported, and managers are not seen as being more approachable than before.
9.
Mission There was no apparent improvement in perceptions concerning the extent to which colleagues and managers understand and act out the mission of the Council.
Table 1.4 Assessment of the change programme: some key findings (workforce as a whole)
518
U niversity of Sunderland
1.
Older staff, senior managers and employees in professional grades were more likely to be imbued with a sense of mission, feel that the public have a positive image of the Council and believe that their department actively listens to feedback from customers. Manual employees in unpromoted posts had significantly more negative perceptions concerning the effectiveness of departmental and interdepartmental communications. Senior managers and professional employees had significantly more positive views of the extent to which new ideas were encouraged. Male workers were more likely to adopt extreme views concerning the recognition of achievement than female workers; this was a general tendency throughout the questionnaire. Improvement suggestions were less likely to have been made by male workers, manual workers and employees in unpromoted posts. The large DSOs employing mainly manual workers whose jobs were dependent on securing contracts in competition with the private sector usually exhibited lower levels of satisfaction than divisions which were mainly staffed by professionals such as art galleries and museums and the architects department.
2. 3. 4. 5. 6.
Table 1.5 Variation in responses within the workforce: some key findings
The contents of Table 1.5 generally suggest that the change programme has most positively impacted on the already converted or the most easily converted groups of employees. In short, the results suggest that the notions of a management culture and an organisational culture are not one and the same thing (Anthony 1993). The current state of play The material set out in Tables 1.4 and 1.5 was fed back by the academics, albeit in much greater detail than here, to the Council in early 1995. The Leadership Strategy Group of the Council then considered two options. One was to use the Councils usual internal communications media (the staff newsletter and briefing groups) to convey the results and findings back to staff/employees. The other option was to use a more specialised survey feedback approach seeking possible responses and suggestions at the individual departmental level. Now answer the questions that were posed to you as Consultant at the beginning of this review activity.
519
intervention, but it is a clear step in the right direction in a large organisation where it is difficult to communicate and reach everybody. Some external benchmarking and communicating/stakeholder feedback may assist with recognition of the need to change. 2. Change takes time and whilst early success is important, we should not read too much into this. Formal changes may have been well integrated; for example, structural change, communications and management roles. There is a sense of expert-led imposed change at present. Are there too many policy initiatives for people to cope with? Low response rate to the questioning may suggest growing alienation. Not much progress has been made on the bottom up and sideways initiatives yet. Team spirit is declining and critical understanding of the mission, central to OD and the alignment of values, is not in place. How can the organisation take the change to new levels? Check out again the Pugh Matrix and related techniques and the clarity of the message of the desired culture. Table 1.1 offers particular scope in introducing internal change agents, core heretics to act in ways that assimilate with double loop learning and creative tension from Unit 5. Getting employees involved in contributing to the vision for their team and working on team processes would all carry the project forward. We see a mix of goal setting, participative activities to build commitment. We also see a sense of challenge concerning the way things are being done. This sense of empowerment and ownership within is part of reinforcing the planned culture in the future. The OD approach would surely go for option 2 to penetrate organisational behaviour and gain a greater sense of involvement and emotional engagement with the project. The learning organisation blueprint should be reviewed at this stage alongside our discussions about competency modelling to ensure clarity of purpose with respect to the culture and capability required matched to the strategy. These competencies need then to be systematically led into the PMS, HRD recruitment and reward policies to reinforce and refreeze the organisation around the revised culture and service levels for its communities.
3.
4.
5.
REVIEW ACTIVITY 2
Much of the casework has served to reinforce our knowledge of change management. This is particularly so for the final case exercise (in the last review activity). However, to round off the module check your progress by answering the following questions.
520
U niversity of Sunderland
Question 1 What are the three perceptions for the intention to change? How will this influence management strategy? Question 2 What sort of criteria might we use to measure or understand culture that might be shared and communicated? Question 3 What are the generic and specific steps associated with planning change in an OD model? Question 4 Identify three key change strategies and rank them in order of importance for: a) b) transformational change crisis driven incremental change uncertain outcome and needs.
Question 5 What is the relationship of culture to performance? How might we evaluate the impact? Question 6 What is the difference between organisational and corporate culture? Is culture changeable? Question 7 What key SHRM policies are likely to contribute to effective OD driven change? Question 8 What is the overlap between SHRM and OD?
U niversity of Sunderland
521
Employee reaction and willingness to change. Depth of intervention, e.g. communication to behaviour
change.
Diagnosing the present state. Determining the future goals/state. Managing the transition.
The specific managerial steps are:
Agree organisational purpose and mission. Assess inner/outer context for change. Collect and assess data force field modelling. Gain involvement and motivate need and commitment to
change.
522
U niversity of Sunderland
Set targets and levels for change interventions. Implement change and developmental strategies. Evaluate and reinforce change through SHRM policies.
Answer 4 The key changes are:
Education and communication. Negotiation and cohesion. Participation and involvement in rebuild.
For incremental change a possible sequence is:
Participation and involvement. Evaluation and communication. Negotiation and cohesion marginal group.
Answer 5 This is a movement from cohesive/transitional to commitment orientation Etzioni (1988) Going beyond control; full use of capability; knowledge, learning climate established; open, trusting relationships; effective team processes. The impact can be assessed by performance results, attitude surveys, stakeholder feedback and effectiveness of group processes. Answer 6 Organisational culture is the sum of subcultures. Corporate culture is the management driven/uniting culture. Depending upon your perspective you might argue that only the manifestations of culture (surface level) are changeable. Alternatively you might argue that given a sustained process of change, employees values can be more aligned to the organisational mission. Some evidence exists of the impact of best practice HR practices. Others argue that the employment relationship is being fragmented by shortcomings and economic determination.
U niversity of Sunderland
523
Answer 7 The key policies are learning based approaches to development and performance management. Answer 8 The overlap between SHRM and OD involves:
Integration. Whole organisation. Process/policy driven. Competence and process based. Learning. Emphasis on capability. Capacity to change. Flexibility and commitment/ownership. Employee relations.
References
The Strategic Managing of Human Resources, edited by John Leopold, Lynette Harris & Tony Watson, FT Prentice Hall, 2004 (Key text for this module) www.csr.gov.uk DTI Corporate Social Responsibility Unit. www.csracademy.org.uk DTI Corporate Social Responsibility Academy. Bate (1990) A description, evaluation and integration of four approaches to the management of cultural change. British Academy of Management Conference, Glasgow, September, cited in Open University (1992) B884 Human Resource Strategy, Unit 5 p140 141. Bate P. (1992) The impact of organisational culture on organisational problem solving in Salaman G et al (eds) Human Resource Strategies. California, Sage
524
U niversity of Sunderland
Beckhard (1989) A Model for the Executive/Management of Transformational Change. The 1989 Annual: Developing Human Resources, University Associates cited in Open University Managing Development and Change Unit 10, p23. Beer, Michael, Eisenstat, Russell A. and Spector, Bert (1990) Why change programs dont produce change Harvard Business Review, November/December, pp. 158-66 Carnall C (1991) The Evaluation of Organisational Change, Aldershot, Gower Etzioni A (1988) The Moral Dimension: towards a new economics New York, Sage Hofstede G (1980) Cultures Consequences California, Sage Huse & Cummings (1985) Organisational Development and Change. St. Paul, Minneapolis. West Publishing Company Janis I. L. (1972) Victims of Groupthink Boston, Houghton Mifflin Kotter and Schlesinger L.A. (1979) Choosing Strategies for Change. Harvard Business Review. March April pp 106 114. Lewin K. (1951) Field Theory and Social Science New York, Harper Row Lisney & Allen(1993) Taking a Snapshot of Culture Change Personnel Management, February. Mabey C, and Pugh D. (1997) Managing Development and Change Unit 10 B751 Strategies for Managing Complex Change Milton Keynes Open University Mabey C, Salaman G and Storey J. (1998, 2nd ed.). Human Resource Management: A Strategic Introduction. Oxford, Blackwell Business. Meek V.L. (1992). Organisational Culture: Organise Weaknesses in G. Salaman et al (eds) Human Resource Strategies California, Sage Peters TJ and Waterman RH (1982) In Search of Excellence Harper Row Pettigrew A (1992) Open University B884 Human Resource Strategies Block 5, Unit 12 Price C. (1987) Culture Change the Tricky Bit. Training & Development, October . Pugh D. (1983) People in Organisations. Penguin Pugh D. (1993). Understanding and Managing Change, in Mabey C. & Mayor-White Managing Change 2nd Ed. Open University.
U niversity of Sunderland
525
Schien E.A. (1982) The role of the founder in creating organisational culture Organisational Dynamics Seminar, Periodical Division, American Management Association. Schien E.A. (1992) Coming to a new awareness of organisational culture in Salaman G et al (eds) Human Resource Strategies. Califiornia, Sage. Storey J. (1992) Developments in the management of Human Resources Oxford, Blackwell Thomas M and Elbeik S (1996), Supercharge Your Management Role Making the Transition to internal consultant. Butterworth Heinemann. Ulrich D (1997) Human Resource Champions Boston, Harvard University Press Williams A, Dobson P. and Walter M. (1989). Changing Cultures London Institute of Personnel & Development
526
U niversity of Sunderland