Report on Banksia Health Service

Mandy Ng 05 October 2012

TABLE OF CONTENTS
Executive Summary 1. 2. 3. INTRODUCTION IDENTIFICATION OF ISSUES PRIMARY ISSUE 3.1. No Strategic Human Resource Management 3.2. No Adequate Training 3.3. No Proper Policies and Flawed Interpretations SECONDARY ISSUES 4.1. Miscommunication 4.2. Confusion 4.3. Lack Of Transparency ALTERNATIVE STRATEGIES 5.1. Strategic Human Resource Management 5.1.1. Management by Objectives 5.2. Human Resource Training 5.3. Establish HR Department 5.3.1. In-House HR Department 5.3.2. Outsource HR Functions 5.4. Occupational Health and Safety Systems 5.5. Establish Internal Communication Channels RECOMMENDATIONS CONCLUSION

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5.

6. 7.

List of References Appendices A. Strategic Management Process for Banksia B. The Four Roles of HR Professionals C. Selection of External HR Consultant D. Benefits and Costs Associated with Setting up In-house Department E. Pros and Cons of Outsourcing F. List of OHS Program Elements

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Executive Summary
This report identified the primary and secondary issues causing Banksia Health Services poor performance and recommended alternative strategies to improve the situation. A diagnostic tool, the fishbone diagram, is used to identify the main issues. The primary issue is the lack of a human resource department and secondary issues includes miscommunication, confusion, and lack of transparency. To address these issues, the setting up a human resource department by outsourcing or inhouse with the aid of a consultant is most crucial. Other strategies includes the implementation of strategic human resource management, using management by objectives as a goal setting tool, sending top management for short-term human resource training, providing study bonds to upgrade existing employees interested in making a career switch, establishing a organisation health and safety management system to manage the welfare of employees, and a proper internal communication channels like the intranet to facilitate information dissemination during this transition period. These suggestions are highly collaborative with the human resource department. It was recommended to carry out the alternative strategies in a time frame of three years. The first years focus would be on reviewing goals with management by objectives and implementation of the intranet. This should be followed closely by engaging the necessary service of a consultant to aid in the set up of the department, implementation of strategic human resource management, and recruitment of experienced executive. The management team and interested employees should be sent for training simultaneously to facilitate a faster set up of an in-house human resources department. After stabilisation of the department, the organisation health and safety system should be carried out and outsourcing of administrative functions can be explored.

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1. INTRODUCTION
This report seeks to identify issues causing Banksia Health Services poor performance. The main focus is on Banksias problematic human resource management (HRM). It is crucial for Banksia to understand and gain the necessary HRM knowledge to address stakeholders needs. Fishbone diagram will be used to identify primary and secondary issues. Alternative strategies will be suggested and recommended.

2. IDENTIFICATION OF ISSUES
The fishbone diagram is a helpful tool in identifying primary and secondary issues leading to a specific problem. According to Clary and Wandersee (2010), the head represents the outcome, each rib represents a main contributing issue, and further details are listed with horizontal sub-branches. Banksia was perceived as a poor performer after failure to meet goals mentioned in Figure 1. The four major issues no HR department, miscommunication, lack of transparency, and confusion will be elaborated later. (Figure 1: Fishbone Diagram Listing Issues Faced by Banksia Health Service) No HR department
No strategic HRM No proper policies Lack of HR training and understanding No proper communication channels Policies and strategies not well understood

Miscommunication

Poor Performer
Not achieving financial and activity targets Engaged in industrial disputes Low score in accreditation Perceived mismanagement

Flawed interpretations of HR policies Lack of trust and low commitment Sense of unfairness leads to disputes Inconsistency

Varied interpretation and application of policies Ad hoc nature of policies

Lack of transparency

Confusion

3. PRIMARY ISSUE
The lack of a HR department is the primary issue in Banksia. Globalisation and the knowledge-based economy had brought the importance of HRM to light (Joseph and Dai 2012; Terpstra and Limpaphayom 2012). Creelman and Ulrich (2007) found that organisations with efficient and effective HRM always hold an advantage over those that did not. Clearly, Banksias erroneous application of HR practices had caused employees
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dissatisfactions. Creation of a HR department is thus critical to Banksias success. The following issues discussed are highly related to the lack of a HR department. 3.1. No Strategic HRM (SHRM) Strategic management serves as a common direction for employees to achieve organisational goals and is closely related to profitability (Kramar et al. 2011; Bowman and Helfat 2001). Despite having a documented set of strategic plans, Banksia had not put any into consistent practice thus possibly causing poor performances. Political reasons was cited to be one of the reasons for the lack of long-term strategies, however, studies revealed that funding dependency does not hinder adoption of SHRM (Guo et al. 2011). Heracleous, Wirtz, and Pangarkars (2006) ESCO framework of strategic alignment suggest that a successful organisation has the elements of Environment, Strategy, Capabilities, and Organisation closely aligned. HRM, a key part of the Organisation dimension, should thus be closely aligned with Banksias strategy. This leads to SHRM - the planning of HR deployments and activities to aid with long-term plans and achievement of goals (Kramar et al. 2011). SHRM has been proven to help organisations achieve competitive advantages and improve employees commitment (Siddiqui 2012). 3.2. No Adequate Training The correct person for the job, with the necessary knowledge and skills, is critical for efficient and effective performance of responsibilities (Wirtz, Heracleous, and Pangarkar 2008). As such, HR functions delegated to the senior management, who were untrained in HR, led to improper application of policies causing employees dissatisfaction. Researches indicated that many global organisations failed to recognise HR functions as strategically important (De Guzman, Neelankavil, and Sengupta 2011) just as how Banksias CEO was hesitant to form a HR department whereas the other level of managers had already understood the importance of HR. Accurate perceptions of top management has been found to contribute to organisations ability to achieve goals (Castrogiovanni, Garrigos-Simon, and Peris-Ortiz 2011) thus it is important for the CEO to understand the importance of HR. 3.3. No Proper Policies and Flawed Interpretations According to the Harvard framework (cited in Kramar et al. 2011), HR policy choice is directly related to employees commitment, competence, cost effectiveness, congruence, and has long-term impacts on organisational, individual, and societal wellbeing. Banksia utilises a
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mix of imported and ad hoc HR policies that may be unique to other organisations and not compatible with Banksia. The improper HR choice had thus resulted in employee dissatisfaction and inability to achieve goals. Flawed interpretations of the policies may have also caused inconsistency and perceived unfairness consequently.

4. SECONDARY ISSUES
Other than HR issues, the following issues contributed to employees low commitment, lack of trust, and perceived unfairness too. 4.1. Miscommunication The lack of trust and commitment in Banksia may have originated from improper vertical communication between levels of management and horizontal communication across functional units between different sites. Managers also find the recent restructuring unsuccessful as they are still unfamiliar with Banksias strategies. Welch and Jackson (2007) states that communication is an important management tool in engaging employees and achieving goals. They identified that effective, quality internal communication is vital for commitment and trust. Findings also revealed that a tailored approach in communication allows employees alignment with organisational objectives thus better understanding and performances (Uusi-Rauva and Nurkka 2010). Proper communication is thus essential to create a harmonious work environment and achieve goals. 4.2. Confusion Previously, Banksias absence of strategies may have resulted in employees confusion about the direction of the organisation. Presently, more confusion may have emerged from decentralisation without proper change management. Adequate change management is needed for the transition as managers need to adapt themselves to the increased autonomy (Waddell, Cummings, and Worley 2007). 4.3. Lack of Transparency Perceived unfairness reflected Banksias lack of transparency. Street and Meister (2004) defined internal transparency as an outcome of communication reflecting the degree wherein employees have access to necessary information for their responsibilities. They also found that transparency affects performances and organisation-employee relationships. Hence, the availability of reliable and relevant information is critical for employees to trust in the organisation and change adaption (Simon 2006).
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5. ALTERNATIVES
Evaluation of issues revealed Banksias need for clear strategic goals, proper HRM, change management, and communication channels. The following strategies address these issues. 5.1. Strategic HRM As mentioned, Banksia should utilise SHRM to gain competitive advantage and employees trust and commitment. Figure 2 illustrates a strategic management process with SHRM. The first step is to re-formulate Banksias organisation strategy and bring HRM into considerations when making strategic choices (Kramar et al. 2011). Refer to Appendix A for in-depth details of the process. An important decision is to determine which of the four HR roles (Refer to Appendix B) Banksia should focus more on. (Figure 2: A model of the strategic management process) STRATEGY FORMULATION Mission Goals STRATEGY IMPLEMENTATION Strategi c Choice HR Needs HR Practices

Internal Analysis Strengths Weaknesses External Analysis Opportunities Threats

HR Capability

HR Actions

Firm Performance Productivity Quality Profitability STRATEGY EVALUATION

Source: Adapted from Kramar et al. 2011.

5.1.1. Management by Objectives Management by objectives (MBO) is a common form of goal setting tool in which systematic and periodic manager-subordinate meetings are held to resolve differences in perceptions and goals (Waddell, Cummings, and Worley 2007). The alignment of personal goals with organisation strategies also allows employees to clarify any different interpretation of objectives. Mutual problem solving, planning of work, and periodic reviews are also part of the process. MBO supports Banksias recently implemented decentralised structure and will be useful in reducing confusion by increasing the level of internal transparency. At the same
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time, employee involvement instills a sense of importance and belongingness which then increases trust and commitment. 5.2. HR Training Banksias senior management requires proper training to understand the strategic importance of HRM. They may attend seminars for quick understanding, or HRM courses for deeper insights. They may also hire HR trainers for a customised course. It is advisable to understand the four different roles of HR professionals (Refer to Appendix B) in order for considerations during the strategic planning process (Kramar et al. 2011). Study bonds can be offered to internal employees wanting to make the change to HR. These employees would be studying and receiving on-the-job training at the new HR department simultaneously. 5.3. Establish HR Department 5.3.1. In-house HR Department Banksia can engage an external HR consultant to facilitate the department set-up (Refer to Appendix C for details in selection of a HR consultant). Advantage in engaging a consultant includes immediate access to HR expertise, like change management and talent recruitment, and having a potentially different and more objective view into the SHRM implementation (Waddell, Cummings, and Worley 2007). They may also aid in hiring HR executives, source for senior managements HR training, and evaluate if current employees interested in making the change should be offered study bonds. Nevertheless, Banksia should evaluate the benefits and costs of establishing the department (Refer to Appendix D). 5.3.2. Outsource HR Functions The dominant advantage of outsourcing is cost-savings (Woodall et al. 2009). Additionally, outsourcing allows in-house staff to focus on strategic priorities rather than time-consuming administrative functions (Delmotte 2008) as studies indicated that hospitals find great success in outsourcing time-consuming routine (HFMA 2012). In line with SHRM objectives, Banksia may partially outsource routine administrative functions to allow HR staff to focus on being a strategic partner and employee champion (Refer to Appendix B). Banksia may also consider engaging a HR consultant as a change agent to aid the transition. Banksia should assess its SHRM objectives to determine if outsourcing is beneficial or detrimental (Refer to Appendix E for pros and cons).

5.4. Occupational Health and Safety (OHS) OHS refers to the promotion and maintenance of the highest degree of physical, mental, and social well-being of employees (Kramar et al. 2011). OHS, managed by the HR department, is important to the health industry as proper managing of health service providers welfare is directly related to retention of talented staff and customers satisfaction (Kabene et al. 2006). Therefore, the lack of proper OHS may have caused dissatisfaction built-up and industrial disputes for Banksia. OHS can also be a change management tool as an employee feedback channel for addressing grievances and complaints of stress from adapting to the new structure. Other OHS programs are listed in Appendix F. 5.5. Establish Internal Communication Channels Ruck and Welch (2012) found that intranet, emails, and social medias are becoming the preferred internal communication channels. They had also provided a model of employee questions to be addressed for a more transparent organisation (Refer to Figure 3). (Figure 3: Conceptual model of employee questions to be addressed)

Source: Adapted from Ruck and Welch 2012.

Setting up an intranet for Banksia, with formal newsletters and informal emails, should be of top priorities. The intranet can be a two-way communication channel for disseminating information on standard procedures and policies and an employee feedback channel to increase internal transparency (Alleyne, Kakabadse, and Kakabadse 2007). Also, the OHS for managing welfare can be a channel for addressing doubts in policies before raising industrial disputes over perceived unfairness.
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6. RECOMMENDATIONS

As reflected in Figure 4, Banksia should start the first year with reviewing its goals and strategies, keeping SHRM in mind, to update it to the organisations current direction. The implementation of MBO and intranet should take place simultaneously as to inform and gather employees views on the new strategies. Banksia could engage then a HR consultant to facilitate the department set-up. Banksia should request for advices in implementing SHRM, recruiting experienced HR executive, and sourcing for good HR courses. Recruiting of HR staff would take place only if internal employees making the change are not sufficient. OHS would be implemented after the department stabilises and the consultant should exit after outsourcing administrative functions.

7. CONCLUSION
The diagnosis conducted on Banksia had revealed issues including no HR department, miscommunication, confusion, and lack of transparency. A three year plan to resolve issues was recommended. The plan involved the engaging of a consultant to set up an internal HR department focusing on SHRM, re-formulate goals with MBO, sending senior management and employees on HR training, utilising OHS to lessen employee grievances, outsourcing HR administrative functions, and establish an intranet for two-way communication.

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List of References
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http://www.fsn.co.uk/channel_outsourcing/in_house_hr_v_hr_outsourcing.

Gillespie, Lisa V. 2012. Weighing the Pros and Cons of Outsourcing. Employee Benefit Advisor 10 (2): 50. doi: http://0-search.proquest.com.prospero.murdoch.edu.au/docview / 919050854. Guo, Chan, William A. Brown, Robert F. Ashcraft, Carlton F. Yoshioka, and Hsiang-Kai Dennis Dong. 2011. Strategic Human Resources Management in Nonprofit Organizations. Review of Public Personnel Administration 31 (3): 248-269. doi: 10.1177/0734371X11402878. Heracleous, Loizos, Jochen Wirtz, and Nitin Pangarkar. 2006. Flying High: Cost Effective Service Excellence at Singapore Airlines. Singapore: McGraw-Hill. HFMA, Healthcare Financial Management Association. 2012. Using Outsourcing to Transform Human Resources. Healthcare Financial Management 66 (1): E1-E8. http://0search.proquest.com.prospero.murdoch.edu.au/docview/922980545. HRIQ, Human Resource IQ. 2012. The Debate: In-House VS. Outsourcing for Globalized Companies. IQPC. http://www.humanresourcesiq.com/shared-services/articles/the-debate-inhouse-vs-outsourcing-for-globalized. Joseph, Kodjo Ezane, and Changjun Dai. 2009. Human Resource Management: A Central Business Concern in Todays Economy. International Journal of Business and Management 4 (11): 130-136. http://ccsenet.org/journal/index.php/ijbm/article/view/4225. Kabene, Stefane M., Carole Orchard, John M. Howard, Mark A. Soriano, and Raymond Leduc. 2006. The Importance of Human Resources Management in Health Care: A Global Context. Human Resources for Health 4 (1): 20-36. doi: 10.1186/1478-4491-4-20. Kramar, Robin, Timothy Bartram, Helen De Cieri, Raymond Noe, John Hollenbeck, Barry Gerhart, and Patrick Wright. 2011. Human Resource Management in Australia: Strategy, People, Performance. 4th ed. Australia: McGraw Hill. Ruck, Kevin, and Mary Welch. 2012. Valuing internal communication; Management and Employee Perspectives. Public Relations Review 38 (2): 294-302. doi: 10.1016/j.pubrev.2011.12.016.

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Siddiqui, Faryal. 2012. Human Capital Management: An Emerging Human Resource Management Practice. International Journal of Learning and Development 2 (1): 353-367. doi: 10.5296/ijld.v2i1.1354. Simon, Carol. 2006. Corporate Information Transparency: The Synthesis of Internal and External Information Streams. The Journal of Management Development 25 (10): 10291031. doi: 10.1108/02621710610708685. Street, Christopher T., and Darren B. Meister. 2004. Small Business Growth and Internal Transparency: The Role of Information Systems. MIS Quarterly 28 (3): 473-506. http://0www.jstor.org.prospero.murdoch.edu.au/stable/25148647. Terpstra, David E., and Wanthanee Limpaphayom. 2012. Using Evidence-Based Human Resource Practices for Global Competitiveness. International Journal of Business and Management 7 (12): 107-113. doi: 10.5539/ijbm.v7n12p107. Ulrich, Dave. 1997. Human Resource Champion: The Next Agenda for Adding Value and Delivering Results. Boston: Harvard Business School Press. Uusi-Rauva, Christa, and Johanna Nurkka. 2010. Effective Internal Environment-Related Communication: An Employee Perspective. Corporate Communications 15 (3): 299-314. doi: 10.1108/13563281011068140. Waddell, Dianne M., Thomas G. Cummings, and Christopher G. Worley. 2007. Organisation Development & Change. Asia Pacific 3rd ed. Australia: Cengage Learning. Welch, Mary, and Paul R. Jackson. 2007. Rethinking Internal Communication: A Stakeholder Approach. Corporate Communication 12 (2): 177-198. doi: 10.1108/13563280710744847. Wirtz, Jochen, Loizos Heracleous, and Nitin Pangarkar. 2008. "Managing Human Resources for Service Excellence and Cost Effectiveness at Singapore Airlines." Managing Service Quality 18 (1): 4-19. doi:10.1108/09604520810842812. Woodall, Jean, Melanie Gurney, Timothy Newham, and William Scott-Jackson. 2009. Making the Decision to Outsource Human Resources. Personnel Review 38 (3): 236-252. doi: 10.1108/00483480910943313.
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APPENDICES
Appendix A: Strategic Management Process for Banksia In accordance with Figure 2 adapted from Kramar et al. (2011), the strategic management process begins with strategy formulation where the organisations mission and goals should be defined and adjusted to reflect and adapt to the business internal and external environment. As Banksia had previously neglected this process entirely, it is important for the management team to properly evaluate the organisations current position and its relationships with the external business environment. The strategic choice should be made with employees participation with the MBO strategy in order to encourage an increased sense of belongingness and importance to the organisation (Waddell, Cummings, and Worley 2007). The strategic choice would then influence on the HR needs of the organisation is planned with the implementation of SHRM. The demand and deployment of HR staff would be carefully planned. The recruitment and selection of HR staff would also be affected as the required skills, abilities, and knowledge of applicants will be critically assessed. At the same time, their behaviours and fit with the organisation culture is also critically assessed during the interview stage. Other HR practices would be aligned with the organisation strategy, for example, employee learning and development, pay structure, and incentives. The end results on the effectiveness of HR policies would be reflected in employees behaviours, turnover rate, and productivity. These would directly impact on the organisations productivity, quality, and profitability. Due to the decentralised structure, Banksia should also pay attention to any emergent strategies during the evaluation process. These emergent strategies may come from the employees feedback channels as new ideas or suggestions to improve policies and procedures. The constant reviewing of organisation strategy is important and critical in maintaining a competitive advantage.

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Appendix B: The Four Roles of HR Professionals Ulrich (1997) presents a framework on the four key roles of a HR professional: Figure 5: Four Roles of HR Professionals Strategic Focus
Source: Adapted from Ulrich 1997.

Strategic Partner
Systems

Change Agent
People

Administrative Expert

Employee Champion

Operational Focus
Strategic Partner focuses on alignment of HRM strategies with organisations strategies

and translates them into action. They need to have business competence, in which they must know the business and understand its systems, economic and financial capabilities (Kramar et al. 2011). High level of knowledge of the business environment is needed to make quick and accurate strategic decisions.
Change Agent focuses on strategic management of the organisations employees during

changes in strategies. They are required to oversee the changes, manage employees change resistance, conflicts, and confusion to ensure the success of the change. Leadership, visioning, and empathy skills are important (Waddell, Cummings, and Worley 2007).
Employee Champion takes care of employee welfare. They listen and respond to

employees and help in finding the right balance between employee demands and organisation resources. Good employee management will result in higher commitment and work productivity (Kramar et al. 2011).
Administrative Expert deals with operational processes and any routine HR backend

work. They are involved with reviewing and streamlining business processes to HR processes in order to increase value of the systems by increasing efficiency and effectiveness. Technical and professional knowledge is thus important and requires constant update to ensure the processes are up-to-date and well maintained (Kramar et al. 2011).
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Appendix C: Selection of External HR Consultant According to Waddell, Cummings, and Worley (2007), when selecting an appropriate external HR consultant, Banksia should be aware of the 5 different consultant styles and select one that is the best for the organisation culture: Emphasis on Morale

HIGH

(Figure 6: Consultant Styles Matrix) Cheerleader Pathfinder

Persuader

LOW

Stabiliser LOW Emphasis on Effectiveness

Analyser HIGH

Source: Adapted from Waddell, Cummings, and Worley 2007. Stabiliser style: Stabilisers is the most ineffective in which the consultant stays a low

profile, conforms to pressure, and often does nothing if not required to.
Cheerleader style: There is high focus on employees morale however effectiveness may

be compromised.
Analyser style: They place greatest emphasis on efficiency however neglected morale,

which may cause conflicts and dissatisfaction.

Persuader style: Persuaders seek for a balance between both dimensions, however

optimises neither. They normally implement low-risk strategies and avoid confrontation. This may result in a weak strategy detrimental to the organisation.
Pathfinder style: Pathfinders seek high morale and effectiveness by using teamwork for

collaborative problem solving.

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Appendix D: Benefits and Costs Associated with Setting up In-House HR Department Possible costs to consider for providing, supporting, and maintaining an in-house HR department includes the following:

System installation: One-time cost for the initial acquisition and implementation; System maintenance and upgrade cost: Periodic upgrade cost to ensure system is up-to-date and functioning properly; Direct labour cost: Salary and benefits of HR staff; Direct non-labour cost: External HR consultant fee, facilities, and so on; Time: Time is needed to recruit, train, and allow familiarising with the new function or work environment (HFMA 2012).

Possible benefits involved with having an in-house HR department:

Control: More control and flexibility when it comes to decision-making; Strategic Planning: Ensured HR functions is aligned with organisation strategy; Comfort: Employee is more comfortable can relate more to internal HR professionals in compared to external when it comes to welfare management; Reputation: Internal HR better understands the kind of talents to attract and retain (HRIQ 2012; FSN 2010).

Appendix E: Pros and Cons of Outsourcing The advantages of outsourcing include: Change from back office administrative role to strategic partner; Outsourcing offers access to greater level of expertise; Faster and flexible response to change; Streamlined resources allow cost savings (Gillespie 2012).

Some disadvantages of outsourcing are:

Disorganisation causing failed outsourcing relationship from misunderstanding the process being outsourced; Low employee morale if outsourced benefits management is not appropriate; Disappearance of in-house HR expertise jeopardising strategic HR functions or strategic roles for future expansion (Gillespie 2012); Loss of control and quality (Woodall et al. 2009).

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Appendix F: List of OHS Program Elements The following are a list of OHS program elements: Employee involvement by OHS representatives, committees, broad participation; Health and safety rules and procedure; Training and upgrade programs for career development; Workplace inspections to evaluate safety of premises; Incident reporting and investigation; Statement of standard principles and procedures for hazard prevention and control; OHS promotion and information provision; Emergency procedures, first aid, medical policies; Work hazards and work organisation issues (Kramar et al. 2011).