Saunders SHRM Im

Instructor's Manual Strategic Human Resource Management: Contemporary Issues First edition

Mike Millmore Philip Lewis Mark Saunders Adrian Thornhill Trevor Morrow For further instructor material please visit:

www.pearsoned.co.uk/millmore ISBN: 978-0-273-68168-7

 Pearson Education Limited 2007 Lecturers adopting the main text are permitted to download and photocopy the manual as required.

1 © Pearson Education Limited 2007

Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies around the world Visit us on the World Wide Web at: www.pearsoned.co.uk ---------------------------------First published 2007 © Pearson Education Limited 2007 The rights of Mike Millmore, Philip Lewis, Mark Saunders, Adrian Thornhill and Trevor Morrow to be identified as the authors of this Work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. ISBN: 978-0-273-68168-7 All rights reserved. Permission is hereby given for the material in this publication to be reproduced for OHP transparencies and student handouts, without express permission of the Publishers, for educational purposes only. In all other cases, no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without either the prior written permission of the Publishers or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6−10 Kirby Street, London EC1N 8TS. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior consent of the Publishers.

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Contents Introduction An overview of the Instructors’ Manual Strategic Human Resource Management: Contemporary Issues: an overview Rationale and aims of the book Structure of the book Readership Pedagogic features

9 9 10 10 11 12 12

Chapter 1 Strategy and human resource management Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions References

14 14 14 14 15 15 15 15 16 16 18

Chapter 2 Strategic human resource management: a vital piece in the jigsaw of organisational success? Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions

19 19 19 19 20 20 20 21 21 21

Chapter 3 SHRM in a changing and shrinking world: internationalisation of business and the role of SHRM. Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom

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• Follow-up work Answers to self check and reflect questions

25 25

Chapter 4

27

Evaluating SHRM: why bother and does it really happen in practice? Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to part 1 case study Questions: Strategic human resource management at Halcrow Group Limited

27 27 27 28 28 28 29 30 30

Chapter 5 The role of organisational structure in SHRM: the basis for effectiveness? Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to case study questions: Daimlers–Chrysler AG

38 38 38 38 39 39 40 40 41 41 42

Chapter 6 Relationships between culture and strategic human resource management: do values have consequences Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to case study questions: Corporate culture and Group values at DICOM Group plc

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49 49 49 50 50 51 51 52 53 56

Chapter 7

61

Strategic human resource planning: the weakest link?

61

Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to case study questions: Human resource planning in mergers and acquisitions References

61 61 62 62 62 63 64 64 67 71

Chapter 8 Strategic recruitment and selection: much ado about nothing? Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to case study questions: Recruitment and Selection at Southco Europe Ltd References

73 73 73 73 74 74 74 75 76 77 80 84

Chapter 9 Performance management: so much more than annual appraisal Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to case study questions: Performance management at Tyco References

86 86 86 86 87 87 87 88 88 89 90 93

Chapter 10 Strategic human resource development: pot of gold or chasing rainbows? Learning outcomes

94 94 94

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Chapter summary Teaching and learning suggestions: Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to case study questions: INA References

94 95 95 95 96 97 97 101 105

Chapter 11 Strategic reward management: Cinderella is on her way to the ball Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to case study questions: Developing a global reward strategy at Tibbett and Britten group

106 106 106 106 107 107 107 108 108 109

Chapter 12 Managing the employment relationship: strategic rhetoric and operational reality Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to case study questions: Strategic approaches to the employment relationship social partnership: the example of the Republic of Ireland Further Reading

113 113 113 113 114 114 114 115 116 116 117 129

Chapter 13 Diversity management: concern for legislation or concern for strategy? Learning outcomes Chapter summary Teaching and learning suggestions: • Comment

130 130 130 130 131 131

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• Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to case study questions: Making diversity an issue in leafy Elgarshire

131 132 133 133 138

Chapter 14 Downsizing: proactive strategy or reactive workforce reduction? Learning outcomes Chapter summary Teaching and learning suggestions: • Comment • Student preparation • In the classroom • Follow-up work Answers to self check and reflect questions Answers to case study questions: The demise of MG Rover Cars?

140 140 140 140 141 141 141 142 143 143 145

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Supporting resources Visit www.pearsoned.co.uk/millmore to find valuable online resources Companion Website for students • Answers to self-check and reflect questions For instructors • Instructor's Manual containing: • learning outcomes and summaries • teaching and learning suggestions including comment, student preparation, in the classroom and follow-up work • answers to self-check and reflect questions • answers to case study questions • references •

PowerPoint slides

Also: The Companion Website provides the following features: • • •

Search tool to help locate specific items of content E-mail results and profile tools to send results of quizzes to instructors Online help and support to assist with website usage and troubleshooting

For more information please contact your local Pearson Education sales representative or visit www.pearsoned.co.uk/millmore

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INTRODUCTION An overview of the Instructors’ Manual This instructors’ manual has been designed to help the lecturer utilise the textbook Strategic Human Resource Management: Contemporary Issues as a teaching resource. This Introduction incorporates a brief overview of the text in order to set the context for its utilisation as a teaching resource. Its substantive content, however, comprises a chapter by chapter commentary with supporting ideas and materials for teaching strategic human resource management (SHRM) to undergraduate and postgraduate students of Management and HRM. Each chapter commentary includes the following features: •

Learning outcomes

•

Chapter summary

•

Teaching and learning suggestions: •

Comment

•

Student preparation

•

In the classroom

•

Follow-up work

•

Answers to self check and reflect questions

•

References

In addition, answers are provided to all case study questions and PowerPoint slides are included for all chapters. There is one integrated case covering the Part One chapters (Chapters 1–4). Answers to the questions for this case appear in this manual immediately after the final chapter of Part One, i.e. Chapter 4. Each Part Two chapter (Chapters 5–14) has its own specific case study positioned at the end of each chapter. Answers to these chapter case study questions appear in this manual immediately after answers to self check and reflect questions for each chapter. There is substantial standardisation in the ‘Teaching and learning suggestions’ for each chapter with respect to the ‘Student preparation’ and ‘In the classroom’ sections. Although tailored to reflect the particular content of specific chapters these sections inevitably reflect our own teaching style preferences. The style that we most commonly favour involves the student undertaking preparatory reading and related activities with the teaching session using these activities to build on a base level of knowledge. A key element of the teaching session when adopting this approach, however, is to provide sufficient time for students to raise any queries they may have on the reading. Many of the pedagogic features of this book such as self check and reflect questions, follow-up study suggestions and case studies can be used as the basis for preparatory work and/or in-class activities. Other ideas for preparatory and in-class activities can be found in this manual. Our ideas are not meant to be prescriptive but simply represent suggestions that can be customised or substituted as required.

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Strategic Human Resource Management: Contemporary Issues: an overview Rationale and aims of the book In teaching strategic approaches to the management of human resources (HRM) to a variety of undergraduate, postgraduate and professional students, we found it impossible to find a single text to adopt as a reader in support of their studies. Our dilemma was that available texts explicitly positioned to address the strategic development of HRM practice were either too inaccessible or insufficiently rigorous in their treatment of strategic integration such that their content mirrored more that to be found in the many personnel or human resource management texts available. We therefore set about writing a book to bridge this ‘divide’. However, in stressing the strategic focus of the management of human resources we were faced with a particular difficulty of terminology. Given the overwhelming consensus that the HRM variant of managing human resources is nothing if not strategic, deciding on the title for this book (Strategic Human Resource Management) provided us with something of a conundrum. If the essence of HRM, and its key feature for distinguishing it from personnel management, is its focus on strategic integration then the ‘S’ of ‘HRM’ is tautological in that it simply adds the strategic element that is already accepted as a given in HRM! It was therefore with some misgiving that we opted for the SHRM title because of the possible confusion this may cause amongst our readership. However, we justify our decision on two grounds. First, in our view the term HRM has come to be inappropriately used such that it has been increasingly adopted in place of personnel management without due regard for its differentiating characteristics. In this sense the term HRM is frequently used in the literature too loosely as a simile for personnel management. This has also been reflected in practise where organisations have relabelled their personnel function. It is not unusual to find that Personnel Departments have become HRM Departments, Personnel Managers, HR Managers and Personnel Officers and HR Officers with no commensurate change in their underpinning ideology or in the way functional roles are executed. This is akin to the proverbial case of ‘old wine in new bottles’! Second, this loose use of the term creates the possibility that some texts masquerade as HRM when they essentially cover the same ground found in earlier personnel management texts. Many of these HRM texts and some of the SHRM texts allude to strategic integration but arguably after a nod in that direction proceed to present the material in a relatively standard way without maintaining an explicit strategic focus throughout. We hope that our readership will agree that the strategic component of HRM underpins the content throughout our book. We have attempted to build on the personnel foundations of HR theory and practice by exploring in detail what is meant by strategic integration, both generally and with specific reference to a selection of key HR levers, and issues around its development and delivery in practise. In order to stress this strategic focus and differentiate our work from those loosely titled HRM texts, we have adopted, with reservation, the title Strategic Human Resource Management. In writing this book the key concern was to capture the distinctive focus of HRM. Our aims can be summarised as to write a SHRM book that: •

maintains a rigorous and critical focus on the ‘S’ of ‘SHRM’ throughout rather than resorting to a more traditional, personnel management, treatment of the subject domain; 10 © Pearson Education Limited 2007

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•

through its written style and supporting pedagogic features can be readily understood by its potential readership;

•

conveys the central importance of vertical and horizontal strategic alignment in a way that enables the reader to appreciate the holistic nature of the concept and how it can be applied in practice to recognised specific areas of HR activity; and

•

grounds the reader in the practicalities of organisational life in a way that enables them to distinguish between SHRM rhetoric and reality.

Structure of the book The book is divided into two parts. Part One, through four chapters (covering respectively: strategy and human resource management; strategic human resource management; international SHRM; and evaluating SHRM) provides an overview of the SHRM territory. In addressing the substance of their respective chapter titles we have endeavoured in this part to present a holistic view of SHRM. A particular concern has been to surface the complexity lying behind the notion of strategic integration and to explore how this complexity impacts on the conceptual development and practical application of SHRM. In support of our attempts in part one to present a holistic approach to the subject domain we have used one integrated case study to cover all four chapters rather than the chapter case studies that are a feature of part two. This comprehensive, integrated case – ‘Strategic Human Resource Management at Halcrow Group Limited’ – appears at the end of part one and hopefully sets the scene for the exploration of the specific key HR levers that follow. The second part looks in detail at 10 selected HRM levers and critically examines how they too can be conceived strategically and operationalised through organisation practice. The 10 areas selected for part two inevitably reflect our personal views. They are included because we feel that they all represent critical components of SHRM practice. Many of these selected levers (Strategic Human Resource Planning, Strategic Recruitment and Selection, Performance Management, Strategic Human Resource Development, Strategic Reward Management and Strategic Employee Relations) will be found in the majority of HRM texts while others (Organisation Structures, Culture, Diversity and Downsizing) are less frequently covered. In all cases our treatment of the 10 selected topics concentrates on their strategic construction and organisational manifestation and consistently adopts a critical perspective that surfaces the difficulties of putting the rhetoric of SHRM into practice. However, in disaggregating this HRM ‘bundle’ to examine its constituent parts we have not abandoned the central HRM tenet of horizontal integration. Throughout the chapters making up Part Two we provide crossreferences to other HR levers to emphasise their interconnectedness and use other devices, selectively, to reinforce the essence of horizontal integration. For example, in Chapter 8 (Strategic Recruitment and Selection) we provide a specific example to demonstrate how recruitment and selection can help facilitate the horizontal integration of the various HR levers and in Chapter 7 (Strategic Human Resource Planning: the weakest link?) we frequently use the theme of mergers and acquisitions to illustrate the need for ‘joined-up’ HRM thinking. Also, although each chapter concludes with its own topic-specific case study, it is possible to use the integrated Halcrow case to explore further the strategic connections of the various HR levers presented.

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Readership This book can be used with a range of students from those with little experience of the world of work to more experienced managers. The principal target audience for this book comprises undergraduates, postgraduates and students on professional programmes who are studying the management of human resources either as their subject specialism or as an integral component of more general business and management programmes. It works well if students have some work experience or already have some knowledge of organisational behaviour. This is nearly always the case with our likely readership. Part-time undergraduate, postgraduate and professional students are nearly always already in employment, or between jobs, and can therefore relate the content of this text to a range of work experiences. Full-time postgraduate and professional students tend to enter such programmes following a period of work experience or, like full-time undergraduate students, have undertaken a work placement and/or part-time jobs prior to or during their studies.

Pedagogic features The over-riding purpose of Strategic Human Resource Management: Contemporary Issues is to help undergraduate and postgraduate students and students on professional courses get to grips with how the discipline of human resource management can be developed as a powerful adjunct to strategic management. The concern throughout is to help students understand how the management of human resources can be developed strategically, at both the conceptual and practical level, to support the formulation and achievement of an organisation’s strategic objectives. Each chapter deals with a dimension of strategic human resource management and discusses relevant theory and practical applications using as little jargon as possible. Tables and figures are used to aid this discussion and as a vehicle for enhancing clarity of communication. A comprehensive glossary provides brief definitions and/or explanations of key terms and an index is available to help students find their way around the book and its underpinning literature sources. Learning outcomes at the beginning of each chapter provide the reader with clear statements of chapter objectives and benchmarks against which the reader can assess their subject knowledge and comprehension. Mapping diagrams are incorporated into chapter introductions to provide a visual summary of the chapter content. These mark out the subject territory by identifying key areas of discussion and showing how these are structured in the chapter. Key concepts boxes are used to help explore conceptual development. These take a variety of forms including, for example, providing subject definitions, identifying key themes, presenting theoretical frameworks and summarising research findings. In practice boxes are used to illustrate how conceptual understanding can be or is being used to inform organisational practice. These too take a variety of forms and include, for example, case studies reported in the literature, cases drawn from the direct work experiences of the author team, examples sourced from the internet and other news media and, occasionally, hypothetical constructions of practical applications. Self check and reflect questions enable students to check whether they have understood dimensions of the chapter content. These can all be answered without recourse to other

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(external) resources and are designed to encourage the student to interact with the chapter readings. They can also be used either as preparatory activities for subsequent class-based teaching sessions or tackled during the teaching session itself. Answers to all self check and reflect questions are provided as part of this instructors’ manual. A summary of key points at the end of each chapter can be used by students before and after reading the chapter to structure their thinking and to ensure that they have digested the main points respectively. Case studies drawn from a variety of sources are used at the End of Part One and Chapters 5−14 to facilitate student comprehension and transfer of learning. Case study questions require students to apply their knowledge and understanding of chapter content to a variety of organisational scenarios covering many different types of organisation. As with self check and reflect questions, the cases and accompanying questions can also be used either as preparatory activities for subsequent class-based, teaching sessions or tackled during the teaching session itself. Answers to all case study questions are provided as part of this instructors’ manual.

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CHAPTER 1

Strategy and human resource management Learning outcomes By the end of this chapter you should be able to: •

define the term strategy;

•

describe and evaluate a range of approaches to strategy making;

•

analyse links between different approaches to strategy and human resource management (HRM);

•

understand the significance of strategic integration to explore links between strategy and HRM and its multi-dimensional nature;

•

analyse the resource-based view of the organisation and describe key concepts related to this approach;

•

describe and evaluate links between resource-based theory and HRM.

Summary •

Strategic management focuses on the scope and direction of an organisation, and often involves dealing with uncertainty and complexity.

•

Strategic human resource management is concerned with the relationship between an organisation’s strategic management and the management of its human resources. The exact nature of this relationship in practice, however, is likely to be difficult to analyse and evaluate, not least because strategic management is a problematic area.

•

Four approaches to strategy making were described and evaluated: the classical approach, evolutionary perspectives, processual approach and systemic perspectives. The implications of each of these approaches for human resource management were subsequently analysed.

•

Strategic integration was used to explore possible links between approaches to strategy and human resource management. Integration has been recognised as a necessary condition for HRM to be considered strategic although it is not sufficient to treat it as the only link to define a strategic approach to HRM. Six possible strands of strategic integration were identified.

•

Resource-based theory was analysed because of its recognition of an organisation’s internal resources as a potential source of competitive advantage. Forms of organisational capability were analysed and their relationship to human resource management were evaluated.

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Teaching and learning suggestions Comment To many students this may not be the most appealing chapter in the book because it does not immediately deal directly with the topic of strategic human resource management (SHRM). This will be the expectation of most students who will want to ‘jump straight in’ to the topic. That said it is important for all students to have a grasp of the early material in the chapter on definitions of strategy and strategy formulation. Specialist HRM students in particular may find this material valuable as they may have dealt with it in fairly basic form in earlier studies. Those students using the chapter as part of a BA Business Studies or MBA course, for example, may have dealt with the material on definitions of strategy and strategy formulation in other modules so a brisk move to later sections of the chapter exploring links between approaches to strategy and HRM would be advisable. All students should find the sections on resource-based theory and its recognition of an organisation’s internal resources as a potential source of competitive advantage, and forms of organisational capability useful because of the strong relationship to HRM.

Student preparation Prior to the class, we believe it is important that students read and make their own notes from the chapter. More specifically we ask students to note those topics that they found particularly complex, or interesting (or both) in order that may form the basis of an initial classroom discussion. The notion of strategy is particularly abstract for students with limited or no work experience. It is also challenging for those students who are in a junior position in their own organisation. In view of this we think it is an important part of student preparation that they think about the issue of strategy in relation to an organisation where they work or one known to them. Indeed, the latter may be easier since they may feel closer to the strategy of a well known multi-national of which they are a customer (e.g. Apple or Microsoft) than to the organisation in which they are an employee. In this regard it is important to emphasise to students that ‘organisation’ may just as easily mean the department where they work as the corporation. Completion of the self-check questions for this chapter is particularly useful prior to the class as they may form the basis of group work. They form an immediate link with chapter content and enable the tutor to develop many teaching points from the resultant discussions. It may be very useful to ask students to illustrate the points they make in response to the self-check questions with ideas from the chapter’s practice and concept boxes.

In the classroom The danger with running a class on this topic is that it runs the risk of being too abstract. We have found that focus on a case study is an important part of a strategy class for HRM students in particular, because it ‘brings to life’ the topic and allows the tutor to make a series of valuable teaching points from the chapter. For example, Practice Box 1.5 ‘The impact of environmental concern on motor vehicle manufacturers’ raises the important issue of the constraints upon the activities of organisations that forms part of the host of considerations that need to be taken into account in the strategy-making process. A case based on this, or a similar, issue may form a useful platform for analysis of strategy.

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Follow-up work The first two of the follow-up study suggestions at the end of the chapter: 1. Undertake a search of practitioner publications (related to HR and management), identify a number of short articles about case study organisations that often feature in these and select, say, two or three of them to identify references to or evidence of any of the strategic management themes discussed in this chapter and their relationships to the management of human resources. 2. Seek out the possibility of talking to a senior manager in an organisation to discuss its approach to strategy making and the relationship between strategy and HRM in this case. are specifically designed to ensure the practical relevance of HRM is not lost in the consideration of more abstract strategic issues.

Answers to Self-Check and Reflect Questions 1.1 Is it possible to reconcile any of these four approaches to strategy making in practice and if so how might this occur? Perhaps the first key point to recognise is that these four approaches are theoretical positions and therefore we should not expect any particular organisation to fit neatly into one such position in reality. Discussion in the first part of this chapter also recognised that ‘real’ organisational behaviour is unlikely to use one approach to the mutual exclusion of other possibilities. Mintzberg et al (1998) recognise that real behaviour will combine deliberate control with emergent learning, for example, while Mintzberg (1987) recognised that in reality a purely deliberate or purely emergent strategy will not exist. Figure 1.1 seeks to illustrate the range of actual strategies that Mintzberg and Waters (1985) identified, from the mainly deliberate to mainly emergent. The first section of the chapter also used the work of Brews and Hunt (1999), which illustrates that good quality planning is likely to combine elements of both formal planning and incrementalism, so that both control and learning can coexist. It was also recognised in the first part of the chapter that theorists who adopt a systemic perspective also agree that organisations should engage in strategic planning; what they question is the universal applicability of the classical approach to formulate strategy. However, we may again refer to the work of Brews and Hunt (1999): their approach to strategic planning recognises the need to undertake this in a flexible manner. In this way, organisations in different countries will be sensitive to their own social, cultural and national institutional systems and adopt an approach to planning that is sensitive to such systemic attributes, perhaps without being aware of the particularistic nature of their actions. It will be multi-national corporations that need to be more overtly sensitive to such systemic differences and to act accordingly. The evolutionary perspective adopts a much more deterministic approach, where management must react to environmental circumstances. However, it was recognised in the first part of the chapter that this perspective has been criticised on the grounds that environmental systems may be more open than is being suggested by this approach to strategy. Where this is the case, this would recognise use of behaviours that include both planning activities and incrementalism to enact more effectively with the environment. These considerations are of course highly abstract but allow us to think about the application of these approaches in practice. You may wish to think about applying these ideas to an organisation that you know.

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1.2 What is the scope for the strategic integration of HRM in relation to each of the four approaches to strategy making discussed in this section? Using the behavioural perspective or matching model to explain the link between the classical approach to strategy and HRM suggests that strategic integration may be a feature of this approach, where HRM is not only informed by organisational strategy but is also capable of shaping it, at least to some extent. The processes involved in strategy formation in practice, however, means that a much more complex and messy picture emerges, which may mean that HRM is not strategically integrated and can only adopt a reactive posture. The reality is therefore likely to be highly variable and depends on a range of different factors. Evolutionary perspectives suggest an approach to strategy making that is highly deterministic, so that while HRM would need to be closely matched to an organisation’s strategy, its approach would be reactive rather than proactive. The processual approach to strategy making is the one that offers the clearest scope for HRM to be strategically linked to organisational strategy. Emergent strategy would, according to this theory, require a proactive HRM approach, which suggests that HRM would capable of shaping as well as responding to organisational strategy. However, the section on the resource-based view of the organisation later in the chapter includes some discussion that evaluates and challenges this assertion. The systemic approach to strategy making recognises that the scope for the strategic integration of HRM with organisational strategy is much less clear: this perspective points to the fact that in many situations HRM will not be conceptualised in a way that is intended to lead to strategic integration. 1.3 Think of an organisational situation with which you are familiar. This may be one in which you currently employed or one that you have worked for previously, or another organisation known to you. Use the model of the six strands of strategic integration to evaluate, as far as you are able, the extent of the integration of HRM and human resources within the organisation. Whilst this question is designed to check your understanding of the elements of this model, it requires you to apply this to an organisation known to you and so your answer will be based on your own evaluation. However, you may have been able to include consideration of the following aspects: •

The nature of the relationship between organisational strategy and HRM. This may have led to some interesting reflections about the nature of strategy in the organisation as well.

•

The nature of horizontal integration between HRM policy areas and also between HRM and other functional areas in the organisation.

•

Whether there is a Human Resource Director and at what level or levels within the organisation.

•

The nature of line management integration with HR policies.

•

The integration of employees with the goals of the organisation.

•

Your judgement about the capacity for the organisation to respond to change as the future unfolds related to the capabilities of its human resource base.

1.4 How would you relate the resource-based view to the dichotomy between the planning school and the learning school that we discussed earlier? In simple terms, the planning school emphasises a deliberate approach to strategy making, which implies a high level of control over the processes involved in relation to both strategy formulation and implementation. The learning school by contrast places emphasis on strategy as an emergent process, embedded in the knowledge and skills of those who manage and work in the operating divisions, business units or departments of organisations. Resource-based

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theorists also stress the importance of learning and knowledge as we saw in the discussion in the final part of this chapter. However, this is not to say that organisations will not seek to develop organisational resources and capabilities deliberately, including core capabilities. Authors such as Prahalad and Hamel (1990) discuss examples of large corporations who have intentionally developed core competencies to achieve competitive advantages over others in their respective industries. In contrast, Mueller’s evolutionary approach suggests that while organisations may express their strategic intent, their level of control over the subsequent development of organisational capabilities will not be as deliberate and controlled as these other examples seem to imply. These differences of view appear to suggest that there may be a range of views about intentionality and deliberateness amongst resource-based theorists as there is between those who subscribe to the planning school and those who subscribe to the learning school. If there are different positions here these may be seen as having different implications for the role of HRM.

References Boxall, P.F. (1996) The strategic HRM debate and the resource-based view of the firm, Human Resource Management Journal, 6(3), 59–75. Johnson, G. and Scholes, K. (2002). Exploring Corporate Strategy: Text and Cases (6th edn). Harlow: FT Prentice Hall.

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CHAPTER 2

Strategic human resource management: a vital piece in the jigsaw of organisational success? Learning outcomes By the end of this chapter you should be able to: •

identify the major principles, which underpin the concept of strategic human resource management (SHRM);

•

analyse the main theoretical approaches to SHRM;

•

explain the history and origins of SHRM;

•

evaluate the studies which aim to establish the link between SHRM and organisational performance.

Summary •

The main principles of SHRM include: •

a stress on the integration of personnel policies both one with another and with business planning more generally;

•

the locus of responsibility for personnel management no longer resides with specialist managers but is now assumed by senior line management.

•

the focus shifts from management–trade union relations to management–employee relations, from collectivism to individualism.

•

there is stress on commitment and the exercise of initiative, with managers now donning the role of ‘enabler’, ‘empowerer’ and ‘facilitator’.

•

The principal theoretical approaches to SHRM are termed: universalist, matching models (closed) and matching models (open). The universalist approach assumes that there are ‘best HR practices’ that promise success irrespective of organisational circumstances. The matching models (closed) approach specifies HR policies and practices that are relevant to specific organisational situations, whereas the matching models (open) approach defines the employee behaviours necessitated by the organisation’s overall strategy. These behaviours are to be delivered through the HR strategy.

•

All of the theoretical approaches to SHRM have their problems. Those concerned with the universalist approach are: defining the ‘best practices’ to apply; the low regard for organisational context; and the absence of employee input assumed. The problems with the matching models (closed) approach are: the ambiguity that attends the defining of strategy; the essentially managerialist stance assumed; and problems concerned with implementation. 19 © Pearson Education Limited 2007

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Problems attending the matching models (open) are the models rather idealised nature and, like the other models, their prescriptive tone. •

The growth of interest in SHRM was due to a number of factors including: the crisis of under-performance in American industry; the rise of individualism; a decline in collectivism; the rise of knowledge workers with differing work expectations; and a search for more status by personnel specialists.

•

In an attempt to establish the link between SHRM and organisational performance there have been numerous studies conducted since the mid-1990s in the USA and UK. In general these have been very positive about the relationship between SHRM and organisational performance although most have not offered an explanation as to why certain HR practices are may lead to enhanced organisational performance.

Teaching and learning suggestions Comment This is a chapter that should appeal to all students studying an SHRM model irrespective of their practical and academic background. It is rooted in strategic management theory but is a vehicle for examining organisational practice in employment contexts of all types. One of the exciting things about teaching management to students is that it enables them to reflect on organisational practice, which makes sense of what’s going on in reality: the ‘oh! that explains why that is done’; or ‘now I can see how that idea is linked to this aspect of policy and practice’. This chapter offers such opportunities for reflection. The section on the three theoretical approaches to SHRM will be of particular interest to many students given the critical stance it takes, among other ideas, to that of the universalist approach. Not only is universalism relevant in the study of SHRM it also permeates the whole of the management literature. The section enables tutors to make valuable points about the value of taking an evaluative stance towards the study of management and, in particular, emphasise the value of contingency theory.

Student preparation As with other chapters, prior to the class, we believe it is important that students read and make their own notes from the chapter. It will be of importance for students to think and make notes upon some of the major themes from the chapter in relation to organisation practice in which they may have been involved.. Some of themes may be: high employee commitment to the goals and practices of the organisation; the securing and training of high quality staff and internal practices to achieve high quality products; and flexibility in terms of organisational structure, employee functions and job content to enable the organisation to respond quickly to change. In similar vein to Chapter 1 it is an important part of student preparation that they think about the issue of SHRM in relation to an organisation where they work or one known to them. It would be extremely useful as class preparation for students to talk to an HR manager about one of the two key themes, e.g. to what extent is the HR strategy in y(our) organisation integrated.

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Prior to the class, the completion of the self-check questions for this chapter is particularly useful as they may form the basis of group work in the class. The questions create an immediate link with chapter content and enable the tutor to develop many teaching points from the resultant discussions. It may be very useful to ask students to illustrate the points they make in response to the self-check questions with ideas from the chapter’s practice and concept boxes.

In the classroom After an initial class discussion based on the student preparation we have found that the topic of SHRM is best illustrated by case study work. For example, one of the central concepts of the chapter lends itself very well to this. This is the so-called open approach to SHRM, which argues the existence of a clear and mutually supportive relationship between organisational strategy and HR strategy. As the chapter explains, using the ‘open approach’, the test of the degree to which the HR strategy is truly ‘strategic’ is a test of its appropriateness to the organisational strategy. The variables in the model: the operating environment (both external and internal) in which the organisation finds itself; the organisational strategy, which requires specific desired employee behaviours to be adopted if it is to be achieved; and the three 'key levers' (structural, cultural and personnel strategies) through which the HR strategy is pursued, may all be identified or suggested, in relation to a case study. This may be the case related to the chapter or another of the tutor’s choice. We have found the model works really well and illuminates many of the ideas of integration in an interesting way.

Follow-up work To some extent the follow-up work will be dictated by the content of the classroom work. If the case study, for example, was based on the ‘open’ approach it may be useful to ask students to work with the ideas in their own organisation or read more about organisations who have pursued HRM and estimate the extent to which the approach adopted by the organisation has been ‘open’. Indeed, one of the suggestions for follow-up work in the chapter: •

search the specialist practitioner HR literature for case studies that illustrate the way in which clear and cogent organisational philosophies inform HR strategy

may be a useful precursor to such an exercise. What this task does is to enable the student to integrate ideas from Chapters 1 and 2.

Answers to Self-Check and Reflect Questions 2.1. What value would you place in a philosophy statement similar to the BP example above were you searching for employment? This is one of those questions that we cannot answer because it is obviously personal to you. That said the intention of the HR specialists who write and publish such statements is to enthuse you sufficiently to prompt you to register an interest in the organisation. As such this is an initial step in the recruitment overture and, possibly, a long-term relationship between employer and employee. If this is the case it must be an honest attempt to portray reality. If the philosophy statement is a genuine attempt to describe life for employees in the organisation then it should be of value to employees because it encourages those potential employees who like the sound of the organisation and, just as importantly, discourages those who do not.

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2.2. In what ways do you think the presence of employee voice may be helpful to the implementation of universalist HR initiatives? The central argument behind the concept of employee involvement in the design and implementation of HR initiatives is that better outcomes will result if employees are involved. This is for two reasons. First, at the rational level it seems sensible that if employees understand the reasons for and components of a particular initiative, then they are more likely to be effective participants in the process of implementation. Performance appraisal is a good example of this. It is not unusual for managers to introduce performance appraisal schemes and incorporate training for managers but not employees. The result is often that employees do not understand the part they play in the process, or, more importantly, really understand the reasons why the organisation is introducing appraisal. The second reason is emotional and concerns the notion of ‘ownership’. We are all more likely to engage more enthusiastically in the initiative if we have been part of its conception and design rather that it being imposed upon us. 2.3. How influential would you say that the factors noted in Figure 2.4 were in creating the drive to introduce SHRM in major organisations? The simple answer to this question, of course, is that it is very difficult to say. On the face of it does seem reasonable to assume that all of these factors were influential. Perhaps some (e.g. the crisis in American industry) were more important than others. But we can safely say that these factors were associated with the rise in interest in SHRM. It would too much to say that they caused the growth of SHRM. When considering such questions as this it raises the extreme difficulty of linking changes in a cause–effect manner. Considering the complexity of this problem is a useful introduction to the section, which concluded Chapter 2, that is, on the HR–organisational performance link. 2.4. What practical contribution do you think the studies linking HR and organisational performance listed in this section have made to the practice of SHRM? Much depends upon the extent to which HR managers take notice of what the studies have concluded. Some may argue that there is little point in academics producing studies such as this if nobody actually in a position to change management policies reads them. We do not take the bleak view that the gap between academia and practice is so wide that the studies will not be of practical benefit. Certainly in the United Kingdom the Chartered Institute of Personnel and Development have done much to commission and publicise the results of the research at conferences and in pamphlets and in-house journals. In many respects the studies tend to confirm a lot of what we might expect. It seems intuitively correct to say that carefully designed and skilfully implemented HR practices will have an effect upon the ‘bottom-line’. But the studies we have outlined go much further than confirming this. They identify the key practices and the combination where these practices may be introduced. They also point to the difference that factors such as the importance of front-line managers may make. Above all, they note some useful measures that may be used to assess HR effectiveness. If some plausible link can be shown, this will contribute greatly to the influence that HR managers can have at the highest levels in organisations.

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CHAPTER 3

SHRM in a changing and shrinking world: internationalisation of business and the role of SHRM. Learning outcomes By the end of this chapter you should be able to: •

identify some of the key background issues relevant to the internationalisation of business;

•

analyse the significance in the growth of multi-national companies;

•

define strategic international human resource management;

•

identify the key components of strategic international human resource management;

•

explain the significance of the capability perspective on strategic international human resource management;

•

evaluate the importance of the cultural perspective on strategic international human resource management.

Summary •

MNCs pursue international business for a variety of reasons in a variety of ways.

•

The importance of MNCs is not new but their growth in recent years has been rapid and significant.

•

SIHRM may be better understood by the examination of a model in which classic MNC components and factors relevant to the MNC’s external and internal operating environments influence the SIHRM issues, functions and policies and practices, which in turn affect the concerns and goals of the MNC.

•

The development of key competences by MNCs is important at three levels: organisational, line management and HR professionals.

•

National cultural differences are an important aspect of SIHRM and have been measured by a number of authors allowing these differences to be categorised.

•

Strategies for managing cultural differences include: ignoring them, minimising them and utilising them.

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•

The effects of national cultural differences on HR practices can be quite profound with the consequence that the transformability of many of these practices is suspect.

Teaching and learning suggestions Comment This is probably the chapter in the book, which will offer the least opportunity for students to engage in reflective learning since most will have no first-hand knowledge of SHRM. The most useful fund of knowledge that most students possess will be that of MNCs with which they are familiar as customers. That said the chapter contains the opportunity for many interesting debates where students and tutors may engage. An example of this is the ethical dimension to the activities of MNCs; a topic which is regularly featured in the news and one on which most of us have strong views. What is less clear from such debates is the role of SIHRM. So the challenge for many tutors will be teasing out valuable learning points related to SIHRM from topics where it is not immediately apparent. But that is not clearly the case with some topics, e.g. culture, which we have found is a subject that interests all students and one that promotes lively debate!

Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We use a variety of vehicles to bridge student preparation and class-based activities to enhance their understanding of the chapter content and its overall relationship to managing human resources strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come prepared to raise them during the teaching session. Sometimes this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write their answers briefly in note format;

•

complete the self check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to self check and reflect questions follow in the next substantive section of this chapter guide.

In the classroom Clearly the approach adopted to ‘student preparation’ can be followed through into the classroom. A starting point that we find useful is to discuss the issues arising from the students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched.

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However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a snappy summary of key issues. Where preparing answers to self check and reflect questions, has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, if preparing answers to self check and reflect questions was not part of preparatory work but consideration of the questions is to feature as part of the taught session, we would favour the group approach as a more stimulating approach. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued. Greater topicality can be achieved by capturing the big business news stories of the week and discussing any SHRM issues that are likely to arise.

Follow-up work The pedagogic features adopted throughout this book are intended to offer up a number of alternatives for follow-up work whilst at the same time leaving the lecturer free to add or substitute their own ideas. If they have not already been used as part of class activities any prior preparation of answers to the self check and reflect questions will serve as a useful reinforcement to chapter content. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for further reading.

Answers to Self-Check and Reflect Questions 3.1. The reasons that companies pursue a strategy of internationalisation are not new. Historically, empires have been built on thriving international trade. Yet the rate of growth of international trade has grown apace in recent years. Why should this be? The first reason is the growth of technology, in particular air transport and information technology. These have made communications immeasurably easier in the past 10–15 years. Secondly, there is easier movement across borders now than in previous generations. The free movement of goods and services across the EU is a perfect example of this. Thirdly, there has been a development of support services including banks and government agencies. Banks now speed financial exchanges electronically across continents in minutes making economic exchanges efficient and less risky. Government agencies provide support for businesses in terms of finance and advice. Finally, the increase in communication has facilitated global brands and the desire of consumers to purchase those brands. For example, the Apple I Pod started life in 2002/2003 in the United States but it was a matter of weeks before demand grew across the world to the extent that Apple could not meet demand.

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3.2. As a senior HR manager in a major MNC what arguments would you anticipate using to defend your company against the anti- globalisation lobby’s position that globalisation was a disadvantageous to your company’s employees? Inevitably your opponents would cite the examples of MNCs, which exploit child labour and vulnerable adult employees by paying poor wages and compelling them to work long hours. But even where MNCs locate production facilities in developing countries you could argue that terms and conditions of employment are often much better than in local companies. You could argue that, for example, in south-east Asia the migration of rural workers to the cities (similar to the British industrial revolution of the 18th and 19th centuries) is evidence that the opportunities provided in a developing economy are more attractive than remaining among the rural poor. In addition, you could argue that the opportunity to develop international careers is an extremely attractive one for many managerial, professional and technical employees. 3.3. In what other ways may the expatriate managers at DecoStore have established tacit knowledge? HCN employees will learn tacit knowledge through the ways in which expatriate managers interpret policies and procedures. All managers in all organisations follow some procedures very closely and pay scant attention to others. This teaches employees a good deal about what the organisation sees as important and what it does not. Of course, this has the potential to lead to confusion among employees. But the ways in which this confusion is accommodated in the minds of employees is part of the learning process, which helps them to sort out what is important and what is not. Tacit knowledge will also be imparted to employees through the patterns of power and influence, which exist among expatriate managers. Which of them is the most powerful? From where does that power emanate? Who wins the battles for scarce resources? Who gets his (usually) or her own way? The answers to these, and other similar, questions will assist the employees to understand power patterns and gain important tacit knowledge about how the organisation works at an informal level. 3.4. Which of the line manager competences do you think are particularly important for HR professionals? Of course, all of them are important. Increasingly, international business knowledge and the ability to take the role of innovator by seeing old problems in new ways and trying new methods of solving them are important as HR professionals operate strategically rather than pursue a narrower specialist focus. Indeed, the former perspective has been the focus of this chapter. However, the final section of this chapter, on the cultural perspective to SHRM, emphasises the importance of both cultural adaptability and perspective taking (i.e. taking into account the views of others). Perhaps the key role of the HR professional is to ensure that senior and line management develop and practise these competences. 3.5. Of what value is this general grouping of national cultures to managers in their SIHRM activities? You may argue that all they do is confirm the general sort of assumptions that managers have about different cultures. If so, this is in itself is of some value. But more importantly what such research does is to provide managers with valuable insights, which they can use in SHRM decision making. These decisions may be concerned with issues of structure (e.g. the extent to which the organisation may decentralise its foreign operations with local HR managers and staff) or HR practices (e.g. whether to impose a standardised reward structure across different countries). Such cultural information may not determine decisions but they have the virtue of concentrating managers’ minds upon the consequences of some of their decisions.

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CHAPTER 4

Evaluating SHRM: why bother and does it really happen in practice? Learning outcomes By the end of the chapter you should be able to: •

explain the importance and contribution of evaluation to strategic human resource management;

•

identify the range of different purposes an evaluation can serve;

•

assess the barriers to evaluation and their causes;

•

identify the various stakeholders in any evaluation and their need both to contribute and to receive feedback;

•

assess the choices to be made in respect of the evaluation process and make suitably informed decisions;

•

outline a range of strategies and data collection techniques involving both primary and secondary data, which may be used to evaluate strategic human resource management; and

•

identify the complexity of issues associated with feeding back the findings of evaluations.

Summary •

Evaluation has the potential to make an important contribution in relation to the implementation of specific HR initiatives but also to wider SHRM.

•

Evaluation takes place continuously on an informal and personal basis and will affect people’s choices and behaviours at work.

•

There are a number of valid reasons relating to organisational culture, unchallenged assumptions and previous experience that explain why planned formal evaluation of strategic HR has rarely taken place.

•

A planned systematic process of evaluation should be included at the beginning of the implementation process for all HR interventions.

•

Within evaluation of SHRM a distinction can be made between typical evaluations and action research. While both use the same strategies and data collection techniques, action research has explicit foci on involvement of participants and subsequent action. Both can make use of both secondary and primary data.

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•

Prior to evaluating SHRM it is important that a clear understanding of the precise purpose and objectives of the evaluation is reached. This needs to reflect the context and purpose of the evaluation and be agreed between those undertaking the evaluation and the sponsor.

•

Evaluation of SHRM involves multiple stakeholders and cannot be divorced from issues of power, politics and value judgement.

•

Feedback typically involves cascading a summary of findings from the top-down the organisation. Alternatively the findings can be shared first with those who generated the data. This can help promote ownership of subsequent actions. Issues that cannot be dealt with may be fed up from the bottom to high levels of the organisation.

Teaching and learning suggestions Comment An immediate problem facing the delivery of this topic is the overall lack of attention it receives in the HRM literature, the topic of evaluation rarely being considered in any depth. This is problematic as we discuss in the chapter. Evaluation is rarely included in a planned evaluation and, on those occasions when it is, the findings are rarely utilised at all, let alone strategically. This observation forms part of the opening section of this chapter and part of the justification for its inclusion as a discrete chapter. It is also a point we believe must be emphasised to the students. In this chapter we argue that the evaluation of HR strategies needs to involve those affected within the organisation as fully as possible. This is not to say that evaluation can only be undertaken by people within the organisation. Rather it implies that where people external to the organisation are used, their role should be to help those within to perceive, understand and act to improve the situation. As part of this we recognise that, depending upon the purpose of the evaluation, one or a number of research strategies might be more appropriate. Evaluation may take place over a range of time horizons. These we suggest can range from one-off case studies perhaps answering the question ‘Where are we now’? through cross-sectional studies, which benchmark HR practices, to longitudinal evaluations perhaps using a series of employee attitude surveys. Similarly, we recognise that to address particular strategic objectives some data collection techniques are likely to collect more appropriate data than others.

Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We have found that producing mind maps of the chapter content is a useful approach to note taking and encourages students to reflect on the internal integration of the subject content of the chapter. We use a variety of vehicles to bridge student preparation and class-based activities to enhance their understanding of the chapter content and its overall relationship to managing human resources strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come to the teaching session prepared to raise them. Sometimes this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance.

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Students may also be asked to do one or more of the following: •

address pre-set questions and write their answers briefly in note format;

•

complete the self check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to self check and reflect questions follow in the next substantive section of this chapter guide. Pre-set questions that we have found useful for structuring student reading, preparatory activities and classroom discussion for the topic of evaluating strategic HRM include: 1. How would you justify the need for evaluation of a new HR initiative to the head of Human Resources? 2. Why do organisations fail to evaluate HR initiatives? 3. What are the purposes of evaluation? 4. Outline the range of evaluation strategies that could be chosen to evaluate an HR initiative?

In the classroom Clearly the approach adopted to ‘student preparation’ can be followed through into the classroom. A starting point that we find useful is to surface and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a summary of key issues. Where preparing answers to self check and reflect questions has been set as part of preparation for the taught session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, if preparing answers to self check and reflect questions was not part of preparatory work but consideration of the questions is to feature as part of the teaching session, we would favour the group approach as a more stimulating approach. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued. Where case study work has featured as part of preparatory activities, similar approaches to those suggested for self check and reflect questions can be adopted. Our approach here would be to start with a more general exploration of the integrative case at the end of Part One: ‘Strategic Human Resource Management at Halcrow’ and use this to focus upon evaluation issues, in particular those highlighted by Questions 6 and 7. However, in doing this it is important to recognise the length of this case and ensure that students have read it prior to the class.

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Follow-up work The pedagogic features adopted throughout this book are intended to offer up a number of alternatives for follow-up work while at the same time leaving the lecturer free to add or substitute their own ideas. If they have not already been used as part of class activities, any prior preparation of answers to the self check and reflect questions and/or the questions suggested for student preparation and/or the integrative case ‘Strategic Human Resource Management at Halcrow’ will serve as a useful reinforcement to chapter content. Our outline answers to the self check and reflect questions follow in the next substantive section of this chapter guide. Answers to the integrated Part One case study questions are included after this chapter. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading.

Answers to Self-Check and Reflect Questions 4.1 Think about the last time you were asked to evaluate a course in which you were participating. Possible course could be a module on your current programme or a training course at your workplace. a. What aspects of the course were you asked to comment about? b. How do you think your evaluation and that of your fellow students was used subsequently? a. Inevitably your answer will depend upon the course that you choose. However, it is likely that it will focus upon the operational aspects of the course such as the quality of the teaching, the usefulness of handouts/module guides, support facilities such as library and information technology, the strengths of the course, the weaknesses of the course, the quality of the teaching facilities and, for many one day courses, the quality of the lunch. What is less likely to have been included is some form of evaluation of how much you felt you had learnt or how you felt that the course would contribute to your work life or you future career. b. Your knowledge of how the evaluations were used subsequently is likely to be less certain, although it is probable that the data were used to improve the course. What is likely to be less clear is whether the wider impact of the learning was considered. 4.2 List the arguments you would use to justify the need for an organisation to justify evaluating SHRM interventions. There are a wide variety of arguments you could list here. Some of the most frequently cited include: •

to help organisations respond to their external and internal environments in a timely and positive manner by providing the information to plan strategically;

•

to provide a mechanism for capturing individual learning and to enable experience to contribute to organisational learning;

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•

to provide an opportunity for analysis and reflection before making adjustments to HR interventions;

•

to improve management decision making;

•

to gain acceptance and commitment to SHRM initiatives;

•

to help create new insights and shared understanding;

•

to overcome what may be subjective evaluations by enabling assumptions held to be tested and shared.

4.3 Before you read on based on your own experience make a list of reasons why you might be reluctant to undertake an evaluation of an HR process. As you read this section compare the reasons you have listed with those we identify. To what extent are they the same or similar to those you have identified? The list of reasons that you are likely to have compiled as your own reasons for being reluctant to undertake an evaluation are: •

•

•

difficulties of undertaking evaluation •

HR is widely considered to be virtually unmeasurable,

•

there is no consensus regarding universally relevant HR indicators,

•

organisations do not possess the necessary skills to produce a competent or credible evaluation;

perceived lack of a need to evaluate •

people ‘know’ the results will be positive,

•

‘gut’ feelings are often perceived to be sufficient,

•

managers often prefer to rely on their informal information channels,

•

managers tend to focus on implementation rather than evaluation;

difficulties associated with dealing with negative outcomes •

previous evaluations have been divisive and negative,

•

a blame culture exists within the organisation,

•

a risk of being unpopular with peers.

4.4 Outline the relative advantages of action research and more typical approaches to evaluation from the perspective of the HR manager sponsoring an evaluation. Your answer to this question is unlikely to be in the same format as ours. For both typical evaluation and action research, we would hope your answer makes reference to the need to gather data in a rational and systematic manner to find out the extent to which the HR intervention(s) has achieved its objectives. In addition we would have expected you to include at least some of the following advantages for typical evaluation and action research, although we recognise our list is not exhaustive:

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A typical evaluation may be advantageous to an HR manager sponsoring an evaluation when: •

an evaluation was not considered to be a necessary part of the SHRM intervention;

•

the HR manager is uncertain whether s/he will wish to act upon the findings of the evaluation;

•

the HR manager requires the evaluation to be undertaken by people who are obviously separate from the organisation so that the findings are more likely to be seen as objective rather than biased by the sponsor’s beliefs;

•

there is a desire to maintain close control of the evaluation process;

•

there is a desire to maintain close control of the findings and the extent to which these are fed back to their employees.

In contrast action research may be advantageous to an HR manager sponsoring an evaluation when: •

the evaluation process is seen as an integral part of facilitating strategic change with regard to HRM;

•

there is a wish that employees work alongside those undertaking the evaluation throughout the process;

•

there is a desire to engender employees’ ownership of the findings and any subsequent changes;

•

there is a desire to develop evaluation expertise within the organisation;

•

the HR manager intends that the knowledge gained from the evaluation is transferred to other aspects of SHRM within the organisation;

•

there is a desire to adopt a process consultation approach.

4.5 Outline the advantages that are likely to accrue to an organisation using a range of techniques, rather than just one, to obtain data to evaluate SHRM. One technique on its own is unlikely to provide sufficient data to fully evaluate SHRM. While secondary data can be used to benchmark the evaluation against an industry or perhaps national context there is often still a need to collect a range of data. By selecting appropriate techniques, the data collected can be matched to the objectives of the evaluation more closely. Different techniques are better at collecting different types of data. For example, to gather information from a large number of people and answer ‘what’? questions questionnaires are an efficient method. However, to explore the same situation in more depth and gather information to answer ‘why’? or ‘how’? questions, techniques such as unstructured interviews are likely to be more appropriate as the interviewee can talk freely about events. Using different data sources also enables the finding to be triangulated. If all the findings suggest the same outcome then you can be more certain that the data have captured the reality of the situation rather than your findings being spurious.

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PART 1 CASE STUDY

Strategic human resource management at Halcrow Group Limited Answers to Case study questions 1. Provide a brief overview of Halcrow Group’s strategy. Like many other former civil engineering companies Halcrow has extended its range of disciplines to cover architecture, project management, environmental science, transport planning and other non-engineering but related skills. To reflect the future needs of the business Halcrow’s operations were brought together in 2001 as four main business groups: Consulting, Property, Transport and Water. The structure of the company was seen as an important component in delivering the strategy. It changed to a matrix structure. There are eight geographical regions meaning that appropriate employees or teams may be brought together for specific projects throughout the world. Each of the four business groups is led by a management team comprising five people including a Group board director or managing director. Within each business group, professional and technical (Professional and Technical staff are assigned to technical skills groups, the leader of whom is responsible for their training and career development. Employees are also assigned to an office in one of the regions. These vary in size from less than 10 to more than 500 employees. The business groups and regional offices are supported by Corporate Support Services, comprising all the corporate and business support functions, including HR, and located predominantly within the United Kingdom. In 2004, Halcrow launched their change programme, ‘Act now’, which was designed to help the group ‘to continue to develop in a dynamic and sustainable way’. The focus of ‘Act now’ was to align employees’ behaviours and approaches to Halcrow’s purpose, values, codes of behaviour and business principles thereby improving individual, team and overall business performance. 2. Outline the linkages between Halcrow Group’s strategy and its strategic human resource management. The focus of the Halcrow change programme, ‘Act now’, was to align employees’ behaviours and approaches to Halcrow’s purpose, values, codes of behaviour and business principles. The intention was that this would improve individual, team and overall business performance. This change programme is intended to be continuous rather than having a specific end date. It emphasises the need for flexibility and the sharing of good practices and learning throughout the group, the centrality of employees to achieving this and the need to monitor and evaluate. The ‘Act now’ change programme is central to everything that Halcrow plan to do in relation to the HRM strategy. The overriding concern is to change the organisation’s culture. It is often said that the Group is full of people who are professional engineers and who take pride in a job well done. In essence, technical excellence has previously taken precedence over commercial success. By the very nature of their training Halcrow people tend to be concerned with ‘detail’ rather than seeing the bigger picture. This has served the group well. But a recent client satisfaction survey commissioned by the group did not show Halcrow in a uniformly glowing light. It reported that Halcrow emerged as technically excellent and a ‘safe pair of hands’ but that clients were looking for much more than technical competence and a track record. They

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wanted business partners whose behaviours were aligned to their own needs. In addition the group was also seen as rather ‘grey’. The challenge for Halcrow is to retain the reputation for technical excellence and reliability while becoming increasingly commercially aware, flexible and, above all, more responsive to customer needs. It is a challenge, which the SHRM strategy, through the change programme, is designed to meet. Overall, the key change issue that is driving SHRM is the need for Halcrow to be more responsive in the light of a more competitive industry. Therefore, the principal aim of the new HR initiatives is to generate more competitive employee behaviours which, in turn, is envisaged will generate better all round employee and business performance. 3. What obstacles do you think that Halcrow management will face as it works to change the Group’s culture from one dominated by technical excellence to one that also embraces commercial awareness? Obstacles related to changing the culture highlighted in the case include: •

The knowledge and understanding (and qualifications) of the workforce need to be developed to ensure that employees have the requisite commercial skills. At present approximately 80% of Halcrow’s employees are classified by the group as professional and technical (P and T) staff who have a minimum of an undergraduate degree in engineering or a related subject and are also members of a relevant professional institution.

•

The focus of employees is on a job well done. As noted in the case, the group is full of people who are professional engineers and who take pride in a job well done. In essence, technical excellence takes precedence over commercial success. Although Halcrow needs to retain its reputation for technical excellence and reliability, the organisation’s employees must become increasingly commercially aware about the group’s profit performance, flexible and, above all, they need to be more responsive to customer needs in the light of a more competitive industry.

•

This is all occurring in an environment in which Halcrow’s customers are taking technical excellence for granted when making decisions about which consultancy group to employ. In view of Halcrow’s reputation for technical excellence this is also an obstacle.

4. What measures might Halcrow take to increase its retention of young professional graduates? Based on the available data, labour turnover amongst young professional graduates is clearly perceived as a critical problem within Halcrow with the potential to frustrate the achievement of its strategic business plans. The sustainability of their commitment to continued dynamic growth and quest for superior business performance as a route to competitive advantage are being jeopardised by the high levels of labour turnover being experienced amongst Halcrow’s cadre of graduate engineers and, more generally, across P and T staff. This problem of labour turnover assumes greater significance within the prevailing organisational context, characterised by: a shortage of high quality consultants throughout the construction and engineering sectors; fierce competition for such labour; progressive decline in the number of students studying relevant degree courses; and increasing client expectations that projects require a stable staffing base to support their delivery. Despite the frequent reference to the problem there is little hard data available in the case on the extent of labour turnover or its causes. Further, apart from benchmarking within their business sectors, there is no evidence of any broader external comparisons that might shed more light on the problem. Therefore, a useful starting point for increasing the retention of young professional graduates is the use of thorough evaluation to address these gaps. However, and in fairness, steps have already been taken in this direction. Employee survey results have

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highlighted feedback, recognition and employee involvement and engagement as being particularly problematic areas requiring attention. There is also reference to problems concerning the managerial environment, the leadership and management skills base, organisational culture, the attractiveness of the financial sector as an alternative career pathway, increasing concerns over staff development and the lack of succession planning together with a clear acknowledgement within the company that these issues require attention. The cursory analysis above at least provides pointers towards future action that can be taken to improve the retention rate of young professional graduates at Halcrow. However, this has to be set in the context of an increasingly articulated specification of the HR base required by Halcrow to achieve its organisational objectives. This embraces required values, codes of behaviour and core competencies that underpin the HR strategy designed to improve the organisation’s human capital base. A key consideration is how these HR requirements are being translated into HR practice and the impact that they may have on future retention. How, for example, is recruitment and selection being conducted to maximise the probability of bringing appropriate staff into the organisation and avoiding such HR requirements becoming mere platitudes, and to what extent does successfully matching employer HR demands and the employee attributes of recruits impact positively on their retention? Further exploration of how recruitment and selection could contribute to improving the retention of young professional graduates could be directly linked to Chapter 8. Apart from its role in contributing to the acquisition and maintenance of required employee behaviours, human resource development (HRD) represents another important potential area for improving retention. A failure to undertake effective induction and to audit training undertaken may in themselves exacerbate labour turnover and cause employees to question the organisation’s commitment to their development and succession planning. There is also, worryingly, a lack of detail with respect to HRD particularly with respect to knowledge management and creating a learning environment given the organisation’s emphasis on the need to develop an open culture within which learning transfer is facilitated. Attention to those features alone may help young professional graduates engage with and commit to the organisation. In addition greater emphasis may need to be placed on a ‘grow your own’ philosophy. From the case details it is not clear what proportion of young professional graduates are recruited directly into the organisation and what proportion are ‘grown’ through company training schemes. However, where labour shortages persist it may well be in the organisation’s interest to recruit school leavers into sponsored training programmes to meet their future professional and technical requirements. This may even be done in conjunction with other companies in the sector to increase the attractiveness of construction and engineering and to secure an increase in the future supply of such staff. This would seem to be particularly appropriate if directed at increasing the participation rate in the sector of previously underrepresented groups such as females. Lastly, another possibility emerges from the outputs of internal evaluation activities. Currently senior managers are working with Kaisen Consulting Ltd to create processes through which employees can become involved in developing actions to improve the managerial environment, which if successful is likely in itself to have a positive impact on retention. As part of this, why not actively involve the ‘at risk’ employee group – young professional graduates – in evaluating the causes of labour turnover and developing action plans to improve retention? This would be entirely consistent with organisational aims to address issues around feedback, recognition, employee involvement, career development and succession planning. Such an approach could incorporate areas such as recruitment and selection and HRD but would almost undoubtedly surface other areas for consideration and action planning. Picking up on this last point, it is accepted that we have been highly selective in the areas we have brought to bear on the problem of increasing retention of Halcrow’s young professional graduates. It is recognised that the reader could range more widely over the content of the book to focus on how such areas as structure, culture, HR planning, performance management,

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reward management and diversity management can all be brought into the equation for developing measures for reducing turnover and increasing retention. 5. (a) What hurdles do you think that Halcrow will have to overcome in its attempt to ensure international employees adopt the Group’s codes of behaviour? (b) Now visit the Halcrow Group website (http:/www.halcrow.com) and read Halcrow’s Statement of Business Principles, paying particular attention to the Code of Business Practice. Expand your answer in the light of what this tells you about the Group’s views regarding business integrity, and what is expected of Halcrow staff. The case reports that the fact that there has been no HR function in any of the offices until recently suggests that HR has experienced a very low profile in Halcrow’s international operations. In fact, the function in all but the most basic administrative sense has been nonexistent. However, the HR director was keen for this to change. A catalyst for this drive is the group’s recently published codes of behaviour. These stress the need for honesty, transparency and integrity in all Halcrow’s business operations. However, the lack of an international HR tradition in Halcrow means that the HR director clearly has a large task on hand establishing the relevance of the function and the mission that HR is attempting to deliver through the change strategy. That is not to say that the employees will openly doubt the relevance of the HR effort, but committing to it fully is a different matter. Delivering a strategy through adjusted employee behaviours is a way of thinking with which most will be totally unfamiliar. Of course, there are the inevitable cultural and communication problems, which may attempt to change employee behaviours. Look again at the list of employee behaviours that Halcrow are trying to encourage throughout the group: •

Treat everyone with respect, trust and dignity;

•

Help each other – share experiences and lessons learned;

•

Be polite;

•

Never undermine anyone directly or indirectly;

•

Work together to resolve disagreements;

•

Be professional and ethical at all times;

•

Listen to others’ points of view;

•

Be honest and open.

The wording of the list presents immediate potential misunderstandings. Does the concept of ethics have the same meaning in all cultures, is the notion of professionalism and what it means accepted consistently internationally. The Halcrow website (http://www.halcrow.com/html/documents/pdf/corporate_info/bus_princ.pdf) contains a very clear account of business principles with helpful statements of what is required from the staff and what the staff may expect from the company. 6. To what extent does the data collected by the employee survey allow the HR director to evaluate the extent to which HR initiatives are supporting the Group’s strategic direction?

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The core content of the questionnaire has remained substantially the same since 2000 enabling benchmark comparisons over time. The 30 questions are used to ascertain employees’ views on 10 key areas that relate clearly to the group’s strategic direction. These include clarity about their job, client focus, their competence, resources to do their job, empowerment, involvement, cooperation from others, feedback to them and recognition. Additional supplementary questions are also included, for example on employee commitment, to allow specific issues to be evaluated. By including location information, such as regional office, business group and skill group, comparisons can be made between different parts of the group highlighting areas that are performing both above and below the Group average. High response rates for the survey (over 67% of employees worldwide returning their questionnaire in 2002 and 72% in 2004) mean that the data collected are more likely to be representative of the Group. 7. (a) How does Halcrow currently make use of primary and secondary data to evaluate the extent to which initiatives to engage employees within the Group are working? Through the 2000 employee survey (primary data), Halcrow was able to identify those areas of strategic HRM highlighted by employees as being most in need of attention. These were: feedback, recognition and involvement of employees. Benchmarking the surveys in 2002 and 2004 against the 2000 employee survey, has allowed Halcrow to establish the extent to which these issues are being addressed through HR initiatives. Results from the surveys suggest that there have been improvements in all three areas. However, data from the survey (and other sources) suggest that there is still more to be done to improve these and other aspects of HRM such as employee engagement. Data from Halcrow’s employee survey has been used to calculate an HR Enablement Index for the group. This is an average score of responses to all the questions in each of the ten key areas and provides an overall indication of the extent to which employees are engaged with their work within the Group. Average scores for each of the 10 key areas are then be used to highlight those aspects where satisfaction is relatively low and where action may need to be taken. Comparison of the 2004 HR Enablement Index score with that for 2002 revealed that there had been no significant change in employees’ engagement. Secondary data on retention rates for the same period revealed that this was within a context of declining labour turnover. This led the HR Director to ask why engagement had only remained constant in a labour market characterised by a shortage of suitably qualified people. The answer to this question is currently being sought from a range of primary and data including employee exit interviews, staff workshops around the world to discuss issues associated with employee engagement and further analysis of the employee survey data. (b) What other measures do you think they might adopt? There are a whole host of other measures that might be adopted to evaluate the extent to which initiatives to engage employees within the group are working. These will relate to data already held by the organisation in HR records such as the technical versus organisational focus of training and development courses attended (secondary data) as well as collecting additional data. For example, subject to agreement and issues of confidentiality, annual reviews between line managers and employees might be developed to explore and feedback issues related to organisational engagement. In addition Halcrow appears only to have considered employee engagement from the perspective of the employees. Given their need to develop commercial awareness it is important that they also seek to understand their customers’ views regarding this. This might be done with focus groups with customers or a series of in-depth interviews.

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CHAPTER 5

The role of organisational stucture in SHRM: the basis for effectiveness? Learning outcomes By the end of this chapter you should be able to: •

define the term organisational structure and evaluate its links to strategy;

•

describe and analyse conceptual approaches to the design of organisational structures and discuss their strategic implications;

•

identify principal forms of organisational structure and explore their main effects on those who work within them at both a theoretical and practical level;

•

analyse the relationship between organisational structure and SHRM.

Summary •

Strategic linkages exist between corporate strategy, organisational structure and human resource strategies, demonstrating the strategic nature of structure.

•

Dimensions of organisational structure have been identified that can be used to analyse the nature and evaluate the effectiveness of an organisation’s structure.

•

These dimensions indicate the complex range of variables to be understood by managers in deciding how they should structure an organisation’s activities to meet its strategic objectives. They also indicate that the design of organisation’s structure involves managerial or strategic choice.

•

Three perspectives were considered that offer explanations about the relationship between the design of organisational structure and strategic effectiveness. These relate to the classical universal, contingency and consistency approaches to the design of organisational structure. A fourth perspective relates to the role of organisational politics and the exercise of power that has already been considered and discussed in depth in Chapter 1.

•

Principal forms of organisational structure were reviewed and their effects on those who work within them analysed and evaluated. These forms include: simple; functional; divisionalised; matrix; project-based; network, cellular and virtual structures. Theoretical linkages between these organisational forms and contingency variables have been recognised. The development of these forms indicates some degree of movement from centralised and bureaucratic structures to decentralised and more fluid ones.

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•

Organisations need to promote human resource strategies that are congruent with the nature of the organisational structure that they chose (or recognise the impact of their structure on their espoused human resource policies and the practice and outcomes of the human resource strategies that they promote).

•

Choice of organisational structure has been recognised as leading to a problematic relationship between the respective desires for managerial control, organisational efficiency and responsiveness to external conditions and intended markets. Attempts to maximise centralised managerial control in situations requiring greater organisational responsiveness are likely to affect the pursuit of effectiveness and working relationships adversely.

•

Decentralised forms of organisational structure may adversely affect the scope for and nature of organisation-wide human resource strategies. In practice, this is likely to be a function of both the nature of the structural form that is chosen and the strategy of the organisation.

Teaching and learning suggestions Comment In general strategy terms one of the most important resources an organisation has is its employees. Within the context of strategic human resource management (SHRM) models and theories a central theme emerging is that people are the organisation’s most important ‘asset’, so how they are organised is crucial to the effectiveness of a strategic approach to the management of human resources (HR). Traditional views about controlling the organisation through structure can be traced back to the early twentieth-century management scientists such as F.W. Taylor and Elton Mayo. These approaches can be directly linked to a view of strategy making that is essentially top-down. Strategy is developed at the top of the organisation and the rest of the organisation including the HR function is utilised as a supporting mechanism in the implementation of the strategy. In this approach to strategic management the organisational structure becomes a method for achieving top-down control. Such principles of control are as bureaucratic or mechanistic. This chapter considers organisational structure in the context of SHRM. The fact that there is a need to regulate the implementation of an HR strategy is accepted but this needs to take of a wide variety of influences into account. For example, the types and range of issue and problems the organisation faces in developing and implementing a strategic approach to the management of its HR. Key issues to consider include: •

The operating environment of the organisation, it may operate in a highly complex or changing environment or in a relatively stable one.

•

How diverse is the organisation, for example the needs of a multi-national company with a wide range of products and services and globally dispersed customer base will be dramatically different from those of a small local firm.

•

How accountable are the senior executives of the organisation to external influences, for example is the organisation a public body, perhaps reporting to a government minister or is it a publicly quoted company reporting to a board of directors and a variety of internal shareholders or is the business privately owned by a family or group of partners who may be owner managers and have complete control over the current and future direction of the business?

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Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We have found that producing mind maps of the chapter content is a useful approach to note taking and encourages students to reflect on the internal integration of the subject content of the chapter. We use a variety of vehicles to bridge student preparation and class-based activities to enhance their understanding of the chapter content and its overall relationship to managing HR strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come to the teaching session prepared to raise them. Sometimes this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write up their answers briefly in note format;

•

complete the self-check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to both self-check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. Pre-set questions that we have found useful for structuring student reading, preparatory activities and classroom discussion for the topic of the role of organisational structure in HRM include: 1. How would you define organisational structures and set it into the SHRM context? 2. What are the principal strategic relationships between organisational structures and corporate strategy and how could they be evidenced in practice? 3. How would you argue the case for and against the formal adoption of structures by organisations?

In the classroom Clearly the approach adopted to ‘student preparation’ can be followed through into the classroom. A starting point that we find useful is to surface and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a snappy summary of key issues. Where preparing answers to self-check and reflect questions has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, preparing answers to self-check and reflect questions was not part of preparatory work but consideration 40 © Pearson Education Limited 2007

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of the questions is to feature as part of the teaching session, we would favour the group approach as a more stimulating approach. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued.

Follow-up work The pedagogic features adopted throughout this book are intended to offer a number of alternatives for follow-up work while at the same time leaving the lecturer free to add or substitute their own ideas. If they have not already been used as part of class activities, any prior preparation of answers to the self- check and reflect questions and/or the questions suggested for student preparation and/or the chapter case ‘Daimler–Chrysler AG’ will serve as a useful reinforcement to chapter content. Our outline answers to both self-check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading.

Answers to Self-Check and Reflect Questions 5.1 Drawing on the dimensions of organisational structure outlined above, use the list of potential organisational consequences from structural deficiencies to evaluate the structure of an organisation known to you. This question is designed to allow you to relate theory to your own experiences so your response will be individually related to your own reflections. However, hopefully you will have been able to use the dimensions of structure outlined in Concepts Box 5.1 and in the discussion that follows this and to relate these to the consequences of structural deficiencies reported in Concepts Box 5.2. For example, too high a level of standardisation or centralisation may in your evaluation be associated with some of the adverse consequences reported in Concepts Box 5.2. Conversely, your evaluation may judge that the structure within which you work is not affected by such adverse consequences because of the appropriate ways in which these structural dimensions are applied in this organisational context. 5.2 What other criticisms do you think may be made against the classical universal approach to the design of organisational structure? The classical universal approach is strongly associated with a philosophy of managerialism. Universal principles are advanced in the name of organisational responsiveness and efficiency. However, while they may be seen as furthering short-term managerial interests they neither consider the consequences of those affected, nor, the longer-term implications of some of the practices that may flow from these universal principals. The available literature related to the use of forms of flexibility, leanness and downsizing would support this view about an absence of thinking about these people-centred and longer-term business consequences. While some of the practices associated with this approach may be seen as encouraging employee involvement, this is based on unitarist principles and does not consider more conflictual frames of reference. 5.3 How would you summarise the key differences between the classical universal, contingency and consistency approaches to the design of organisation structure?

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The classical universal approach is associated with the identification of so-called best practice principles that may be used in a variety of organisational settings. It is therefore associated with the notion of 'one best way'. The contingency approach requires a more situational analysis and believes that effective organisations will result from a structural design that takes account of the demands created by the environment and the characteristics of the organisation. The consistency approach allows for structural variation based on a broader range of aspects. It highlights the need to analyse the internal fit between the various elements of an organisation's structure to produce a higher level of effectiveness and performance. 5.4 Using the ideas discussed above, how would you summarise ‘organisational fluidity’? ‘Fluidity’ is used, following Clegg and Hardy (1996), as the opposite to, or movement away from, bureaucracy. Bureaucracy is associated with systems of rules and rule-following, division of labour, hierarchy, authority and centralisation. ‘Fluidity’ by contrast is associated with decentralisation, collaboration, the need for participative and entrepreneurial behaviours, alternatives to hierarchy and structures that facilitate these. The later forms described in the section entitled ‘Principal forms of organisational structure and their effects on those who work within them’ progressively describe attempts to construct structures that are intended to produce these outcomes. Of course, the actual incidence of organisations using more radical types of structure is still very much in the minority. 5.5 The discussion in this section has considered the impact of decentralised organisational structures on the development of human resource strategies. How do you think a more centralised and bureaucratic form of organisational structure will affect the development of human resource strategies? Large organisations based on these principles were associated traditionally with the existence of an internal labour market. For certain groups of employees, this offered a pathway for progression linked to the provision of training and development, incrementally progressive rewards and security of employment. These characteristics are associated with a psychological contract that exchanges security and gradual progression in the organisation for loyalty and commitment. The bureaucratic approach also points to the creation of centralised rules that are likely to include those related to HR. Organisations based on centralised and bureaucratic principles are therefore likely to develop corporate HR strategies that are applied across the organisation. However, the effects of such corporate HR strategies may be questioned in practice. Those outside particular groups may be excluded from the intentions of these HR strategies, especially in the context of recent developments to differentiate more strongly between core and peripheral groups of workers. Secondly, a centralised and bureaucratic organisational structure is likely to have an adverse impact on the intended outcomes of certain HR strategies in an organisation. Concepts Box 5.2 and related discussion are examples of this type of effect. The impact of structures based around centralised controls and bureaucratic procedures may thus act to impair HR strategies aimed at promoting or improving employees' performance, involvement and commitment. This is likely to indicate a failure by those responsible to appreciate the lack of congruence between the impact of this type of structure and the aims of such HR strategies, if this is indeed their real aim.

Answers to Case study questions Answers for the Daimler–Chrysler (DC) case study have been presented in the form of a PowerPoint presentation that can be used to respond to class discussion and analysis of the case study.

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1

As the HR-Director of DC (Stuttgart, Germany) you are required to develop a ‘suitable HR strategy' and to propose solutions to the problems raised by the actual situation of DC and the intentions of the CEO described above.

State your understanding of the situation at DC and determine the needs of DC (problems within DC and reasons for the new organisational structure); also describe some strategic elements of the organisational structure.

Question 1 New HR Strategy Downsizing and “Decruitment” Options • • • • • • • •

sharing Firing and/or layoffs Voluntary Severance Incentive Program Recruitment stop Transfers Reduced workweeks Early Retirements Job Regular Unpaid Sabbatical

Common Mistakes in Restructuring & Creating New HR Strategies • Not involving management and employees • Avoiding employee input when times get tough • Faulty belief that downsizing employees will boost financial performance • Breaking the psychological contract that reflects the common interests of employers and employees • Failure to treat employees fairly and with dignity

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Organizational Structures to Support HR Strategies in the 21st century Cultural Change

Demographic Change

Complexity Knowledge Transportation tech Communication tech

Diversity

Flexibility Flatter Smaller Quicker networked

Globalization

Hyper Competition

Pace of Innovation

Technology

2

Whereas German companies like Deutsche Bank AG, Lufthansa AG or Allianz AG are seen by specialists and scholars as ‘truly’ global companies with excellent strategic HRM policies Daimlers Chrysler lacks such a reputation. There were incredible problems integrating Chrysler in the DC group. It took years to fix many post-merger problems. There are many other examples of a poor international HR policy of DC. This may also be a reflection of a generally rather poor (strategic) HR management of DC’s head office.

You are therefore also asked you to answer the following questions: •

In light of the intentions in the announcement of DC (text above), which HR areas or HR challenges are concerned?

•

Please name some of these challenges. Then establish a plan of action by formulating and justifying possible solutions to the challenges you have identified.

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Question 2 Improving organizational effectiveness at DC: Key HR Challenges • Centralization of strategic functions • Concentration of operational functions which are demanded by different companies of DC-Group (realization of synergies) • Decentralization of all other operational functions which are specific for each business units • Tendency toward a “matrix structure” • Flatter organizations: Quicker communication, empowerment, cost savings fewer layers of management • Creating a more “horizontal” company ( defining the firm’s core processes) • More networking in a matrix • Reassigning support staff from headquarters to divisional offices and workplaces • Empowerment of employees

Improving organisational effectiveness at DC: Key HR Challenges

Fundamental Challenge Organizational Designs (1) Functional Organization

Product Organization

CEO

VP Production

VP Marketing

Product ion Man.Prod. A Production Man. Prod. B

CEO

VP HRM

VP Product A

VP Product B

ProductManager A

Production Man. Prod. A

Production Man. Prod. B

ProductManager B

Product Manager A

Product Manager B

HRM Man. Product A

HRM Man. Product B

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Fundamental Challenge Organizational Designs (2) Matrix Organization

CEO

Functional Managers

Production

Marketing

HRM

Manager Product A

Manager Product B

3

What type of organisational structure should be created and implemented to support the new HR strategy?

Question 3 Possible (Matrix-) Structure of DC Group HO Board

Finances

Mercedes Board

Fin. Mercedes

Human Resources

Human Resources Mercedes

IT and Organisation

IT and Organisation Mercedes

R&D

R&D Mercedes

Chrysler Board

Fin. Chrysler

Production

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4

What are possible advantages (and disadvantages) of creating a new organisational structure?

Question 4 Global Product Division Advantages of new structure • Clear responsibility for a Product or a Division • Control within Division product-based structure • Decision making within Products Areas • Responsibility for Strategy and Top Management (for all Divisions) • Additionally responsible for Strategy (Group and all Top-Strategies of Divisions)

Headoffice

CEO CEO Mercedes Mercedes Car CarGroup Group

Top Top Management Management

Product ProductAA

Product ProductBB

Product ProductCC

Europe Europe

Americas Americas

Asia Asia

Strategy Strategy

Human Human Resources Resources

Marketing Marketing

How to provide a DC-culture of empowerment, involvement, participation and innovation? Explain business plans and strategy Explain the necessary change of employees’ role and responsibilities. Organizational development Effective organisation (Business Success, improved productivity and quality..) Stimulating and Nurturing Innovation and an innovative culture Employee (Enabling, motivation, training, confidence..) Involve Unions as partners A “new” leadership style with Mercedes

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5

In developing and implementing the new structures, the company will have to recruit new international managers. How could the company really select and develop a group of experienced international managers? What instruments would you use?

Question 5 Recruiting New International Managers Managing the Change Process • Establish a sense of urgency • Mobilize commitment to change through communication and involvement • Access to information on business plans and operational performance. • Create a guiding coalition; involve unions and workers representatives as partners at every stage • Develop a shared vision and communicate the vision • Enable employees to make the change (team structure and development, training, and information flow) • Show short-term wins; give incentives • anchor the new ways of doing things in the company’s culture; • Monitor progress and adjust the vision as required

DC’s SHRM Approach in a truly global Company 1. Develop and manage Common international Culture vs. national or corporate Culture 2. International Recruitment, Staffing, Assignment and Performance Management 3. Train Employees and Managers, build up international “people pool” without regard to nationality 4. IHRM is “state of the art” (instruments, processes, systems; e.g. admin services, cross-cultural training, compensation, competency management) 5. International Communication and network (projects, cross-cultural teams, conferences, matrix) 6. Manage cultural diversity and draw benefits out of it

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CHAPTER 6

Relationships between culture and strategic human resource management: do values have consequences? Learning outcomes By the end of this chapter you should be able to: •

explain the meanings of national and organisational cultures and the debates relating to their existence;

•

discuss the importance of organisational and national cultures in managing SHRM interventions;

•

explore the three main perspectives through which culture has been explored within organisations: integration, differentiation and fragmentation;

•

assess the complexity of issues associated with aligning culture to an organisation’s strategic direction;

•

analyse the linkages between organisational and other cultural spheres and SHRM interventions.

Summary •

An understanding of culture and the interactions between different spheres of culture such as national and organisational, can assist in the selection and application of effective HRM interventions and the hierarchies in which they are placed. At the same time, SHRM interventions can influence the culture within an organisation.

•

Culture consists of shared attitudes, beliefs, values and behaviours that belong to and have been learned by a group and, because they are considered to be valid, have been internalised and are taken for granted. These are taught to new members of the group as the correct way to perceive, think and feel.

•

Culture is one of a range of factors that can influence an organisation's competitiveness.

•

There is long-standing debate as to whether the impact of national cultural differences is declining or increasing. This is known as the convergence/ divergence debate.

•

Researchers have developed dimensions upon which national cultures can be placed. These emphasise the importance of power and the way it is exercised, alongside other factors, such

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as tolerance of uncertainty, orientation to time, the relative focus on individuals and the way in which conflicts are resolved. •

Nations’ scores against dimensions of national cultures can be thought of as stereotypes representing the mean around which scores for individual members of that country are dispersed. There is likely to be less variation within countries than between countries.

•

Within organisations culture is most visible in practices or artefacts and, to a lesser extent, espoused values. SHRM interventions are largely concerned with structural means of influencing and supporting these visible manifestations.

•

To re-align an organisation’s culture, the basic underlying assumptions upon which these practices or artefacts are based need to be changed. As these are deeply and strongly held within each employee’s subconscious they are difficult to change, especially over the short term.

•

Re-aligning an organisation’s culture is a complex process utilising a range of strategies. These are often divided into top-down (programmatic) and bottom-up (critical path) approaches.

Teaching and learning suggestions Comment Most students will come to this topic having already experienced it in other modules. This presents advantages and disadvantages. One advantage is that students are likely to be familiar with both Handy’s four fold typology of organisational cultures and may well have also be aware of Hofstede’s dimensions of national cultures. However, this may well be offset by their limited understanding and acceptance of either typology uncritically. We have also found that most students are also familiar with Johnson and Scholes’ cultural web, often from business strategy modules. Within this chapter, we adopt a structure of general to specific. Consequently, we start by considering different meanings of culture and exploring different typologies of national cultures. Building upon this we then examine frameworks for understanding organisational cultures and typologies of organisational. Not surprisingly we consider the implications of different cultures for different SHRM interventions. In our consideration we adopt the standpoint that an organisation’s culture is an objective entity, and in particular that it is ‘something an organisation has’ (Legge, 1994: 405). This implies that an organisation’s culture, as well as impacting upon human resource (HR) policies and practices, is something that can, at least theoretically, be manipulated and managed to achieve alignment with an organisation’s strategic direction. To this end we offer an analysis of a variety of ways in which this might be achieved and the contribution SHRM might make. Within this analysis we feel it is worth emphasising, especially to students with limited workplace experience that, while a large number of views and prescriptions for realigning or changing an organisation’s culture abound, in reality the process is long term and complex needing careful study prior to attempting any strategy of change. A particular difficulty facing the teaching of culture in relation to SHRM is therefore, the fact that typologies are inevitably generalisations of the national and workplace reality. For this reason, we try to make the links between theory and practice in the self-check and reflect

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questions and the boxed examples. These allow the students to explore how the material they are studying applies to the world of work.

Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We have found that producing mind maps of the chapter content is a useful approach to note taking and encourages students to reflect on the internal integration of the subject content of the chapter. We use a variety of vehicles to bridge student preparation and class-based activities to enhance their understanding of the chapter content and its overall relationship to managing HR strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come to the teaching session prepared to raise them. Sometimes this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write their answers briefly in note format;

•

complete the self-check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to both self-check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. Pre-set questions that we have found useful for structuring student reading, preparatory activities and classroom discussion for the topic of culture and SHRM include: 1. Based upon your reading do you consider culture is something an organisation is or one of a series of organisational attributes? 2. What are the main similarities and differences between different typologies of national cultures? 3. Why do you think it is often stated that it is difficult to change an organisation’s culture? 4. Is it better to adopt a top-down or a bottom-up approach to organisational change?

In the classroom Clearly the approach adopted to ‘student preparation’ can be followed through into the classroom. A starting point that we find useful is to surface and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a brief summary of key issues.

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Where preparing answers to self-check and reflect questions has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, preparing answers to self-check and reflect questions was not part of preparatory work but consideration of the questions is to feature as part of the teaching session, we would favour the group approach as a more stimulating approach. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued. Where case study work has featured as part of preparatory activities, similar approaches to those suggested for self-check and reflect questions can be adopted. If coming to the case afresh, there is unlikely to be time for groups to consider all four questions. Here we would suggest that groups major on one of the case questions only moving on to others if they have time. Our answers to the three questions arguably present a degree of comprehensiveness and detail unlikely to be echoed within the parameters of a standard teaching session. However, they can be introduced into discussion of the case study and their validity critiqued. In addition, there is scope for further detailed development of our answers and examples are provided as to how this might be put into operation.

Follow-up work The pedagogic features adopted throughout this book are intended to offer a number of alternatives for follow-up work while at the same time leaving the lecturer free to add or substitute their own ideas. If they have not already been used as part of class activities, any prior preparation answers to the self-check and reflect questions and/or the questions suggested for student preparation and/or the chapter case ‘Corporate culture and group values at DICOM Group plc’ will serve as a useful reinforcement to chapter content. Our outline answers to both self-check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading. A further task for part-time students could involve them exploring their own organisation’s culture with a view to analysing the extent to which the symbols/artefacts, espoused values and basic underlying assumptions mutually reinforce each other.

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Answers to Self-Check and Reflect Questions 6.1 Produce a table summarising the arguments for convergence and for divergence of national cultures using the following structure: Arguments for convergence

Arguments for divergence

•

advances in telecommunications mean the world is becoming smaller

•

language differences encourage divergence

•

people are increasingly buying global brands

•

different religious beliefs mean things are done differently

•

there is a rapid increase in the use of technology

•

political systems and laws differ between countries

•

growing numbers of multinational firms will result in structures, strategies and practices becoming more similar between countries

•

countries differ in their level of economic development

•

within countries workforces are increasingly culturally diverse

•

multinational organisations have no national allegiances, only an international common purpose

•

many managers are trained in western business schools which tend to underpinned by similar ideologies

6.2 Examine Tables 6.1 and 6.2 and select two countries with contrasting profiles. Use Hofstede’s dimensions to suggest how SHRM interventions to motivate and appraise employees might differ between these countries. Now repeat this process using Trompenaars and Hampden-Turner’s dimensions. To what extent do your suggestions differ? Inevitably your precise answer will depend upon the two contrasting countries you have chosen. In our answer we have chosen the United Kingdom and Japan. As you will see, although the dimensions differ, the suggestions based upon these dimensions are similar. Hofstede: The United Kingdom scores lower on the power distance dimension than Japan. According to Hofstede, this suggests that UK employees will be less likely than Japanese employees to accept uneven distributions of power within the workplace and will expect more consultative decision-making. UK employees will also be less likely to be happy with large pay and reward differentials than Japanese employees. Hofstede’s research suggests that UK employees are likely to be more individualistic than Japanese employees. This suggests that the UK employees are more likely to prefer bonuses such as individual performance related pay while those in Japan may prefer team-based performance related pay or company wide bonuses. Both UK and Japanese employees are likely to place emphasis on performance at work, both having scored towards the masculine on Hofstede’s masculinity/femininity dimension. This means there are less likely to be differences in their views in this area. However, Hofstede’s work highlights that UK and Japanese employees differ markedly on uncertainty avoidance. UK employees are likely to have a lower level of uncertainty avoidance, 53 © Pearson Education Limited 2007

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implying that they are less likely to be motivated by long-term job security. This means that the reward package developed is likely to differ from that, which would be developed for Japanese employees. Finally, Hofstede’s work highlights that Japanese employees are likely to have a longer-term view than their UK employees. This may be reflected in the focus on longer-term targets rather than quick results more normally expected in UK organisations. Trompenaars and Hampden-Turner According to Trompenaars and Hampden-Turner, UK employees are likely to be more universalist than those in Japan. This suggests that schemes to motivate UK employees are more likely to need to be clearly delineated with well defined criteria than those in Japanese organisations. Differences in attitudes to time also support this suggestion, UK employees being more likely to consider motivation as a linear sequence where specific performances result in specific rewards. As discussed in this chapter, Trompenaars and Hampden-Turner’s individualism versus communitarianism dimension is almost identical to Hofstede’s individualist/collectivist dimension. Not surprisingly therefore it would seem likely that UK employees are more likely to prefer bonuses such as individual performance related pay while those in Japan may prefer team-based performance related pay or company wide bonuses. The specific versus diffuse and the attitudes to the environment dimensions also support this assertion. The former suggests that Japanese employees are more likely to consider issues such as performance holistically, emphasising the interdependency of their own performance with that of others. The latter suggests that, in contrast to UK employees, Japanese employees are more likely to consider the wider external context within which their performance has occurred. Relative scores on the neutral versus emotional dimension suggest that communicating personal feelings when motivating employees is more likely to be acceptable in the United Kingdom than in Japan. Trompenaars’ and Hampden-Turner’s dimension achievement versus ascription suggest that UK employees are more likely to expect rewards such as promotion for their own achievements. In contrast, Japanese employees focus’ on ascription suggests that seniority and promotion linked to age or time served in the organisation are more likely to be acceptable. 6.3 Why do you think it is difficult for managers to describe their organisation’s culture in detail? Although outward manifestations of culture are easy to discern (relatively visible), deeper underlying meanings upon which these are based are more difficult to decipher. In particular, the underlying values upon which an organisation’s culture are based are held deep within individual employees’ subconscious. Consequently, although they are articulated in individuals’ practices and, perhaps, the organisation’s espoused values, they occur almost automatically and are taken for granted. This means they are likely to be thought about only rarely. 6.4 Visit HP’s corporate website at http://www.hp.com. Use the menus to go to the pages headed ‘Company information: About us – History and Facts’. What clues do these give you about the culture of HP? Which culture do you consider was dominant in the merger between HP and Compaq? As you browse through these pages you will find lots of clues to HP’s corporate culture. Some of those that are readily apparent are the stories relating to the founding and early years of HP.

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Others relate to the management style adopted and the SHR interventions made by the company. They include: •

The story that when Bill Hewlett and Dave Packard founded HP in 1939, they built the company's first product, an electronic instrument used to test sound equipment, in a Palo Alto garage.

•

The HP management style of management by walking about was created by the founders and emphasises personal involvement, good listening skills and the recognition that everyone in an organisation wants to do a good job.

•

The use of an open door policy to create an atmosphere of trust and mutual understanding. This policy encourages employees to discuss problems with a manager without reprisals or adverse consequences.

•

The provision of medical insurance for employees, using first names to address them, and the holding regular parties to show that the company cares for its employees.

•

The use of reward schemes to reflect the company’s belief that all employees should share directly in the company’s success.

•

The use of charitable giving and other activities to show the company’s belief that it has a responsibility to be a good corporate citizen.

•

The design and location of buildings reflect the company philosophy that people require attractive and pleasant surroundings to attain maximum job satisfaction and to perform to the best of their abilities.

•

The institution of flexible working hours, or flex-time. The purpose, as explained by Bill Hewlett was ‘to allow employees to gain for family leisure, conduct personal business, avoid traffic jams or to satisfy other individual needs’.’

Although the website talks about the historical development of Compaq – the company with whom HP merged in 2002, there is relatively less information provided than for HP’s development as outlined above. This combined with the company retaining the HP name may be taken to suggest that the HP culture was dominant in the merger (see also Practice Box 6.6). 6.5 How might an organisation use SHRM interventions to support a culture re-alignment process? SHR interventions are likely to be used to support and facilitate cultural re-alignment rather than initiate it. It is important that such interventions are aligned to the desired culture, and therefore the overall strategy of the organisation, and that they project values appropriate to both the strategy and the culture. Symbols of cultural re-alignment such as the management structure, office space and car parking allocations can be used to reinforce the new culture. Training interventions can also be used to help educate employees about the reasons for the re-alignment and the new desired behaviours. HR systems can be designed and implemented to support the desired culture. For example, performance measurement and reward schemes can be used to monitor and reinforce desirable behaviours in employees such as openness, learning and risk taking. Similarly recruitment, retention and redundancy can be used to help ensure that employees’ skills and preferred approaches to working match an organisation’s requirements.

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Whether top-down or bottom-up strategies are adopted, it is important that the HR interventions used provide consistent clues to the desired culture. 6.6 Why might organisations choose a top-down approach to cultural re-alignment? Top-down approaches may be appropriate in particular circumstances or at particular times during a culture change process. Re-examining Table 6.4 highlights those of Bate’s (1995) design parameters of culture re-alignment for which a top-down approach is more effective. In particular, the table emphasises the ability of top-down approaches to communicate simple messages quickly. Thus, where expressiveness is essential to culture re-alignment or to a particular stage of the culture re-alignment process then a top-down approach may be most appropriate. This is especially where all that is required are changes at the practice/artefact level or rapid change is required. Top-down approaches may also be effective where it is essential that the new culture’s message is spread throughout all levels of an organisation such as the merger between HP and Compaq. The ability of the message to penetrate in such cases depends on the communication process being highly structured. However, it must be remembered that in the short-term, such an approach is likely to generate some resistance to the new culture’s values and basic underlying assumptions. In contrast, bottom-up approaches are more likely to generate a shared understanding and ownership of the new culture, although initially only amongst a sub group of employees rather than the whole organisation.

Answers to Case study questions 1. Drawing on the information given in this case, construct a cultural web for DICOM group. Inevitably the visual cultural webs that are constructed by the students will differ. However, each sphere is likely to contain at least some of the following elements drawn from the case: Routine: this is the way that different members of the organisation link behave towards each other and link together or ‘the way we do things around here’. Johnson and Scholes (1993:60) continue that at their best such routines ‘lubricate’ the workings of the organisation. DICOM is promoted to its staff as the ‘DICOM Family’. The unofficial (although heavily endorsed by senior management) aim is ‘To make money and have fun doing it’. Consequently, management and staff operate together with the minimum of supervision necessary and allow staff great freedoms to do their jobs in their own way, albeit within the confines of company procedures and policies (paradoxical as it might sound). As senior management would put it, ‘We like to steer with very long reins’. Rituals: these are performances that re-enforce the routines above, such as training programmes, assessment and promotions. Training is a very important part of DICOM’s culture. All levels of staff are encouraged to take advantage of both in-company and external training programmes. If there is a business advantage in the training, then DICOM will finance it and allow the individual the time to complete it. At present within the UK office, staff are attending courses as divers, as CIPD diploma, Open University CMS and a number of technical staff are undergoing Microsoft Certification training. DICOM have recently introduced a new initiative, ‘The DICOM Academy’. As part of the programme all DICOM management (and those identified as management for the future) are being offered a series of one-week courses at various venues around the world, taught by Harvard Business School professors alongside DICOM board members. These have included Leadership and Marketing.

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Performance appraisal is carried out annually, with three monthly reviews in some areas. The onus is very much on the staff to review their own performance. They fill in their own appraisal schedule with their line manager, and are asked things such as, ‘How do you rate your punctuality on a scale of one to ten’? If the member of staff has very different ideas of the rating to his/her manager, then a discussion is held and a compromise reached. Wherever possible, staff are given as much responsibility as they can handle as quickly as possible in both their own development and their working lives. Wherever possible, internal staff are promoted into managerial positions as they arise. Where this is not possible, they are involved in the writing of the job specification and the recruitment process, including the interview and selection process. Stories: these are told by members of the organisation to each other, outsiders, new recruits and mavericks. Their aim is to create awareness of organisational history, personalities and important events. Stories form a very important part of the way DICOM portrays itself. They are used to illustrate the company's values to visitors, new hires and people who come for job interviews. In the main, all the stories emphasise the humanity and caring nature of the Swiss based board of directors and how this permeates the entire company. The case highlights the story regarding the company’s tenth anniversary celebrations. All the 800 company staff from around the world and their partners were invited to Switzerland for all expenses paid weekend of celebrations at the Lucerne opera house, which was hired exclusively for the company for the whole weekend. Legend has it that the company chairman paid for this out of his own pocket. Announcements regarding company performance and other news are communicated regularly to the whole company through email from the CEO. He always begins the email, ‘Dear Friends’, and always makes a point of finishing off by thanking everyone for their hard work and commitment. DICOM's board of directors asked all subsidiaries to complete an annual report on promotions, hires of disabled staff and donations to charity. This is done with the aim of promoting ‘ethical awareness’ amongst DICOM's management. Subsidiaries are also expected to produce a bimonthly newsletter for local staff, keeping them informed of company news and performance, as well as giving them to opportunity to include their own personal and departmental news. Symbols: these include things such as offices, cars, logos, titles and terminology, which themselves can become representative of the nature of the organisation. Virtually all employees work in an open plan offices and symbols of rank and seniority are discouraged. Language is very important within DICOM with unique ‘organisational’ meanings being given to some everyday words. This would make some conversations within the organisation fairly unintelligible to outsiders, although completely sensible to those within. This helps reinforce the feeling of camaraderie, and membership. For example: DICOM word

Meaning

'Standards!'

Well done! Congratulations! For example, we have set the standard to our competitors.

We don't wear stripes

Everyone has the right to have their say and be involved in decision-making.

Control systems: these are measurement and reward policies that emphasise what is important to the organisation, and focus attention on it accordingly.

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Measurement is a continual process, even if official performance reviews are not. Workgroups normally meet on a monthly basis to discuss problems and progress. All are encouraged to make suggestions to improve workgroup performance against certain measurable criteria. Where performance of an individual is exceptional, managers have discretion to reward them in a way most valuable to the individual. This might be the granting of extra holiday, a meal for them and their partner or a public display of gratitude at an award ceremony. Every year at the Christmas celebration, a number of awards and prizes are given out to individuals and workgroups who have been voted as exceptional by their colleagues. Power structures: these are associated with the key constructs of the paradigm. Senior management is most likely to be associated with the core assumptions and beliefs as to what is important to the organisation. Students are likely to find this sphere more difficult to discern from the case. However, the role of senior management in the group’s tenth anniversary celebrations emphasises how management are associated with core assumptions and beliefs that are important to the organisation. Organisational structure: this is the more formal way in which the organisation functions, and is likely to demonstrate power structures, relationships and again what is important to the organisation. DICOM has a very flat organisational structure. Within the United Kingdom, there is the Managing Director, Senior Managers, Junior/Workgroup Managers and staff. As noted within the case, although employees do have ‘rank’ the display of ‘stripes’ is not encouraged. When visitors are shown around the company, managers introduce their staff saying ‘These are my colleagues’. If anyone said ‘These people work for me’ or ‘these are my staff’ people would become quite annoyed and expect a later apology. 2. Assess the extent to which DICOM Group’s culture is aligned to its vision and mission. Having constructed their cultural webs, students are likely to find this and subsequent questions far easier to answer. The vision and mission are both set out clearly at the beginning of the case. We have found that in answering the question, students benefit most from seeing how each sphere in their cultural web enables each of six bullet points that make up the mission are addressed using a simple table. These then enable DICOM to work towards its vision. For example: Mission statement

Evidence

Cultural web sphere

We care for our customers better than anyone else in our industry.

Limited evidence

We are a premier business partner of the world's leading system integrators, software developers, IT resellers and OEMs

Symbols

Language is very important within DICOM with unique ‘organisational’ meanings being given to some everyday words. For example, ‘standards’

We only compete with superior products and services in fast growing information technology sectors in which we can achieve and maintain a dominant market share

Symbols

Language is very important within DICOM with unique ‘organisational’ meanings being given to some everyday words. For example, ‘standards’

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We hire the highest calibre employees available and continually invest in their development.

Rituals

Training is a very important part of DICOM’s culture. All levels of staff are encouraged to take advantage of both in-company and external training programmes including the DICOM Academy. Performance appraisal is carried out annually, with three monthly reviews in some areas. The onus is very much on the staff to review their own performance.

We constantly aim to achieve attractive returns for our shareholders.

Control systems

Workgroups normally meet on a monthly basis to discuss problems and progress. All are encouraged to make suggestions to improve workgroup performance against certain measurable criteria.

To us respect, integrity and loyalty constitute very important values, reflected in a co-operative relationship with the society and the environment in which we operate.

Routine

DICOM is promoted to its staff as the ‘DICOM Family’. The unofficial (although heavily endorsed by senior management) aim is ‘To make money and have fun doing it’.

Stories

Power structure

The humanity and caring nature of the Swiss based board of directors and how this permeates the entire company. DICOM has a very flat organisational structure. Within the United Kingdom, there are the Managing Director, Senior Managers, Junior/Workgroup Managers, and staff. As noted within the case, although employees do have ‘rank’ the display of ‘stripes’ is not encouraged.

3. To what extent do you consider that DICOM Group’s culture exhibits characteristics identified by Hofstede (Table 6.1) and by Trompenaars and Hampden-Turner (Table 6.2) for Switzerland? Give reasons for your answer. Hofstede Power distance relates to the extent to which less powerful employees accept that power is distributed unequally. Within DICOM inequalities between people appear to be minimised and consultative decision appears more likely to be used. Individualism/collectivism refers to the extent to which individuals are orientated to themselves and their immediate family, rather than wider strong cohesive in-groups that offer protection in exchange for unquestioning loyalty. In DICOM contracts of employment appear to be based on mutual advantage, DICOM providing training and good physical conditions. This suggests the organisation is more collectivist. Masculinity/femininity refers to the extent to which assertiveness and decisiveness are prioritised over more caring values such as nurturing and concern for quality of life. Within DICOM importance is placed upon competition and high performance emphasising the ‘masculine’ aspects of this dimension. At the same time, the resolving of differences by discussion emphasises the feminine aspects of this dimension.

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Uncertainty avoidance relates to the extent to which people feel threatened by ambiguous or unknown situations. It is less clear from the case where DICOM is placed upon this dimension. Confucian dynamism captures the long- or short-term orientation. Although DICOM places emphasis on the importance of social obligations, the emphasis on results and high performance suggests a more short-term orientation. Trompenaars and Hampden-Turner Relationships with people Universalism versus particularism. Relationships with people are important within DICOM. However, personal relationships are not anticipated to impact upon business decisions. Rather they are expected to be made logically, impartially and professionally suggesting a more universalist focus. Individualism versus communitarianism emphasises that societies can be individualistic or collectivist. Within DICOM employees appear to regard themselves as part of a group and consequently more communitarian than individualistic. Neutral versus emotional highlights the extent to which it is acceptable to express emotions publicly and communicate the full extent of personal feelings. Within DICOM, by establishing rapport between individuals, it appears possible to discuss performance issues and communicate personal feelings. Specific versus diffuse is concerned with the relative importance ascribed by different cultures to focusing on the specific, for example analysing issues by reducing them to specific facts, tasks, numbers or bullet points. This is contrasted with a focus upon analysing issues by integrating and configuring them into relationships, understandings and contexts. From the information within the case, it is uncertain where DICOM would be placed on this dimension. Achievement versus ascription This focuses upon the way in which status is accorded. DICOM places relatively high values on achievement rather than status. Attitudes to time This focuses particularly on whether time is viewed as linear and sequential (past, present and future) or circular and synchronic (seasons and rhythms). These differences are likely to impact on how planning and organising takes place, little information on which is provided in the case.

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CHAPTER 7

Strategic human resource planning: the weakest link? Learning outcomes By the end of this chapter you should be able to: •

identify and discuss the core principles that underpin the concept of strategic human resource planning;

•

critically evaluate the extent to which strategic human resource planning represents the vital connecting link between organisational strategy and SHRM practice;

•

analyse the conceptual and operational difficulties surrounding the practise of strategic human resource planning;

•

assess the relevance of strategic human resource planning to organisations facing an increasingly changing business environment;

•

review potential avenues for addressing the difficulties associated with human resource planning to enhance its operational viability.

Summary •

HRP is the name given to formal processes designed to ensure that an organisation’s human resources capability can support the achievement of its strategic objectives. It involves forecasting the future demand for and supply of labour and drawing up HR plans to reconcile mismatches between the two.

•

When viewed as the vital link between organisation and HR strategies HRP can be regarded as a bridging mechanism fulfilling three vital roles: aligning HR plans to organisational strategies to further their achievement; uncovering HR issues that can threaten the viability of organisational strategies and thereby lead to their reformulation; and acting in a reciprocal relationship with organisational strategies such that HR issues become a central input into the strategy formation process.

•

Numerous difficulties surrounding the practise of HRP may thwart its potential to serve as the link between organisational strategy and SHRM practice. These difficulties may be sufficient to lead organisations to abandon any thoughts of practising HRP, may conspire to reduce the effectiveness of HRP practice or may limit its application to short-term, operational matters.

•

Patchy and limited data on HRP practice points to its low level of take-up by organisations leading to an alternative perspective of HRP as the missing or weakest link between

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organisational and HR strategies. This leads to a paradox where the more the complexities of organisational life warrant the establishment of HRP as the vital link the more these complexities are likely to cause HRP to be cast aside to become the missing/weakest link. •

Avenues for confronting operational difficulties and forging HRP as the pivotal bridging mechanism between organisational strategy and SHRM practice focused on: raising the profile of HR issues generally and the status and credibility of HR practitioners particularly; using contingency and scenario planning to introduce flexibility into the HRP process; building towards a flexible workforce that can manage the vagaries arising from unplanned developments and an uncertain future; and developing an HRP process centred on continual review, evaluation and adaptation and adopting a multi-stakeholder approach to make this a realistic possibility.

Teaching and learning suggestions Comment An immediate problem facing the delivery of this topic is the overall lack of attention it receives in the human resource management (HRM) literature, particularly in the United Kingdom, despite its potential bridging role between corporate strategies on the one hand and HRM strategies and operational activities on the other. Increasingly mainstream HR texts do not include a chapter on human resource planning and where they do its strategic role receives only passing attention. One reason for this is the conflation of HRP and HRM such that both may come to be regarded as synonymous. This is not the stance adopted in this chapter, which makes the case for human resource planning (HRP) to be regarded as the prime vehicle for translating the strategic imperatives of organisations into meaningful human resourcing strategies, policies, procedures and operational activities. Drawing on the seminal work of Schuler and Jackson (1987), for example, HRP is the bridge that links their competitive strategies with HRM practices. Here the argument is that to identify and develop HR practices relevant to different organisational strategies requires a deliberate planning intervention, that is, HRP. However, it is also important to emphasise that this one-way, top-down strategic relationship between corporate and HRM strategies is only one of a number of different types of strategic fit such that at the other extreme, for example, HRP when used to identify and generate core competences can become a vehicle for shaping organisational strategy itself. It is also important to emphasise to students that there is a potential conflict between the whole notion of planning and the environmental uncertainties surrounding many organisations. Planning suggests a degree of certainty that is largely unrealistic in today’s volatile business climate. Therefore to be useful HRP processes have to be shaped so that they can accommodate planned and unplanned change over different time horizons.

Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We have found that producing mind maps of the chapter content is a useful approach to note taking and encourages students to reflect on the internal integration of the subject content of the chapter.

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We use a variety of vehicles to bridge student preparation and class-based activities to enhance their understanding of the chapter content and its overall relationship to managing human resources (HR) strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come to the teaching session prepared to raise them. Sometimes this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write their answers briefly in note format;

•

complete the self check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. Pre-set questions that we have found useful for structuring student reading, preparatory activities and classroom discussion for the topic of strategic HRP include: 1. How would you define HRP and set it into the SHRM context? 2. What are the principal strategic relationships between HRP and corporate strategy and how could they be evidenced in practice? 3. What do you understand by the HRP paradox and how does this impact on the utility of the concept? 4. How would you argue the case for and against the formal adoption of strategic HRP by organisations?

In the classroom Clearly the approach adopted to ‘student preparation’ can be followed through into the classroom. A starting point that we find useful is to surface and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a snappy summary of key issues. Where preparing answers to self check and reflect questions has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, if preparing answers to self check and reflect questions was not part of preparatory work but consideration of the questions is to feature as part of the teaching session, we would favour the group approach as a more stimulating approach. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued.

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Where case study work has featured as part of preparatory activities, similar approaches to those suggested for self check and reflect questions can be adopted. Our approach here would be to start with a more general exploration of the HRP implications of mergers and acquisitions and use this to develop an evaluative framework against which practice in the three case companies can be analysed. If coming to the case afresh, there is unlikely to be time for groups to consider all four questions. Here we would suggest that groups be allocated one of the case companies (Deutsche Bank/Bankers Trust or British Petroleum/Amoco or Volvo/Ford) and asked to work through Questions 3 and 4 for their allocated company. Group outputs can then be used as the basis for a plenary consideration of Questions 1 and 2. Greater topicality can be achieved by capturing the big business news stories of the week, discussing the HRP issues that are likely to arise and exploring how HRP might be used effectively to address these issues.

Follow-up work The pedagogic features adopted throughout this book are intended to offer up a number of alternatives for follow-up work while at the same time leaving the lecturer free to add or substitute their own ideas. If they have not already been used as part of class activities, self check and reflect questions and/or the chapter case study, ‘Human resource planning in mergers and acquisitions’, can be set as follow-up work and should serve as a useful reinforcement of chapter content. Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading. A further task could require students to research reported case examples of mergers and acquisitions and analyse the extent to which HRP is evident during the planning, implementation and consolidation stages and the likely consequences of their findings.

Answers to Self-Check and Reflect Questions 7.1 To what extent can the hard and soft variants of HRP be regarded as mutually exclusive? Too frequently hard and soft HRP are presented as either/or alternatives. Like much else in the literature this is far too simplistic and ignores the potential for both to operate in tandem and for hard HRP to have a soft edge and vice versa. For example, throughout the chapter mergers and acquisitions are used as a linking theme to illustrate facets of HRP practice. Here hard HRP will often involve: restructuring work activities to remove unnecessary duplication; forecasting staff numbers against this reduced requirement; and making staff surplus to requirement redundant to bring labour supply into line with demand. Although ‘hard’ this action may be vital if the planned synergies from merger/acquisition are to be realised. However, at the same time soft HRP may be evident. The organisation may be trying to manage the cultural integration of surviving employees or setting aside the cultural inheritance to re-align the organisation culture. Further the hard, quantitative manifestation of HRP arising from redundancy may simultaneously exhibit a soft edge. The way the organisation manages the process, including its

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treatment of survivors, is likely to directly affect the success of the redundancy programme itself and the future prospects of the emerging organisation. Similarly, if cultural alignment is imperative for the future survival of the organisation, employees unable to make the necessary adjustment may find themselves managed out of the organisation. 7.2 To what extent can the view that HRP is all about ensuring that the right person is in the right place at the right time be interpreted as a soft, as well as hard, approach to HRP? In a similar vein to Question 1, this simple view of HRP has been strongly associated with the ‘hard’ variant but arguably contains within it the potential for a ‘soft’ interpretation. This view is often bracketed with manpower planning with the assumption that the ‘right person’ carries with it quantitative overtones. Here it is interpreted as referring to the number of employees with manpower planning being about ensuring that the supply of staff matches the demand for staff arising from the different tasks to be performed. However, this is a restrictive interpretation because ‘right person’ could equally be said to refer to the soft, qualitative dimension of HRP. Here ‘right’ could be expressed in terms of skills and competences, cultural orientation, motivation, commitment, values etc. However, a number of these attributes represent intangibles. Some are personal, some contextual and some organisational such that any attempt to incorporate them within HRP will require an approach that reflects the longer-term orientation consistent with strategically focused HRP. Therefore, although this view of HRP appears simple in appearance, it can be argued that a broader interpretation reflects more comprehensive definitions of HRP. The key lies in how ‘right’ is interpreted and similar analysis can be applied to ‘right place’ and ‘right time’. 7.3 How would you map out the benefits of HRP identified in the above analysis against the ‘regulation’, ‘control’ and ‘shape’ phases of Ulrich’s (1987) model of transitions in SHRP (see Table 7.4). You might find it helpful to structure your answer in tabular format. To get you started, one example under each of the three phases identified by Ulrich has been provided below. Phase I Regulation

Phase II Control

Phase III Shape

Provides detailed information that enables tighter control over staffing numbers and costs.

Enables HR strategies to be linked to and integrated with organisational strategies.

Surfaces and recognises the potentially unique contribution an organisation’s human capital can make to long-term strategic direction.

Generates a detailed audit of an organisation’s human capital.

Provides a formalised process that encourages organisations to take account of HR issues early on in strategy making thereby reducing the risk of implementation failures due to a lack of HR capability.

Ensures that the HR dimension receives due attention in the strategy making process.

Enables the appropriateness of the organisations current skills, knowledge and attitudes mix to be analysed.

Provides a formalised process for generating plans to tackle the HR issues arising from strategic planning.

Provides a process for raising people issues early in the strategy – setting debate and ensures that business-based plans are put in place for the people outcomes of this debate.

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Provides a mechanism for forecasting labour demand against internal and external supply in terms of numbers, knowledge, skills and attitudes.

Generates a variety of HR solutions for tackling the complexity of problems arising from strategy making.

Operates as a major facilitator of competitive advantage.

Matches labour demand and supply and through gap analysis surfaces mismatches between the two that need to be addressed.

Enables HR strategies, policies, procedures and practice to be developed as a coherent bundle of activities.

HRP has an important role to play in reconciling the needs of individual employees and the needs of the organisation.

The integration of HR policies and practices horizontally and vertically contributes positively to organisation performance. Facilitates the pursuit of high performance organisations commonly associated with SHRM by focusing on a high commitment, productivity and trust agenda. Crucial to helping organisations to adapt the workforce to meet changing demands arriving from a dynamic socio-economic climate. 7.4 For each of the above cases answer the following question and justify your answer with reference to case evidence: •

Which of the six strands of strategic integration are evident in the case company?

The SIBUC case HRP at SIBUC reflects a systems perspective where it is conducted as a rational process flowing down through the three levels of organisational strategy. HRP starts from the organisation mission and strategic objectives, which inform the objectives for each of the nine functional areas. This led to the formulation of a set of HR objectives, strategies, plans and control mechanisms to help achieve the organisation’s over-arching mission and strategy. This mirrors the first and third strands of strategic integration (and perhaps by implication, the second). Emerging from the strategic objectives is a set of what could be called core competences such as service vocation, innovative, autonomous and effective interaction. These together with the cross-integration of the objectives for the nine functional areas provides for horizontal integration, the fifth strand. The use of the SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis to analyse and draw on the strengths of the existing staff, however, provides an opportunity for these to shape strategy formulation and suggests the possibility for two-way strategic integration, the fourth strand. The Farquhar case The Farquhar case appears to be much more opportunistic. Planning appears less formalised and the big decision to locate a production unit in the Czech Republic arises from the economic

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potential emerging from Eastern Europe. In this sense Farquhar appears to be responding to change in a dynamic business environment, which reflects the sixth strand of strategic integration. Developments in the Czech plant are also working upwards to influence production practice at Huntley, reminiscent of the fourth strand. Although Farquhar’s corporate strategy is not made explicit the location decision clearly reflects first and second-order strategic decisions and therefore relates to the first and second strands.

Answers to Case study questions We would like to emphasise that we have used Salama et al’s (2003) work as a vehicle for an analysis of HRP particularly as it applies to mergers and acquisitions. It should be stressed that this was not the main point of focus in their study and their published work obviously reflects this. It should be remembered throughout that there is limited specific data available on the HRP processes and activities deployed by the case companies. Therefore, at times, it has been necessary to make assumptions that we recognise in reality may be open to question. In answering the case study questions we found it helpful to keep in mind that mergers and acquisitions comprise a number of key stages. First, there is a pre-merger or integration phase where organisations have the opportunity to assess the compatibility or fit between the merging organisations. Second, there is the post-merger or integration phase where plans to exploit the potential synergies provided by mergers and acquisitions are finalised and implemented. Salama et al (2003) refer to these two phases as the courting and the marriage phases respectively. As such these phases arguably cover the due diligence period ahead of merger and the short to medium-term HRP time horizon following merger. Third, is a longer-term, post-merger consolidation phase that may also incorporate further, significant strategic change. 1. Compare and contrast the three outline cases from an HRP perspective. What are the main similarities and differences between them? In all three cases it appears that any HRP considerations lie downstream from a first-order strategic decision to merge. One possible exception is the Deutsche Bank and Bankers Trust merger where it might be argued that the results of the cultural assessment exercise could have resulted in ‘the marriage’ being called off. However, it seems to us that the exercise was designed more to identify issues that would have to be addressed during the marriage phase than to determine whether the merger should go ahead or not. In all three cases attention is being paid to second-order strategic issues concerning structures. For Deutsche Bank/Bankers Trust and Volvo and Ford restructuring is at a corporate level whereas with British Petroleum (BP) and Amoco it appears to be more concerned with merging functional operations. In all three cases there appears to be an understanding of the importance of cultural compatibility and the need to successfully manage any emerging acculturation process. This reflects concern for soft HRP issues. There is also evidence that hard HRP issues are being persued. For Deutsche Bank/Bankers Trust this has a clear line through to downsizing/redundancy whereas with BP/Amoco and Volvo/Ford we are reading ‘synergies’ as a euphemism for rationalising business functions, leading to redundancy as a natural consequence. In terms of process both BP/Amoco and Volvo/Ford established integration teams to help manage the merger although their emphasis appeared to be more on identifying potential operational synergies. Across all three cases, and particularly with Deutsche Bank/Bankers Trust and BP/Amoco, where there is more detail available, it is not clear what HRP processes

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are being used to generate the HRP initiatives being implemented. However, with Deutsche Bank/Bankers Trust there appears to be a close fit between the analysis of results from the cultural assessment exercise and subsequent management action and HR initiatives deployed. This is unlikely to have happened by accident and suggests that deliberate planning lies behind such integration. Communication, a vital ingredient to successful mergers and acquisitions, appears being handled differently across the three cases. For Deutsche Bank/Bankers Trust the communication focus appears to be directed at employees during the courting phase through the cultural assessment exercise and enhanced communication to close the information gap revealed by its findings. For BP/Amoco the focus appears to be on the marriage phase with different approaches adopted for managers and employees. For the former there were regular meetings designed to breakdown barriers between BP and Amoco managers whereas for the latter attitude surveys are being used to surface issues that managers would need to address if they are to win over the ‘hearts and minds’ of employees. For Volvo/Ford there is no explicit reference to communication processes. However, the fact that a cultural analysis of the two companies has been derived from employee perceptions implies that some form of employee survey has been conducted during the courting phase. With Deutsche Bank/Bankers Trust and BP/Amoco there is evidence of specific downstream HRP initiatives designed to facilitate achievement of strategic objectives whereas with Volvo/Ford such HRP appears, at best, to have been deferred until after operational synergies have been achieved. Although the integration team in Volvo/Ford was seen ‘as an important vehicle for overcoming cultural differences’ there is no suggestion as to how this was to be achieved. Lastly, despite the process being essentially top-down there is evidence pointing to the use of ‘employee voice’ to provide a bottom-up perspective. This would certainly appear to be behind the cultural analysis at Volvo/Ford and can be seen to be driving management thinking at Deutsche Bank/Bankers Trust. However, involvement beyond this is not evident although at BP/Amoco it might be part of the input into establishing desired work behaviours, systems and processes. 2. If you had been responsible for the HRP dimension of each of the three merger situations, which do you think was handled most effectively and why? Interestingly, in each of the three cases there is no real indication as to the role, if any, being played by any HR function in planning and implementing the merger. However, on the basis of available information, we found it easier to identify Volvo/Ford as the merger situation we believed to have been handled least effectively from an HRP perspective. Here, apart from the initial cultural analysis and organisational restructuring, HR concerns appear to play second fiddle to other functional concerns arguably raising the risk of merger failure because of poor HRP as highlighted by Appelbaum and Gandell (2003). The choice between the other two case scenarios is much more difficult as there is merit in both their approaches to HRP. In the HRP chapter summary it was argued that ‘When viewed as the vital link between organisation and HR strategies HRP can be regarded as a bridging mechanism fulfilling three vital roles: aligning HR plans to organisational strategies to further their achievement; uncovering HR issues that can threaten the viability of organisational strategies and thereby lead to their reformulation; and acting in a reciprocal relationship with organisational strategies such that HR issues become a central input into the strategy formation process’. We would argue that both the Deutsche Bank/Bankers Trust and BP/Amoco cases evidence the first role of ‘aligning HR plans to organisational strategies to further their achievement’. However, we were initially attracted to the Deutsche Bank/Bankers Trust case where we felt there was more explicit concern to incorporate the second of these HRP roles concerned with ‘uncovering HR issues that can threaten the viability of organisational

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strategies’. From this perspective it could be argued that the Deutsche Bank/Bankers Trust case evidences a more comprehensive approach to HRP than BP/Amoco, particularly with respect to their handling of the pre-merger integration phase. However, contrary to this initial position, we would argue that BP/Amoco comes out stronger in the post-merger integration phase. Apart from a concern to challenge prevailing working values, the Deutsche Bank/Bankers Trust marriage appears to overly focus on the hard HRP issues surrounding business efficiency. While this is a critical consideration there is evidence that not only is this dimension being actioned within BP/Amoco but that they are also dealing with soft HRP issues to a greater extent. With BP/Amoco we particularly liked the fact that rather than imposing a cultural blueprint they appeared to be more concerned to identify and develop appropriate behaviours from an analysis of current patterns of employee behaviour. There is an apparent concern to develop a new corporate culture and the commitment to build from current patterns of work behaviour is also evident in the approach being adopted for integrating systems and processes, including HR. Here ‘best practice’ is being used as the guiding criteria for such decisions irrespective of where it appears across the constituent companies. Throughout the cases there is very little reference to arguably a third phase of mergers and acquisitions, the post-merger consolidation phase. This incorporates a longer-term perspective and we particularly liked the intended use by BP/Amoco of regular monitoring of employee attitudes to shape future managerial action to secure their commitment to the new company. There appeared to be less concern for longer-term HRP issues within the Deutsche Bank/Bankers Trust case. In conclusion, based on the above analysis, we believe that the HRP dimension of the respective merger scenarios was handled most effectively within BP/Amoco. However, this could have been improved significantly if greater attention had been paid to HRP during the courting phase and the outcomes of this used to further guide HRP decisions during the marriage phase. 3. If you had been responsible for the HRP dimension of each of the three merger situations what would you have done differently and why? More general points relating to HRP in the three merger situations are covered in our answer to question four below. Here, we concentrate more on detailed operational HRP issues arising from the case scenarios. We have simply provided short, bullet point responses to provide examples of the sort of HRP practices we would have advocated. These can be used to facilitate a discussion around developing a broader and deeper analysis of the three case scenarios from an HRP perspective. Deutsche Bank/Bankers Trust 1. Given the challenge to existing Deutsche Bank working values, develop a new corporate culture for the merged company. 2. Translate this cultural blueprint into those over-arching employee values and behaviours (perhaps using a competency framework) thought to be necessary to achieve long-term merger and corporate business success. 3. Use these values and behaviours as the operational criteria when making HR decisions with respect to selection for redundancy, transfers, promotions, human resource development (HRD), reward allocation etc. 4. Develop communication channels/initiatives to cover the ‘marriage’ phase of merger and the longer-term consolidation phase. 5. Consider the approach to employee involvement in key areas such as ‘integration team’ membership and development of new working values as well as a broader consideration of the employee relations strategy to be adopted.

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6. Identify further key HRP issues and develop appropriate responses. Apart from communication and employee involvement identified above, these might include, for example, managing survivors, HR systems and processes such as job grading and remuneration, HRD strategies for acculturation and organisation structures to facilitate the emerging corporate culture (or vice versa). BP/Amoco 1. A clear HRP focus in the ‘courting’ phase to establish what will be the likely HR issues that will need to be addressed as part of the merger process (core values, attitudes, competences; structures; change management approaches; employee relations strategies etc.). 2. Make more explicit the nature and scope of employee involvement with respect to the ‘integration team’, development of core behaviours, development of new corporate culture, analysis of ‘best practice’ etc. 3. Significant investment in communication to keep employees informed and engaged in the merger process (and beyond). 4. Challenge the apparent quota-based approach to manager selection and replace with a performance and/or competency-driven approach. 5. Work through key organisational structures and assess the HRP consequences of any revised structures. 6. Plan how to manage the fallout from any: restructuring; functional rationalisation, particularly in terms of downsizing/redundancy; and performance management. Volvo/Ford Here we would have done just about everything differently. In terms of the information available we would certainly have wanted to work through the HRP implications of identified cultural differences between Volvo and Ford and the major structural reorganisation as well as making explicit the HR remit of the integration team if it is to fulfil its role as ‘an important vehicle for overcoming cultural differences’. More generally we would have given active consideration to all the other points raised above against the Deutsche Bank/Bankers Trust and BP/Amoco cases. 4. Critically evaluate the HRP process and practice evident in the three cases against the subject content of the chapter. Again we would suggest that our responses here leave scope for further development through facilitated discussion in-class. While a merger can be seen as an example of first-order strategy it does not in itself constitute the long-term corporate strategy of the organisation. What this corporate strategy might be in the three case scenarios is not made explicit in the information provided. This throws up two important limitations in HRP terms. First, the absence of a broader corporate strategy makes it impossible to evaluate the appropriateness of any HRP activity directed at furthering its achievement or to uncover HR issues that might threaten its viability. At best, it might be surmised that the mergers reported on are designed to achieve competitive advantage through cost minimisation but this is almost certainly not the whole picture. Second, in terms of temporal analysis, the focus in the cases is on short-term and, to a lesser extent, medium-term HRP activity. This ignores HRP related to the ‘long-term cycle’. As identified by Gratton et al (1999), the long-term cycle requires different clusters of people processes to secure strategic integration compared to those required for the ‘short-term cycle’. In the case scenarios there is no clear division or distinction in identified HR interventions between those relevant to short and long-term planning cycles.

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The above analysis throws up two further important limitations in all the case scenarios presented. First, there is no evidence that the third ‘vital role of HRP identified in the chapter summary has played any part in organisational thinking. This third role concerned the ‘reciprocal relationship with organisational strategies such that HR issues become a central input into the strategy formation process’. As far as can be seen here, HRP concerns appear to be almost exclusively directed at the output rather than the input level. Second, and very much related to Gratton et al’s (1999) temporal perspective, it is difficult to discern any HP consideration around the general issues of managing change and enhancing organisational competence to deal with planned changes (e.g. the merger) let alone future shocks. What is apparent throughout the chapter case study is that within the consideration of three mergers involving international companies there is little or no detailed information on the HRP processes deployed by the case organisations. We are in the dark as to how HR interventions have been determined and as to how they fit into a broader HRP process. There does not appear to be any evident HR strategy underpinning HRP (in an HR strategy input–HRP output relationship) or deriving from it (in an HRP input–HRP strategy output relationship). Further, there is no mention of HRP ownership making it difficult to discern the role, if any, of any extant HR function or the extent to which HRP has been embedded in line managers’ role responsibilities. Without this it is not possible to determine which conceptual models of HRP might apply to practice in the case companies. As will be evident from answers to earlier questions, there is also little focus on any post-merger consolidation phase. This may be an important phase if the marriages are not to subsequently breakdown and lead to ‘divorce’. Although there is hard HRP thinking evident in the first two case scenarios we are left to speculate on the extent of any labour demand and supply forecasting. This means that the quantitative dimension of HRP receives no substantive coverage and that the overall scope of any HRP is in consequence restricted. While the evident concentration on cultural issues exemplifies soft HRP concerns it is arguably at the expense of a broader consideration of the soft and hard HRP issues surrounding mergers and acquisitions. In brief, against the chapter content, we flag up three further considerations:

1. That the above critique, together with answers to Questions 1–3, only serves to demonstrate how difficult it is to practice strategic HRP. Despite the adage ‘to fail to plan is to plan to fail’ our review of some of the HRP issues to be confronted in mergers alone exemplifies the complexities associated with the process and lends credence to those who question its operational efficacy. 2. Notwithstanding the complexities associated with HRP our review should also lead to a greater understanding of the possible consequences of ineffective or non-existent HRP (in this case with mergers). 3. The centrality of flexibility to HRP, if it is to gain credence as an operational HR tool, is not surfaced by any of the three case scenarios. There is no evidence of any contingency or scenario planning being used to inject flexibility into the HRP process or steps being taken to build flexibility into the workforce itself so that it can better deal with the vagaries of future uncertainties as well as planned change.

References Appelbaum, S.H. and Gandell, J. (2003) A cross method analysis of the impact of culture and communications upon a health care merger, The Journal of Management Development, 22:5, 370–409.

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Gratton, L. (1999) People processes as a source of competitive advantage, in Gratton, L., Hope Hailey, V., Stiles, P. and Truss, C. (eds) Strategic Human Resource Management, Corporate Rhetoric and Human Reality, Oxford: Oxford University Press, 170–198. Gratton, L., Hope Hailey, V., Stiles, P. and Truss, C. (1999) Strategic Human Resource Management: Corporate Rhetoric and Human Reality, Oxford University Press. Salama, A., Holland, W. and Vinten, G. (2003) Challenges and opportunities in mergers and acquisitions: three international case studies — Deutsche Bank–Bankers Trust; British Petroleum–Amoco; Ford–Volvo’, Journal of European Industrial Training, 27(6), 313– 321. Schuler, R.S. and Jackson, S.E. (1987) Linking competitive strategies with human resource management practices, The Academy of Management Executive, 1(3), 207–19.

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CHAPTER 8

Strategic recruitment and selection: Much ado about nothing? Learning outcomes By the end of this chapter you should be able to: •

provide an underpinning rationale in support of the development and practise of strategically integrated recruitment and selection;

•

identify and explain the major features of strategic recruitment and selection and summarise these through an explanatory model;

•

analyse how recruitment and selection can be developed to fit a variety of strategic scenarios using illustrative examples to support your analysis;

•

explain how recruitment and selection practice can be shaped to accommodate the demands of strategic change and unplanned change arising from an uncertain future;

•

evaluate evidence to determine the extent of strategic recruitment and selection practice;

•

account for the apparent mismatch between the rationale for strategic recruitment and selection and paucity of evidence of its practise.

Summary •

The pursuit of competitive advantage, interest in SHRM and the role of recruitment and selection in securing one of an organisation’s most valuable assets provide a powerful rationale for the development of strategic recruitment and selection.

•

It is possible to construct a model of strategic recruitment and selection around three primary features: strategic integration; a long-term perspective; and the use of HRP as a bridging mechanism between strategy and HR practice. The strategic variant elevates the organisational importance of recruitment and selection and leads to the generation of a more demanding person specification. These two outcomes generate four consequential interrelated, secondary features that are likely to shape strategic recruitment and selection practise: the adoption of a front-loaded investment model; rigorous evaluation of outcomes; the use of high validity, sophisticated selection methods; and multi-stakeholder involvement.

•

Far from being a simple notion strategic fit has been revealed as a multi-dimensional concept where it is possible to identify at least six different strands. This means that strategic recruitment and selection has potentially to be aligned with multiple interpretations of strategy if it is to satisfy its strategic credentials.

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•

Despite uncertainties surrounding strategy implementation and the business environment as it unfolds over time, recruitment and selection practice can be shaped to support long-term changes in strategic direction.

•

On balance and despite a powerful rationale to the contrary, organisational approaches to recruitment and selection practice appear to be dominated by traditional and not strategic approaches.

•

The overall conclusion is that although the case for adopting strategic recruitment and selection may be seductively persuasive it is arguably another case in the HR arena where the rhetoric runs ahead of the reality.

Teaching and learning suggestions Comment The chapter begins by presenting a rationale for the adoption and practise of strategic recruitment and selection by organisations. In brief, it is argued that over the last two decades there has been considerable focus on strategic management and its crucial role in securing competitive advantage and that employees are a critical, if not the most important, resource for achieving an organisation’s strategic objectives. From this stance it is argued that it would therefore be rational for organisations to tailor their recruitment and selection practice to meet their strategic imperatives. On this basis the prime concern of recruitment and selection would be the employment of staff who can make a direct contribution to the achievement of an organisation’s strategic objectives. Whatever the merits of this argument, a review of research findings at the end of the chapter concludes that there is little evidence that strategically-driven recruitment and selection is being practised by organisations. In contrast, what was found was that traditional approaches to recruitment and selection, driven by the demands of specific job vacancies, continue to dominate organisational practice. This may account for why there is, like HRP, a paucity of literature on strategic recruitment and selection. The overwhelming majority of literature on recruitment and selection focuses on its traditional construction and delivery and not its strategically-driven variant. Two particular difficulties facing the teaching of strategic recruitment and selection are, therefore, the wide chasm that exists between the apparent logic for its practise on the one hand and the absence of evidence of its practise on the other and its lack of coverage in the literature. For this reason the chapter explores the concept of strategic recruitment and selection in depth. It particularly draws on material from Chapters 1 and 7 to illustrate and explore the multiple meanings of strategic fit in relation to strategic recruitment and selection. This approach is supported directly by the self-check and reflect, and case study questions most of which require the reader to work through the conceptual construction of strategic recruitment and selection and/or apply it to a number of real organisational scenarios.

Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We have found that producing mind maps of the chapter content is a useful approach to note taking and encourages students to reflect on the internal integration of the subject content of the chapter.

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We use a variety of vehicles to bridge student preparation and class-based activities to enhance their understanding of the chapter content and its overall relationship to managing HR strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come to the teaching session prepared to raise them. Sometimes this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write their answers briefly in note format;

•

complete the self check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. Pre-set questions that we have found useful for structuring student reading, preparatory activities and classroom discussion for the topic of strategic recruitment and selection include: 1. Based on prior learning and/or experience, how would you map out the entire recruitment and selection process in a flow diagram? 2. What are the main strengths and weaknesses of the recruitment and selection process you have drawn up in response to Question 1? 3. What do you understand to be the key similarities and differences between the traditional approach to recruitment and selection focused on job fit and the strategic variant focused on organisational fit? 4. What problems are likely to be encountered by an organisation intent on developing and practising a strategic approach to recruitment and selection? 5. To what extent can a recruitment and selection exercise that you have encountered be classified as strategic?

In the classroom Clearly the approach adopted to ‘student preparation’ can be followed through into the classroom. A starting point that we find useful is to surface and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a snappy summary of key issues. Where preparing answers to self check and reflect questions has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, if preparing answers to self check and reflect questions was not part of preparatory work but 75 © Pearson Education Limited 2007

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consideration of the questions is to feature as part of the teaching session, we would favour the group approach as a more stimulating approach. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued. Where case study work has featured as part of preparatory activities, similar approaches to those suggested for self check and reflect questions can be adopted. If coming to the case afresh, there is unlikely to be time for groups to consider all four questions. Here we would suggest that groups major on one of the case questions only moving on to others if they have time. Our answers to the four questions arguably present a degree of comprehensiveness and detail unlikely to be echoed within the parameters of a standard teaching session. However, they can be introduced into discussion of the case study and their validity critiqued. In addition there is scope for further detailed development of our answers and examples are provided as to how this might be put into operation. For students who have not previously studied recruitment and selection before it is useful to spend more time on exploring the fundamentals of the ‘traditional’ process. Here the first question suggested for student preparation (Based on prior learning and/or experience, how would you map out the entire recruitment and selection process in a flow diagram?) can be used as the basis for group work. Groups can be asked to share their flow diagrams and draw up a composite flow chart before analysing it in terms of the second question suggested for student preparation (What are the main strengths and weaknesses of the recruitment and selection process you have drawn up in response to Question 1?). For students who are adding a strategic focus to prior studies of HRM it is more useful to focus on their answers to Questions 3–5 of those suggested for student preparation. We have particularly found it useful to focus on students’ practical experiences of recruitment and selection and to analyse these to evaluate their strategic credentials against the conceptual models provided in the chapter. Even if this did not form part of ‘student preparation’ it is normally possible to get students to share and analyse their recruitment and selection experiences in this way.

Follow-up work The pedagogic features adopted throughout this book are intended to offer a number of alternatives for follow-up work while at the same time leaving the lecturer free to add or substitute their own ideas. If they have not already been used as part of class activities, self check and reflect questions and/or the chapter case study, ‘Recruitment and Selection at Southco Europe Ltd’, will serve as a useful reinforcement of chapter content. Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading. A further task for full-time students would be to utilise material on recruitment and selection practice gathered as part of any search for a ‘first destination’ job and analyse it for evidence of strategic practise.

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A further task for part-time students could involve them researching their own company’s recruitment and selection activities in more depth with a view to analysing its strategic credentials against the conceptual referents provided in the chapter.

Answers to Self-Check and Reflect Questions 8.1 Imagine that you work as an HR officer for a company that is unhappy with the effectiveness of its current recruitment and selection practice. You have been asked to write a paper presenting a rationale for the development and subsequent implementation of strategic recruitment and selection. Before you read on, take five minutes out to think through the main arguments that you would use to structure such a paper. Write them down now in note form. If you have already read Chapters 1, 2 and 7 you should find these helpful in developing your ideas. This is one of two questions designed to engage the reader with the subject through a process of interaction. The authors’ answer to this question is summarised in Key Concepts 8.3 and you would have been able to compare your answer against this and weigh the significance of any differences. If you have not already done this you should now do so although the full value of this question will have been lost if it was not answered before reading on. 8.2 What potential features emerge from your reading of the section ‘What is the rationale for strategic recruitment and selection’? that you would expect to be incorporated into the development of a conceptual framework of strategic recruitment and selection? This is another interactive question although here the answer is embedded in the rest of the chapter and is therefore not so obvious. It is argued that the themes below emerge from this section in the following order of appearance: •

a strategic focus so that recruitment and selection is linked inextricably with corporate objectives;

•

the need to facilitate change in an increasingly turbulent business environment;

•

adoption of a long-term perspective consistent with the strategic focus;

•

the need for HRP to match recruitment and selection activities to corporate strategy;

•

recognising the importance of recruitment and selection when human resources are viewed as an organisation’s most valuable asset;

•

the need for recruitment and selection to be internally integrated with other activities making up the HR bundle; and

•

the need to adopt a broader organisational focus into the processes of job analysis.

Further on in the chapter these themes take form through the development of a conceptual framework and model of strategic recruitment and selection. You might like to go back and see how the above themes have been reflected in these explanatory devices. 8.3 To what extent do staffing processes at the Dionysos reflect the strategic approach to recruitment and selection encapsulated by the conceptual framework and model depicted in Key Concepts 8.4 and Figures 8.3 and 8.4? Before directly addressing this question it is arguably important to reflect on the contextual circumstances impacting on recruitment and selection practice at the Dionysos. In summary, the hotel:

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•

is located in Turkey and not subject to the draft of legislation operating on recruitment and selection within the European Union;

•

currently operates in a loose labour market where supply of labour exceeds demand;

•

essentially provides a single product that supports a relatively straightforward approach to first, second and third order strategic decisions; and

•

can be classified as a small to medium family business.

Within this identified context, current recruitment and selection practice could be argued to reflect the strategic variant through at least two strands of strategic integration. There is a strong link between the personal attributes, or core competencies, required in staff and the business goal with particular emphasis on service quality and family fit. There is also evidence of horizontal integration through an inter-related bundle of HR practices including staff development, welfare, performance management, reward management, management style and employee involvement. The strategy itself suggests a longer-term focus of creating a market niche and, although not formalised, a degree of HRP is evident in the HR practices developed and their integration with strategic imperatives. Although not cited in the case, both Rim and Ahmet actively use their MBA qualifications to inform their business planning. With respect to secondary features recruitment and selection at the Dionysos, although somewhat unconventional by UK standards, reflects a front-loaded investment approach and use of sophisticated selection with some evidence of multi-stakeholder involvement. The probationary period is tantamount to an extended, realistic and valid application of work sampling which costs a minimum of one month’s pay for each shortlisted candidate. There is also extensive and meaningful involvement of staff in making appointments to their work groups. In addition there appears to be significant attention given to evaluating organisational performance against key performance indicators. Although this evaluation is not explicitly linked to recruitment and selection, by implication it incorporates measurements of the quality of service provided by recruits. The hotel industry is very labour intensive and dependent on the quality and performance of its staff. Presumably therefore the success of the Dionysos in meeting its business goals has to be down in no small measure to the staff employed to deliver its vision. 8.4 To what extent does the process used to recruit Ryan Parry reflect a strategic approach to recruitment and selection? It is recommended that you conduct your analysis against the conceptual framework and model of strategic recruitment and selection presented earlier in the chapter (Key Concepts 8.4 and Figures 8.3 and 8.4). An analysis of the Buckingham Palace example against featured templates of strategic recruitment and selection is clearly constrained by a lack of detailed information. However, despite reference to careful selection, a feature of Borucki and Lafley’s definition of strategic recruitment and selection, the signs are not good. While not privy to the corporate strategy of the Palace, if one exists, and although it does not fit neatly into the normal classifications of strategy, it is difficult to believe that the security of the monarch and other members of the Royal Family is not a central objective. Allied to this, particularly given the sensitivity to media relations, it might be expected that personal attributes such as commitment to the Royal Household, fidelity, honesty, integrity etc. would be fundamental attributes of personal specifications designed to recruit staff against this paramount concern for security. On the basis of the reported events and their detailed exposure in the tabloids it would seem that the antithesis of strategic recruitment and selection is operating here. There was either no strategic connection or the recruitment and selection process blatantly failed to deliver it. Selection methods used appear to be very basic and far removed from sophisticated selection with no evidence of a front-loaded investment model or multi-stakeholder involvement. Ryan Parry resigned from his post, presumably so he could reveal all, but it begs the question as to

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how long he could have worked at the Palace without being rumbled! What does this say about effective evaluation of recruitment and selection? 8.5 In Chapter 2 a number of studies exploring the contribution of SHRM to organisational performance reported on. A critique of the research methodology used by each study was presented under the banner of ‘Study limitations’. On a similar basis, what limitations can you identify in the study outlined above in Practice 8.11 that might explain the low incidence of strategic recruitment and selection reported? First, it might be argued that the study was directed at recruitment and selection practice generally and was not directly focused on strategic recruitment and selection. Second, the use of a non-directed, self-reporting procedure (flow chart production) inevitably reflects the personal perceptions of the respondent. While this was the intention it may nevertheless result in features being incorrectly omitted or inadvertently invented. However, other survey methods are not without these problems but here there were a number of checks and balances in operation. Class-based discussion allowed the opportunity for further elaboration or correction. Respondents were not led by the structure and content of data collection methods such as questionnaires or interview questions. By definition respondents were close to the action and not remote as might be the case with some respondents to questionnaires. The data was not likely to be doctored for a particular audience as its use was not disclosed until after its production. Also the fact that in some instances a number of respondents were employed by the same organisation (as many as eight in one case) and the availability of company-produced documentation made it possible to compare and contrast data and identify any glaring inconsistencies. Third, there was an element of leading in as much as their responses were not completely nondirected. As described earlier, emphasis was placed on the beginning and end points of their flow charts. Additionally, prior to producing their data students were exposed to other course inputs and preparatory activities. For management students this covered SHRM, HRP and recruitment and selection. For personnel students this covered strategic integration, HRP and recruitment and selection. As a result students were arguably sensitised to relevant subject material that was particularly associated with the beginning and end points of the recruitment and selection process and, more generally, strategic human resource practice. Taken together this could result in an over-statement of features of recruitment and selection associated with the strategic variant which could not be quantified. Fourth, the fact that responsibilities for recruitment and selection are generally divided in organisations between line managers and specialist personnel practitioners raises the possibility that respondents may only participate in part of the process. This may provide them with an incomplete or distorted picture of the process. However, these two groups were almost equally represented and taken together should provide a comprehensive picture of the state of play particularly where line manager and personnel practitioner respondents hail from the same organisation. Lastly, the process of data collection itself is open to abuse. Students do not always undertake preparatory work as diligently as their tutors might like and it is possible, for example, that students may simply omit elements of the flow chart in their rush to complete ‘homework’. However, it could be argued that there is a greater motivation for students to complete a task in which they have a vested interest (i.e. part of their personal study) than there is for questionnaire recipients to become respondents. It is also important to remember that there is an assumption here that student perceptions of practice will reflect what they see as the most significant aspects of recruitment and selection practice. It is possible to conjecture that if senior managers maintain that their organisation’s human resource practices are strategic but that operational staff do not identify with this then the strategic message has not been internalised. Put another way if those responsible for recruitment and selection activities do not perceive any

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strategic significance they are unlikely to be found practising the strategic variant whatever the organisational intent!

Answers to Case study questions The first two of four case study questions are embedded in the case itself and have been answered here as we expected our readers to answer them. Therefore, although further material relevant to these case questions may be revealed as the case unfolds, Questions 1 and 2 have been answered solely on the basis of what has gone before in the case narrative. 1. Based on the information provided with respect to organisation context, strategy, vision, mission statements and annual key objectives, what core competencies do you feel will underpin Southco’s recruitment and selection processes? For us the key words appearing in the opening section of the case (covering organisation context, strategy, vision, mission statements and annual key objectives) that impact on recruitment and selection are: ‘leading global source of engineered access …………. solutions’; ‘continuous growth’; ‘seamless teamwork’; ‘operational excellence’; “performance management’; ‘a climate of constant change’; and ‘appreciation of cultural diversity’. Putting our own strategic interpretation on these contextual statements, it would seem that the organisation is pursuing a mixture of growth, innovation and quality strategies underpinned by a performance, team-based culture. At times these strategic intents may surface internal contradictions that may put further pressure on recruitment and selection practice. Further, we would argue that these strategic concerns are being pursued in a dynamic global market place where change is a constant. All of this leads potentially to very demanding person specifications although we argue that in a team working environment it is not necessary for all members to posses all required core attributes. What we advocate instead is that teams need to contain a critical mass of the required attributes among its membership. Working from this analysis, we would argue that competencies associated with innovation, quality enhancement, performance management, managing change, diversity, foreign languages and teamwork are likely to be ‘core’ to Southco realising its strategic imperatives. A useful starting point to competency analysis to meet the strategic requirements of innovation and quality is the work of Schuler and Jackson (1987), developed further in Chapter 2. They identified the following required employee behaviours to support the respective strategies of innovation and quality enhancement: Innovation – high degree of creativity, longer-term focus, high degree of co-operation and interdependence, equal attention to process and results, high degree of risk-taking, and high tolerance of ambiguity. Quality enhancement – repetitive and predictable behaviours, long/intermediate-term focus, modest degree of co-operation and interdependence, high concern for quality, modest concern

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for quantity, high concern for process, low risk-taking, and high commitment to organisational goals. A number of the above employee behaviours are arguably also relevant to other identified competency requirements. For example, a high degree of co-operation and interdependence, and equal attention to process and results can be related to effective team working and a high degree of risk-taking, and high tolerance of ambiguity to managing change. Adding to this, Cockerill (1989:54–55) cites 11 competencies that are associated with high performance management in rapidly changing environments: ‘information search; concept formation; conceptual flexibility; interpersonal search; managing interaction; developmental orientation; impact; self-confidence; presentation; proactive orientation; and achievement orientation’. To operate successfully in an environment of dynamic change arguably requires a critical mass of employees who possess competencies associated with continuous learning and development, and transformational leadership skills. These include, for example: experiments; admits mistakes; openness; encourages ideas; makes joint decisions; charismatic; inspirational; goal directed; adopts rational approaches to problem solving; and with a strong concern for the needs of individuals with a capacity to contribute to their further development (Bass, 1990; Evenden, 1993). As before, a number of these overlap competency boundaries. With respect to teamwork, for example, it could be argued that admits mistakes, openness, encourages ideas, makes joint decisions and concern for the needs of individuals with a capacity to contribute to their further development are all relevant. Standing somewhat outside this list are the competency requirements around foreign languages required by global operations. This may simply be expressed in terms of fluency in a number of particular languages but would need to embrace the full range of linguistic competencies, verbal, written, comprehension etc. We could go on but what is already emerging is a very demanding list that leads us to three further points. First, is a reminder that core competencies represent those required in sufficient quantity in the workforce as a whole to support the achievement of corporate strategies and do not represent a person specification to be applied to every prospective employee. Second, the legitimacy of our ideas can be discussed further through class discussion. We would argue, for example, that: the list could be augmented, particularly in the area of diversity (where we have been deliberately silent but where Chapter 13 can be used as a source of ideas); some entries are open to challenge; and others require further exploration to establish their full meaning or legitimacy. Third, any debate around core competencies should be accompanied by the caveat that, however, the competencies are generated they need to be validated in the specific organisational context to which they apply if they are to serve a useful purpose. 2. What do you think would be an appropriate recruitment and selection procedure for Southco to follow? Map out your answer providing as much detail as possible on the recruitment and selection methods you would use. We start with a given that recruitment policy at Southco dictates that in the first instance vacancies must be advertised internally. However, irrespective of whether the focus is internal or external we would advocate that the process should start with the development of comprehensive role descriptions and person specifications that capture the demands arising form the strategic and competency analysis presented immediately above. Therefore we would expect these recruitment documents to adequately reflect role responsibilities and competencies associated with organisational requirements with respect to innovation, quality enhancement, performance management, managing change, diversity, foreign languages and teamwork.

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The job description and person specification will be used as the basis for the creation of a realistic job and organisational preview to be shared with candidates, as stakeholders, at every opportunity. This would start with the production of objective job advertisements providing sufficient detail to enable the prospective candidate to assess their continued interest in the vacancy. We recommend that this should be supported by open access to a help line to discuss the vacancy and, when recruiting externally, the organisation, to ensure a realistic preview of both is fully communicated. For major recruitment exercises involving multiple vacancies, key managerial appointments and areas of short supply we advocate that this be supplemented by open days/evenings designed to enable prospective candidates to subject the organisation to close scrutiny. With respect to external advertising it is difficult to be precise because specific copy and media placement will depend on the particular vacancy in question. However, this must be preceded by a detailed analysis of potential recruitment sources augmented by an evaluation of the company’s previous recruitment exercises. For each vacancy we would require a competency-based application form that reflects precisely the core organisational and job competencies demanded by the role. Although some of the information will be common the competency-based component of the application form will need to be tailor-made if it is to be fit for purpose. To provide greater objectivity we would propose that applications received are evaluated independently by three stakeholders against the persons’ specifications. These stakeholders would then meet to determine the shortlist. Initially the shortlisting panel should identify all those applicants where there is agreement amongst all three stakeholders that they meet the shortlist criteria based on their independent assessments. Hopefully any panel discussion will then be about discussing finer distinctions between such applicants before finalising the shortlist. Cockerill (1989) argued that competencies can be assessed reliably through direct observation and simulated assessment centre conditions. Given the likely complexity of the persons’ specifications the use of multiple selection methods will almost certainly be necessary if reasonable levels of validity are to be achieved. Under these circumstances assessment centres, which feature direct observation as one of their elements, would be a sensible option. Based on the competency analysis we would anticipate the use of psychometric testing to assess dimensions such as attitudes, intelligence, motivation and personality supported by simulated group exercises to further assess teamwork competencies. In-depth interviews would be competency-based, structured and behaviourally oriented to assess directly those competences incorporated into application forms. Assessment centre exercises directed at work sampling would be designed so as to actively involve other important stakeholders and enable their participation in the selection process. This is seen to be particularly relevant to support the assessment of cultural fit, attitudes to others, interpersonal competencies and teamwork. If there is an interest in exploring the topic of strategic recruitment and selection in greater depth then a further, demanding exercise would be to take competencies identified under Question 1 and work through how each one could be assessed in detail within the multiple selection method context advocated. So, for example, taking risk-taking or high tolerance of ambiguity the task would be to work through how these could be assessed through interview, psychometric testing, work sampling etc. 3. To what extent could Southco’s approach to recruitment and selection be classified as strategic? Justify your answer with evidence drawn from case material. Encouragingly there appears to be evidence of both external, vertical integration (Mabey et al, 1998) and institutional integration (Mabey and Iles, 1993) of HRM at Southco where the corporate alignment of the HR function is seen as a critical success factor and the most senior HR manager is regarded as an indispensable member of the senior management team. This is

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further evidenced through the corporate scorecard where the HR function is seen to represent one of the key measurables relating to performance delivery against corporate goals. How this feeds through to recruitment and selection practice, however, is less clear-cut. With respect to the primary features of strategic recruitment and selection (strategic integration, long-term perspective and formalised HRP), the concern for candidate fit both with organisation culture and its global context and the requirement for candidates to be able to adapt to the fastpaced business environment characterising Southco all reflect a strong strategic focus. Although not incorporated into the case study, this was exemplified by the process used to recruit a new managing director during the time the case study was being written. Here the strategic objectives of the organisation were used to identify the key role responsibilities and related objectives of the managing director over the short and longer-term and the personal competencies necessary to deliver these successfully. These key role responsibilities, objectives and competencies then became the basis for all subsequent recruitment and selection activity. What is not evident, however, is the extent to which this overtly strategicallydriven approach to recruitment and selection, demonstrating both the primary features of strategic integration and a longer-term perspective, is used to underpin the recruitment and selection of staff lower down the organisational hierarchy. This is not to say that this is not the approach followed and, on the basis of evidence available from the case, it can at least be argued that the over-arching concern for organisational fit directly reflects these primary features. With respect to the secondary features of strategic recruitment and selection (adoption of a front-loaded investment model, rigorous evaluation, the use of sophisticated selection methods and a multi-stakeholder approach) there is certainly some clear evidence to support some of these features. Here we would argue that the adoption of a front-loaded investment model, the use of sophisticated selection methods and a multi-stakeholder approach are evidenced by: •

the philosophy that recruiting the ‘wrong’ person leads to substantial organisational costs;

•

the use of a competency-based approach;

•

the information material sent to candidates to establish realistic organisational and job previews;

•

the length of selection events;

•

the use of behaviourally-based interviews, competency assessments, psychometric testing, presentations and the assessment of team interaction;

•

the involvement line managers and more senior levels of the management hierarchy, the HRD manager and the current role holder; and

•

the joint decision-making process conducted against competency and cultural fit assessments.

On the basis of the evidence available, and acknowledging that this will not necessarily represent a complete picture, we conclude that at the very least Southco are operating a highly professional and sophisticated recruitment and selection process and that at the very best it has strong strategic underpinnings. However, as revealed by our answer to the last case question below, on the basis of available information the process does not meet all of our criteria for strategic recruitment and selection and therefore as currently evidenced is classified as largely but not fully strategic.

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4. What changes would you make to Southco’s recruitment and selection processes in order to more fully meet the model, core dimensions and conceptual framework of strategic recruitment and selection captured respectively in Figures 8.3, 8.4 and Key Concepts 8.4? From the foregoing analysis it is argued that the following changes or additions are necessary in order for Southco’s recruitment and selection processes to more fully meet the model, core dimensions and conceptual framework of strategic recruitment and selection captured respectively in Figures 8.3, 8.4 and Key Concepts 8.4 in Chapter 8: •

evidence of closer strategic alignment for a wider range of appointments throughout the organisational hierarchy;

•

evidence that the qualities of the organisation’s existing HRs are being considered as an input into strategy formulation to establish two-way strategic integration;

•

the explicit use of a HRP mechanism or equivalent to translate corporate objectives into valid core competencies;

•

the clear articulation and use of a set of core values and/or competencies to inform recruitment and selection decisions broadly throughout the organisation;

•

evidence of a long-term focus being adopted in addition to the more immediate job requirements in most appointments throughout the organisational hierarchy;

•

rigorous evaluation of recruitment and selection processes and outcomes to assess: the validity of specified competencies and appointment decisions; stakeholder satisfaction; costeffectiveness; contribution to the achievement of corporate objectives and strategies, and the successful management of change; and to inform the further development of recruitment and selection practice; and

•

more comprehensive evidence that key stakeholders are routinely being involved in recruitment and selection exercises.

References Bass, B.M. (1990) From transactional to transformational leadership: learning to share the vision, Organizational Dynamics, Winter, 19–31. Cockerill, A. (1989) The kind of competence for rapid change, Personnel Management, September, 52–56. Evenden, R. (1993) The strategic management of recruitment and selection, in Harrison, R. (ed.) Human Resource Management: Issues and Strategies, Wokingham, Addison–Wesley, 219– 45. Harrison, R. (ed.) Human Resource Management: Issues and Strategies, Wokingham, Addison– Wesley. Mabey, C. and Iles, P. (1993) The strategic integration of assessment and development practices: succession planning and new manager development, Human Resource Management Journal, 3(4), 16–34.

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Mabey, C., Salaman, M. and Storey, J. (1998), Human resource management; a strategic introduction (2nd edn), Oxford, Blackwell. Schuler, R.S. and Jackson, S.E. (1987) Linking competitive strategies with human resource management practices, The Academy of Management Executive, 1(3), 207–19.

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CHAPTER 9

Performance management: so much more than annual appraisal Learning outcomes By the end of the chapter you should be able to: •

define performance management and explain its relationship to strategic human resource management;

•

analyse the reasons for the growth in importance of performance management;

•

explain the performance management systems model and the key processes embedded in the model;

•

evaluate some of the major criticisms of performance management;

•

suggest ways in which performance management may link more closely to strategic human resource management.

Summary •

Performance management is an umbrella term to describe not a single activity but a range of activities which may be gathered together to enhance organisational performance.

•

Although the performance indicators approach to performance management has proliferated in many organisations, it offers a restricted perspective on performance management.

•

Performance management may be linked to the organisation’s strategy through horizontal and vertical integration.

•

Performance management has the facility to change the culture and therefore the working practices of organisations as part of a concerted effort to generate change through its role as part of an organisation’s ‘high performance’ HR strategy.

•

An important way of integrating the HR practices is to use the skills, behaviours and attitudes necessary to deliver effective job performance as a way of assessing individual success.

•

Among the reasons for the growth in importance of performance management, are the desire to achieve greater organisational effectiveness and the dissatisfaction with traditional performance appraisal.

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•

The performance management systems models includes inputs such as external and internal contexts and employee skills, processes including setting objectives and 360-degree appraisal; HR outputs such as performance plans and pay awards; and enhanced organisational performance.

•

Included in the major conceptual flaws in performance management thinking are the potential preoccupation with management control, the assumed compliance of employees and the dangers of prescribing a particular model of performance management without paying due regard to the organisation’s context.

Teaching and learning suggestions Comment This chapter has been written from the perspective of the HRM specialist rather than the management generalist. This is an important distinction. The chapter opens with a section, which is written to demonstrate that performance management is much more than performance measurement, the ‘metrics’ approach that dominates in so many organisations. Thus, the chapter concentrates very much on the processual approach to performance management. Yet, as the chapter title makes clear, the chapter is not just about the process of performance appraisal; this is treated as just one aspect of performance management. What the chapter attempts to achieve is to place performance management clearly within the framework of SHRM by placing emphasis upon the extent to which performance management can be integrated with other HR components. Therefore, the hope is that the reader will see how performance management is an intrinsic part of the SHRM approach and fit this chapter neatly in the framework of the whole content of the book.

Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We use a variety of vehicles to bridge student preparation and class-based activities in order to enhance their understanding of the chapter content and its overall relationship to managing human resources (HR) strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come to the teaching session prepared to raise them. Sometimes, this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write their answers briefly in note format;

•

complete the Self-Check and Reflect Questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to both Self-Check and Reflect Questions and case study questions follow in the next two sections of this chapter guide. Pre-set questions that we have found useful for

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structuring student reading, preparatory activities and classroom discussion for the topic of performance management include: 1. How would you define performance management and set it into the SHRM context? 2. What are the weaknesses of performance management in many organisations? 3. What are the principal strategic relationships between performance management and corporate strategy and how could they be evidenced in practice? 4. What do you think are the most important outputs of the performance management model in your organisation or one known to you?

In the classroom A starting point for classroom activities that we find useful is to raise and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a summary of key issues. Where preparing answers to self- check and reflect questions has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, if preparing answers to self- check and reflect questions was not part of preparatory work but consideration of the questions is to feature as part of the teaching session, we would favour the group approach as a more stimulating method. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued. Where case study work has featured as part of preparatory activities, similar approaches to those suggested for self check and reflect questions can be adopted. Our approach here would be to start with a more general exploration of the performance management implications of the case.

Follow-up work The pedagogic features adopted throughout this book are intended to offer a number of alternatives for follow-up work while at the same time leaving lecturers free to add or substitute their own ideas. If they have not already been used as part of class activities, any prior preparation of answers to the self-check and reflect questions and/or the questions suggested for student preparation and/or the chapter case ‘Performance management at Tyco’ will serve as a useful reinforcement to chapter content. Our outline answers to both self-check and reflect questions and case study questions follow in the next two sections of this chapter guide. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading.

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Answers to Self-Check and Reflect Questions 9.1 What factors do you think would explain the weaknesses Radnor and McGuire found in their research? It seems that they may well stem from one particular source: the imposition of performance management upon managers in the UK public sector by central government. However wellintentioned the government was, the point is that the initiative in many cases was not the idea of managers in the organisations in which it was implemented. This raises question about the extent to which it is reasonable for those managers to be enthusiastic about their performance management scheme and transmit this enthusiasm to their line managers and employees. Perhaps the best that can be hoped for is a following of government guidelines, which is what seemed to be happening. 9.2 What obstacles do you think may stand in the way of an attempt by organisations to adopt a ‘new style’ of management in which the 'new style' manager is supportive, a team leader, a coach and facilitator? There are a number of reasons why this may be a difficult, not the least of which is traditionalism. The image of the boss ‘as someone who tells me what to do’ as opposed to ‘someone who asks me if I would be happy to do it’ is a difficult one for many managers, and, indeed, employees, to grasp. It contradicts generations of thought and practice. Yet in many Western developed countries at least, the general consensus is that this may be the most effective way to get the best out of people. In addition, there is an insufficiency of the skills needed to practise the new style of management. Many managers do not find it easy to be more consultative because it is not as easy. Giving negative feedback in such a way that it is accepted as legitimate by employees is a difficult skill. Many managers say that the most difficult thing that they have to do is to tell employees that they are being made redundant. The traditional promotion route for many managers is through the ranks of their technical skill. So many managers are managers because they have been good technicians; their potential managerial skills have traditionally not been considered when promotion decisions are made. So it is understandable if many find the ‘people’ side of their management role difficult and forbidding. 9.3. To what extent do you think that the lack of objectivity in performance appraisal may be overcome in performance management? There is an argument that a lack of objectivity is inherent in most assessments of employee performance. By objective we mean phenomena having reality independent of the mind. Yet all decisions in the range of activities concerned with performance management are subjective; that is they are clearly not independent of the mind. They reflect managerial judgements about, in particular, what to assess, and how to assess so the objectivity evident in performance appraisal is equally evident in other performance management activities. 9.4. In what ways do you think the psychological contract is threatened by the shortcomings in the implementation of performance management at Stiles et al.’s organisations? In the research the key components of the psychological contract were organisational commitment and trust. Commitment-seeking HR activities such as performance management are usually accompanied by explicit and implicit messages of which make promises to employees of better rewards, better development etc. In the organisations surveyed in the research it seemed that there were a lot of reasons for those promises not being kept. If they

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are not kept then managers should not be surprised if levels of trust and commitment are not what they hoped for. 9.5. What problems may be involved in distinguishing between lack of capability and negligence? In practice the difference may be quite difficult to establish. Negligence suggests a strong element of wilfulness. In this case the employee is deliberately negligent due to a slipshod, careless attitude. But some cases of negligence may be the consequence of the employee not having sufficient awareness of what constitutes negligence, i.e. he or she is not capable of understanding what negligence means in the context of his or her job. For example, there is a difference between call centre operator A, who treats customers in a brusque manner because she is having a bad day to assistant B who always treats customers in this manner because she does not know the difference between brusqueness and a polite yet business-like manner. The way in which you would treat these two employees would be quite different. Repeated brusqueness on the part of the assistant A would be a misconduct case for the disciplinary procedure whereas assistant B may well be treated as ‘incapable’. There may be a case for moving assistant B to alternative work more suited to her skills and experience (e.g. not involving customer contact), always assuming that her employer can offer her such work. 9.6 What other potential problems may be relevant to the introduction or implementation of performance management? Like most other HR initiatives the list is endless! The main problems, as the chapter has sought to illustrate, are concerned with ineffective implementation rather than flawed design. Some of these problems are: resistance from managers who see performance management as just more ‘HR bureaucracy’; lack of training for managers and employees; lack of top management commitment; lack of resources and lack of evaluation of schemes in order to see what could be improved. However, there are other potential difficulties, which may be concerned with principle rather than practice. Given the strategic thrust of this book and this chapter it may be that there is a lack of strategic coherence concerned with performance management due to the lack of vertical and horizontal integration.

Answers to Case study questions 1. What action is needed to ensure that Tyco managers play their full part in ensuring that the performance management system is effective? The handbook, which outlines the details of the scheme specifies that managers must: •

set and clarify employees’ goals;

•

support employee development and possible career progression;

•

provide useful, frequent and candid feedback;

•

assess performance fairly.

Clearly it is how effectively the managers conduct these activities that will determine that the performance management system is effective. The most important precursor to the pursuit of these activities is that the managers must be committed to the effective principles of the scheme. This is easier said than done. In many organisations performance management is seen as just another personnel department imposition: ‘as long as it’s done and the forms are filled in that is all that is necessary’. Unfortunately, the ‘metrics’ based performance

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measurement approach to performance management tends to encourage such a bureaucratic outlook. This is clearly not the approach at Tyco as the second and third aims of the performance management scheme make clear: •

it empowers employees to take an active and influential part in the processes; and

•

it is designed to assess not only the results that employees achieve but the way in which these results are achieved.

The implications for managers of these twin aims are important. It suggests that commitment to the effective principles of the scheme is not enough. What is also necessary is an enlightened attitude to the management of people, which believes that how people do what they do is as important as what results they achieve. This is profoundly different from the ‘metrics’ based performance measurement approach to performance management where the emphasis is solely on results. Commitment to the performance management scheme and an enlightened attitude to the management of people must be allied with training in the skills of goal setting, development needs identification, feedback giving and assessment. All this will mean that Tyco managers should play their full part in ensuring that the performance management system is effective. 2. What action is needed to ensure that Tyco employees are equipped to gain the maximum benefit from the performance management system? The handbook which outlines the details of the scheme specifies that employees must: •

work hard to achieve their goals;

•

take responsibility for their own professional development;

•

solicit, listen to and act upon feedback;

•

assess their performance objectively.

In the same way as managers must be committed to the principles of the performance management scheme at Tyco so must employees. The second responsibility that is thrust upon employees as part of the scheme, to take responsibility for their own professional development, demands a quite different psychological approach from that with which many employees are familiar. They are used to the idea of the employer accepting responsibility for employee development. After all, many of us have grown up with the idea of the organisation being a ‘good company to work for’, which will ‘look after us’. This is very different from the idea of employees accepting responsibility for their own career planning and development. It is consistent with characteristics of the ‘new psychological contract’ which are set out in Table 9.1 below.

Table 9.1 Characteristics of the ‘old’ and ‘new’ psychological contract Characteristic

Old

New

Focus of the employment relationship

Security and a long-term career in the company

Employability to cope with changes in this and future employment

Format

Structured and predictable

Flexible and unpredictable

Duration

Permanent

Variable

Underlying principle

Influenced by tradition

Driven by market forces

Intended output

Loyalty and commitment

Value added

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Employer’s key responsibility

Fair pay for a fair day’s work

High pay for high job performance

Employee’s key responsibility

Good performance in present job

Making a difference to the organisation

Employer’s key input

Stable income and career

Opportunities for self-development

Employee’s key input

Time and effort

Knowledge and skills

Adapted from Hiltrop (1995:290). The third responsibility that is thrust upon employees as part of the scheme, to solicit, listen to and act upon feedback, is consistent with the personal acceptance of responsibility for career development. It demands an openness that, again, will be quite difficult for many employees who are more used to defensiveness when faced with criticism, even of the more constructive type. Assessing their performance objectively obviously demands similar openness. 3. What should be the priority concerns of Tyco HR specialists in their attempt to ensure that the performance management system is fully integrated with other HR activities? The chapter goes into some detail about how performance management systems may be fully integrated with other HR activities. Vertical integration may be achieved by reinforcing to the Tyco mission, and, crucially, relating the organisation’s business objectives to those of the individual. This, and the notion of the necessity for employees to accept more responsibility for their own development, is consistent with what the chapter notes about performance management being seen as part of a so-called ‘high performance’ HR strategy. The characteristics of such a strategy are: •

decentralised, devolved decision-making, made by those closest to the customer – so as constantly to renew and improve the offer to customers;

•

development of people capacities through learning at all levels, with particular emphasis on self-management, team capabilities and project-based activities – to enable and support performance improvement and organisational potential;

•

performance, operational and people management processes aligned to organisational objectives – to build trust, enthusiasm and commitment to the direction taken by the organisation;

•

fair treatment for those who leave the organisation as it changes, and engagement with the needs of the community outside the organisation – this is an important component of trust and commitment-based relationships both within and outside the organisation.

All this suggests an emphasis upon attention to organisation structural design (see more detail in the chapter); and training and development to support performance management. 4. What problems may be encountered in applying a standardised performance management system throughout the 100 countries in which Tyco operate? The overall aim of Tyco’s performance management system is to contribute to the company’s goals of achieving operational excellence and becoming one unified company. The aim is to unite Tyco teams throughout the world into a single operating company with a healthy culture characterised by alignment and growth opportunities. This suggests that the key task for Tyco management is to communicate the performance management strategy and policy throughout its operating companies and to train all those involved in its operation. But, given all that Chapter 3 says about cultural adaptation that is clearly easier said than done. Part of the section defining national culture in Chapter 3 states 92 © Pearson Education Limited 2007

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that ‘(national culture) affects all aspects of how people think, solve problems and make decisions both within and outside their employing organisations’. The complexity of ideas contained in the previous answers to this case study suggests that Tyco employees in different operating countries will think very differently about some of the issues. Take, for example, the notion of individual responsibility for self-development. If this is a problem for many organisations in highly individualist cultures like the United States and the United Kingdom, it follows that it is likely to be even more so in cultures where dependence upon the employer has traditionally been prevalent. An example here is China, whose state-owned enterprises for much of the latter part of the 20th century operated a cradle to grave welfare system where the employer accepted responsibility for all aspects of the employee’s life, both inside and outside work. Chapter 3 specifies three ways of dealing with national cultural differences: ignoring the differences; minimising the differences and utilising the differences. The first approach sees cultural differences as irrelevant, or at least to push them to one side in the pursuit of standardisation and efficiency. This may be an important part of the MNCs overall business strategy since the strength of international brands such as Wal-Mart and Starbucks depends upon the customer receiving a similar experience in whichever part of the world the store is situated. Tyco may admire the marketing strategy of these organisations but this implies an HR strategy that is similarly uniform, which seems intuitively wrong. The second approach to dealing with national cultural differences is minimising cultural differences. This perspective sees cultural differences as a problem but does not ignore such differences. Operating companies in different countries are given some decision-making autonomy on the basis that ‘local people know what is best for them and the part of the organisation, which is located in the host country should be as local in identity as possible’. This approach does not rule out the possibility of the MNC developing a strong corporate culture: but there is sufficient flexibility to adapt that culture to local conditions’ (Perlmutter, 1969). Indeed, such flexibility may be dictated by the necessity for adapting to local custom and legislation. The third approach is utilising cultural differences. Here Tyco will be concerned to use cultural differences as a learning opportunity and a source of competitive advantage. This will enable the company to take advantage of different ideas and insights from wherever they may come. At first sight, this seems consistent with Tyco’s desire to ‘become one unified company….to unite Tyco teams throughout the world into a single operating company with a healthy culture characterised by alignment and growth opportunities’. But the cost of this is the element of standardisation of the performance management system. We are left wondering whether an effective standardised performance management system is possible. It may be that standardisation is consistent only with bureaucracy and effectiveness with differentiation. So Tyco’s aim, however laudable, may not be realisable.

References Hiltrop, J,M. (1995) The changing psychological contract: the human resource challenge of the 1990s, European Management Journal, 13(3), 286–294. Perlmutter, H. (1969) The tortuous evolution of the multi-national corporation, Columbia Journal of World Business, 1, 9–18.

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CHAPTER 10

Strategic human resource development: pot of gold or chasing rainbows? Learning outcomes By the end of this chapter you should be able to: •

develop and discuss a continuum of strategic maturity upon which different approaches to Human resource development (HRD) can be located;

•

identify and explain the major features of Strategic human resource (SHRD) and organise these into a conceptual framework;

•

analyse how systematic approaches to HRD can be accommodated in conceptual frameworks of SHRD;

•

analyse the significance of the learning organisation and knowledge management to SHRD;

•

critically review the rhetoric and reality of the role of managers as key SHRD stakeholders.

Summary •

It is possible to construct a continuum of HRD strategic maturity upon which different approaches to HRD can be positioned. At the strategically immature end HRD is conducted in isolation of organisational strategies. Here any strategic linkage is accidental and HRD interventions represent isolated, tactical responses to operational problems encountered. At the strategically mature end HRD approaches and specific interventions reflect full strategic integration through their effective accommodation of two-way vertical and horizontal integration.

•

In addition to strategic integration, SHRD is characterised by: senior management sponsorship; the commitment and active involvement of all levels of management; effective collaborative partnerships between HRD specialists and line managers; systematic environmental scanning to maximise the lead time for developing HRD responses to change; transformation in the role of HRD specialists from training providers to proactive change agents; a learning culture; and comprehensive evaluation of SHRD interventions.

•

Although often positioned at the non-strategic end of the continuum of strategic maturity, it is possible for the more familiar systematic cycle of HRD to be modelled to incorporate the characteristics of SHRD.

•

The learning organisation and knowledge management have emerged as two recent approaches to HRD that have a strong strategic connection. The learning organisation focuses on the process of learning to learn so as to enable learning within organisations to

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be faster than their competitors and the rate of change. Knowledge management adopts a narrower focus and seeks to capture, disseminate and utilise existing knowledge and generate new knowledge in order to sustain an organisation’s competitive position and promote innovatory behaviour. Both concepts place a premium on human capital as the route to sustainable competitive advantage where learning and knowledge can assume the status of an organisation’s core competence. •

Within a multi-stakeholder perspective, managers can be identified as the linchpin for the successful execution of SHRD. However, for a variety of reasons, their willingness and ability to assume this central role in SHRD is questionable.

Teaching and learning suggestions Comment Contrary to the situation for strategic human resource planning and strategic recruitment and selection there is a much greater wealth of literature available on the topic of strategic human resource development (SHRD). In this literature there is a particular emphasis on strategic integration, the centrality of learning and a learning culture to SHRD and multi-stakeholder responsibilities and involvement. These represent three key themes running through Chapter 10 although with respect to multi-stakeholder responsibilities and involvement the emphasis on HRD professionals commonly found within the SHRD literature is downplayed in favour of a greater focus on managers as HRD stakeholders. An important consideration here is the critical role played by managers in learning and development generally and its strategic manifestation particularly. This is graphically illustrated by ‘A case of two managers’, Felicity and Stanley, depicted in Practice Boxes 10.10 and 10.11. An important feature of the chapter is the attention given to the traditional systematic cycle of HRD and its strategic potential. This strategic potential is often overlooked in the SHRD literature whereas in Chapter 10, along with other models of HRD, we have attempted to show that irrespective of how HRD is portrayed or constructed it is possible to provide it with a strategic focus. Here, throughout the chapter, we have tried to capture and explore different degrees of strategic HRD focus, or integration, through the use of a conceptual model of strategic maturity developed along the lines of a continuum. We hope the concept of a continuum, with an absence of any strategic connection at one end and full strategic integration at the other, will provide a useful teaching vehicle for the exploration of the SHRD subject domain.

Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We have found that producing mind maps of the chapter content is a useful approach to note taking and encourages students to reflect on the internal integration of the subject content of the chapter. We use a variety of vehicles to bridge student preparation and class-based activities in order to enhance their understanding of the chapter content and its overall relationship to managing HR strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come to the teaching session prepared to raise them. Sometimes this may be

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formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write their answers briefly in note format;

•

complete the self check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. Pre-set questions that we have found useful for structuring student reading, preparatory activities and classroom discussion for the topic of strategic HRD include: 1. Drawing on the models and conceptual developments contained in the chapter, what for you constitutes SHRD? 2. To what extent is SHRD an unrealistic organisational aspiration and why? 3. Why are the concepts of the learning organisation and knowledge management so difficult to get to grips with? 4. How could organisational HR practice be developed and implemented to foster greater commitment among managers to their HRD role responsibilities? 5. To what extent could HRD practice in an organisation known to you be classified as strategic and what would be necessary to increase its strategic credentials?

In the classroom Clearly the approach adopted to ‘student preparation’ can be followed through into the classroom. A starting point that we find useful is to surface and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a snappy summary of key issues. While preparing answers to self check and reflect questions has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, if preparing answers to self check and reflect questions was not part of preparatory work but consideration of the questions is to feature as part of the teaching session, we would favour the group approach as a more stimulating approach. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued. Where case study work has featured as part of preparatory activities, similar approaches to those suggested for self check and reflect questions can be adopted. If coming to the case afresh, there

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is unlikely to be time for groups to consider all four questions. Here we would suggest that groups major on one of the case questions only moving on to others if they have time. HRD is an area where almost every student has some experience irrespective of whether they are full or part time. The majority of full-time students will have accumulated work experience prior to and during their higher education studies and many will be following business-related courses, which incorporate a placement element. Therefore, we have found it both feasible and useful to surface these experiences during class discussion and to subject them to critical analysis in order to evaluate their strategic credentials.

Follow-up work The pedagogic features adopted throughout this book are intended to offer up a number of alternatives for follow-up work while at the same time leaving the lecturer free to add or substitute their own ideas. If they have not already been used as part of class activities, the self check and reflect questions and/or the chapter case study, ‘INA’, will serve as a useful reinforcement of chapter content. Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading. One common denominator amongst students is that they are all actively engaged (or should be!) in the process of learning. An interesting exercise, therefore, is to ask them to reflect on the relevance of concepts underpinning the learning organisation and knowledge management to their student learning experiences and how they think these could be exploited in the world of work by both themselves and their work organisations.

Answers to Self-Check and Reflect Questions 10.1 Based on the story so far, what do you think are the essential characteristics of SHRD? Analysing the content of HRD/SHRD definitions surfaces a number of characteristics of the concept. Of these, strategic integration is the most frequently cited but takes on a number of different forms. First, is where HRD is managed strategically to help achieve organisational objectives. Second, SHRD can be viewed as a process that helps influence and shape strategy making. Third, is horizontal integration with other SHRM activities. In addition, there is a clear focus on continuous individual and organisational learning and growth. At one level, providing workplace learning experiences and utilising the resultant outputs of knowledge, skills and attitudes is seen as a necessary input into organisational learning and the achievement of business goals and strategies. At another level, the creation of a learning culture, with its emphasis on developing human capital as a core competence, is seen to lie at the heart of SHRD. There is also due consideration given to mutuality of interests between individual and organisational needs through focusing on achieving the longer-term aspirations of both. Lastly, it is possible to identify a focus on future change that not only reinforces the long-term perspective but also casts SHRD into a proactive as well as reactive process.

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10.2 Before reading on, how would you critique Garavan’s depiction of SHRD as summarised in Key Concepts 10.2? Although Garavan’s early work provides a very useful starting point to an exploration of SHRD he appears to approach the subject very much from the perspective of the HRD specialist. Most of the key characteristics he identified relate specifically to the HRD function, which gives rise to a number of potential problems. First, it could be argued that this perspective may signal that the HRD function is seen as the most important stakeholder with prime responsibility for HRD. This would clearly represent a position that is inconsistent with SHRM with its emphasis on devolvement of HR to line managers. However, against this, his two characteristics of ‘top management support’ and ‘line manager commitment and involvement’ (Garavan, 1991: 18 and 20) reflect the SHRM roots of SHRD but could lead to a second difficulty. By placing together a heavy emphasis on the functional responsibilities of HRD specialists on the one hand and increased managerial responsibility and involvement on the other it may be setting up a recipe for conflict between these two respective stakeholders. Third, if taken to its extreme, the adoption of SHRM may result in the total abandonment of a specialist HR (and HRD) function making it impossible to activate the HRD functional interventions anticipated by Garavan. Lastly, although the absence of a specialist HRD function may be rare in large organisations the same cannot be said for small and medium-sized organisations. Another problem area arises around the central characteristic of 'integration (of HRD) with organisational missions and goals’ (Garavan, 1991: 17–18). Within Garavan’s analysis business strategy is introduced in a generalised way that masks its true complexity and SHRD is essentially cast in a downstream relationship to it (although there is acknowledgement of the potential for HRD to influence strategy formulation through its attention to environmental scanning). In previous chapters it has been stressed that strategy is a multi-dimensional concept incorporating two-way vertical integration against a number of different orders (or levels) of strategy. Such issues are discussed at length elsewhere in this book and you are particularly referred back to Chapters 1, 7 and 8 for confirmation. A final possible area of critique arises from potential gaps in Garavan’s (1991) analysis. For example, his characteristic features of SHRD appear to have a very managerialistic bias. Stakeholder involvement covers HRD specialists, line managers and senior managers with no reference to employees. It may be recalled that in a number of definitions reviewed earlier there was an emphasis in the mutuality between individual and organisational growth such that SHRD was concerned not only with strategic integration but also with developing employees towards their full potential. Increasingly employees may be expected to take the lead role in their own personal development thereby shifting responsibility for SHRD. This is not to say that this shift in responsibility is an outcome of SHRD but it is legitimate to question whether the onus of responsibility might be different under HRD and SHRD respectively. Similarly, approaches to the more prosaic areas of training needs analysis and HRD delivery, including the emphasis of on-the-job training versus off-the-job training, might be differently oriented under SHRD compared to HRD. 10.3 How can SHRD help support second-order strategy changes designed to produce a flatter organisational structure through delayering? Recessionary pressures and cost reduction strategies frequently lead to organisations trying to do more for less. Often this means substantial downsizing and/or delayering with the two frequently being synonymous as layers of management are removed from the organisation. When they are applied in tandem the consequence for the remaining workforce is that levels of output may have to be maintained, or even increased, while at the same time the displaced managerial processes need to be absorbed into the job specifications for those that remain. In order to accommodate restructuring through delayering employees almost inevitably require a different skills base. Firstly, there may be a need for a set of technical skills necessary to

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support multi-skilling in order to enable employees to learn the jobs of colleagues and to cross hierarchic job boundaries, for example, skills associated with quality control, work scheduling, stock inventories and maintenance functions. Secondly, there are conceptual skills, which are frequently demanded by the vertical integration of work particularly where it embraces managerial responsibilities. Examples include quality assurance, problem solving, risk assessment, preventative maintenance and customer service. Thirdly, there are behavioural skills that are strongly associated with management processes and effective team organisation. Examples here could include giving and receiving feedback, negotiation, leadership, communication, group dynamics and personnel functions such as recruitment, HRD, performance appraisal and discipline. Whatever management's motivation for delayering the implications it has for SHRD should now be readily apparent. Almost every change to organisational structures will carry with it the need to develop additional and/or different skills in the workforce. This potentially represents a formidable HRD agenda particularly given the multi-dimensional nature of the skills base outlined above. Organisations will then need to develop specific HRD interventions to address these needs and are likely to do so against the conventional decision options confronting HRD practitioners, for example, on-the-job versus off-the-job HRD or internal versus external provision. Possibilities might include National Vocational Qualifications (NVQ)s, which are designed to provide practical skill development, competency-based HRD programmes and the use of open learning as a vehicle for acquiring theoretical knowledge. The SHRD portents for effective restructuring, however, are not particularly encouraging. Approaches to HRD frequently focus on knowledge and skill dimensions and neglect attitudes perhaps in the hope that appropriate attitude change will automatically flow from behavioural change! The business conditions that frequently spawn restructuring programmes may well lead to disinvestment in HRD rather than challenge the myopic managerial stance on HRD. Lastly, managers may not be of a sufficiently high calibre to handle the challenges to traditional command and control structures presented by restructuring through delayering. This clearly places a premium on management development, as a component of SHRD. 10.4 Why might it be argued that managers are the linchpin in the successful introduction and maintenance of SHRD? Underpinning SHRD is the notion of strategic integration where HRD acts to both influence and shape an organisation’s strategic direction and support its effective implementation. Managers are arguably the conduit through which this two-way strategic integration can be developed. This is consistent with the key role played by managers in performance management systems (Chapter 9) where they play a vital downstream and upstream role. In the downstream role they act to cascade strategic integration down through the organisation. In their upstream role they act as the channel for the upward communication that can highlight impediments to strategy implementation and/or provide an input into strategy making. Management support, commitment and involvement have been identified as key characteristics of SHRD. For example Garavan’s (1991) analysis, depicted in Key Concepts 10.2, refers to Top management support – where the strategic integration of HRD requires the active support and participation of senior management in order to become a reality and Line manager commitment and involvement – where the line manager takes centre stage in identifying and addressing the HRD needs of subordinates. McCracken and Wallace (2000) built on these two propositions to argue that SHRD requires top management leadership and line manager collaboration with HRD specialists to develop strategic partnerships if full strategic integration is to be achieved. They also argue that senior managers should take responsibility for scanning the organisation environment and identifying the HRD implications arising from their analysis (Key Concepts 10.3).

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The active involvement of managers in SHRD covers a number of key areas of responsibility. Managers: •

will frequently take the lead role in identifying HRD needs;

•

are likely to have substantial input into organisational SHRD resourcing decisions;

•

increasingly contribute directly as coaches and mentors as SHRD interventions move away from prescriptive off-the-job courses to focus on the learning opportunities offered by the immediate workplace; and

•

are likely to be at the heart of the effective transfer of know-how acquired either through offthe-job HRD or workplace learning.

Senior managers arguably represent the dominant coalition of interests in organisations and through their decisions and behaviour, exert strong influence on the prevailing organisation culture. Their decisions on the structural design of the organisation, commitment to their personal development and performance in executing their HRD role responsibilities help determine the extent to which the organisation develops a learning environment. For example, the extent to which mangers are able to create the conditions that support mutual learning and which capture, disseminate and share learning as well as an appropriate culture that supports experimentation, risk-taking, independent thinking, discord, authority based on expert knowledge rather than status is likely to be instrumental to the creation of a learning culture. 10.5 What factors have contributed to the relatively low level of importance attaching to management development? Running through the chapter are a number of references to factors that may impact adversely on management development. For ease of reference these might be grouped under three headings. Based on your own experiences you may of course be able to add to those factors identified here. Firstly, there are the direct experiences of the managers themselves. They may have got where they are with little personal investment in management education and training, which may therefore be perceived as largely irrelevant. This attitude is likely to be reinforced if organisations demonstrably promote staff into management positions on the basis of their functional expertise rather then their potential management competence. Secondly, their interpretation of their role may emphasise functional rather than managerial responsibilities. This may reflect a comfort zone where they find it easier to carry on much as before rather than tackle a set of difficult responsibilities for which they feel inadequately prepared. Further if the way they develop their staff is not explicitly rewarded their functionally oriented behavioural patterns are likely to be reinforced. Thirdly, the way they are managed within the organisation will impact on their attitudes to personal development. They may have experienced little by way of quality one-on-one development time with their manager and are therefore exposed to poor role models. Further, the emphasis on short-term results may send out signals that longer-term investment in HRD is a low priority.

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Answers to Case study questions 1. How is INA trying to build a learning culture and how would you assess its success to date? INA’s commitment to the development of a learning culture and the critical strategic significance of it doing so successfully are clearly evident. In moving to the position where the company intends to compete on the basis of its skill base, the development of a culture of continuous improvement and building towards a learning organisation are seen as essential in order for it to realise its strategic vision. The company regards its survival and future success as being dependent on its ability to learn faster than the rate of change. Although only a short way into its period of strategic re-alignment, the company has already taken a number of significant steps towards building a learning culture. An interesting initiative was the initial step taken to hold individual meetings with all employees, which surfaced their perceptions on the obstacles confronting the development of a learning culture and ideas on how they could be addressed. The fact that management responded to their ideas with a clear set of actions communicated early confirmation of the importance of employee voice and of managers’ own recognition of their need to learn. Another key initiative was the development of systems to support company financed individual learning plans (similar to EDAPs) particularly, as it transpired, that some of the HRD outcomes of these plans involved employees attending non work-related study in their own time. Such investment should have communicated a clear message that the company values and is prepared to support learning for its own sake. The re-launch of a suite of NVQ programmes was clearly designed to underpin the development of the company’s skill base. The introduction of the NVQ level 2 programme in performing manufacturing operations for all of the company’s production operators exemplifies INA’s commitment to learning and development throughout the organisation. Another important milestone was the development of a learning centre. Here, computerised learning facilities provide a network of HRD possibilities for all staff and as an example of its impact to-date 100 employees have signed up for the Government-initiated Learndirect courses. In-house continuous improvement courses further reinforce the focus on learning and, importantly, this is increasingly being supported by those already trained becoming involved as coaches, mentors and NVQ assessors in order to help cascade the outputs of the various training programmes throughout the organisation. As roles are redefined HRD support is also being offered to help facilitate these changes such as programmes to develop meetings skills to support the active engagement of employees in the works council and its sub-committees. Interestingly the trade union Amicus also appears to be fully committed to fostering the development of a learning organisation. It has secured significant funding for investment in the company’s learning centre and appoints and sponsors four learning representatives and uses TUC courses to support their role development. At this early stage it is obviously impossible to assess how successful INA has been in its intent to develop a learning culture because it is, by definition, a long-term project. However, early signs are encouraging. For some operators gaining the NVQ award represented their first ever external qualification and a number already seem to have got the learning and development bug as they are now progressing through levels 3 and 4 of the programme. Other encouraging signs are: the active use of learning centre facilities by employees; the transfer of non work-related study to work situations by some employees; the general organisational commitment to learning being valuable in its own right; and the cyclical impact of learning and development as those already trained increasingly get involved in the development of others and thereby further develop their own skills base.

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2. In a number of models of SHRD, employees, line managers and senior managers are identified as having important roles to play in its development (for example Mabey et al, 1998; McCracken and Wallace, 2000). To what extent do these stakeholders represent obstacles to the development of SHRD in INA and how are any such obstacles being addressed? The starting position for business turnaround was not particularly propitious. The workforce was characterised by long-serving employees who had received little task-based HRD. In addition the workforce was generally cynical about management’s change intentions because of the failure of previous turnaround initiatives. This cynicism was arguably evidenced by the operation of the ‘grapevine’, which was not only rife but had become the most believed source of information in the company. From the collective (union) perspective: the works council was regarded as little more than a forum for discussing housekeeping issues; shop stewards viewed confrontation and not collaboration as the natural modus operandi; and employee relations had deteriorated to such a low level that despite INA’s dire predicament strike action was being actively mooted in response to a number of unresolved issues. For line and senior managers the major frustration was that they could not adequately fulfil their role responsibilities, including those related to HRD. In response to the company’s predicament, the demands of production had resulted in the HR roles of managers, supervisors and team leaders becoming diluted. In a chain reaction team leaders were spending too much time helping out with production meaning that the management hierarchy had become distorted with supervisors operating as team leaders and managers as supervisors. Also management’s previous track record in HRD did not augur well for INA’s change in strategic direction. Previous attempts to build skills through NVQ (National Vocational Qualifications) programmes had foundered because of lack of time and commitment amongst supervisors to undertake the necessary assessments of employee competencies. Based on the above, the identified stakeholders could have represented a very significant impediment to the proposed strategic re-alignment. However, action being taken appears not only to be addressing identified obstacles but doing so successfully. As a starting point we would argue that the steps being taken to build a learning culture described immediately above, carry with them significant potential to successfully address the obstacles presented by stakeholder attitudes, behaviours and competencies. For employees, two steps appear to be particularly important. First, was the one-to-one meetings directed at: communicating the company’s position honestly; explaining the company’s vision for business turnaround; and signaling management’s commitment to that vision. Second, was the direct HRD investment by INA in its employees such that even if the latest attempt at business turnaround failed those employees would have at least been equipped with high-level, portable skills that would significantly enhance their employability. A key step from the collective perspective was the forging of a partnership agreement with the trade union Amicus. This resulted in the union signing-up to the change programme and appears to have been a major contributory factor in changing the employee relations climate and opening up a genuine twoway dialogue as exemplified by the re-alignment of the works council’s remit and operation. For managers, supervisors and team leaders an important step has been the redefinition of their role responsibilities to enable them to commit to their HRD responsibilities. This has been supported by training needs analysis to identify skills gaps that might constrain effective role performance and appropriate training to meet identified needs such as communication. This has led, for example, to the introduction of an NVQ level 3 in business improvement techniques for supervisors and an NVQ level 3 in management for team leaders.

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3. Where would you position INA along the HRD strategic maturity continuum (Figure 10.8) and how would you justify your placement decision? Drawing on the work of Garavan (1991) and McCracken and Wallace (2000), the strategic credentials of INA’s HRD activities have initially been analysed against their 9 characteristics of HRD as follows: 1. There is clear vertical strategic alignment between INA’s decision to compete on the basis of quality and its commitment to develop workforce capability through switching investment in machinery to investment in human capital in order to build an employee skill base capable of realising the company’s strategic vision. Although there is reference in the case to the works council now playing a key role in developing strategy there is too little detail here to suggest that this vertical strategic integration is anything but downstream at this stage and is therefore more consistent with Garavan’s views. 2. Consistent with Garavan, the active support of senior management for HRD is apparent through the many initiatives detailed above. This is reinforced by the assistance senior managers provide in customising training to meet INA’s context and their participation in its delivery to those with leadership roles. However, no clear picture emerges that senior managers are adopting the strategic HRD leadership role championed by McCracken and Wallace. 3. The strategic and consequent HRD re-alignment, identified in 1 above, appears to have been formulated directly from environmental scanning. However, this is again more consistent with Garavan’s views as it appears to reflect the previously cited downstream strategic relationship rather than a senior management role to scan the environment for HRD implications as advocated by McCracken and Wallace. 4. HRD plans and policies appear to be being systematically integrated with organisational strategy within a clearly defined HRD strategy directed at developing a continuous improvement culture and building towards a learning organisation consistent with the SHRD views of McCracken and Wallace. 5. There is clear evidence of line manager commitment and involvement. This is consistent with their pivotal role in HRD anticipated by Garavan. However, there is no substantive evidence of line managers developing strategic relationships with HRD specialists as propounded by McCracken and Wallace. 6. The case provides no substantive evidence related to HRD being developed alongside and in a complementary way with other HRM activities. Therefore, although there may be some implicit evidence to the contrary, it is argued that horizontal integration is missing from the strategic equation. 7. The case provides no substantive evidence related to the roles of training specialists in INA. However, reports of INA’s story by Roberts (2003) and Evans (2004) both appear to indicate that the Personnel Manager in delivering his HRD role responsibilities is fully engaged as an innovative change consultant consistent with McCracken and Wallace’s construction of SHRD. 8. Again consistent with McCracken and Wallace’s construction, there is an evident and significant role being played by HRD to influence and change organisational culture. 9. The case provides no substantive evidence related to the process of evaluating HRD in INA. However, the summary of achievements to date, detailed at the end of the case, point to the success of the changes being made at INA particularly in terms of their strategic contribution. Without further data it is impossible to assess the contribution of the various HRD interventions although against this it could be argued that this must have been substantial for the company to be named ‘Welsh people development company of the year’ in 2003 and shortlisted for CIPD’s annual People Management Award in both 2003 and 2004.

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In addition, it is argued that evidence of multi-stakeholder involvement in HRD places INA towards the right hand side of the continuum of HRD strategic maturity depicted in Figure 10.8 in the chapter. Apart from the involvement of senior managers, line managers and training specialists apparent in the foregoing analysis, this includes: •

collaboration with a local college in delivering the NVQ level 2 programme in performing manufacturing operations;

•

employee representatives through their participation in the works council, its subcommittees and as learning representatives;

•

support of the trades union Amicus in part funding INA’s learning centre; and

•

the pivotal role being played by line staff in transforming the company’s skill base.

On balance we argue that the above analysis (points 1, 2, 3, 5 and 9) reflect more Garavan’s (1991) depiction of SHRD although elements of McCraken and Wallace’s depiction are evident in points 4, 7 and 8. This, together with evident multi-stakeholder involvement, pushes our placement of INA on the continuum (Figure 10.8) further to the right. In conclusion, although recognising that there is limited evidence of two-way vertical strategic integration, we argue that INA’s current position on the 6 point continuum of HRD strategic maturity is significantly to the right of point 4 (‘HRD’) and just short of point 5 (‘SHRD’). 4. Either – what recommendations would you make to help INA move further towards strategically mature HRD? Or – what further evidence would be needed to justify positioning INA at the SHRD end of the HRD strategic maturity continuum (see Figures 10.3 and 10.8)? Given our analysis in Question 3 above we argue that to fully satisfy positioning INA at the SHRD point on the continuum and to move it even further to the right towards the final point of SHRD plus requires: •

two-way strategic integration where HRD more explicitly informs strategy formulation and subsequently leads to the position where employee capabilities become identified as the organisation’s core competence;

•

the development of strategic partnerships between line managers and those with specialist HRD role responsibilities;

•

concerted attention being paid to horizontal integration to ensure the development of a complementary bundle of HRM activities; and

•

success criteria of HRD interventions to be defined at the point of their development and subsequently evaluated using transparent processes with results being openly disseminated throughout the organisation.

With a nod to the second’ option of Question 4, it could of course be that INA is already doing the above and all that is required is evidence to this effect. More directly, we would argue that to fully justify our current positioning of INA on the continuum requires additional evidence in support of: •

HRD plans and policies being developed within a clearly articulated and coherent HRD strategy;

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•

the organisation change consultant role of HRD specialists;

•

the strategic contribution being made by those with specialist responsibility for HRD;

•

HRD’s input into shaping and managing culture change; and

•

evaluation of the direct strategic contribution of HRD.

Lastly, it is argued that it is too early to position INA against a concept that is fundamentally long-term in its orientation and that what will be needed is an accumulation of confirmatory evidence over time.

References Evans, J. (2004) Bearing up brilliantly, People Management, 11 November, 32–33. Garavan, T.N. (1991) Strategic human resource development, Journal of European Industrial Training, 15(1), 17–30. McCracken, M. and Wallace, M. (2000) Towards a redefinition of strategic HRD, Journal of European Industrial Training, 24(5), 281–290. Roberts, Z. (2003) Learning leads the way, People Management, 6 November, 34–35.

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CHAPTER 11

Strategic reward management: Cinderella is on her way to the ball Learning outcomes By the end of the chapter you should be able to: •

define reward management and strategic reward management;

•

explain the factors in the external environment which have led to the increased interest in strategic reward management;

•

analyse the links between intra-organisational factors that impact upon strategic reward management.

Summary •

Reward management is concerned with financial and non-financial rewards to employees and embraces the philosophies, strategies, policies, plans and processes used by organisations to develop and maintain reward systems. Strategic reward management plays an important role in delivering the organisation’s overall business strategy by creating in employees certain behaviours, the need for which are implied by the business strategy. These employee behaviours may be produced by an HR strategy, which includes a reward strategy as well as other HR strategies such as the cultural strategy; the structural strategy and other HR strategies.

•

A variety of factors in the external environment have led to the increased interest in strategic reward management. Principal among these are those factors, which have impacted upon the commercial environment in which organisations operate creating the necessity to be more competitive and responsive to change.

•

The intra-organisational factors, which impact upon strategic reward management are the organisation cultural strategies, structural strategies and other HR strategies. In terms of reward the principal contributors to the organisation’s cultural strategies are pay for performance schemes. These may be at the level of the individual, the team and the business unit and the organisation.

•

The reward contribution to the organisation’s structural strategies involves changing reward structures. In this chapter the move from traditional pay structures to job family and broadbanded structures were examined. Competence-related pay was analysed as the means by which reward may complement other HR strategies.

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Teaching and learning suggestions Comment The chapter makes the point that reward has always enjoyed something of a Cinderella status in the world of personnel management. It has traditionally been about the rather dull but necessary concerns of wage and salary administration than the more exciting arena of strategy. This chapter covers evidence, which suggests that the situation in many organisations may not have changed that much in the last twenty years. However, for the more progressive organisations times have changed; reward now plays a central part in HR strategy. It is this change, which is the theme of this chapter. A broad definition of reward is used in the chapter. This includes non-pay benefits, such as recognition and pensions, as well as wages and salaries. The term ‘strategic reward management’ is also explained. This serves as the guiding framework for most of the chapter. The chapter has a detailed analysis of the factors in the external environment, which have led to the increased interest in strategic reward management. But the main part of the chapter is about the environment internal to the organisation and the links between intra-organisational factors, which impact upon strategic reward management and strategic reward management. The chapter also includes a discussion of some of the ethical concerns which attend new types of reward.

Student preparation As with other chapters, we believe it is essential that students read and make notes from the chapter prior to the class. We use a variety of vehicles to bridge student preparation and class-based activities in order to enhance their understanding of the chapter content and its overall relationship to managing HR strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come to the teaching session prepared to raise them. Sometimes this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write their answers briefly in note format;

•

complete the self check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to both self check and reflect questions and case study questions follow in the next two sections of this chapter guide. Pre-set questions that we have found useful for structuring student reading, preparatory activities and classroom discussion for the topic of strategic reward management include: 1. How would you define strategic reward management and set it into the context of SHRM?

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2. What factors in the external environment have led to the interest in strategic reward management? 3. What are the principal strategic relationships between strategic reward management and corporate strategy and how could they be evidenced in practice?

In the classroom A starting point for classroom activities that we find useful is to raise and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a summary of key issues. Where preparing answers to self check and reflect questions has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, if preparing answers to self check and reflect questions was not part of preparatory work but consideration of the questions is to feature as part of the teaching session, we would favour the group approach as a more stimulating method. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued. Where case study work has featured as part of preparatory activities, similar approaches to those suggested for self check and reflect questions can be adopted. Our approach here would be to start with a more general exploration of the strategic reward management implications of the case.

Follow-up work The pedagogic features adopted throughout this book are intended to offer a number of alternatives for follow-up work while at the same time leaving lecturers free to add or substitute their own ideas. If they have not already been used as part of class activities, any prior preparation of answers to the self check and reflect questions and/or the questions suggested for student preparation and/or the chapter case ‘Developing a global reward strategy at Tibbett and Britten Group’ will serve as a useful reinforcement to chapter content. Our outline answers to both self check and reflect questions and case study questions follow in the next two sections of this chapter guide. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading.

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Answers to Self-Check and Reflect Questions 11.1. What obstacles stand in the way of the more widespread adoption of work-life balance policies? It is undoubtedly more likely that work-life balance policies will be more prevalent in larger organisations. This may be for two reasons in particular. First, it tends to be larger organisations that blaze the trail in terms of ‘good HR practice’ and second, resources tend to be spread less thinly in larger organisations. These reasons may provide the answer to the question. Usually, when measures such as this are introduced smaller organisations cry foul and argue that initiatives such as work-life balance policies hinder their ability to manage their own businesses and harm their commercial viability. There is, of course, some truth in this. However, you may argue that the cause of women wishing to have families and careers would be greatly harmed by the absence of maternity legislation. This is now taken for granted in developed countries. The pace the adoption of general work-life balance policies may, therefore, hinge upon the willingness of governments to legislate. 11.2. What problems occur to you when you look at Figure 11.2? There is one which cries out from the diagram: what if the organisation does not have a business strategy? The theory of strategic reward management explained in the chapter revolves around the assumption that this will be in place. Chapter 1 explains that strategy formulation is not the neat, unproblematic process, which the literature often assumes. But the absence of a formal written strategy does not necessarily invalidate the model in Figure 11.2. The general thrust of the organisation’s affairs serves the model in the same way as the formal written strategy. That said it would be realistic to point out that Figure 11.2 is more appropriately applied to the larger organisation with a specialist HR (if not necessarily reward) function. 11.3. Moving from a situation where all pay is base pay to one where there is a combination of base and variable pay does carry with it threats. What may these be? Variable pay puts a proportion of the pay packet ‘at risk’ through techniques. Employee wellbeing is potentially threatened by an increased amount of insecurity and unpredictability that is potentially harmful both economically and psychologically. Additionally, putting a proportion of employees’ income at risk may lead to such behaviours as overwork, which may damage both mental and physical health. Variable pay also carries with it the threat of greater unfairness in that decisions have to be made by managers about the level of pay to be received. This too creates the potential for employee instability. 11.4 What may be some of the potential disadvantages of competence- based pay? Most problems occur with the definition and measurement of competences. Much work has gone into defining competences in the areas of job design, selection and training. But relatively little attention has given to the issue of measurement for pay purposes. This may be more straightforward when manual skills are involved but for many knowledge-based jobs the problems come with the so-called soft skills such as team leadership or motivating others. As the chapter text notes, the more subjective the process becomes the more scope there is for perceived unfairness among employees. There are other potential disadvantages. Developing competences in employees is worthless if they are not to be used in the workplace. Another problem may be the disentangling of the motivational effects of enhanced reward and enhanced skills. Some reward commentators believe that applying extrinsic benefits (e.g. pay) to intrinsic factors (e.g. competence

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development) renders employees less motivated by the prospect of achieving new competences.

Answers to Case study questions 1. Why do you think that the creation of internal consistency was such an important objective of the new reward strategy? The key to the answer to this question lies in the second and third objectives of the broader framework for reward, which the company wished to introduce across the company. These were to: •

address tactical issues impacting negatively on employee motivation and engagement, and create a culture where performance drives reward and recognition; and

•

create competitive advantage for Tibbett and Britten Group in the marketplace, particularly by improving its reputation as a contractor and employer of choice.

Clearly it was felt that such fundamental concerns of reward strategy were being prejudiced by a lack of internal reward consistency. The potential harmful outcomes of a lack of internal reward consistency are always the perception by some employees that they are being unfairly treated in comparison with others. One of the basic ‘truths’ of reward management is that all of us, as employees compare our salaries with someone else, both inside and outside our employing organisation. Preventing perceptions of unfairness is well-nigh impossible. But employers can take as many steps possible to lessen these by attempting to achieve internal consistency within the organisation and external consistency with similar jobs and similar employers in the relevant labour market. Tibbett and Britten sought to do this through bringing a measure of internal consistency to reward by establishing a group policy framework that would: help managers communicate a coherent policy on reward; guide country managers in the alignment of reward policies and projects within overall group principles; initiate a cost-effectiveness review of current reward expenditure in light of what is identified as valued by employees; and maintain the flexibility for local innovation and adaptability to customer's needs. It should be borne in mind that most of Tibbett and Britten Group’s employees were transferred from major customers such as Debenhams, Homebase or IBM. These employees retained their existing terms and conditions of employment. This meant that there were a wide variety of pay and grading arrangements in operation. These varied by country and by contract. There were short- and long-term incentives and other benefits. There were also differing local relationships with trade unions. Local managers had traditionally agreed to vary certain arrangements locally and to pay upper quartile rates, for instance, or to use a particular form of competency-based pay. While the use of Tibbett and Britten Group incentives and benefits had become more consistent, many contracts were determined by the terms and conditions transferred from the customer. Most non-management employees were not on Tibbett and Britten Group terms and conditions. Managing the anomalies thrown up by this inconsistency was a key issue in the company's relationships both with employees and customers.

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2. Look again at the ten principles. Do you think there may be any potential contradictions inherent in these principles? Some potential contradictions are suggested. These may be: Principle

Potential contradictions

’Think global, act local’ by creating programmes that employ group principles and maintain optimum internal consistency and cohesion, while providing the flexibility to adapt to local market requirements and practices.

It may sound a bit pedantic but the very act of providing the flexibility to adapt to local market requirements and practices may in itself contain the potential to lead to internal inconsistencies. To deny the opportunity for managers the scope for flexibility to adapt to local market requirements would, of course, be unworkable, but the threat of internal inconsistencies must be recognised.

Pay for performance, strongly differentiating rewards, which reflect the underlying contribution of individuals through performance assessment against stretching objectives.

As the chapter points out, one of the problems of problems of paying for individual job performance is that managers find differentiating between individual performance levels is very difficult. This may be for a variety of reasons. One of these, which the Tibbett and Britten Group reward principle opposite overlooks, is that the contribution of individuals may be broadly similar. This can lead to a situation of ‘forced’ differentiation which contains the potential for internal inconsistency and perceived unfairness.

Implement rewards selectively and tactically, where justified, in recognition of the unique characteristics of certain roles.

Again, It may sound a bit pedantic, but the emphasis upon the unique characteristics of certain roles, as opposed to their similarity, leads to differentiation which potentially leads to internal inconsistency and perceived unfairness.

Support and encourage all managers to ‘recognise from the heart’ the contribution of individuals and teams, as a critical component of the Total Rewards strategy.

The pursuit of internal consistency suggests to us an activity associated with cool rationality; ‘recognition from the head’ rather than ‘recognition from the heart’. The latter suggests the potential for subjectivity rather than objectivity, and for inconsistencies such as favouritism.

Incorporate flexibility in the design of reward programmes, to provide the benefit of choice across our increasingly diverse workforce and to facilitate controlled tailoring to customer requests.

Again, the components of this principle: flexibility, choice, diversity, responding to customer requests; suggests decisions which do not reflect internal consistency.

The answer to this question may strike you as rather over-critical. Does not all human activity contain the potential for contradiction? Are we all as humans entirely rational and consistent in our thoughts and actions? Of course, we are not. And Tibbett and Britten Group reward principle designers are no different from the rest of us. Preventing internal inconsistency is, arguably, impossible and may be undesirable. Being aware of its potential is neither.

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3. What potential benefits do you think may accompany the achievement of greater transparency in the new reward strategy? Look again at the answer to Question 1. The point was made that preventing perceptions of unfairness is well-nigh impossible. But employers can take as many steps possible to lessen these by attempting to achieve internal consistency within the organisation and external consistency with similar jobs and similar employers in the relevant labour market. It is tempting for employers to conceal their reward decisions as much as possible on the basis that concealment heightens management control while transparency lessens management control. After all, the less employees know about pay reward decisions the weaker position they are in to challenge those decisions. While managers at Tibbett and Britten Group may not want to go as far as revealing all the details about the rewards to individuals the basis upon such reward decisions were made will lessen the possibility of perceived unfairness.

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CHAPTER 12

Managing the employment relationship: strategic rhetoric and operational reality Learning outcomes By the end of this chapter you should be able to: •

explain the importance of the employment relationship to SHRM ;

•

define the employment relationship;

•

evaluate the strategic approaches to managing the employment relationship;

•

identify the various formats for organising the employment relationship at a range of levels;

•

define employee involvement and voice;

•

assess the linkages between SHRM and employee relations;

•

evaluate the concepts of partnership and the psychological contract.

Summary •

The management of the employment relationship is a central area of discussion, research and organisational practice within the field of SHRM. Key concepts include the shift from traditional industrial relations to employee relations. Key parties to the employment relationship can be the grouped into bodies representing employers and employees.

•

Two key differing perspectives in relation to a strategic approach to the management of the employment relationship – namely unitarism and pluralism – are identified and discussed.

•

Key theoretical contributions in relations to strategic HRM and employee relations have been identified and grouped. Four possible organisational approaches to the management of the employment relationship are presented. These four approaches are: new realism, traditional collectivism, individualised SHRM and the black hole.

•

Potential policies and practices in relation to managing employee relations in a strategic manner are discussed. This discussion is presented under the central theme of employee involvement and participation. Within this context two key approaches are discussed in depth namely partnership and the psychological contract. The practical realities of developing and managing partnership are discussed, as are the elements involved in the development of the psychological contract at the workplace and organisational level.

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Teaching and learning suggestions Comment Our aim in this chapter is to consider how the management of the employment relationship can contribute to the achievement of SHRM. Essentially, the chapter has three key areas– the first area focuses on defining the changes that have taken place in the employment relationship. Central to this discussion has been the shift away from industrial relations to employee relations. The aim of this chapter is to explore and assess the linkages that exist between employee relations and SHRM. This exploration emerges in the second and third areas of this chapter. In the second area an analysis of key theoretical discussions on the linkages between SHRM and employee relations will be presented. In the third area of the chapter evidence of the practices associated with a strategic approach to the management of the employment relationship will be presented. These practices are grouped around the central SHRM concept of employee involvement and participation. In the last 25 years the human resource management (HRM) literature has seen significant focus and evaluation being placed on a ‘strategic’ approach to the development and implementation of HRM policies and practices (Legge, 1995; Storey, 1995, Tyson, 1995; Schuler and Jackson, 1999; Boxall and Purcell, 2003). Extensive discussions on this strategic approach will have taken place in previous chapters of this book and the purpose of this chapter is to consider the management of the employment relationship and evaluate the strategic choices that are available to the various parties in this relationship. The term employment relationship can be defined most simply as the interaction between employers and employees. This simplistic definition highlights a potential problem in the employment relationship, if the relationship is merely based on interaction at best is will be operational and as such have little strategic value for the parties involved. Traditionally the management of the employment relationship has focused around the concept known as industrial relations. Industrial relations are generally understood to refer to the relationship between employers and employees collectively. The focus of industrial relations was firmly based on collective relationships that existed between individual or often groups of employees and the representatives of employees, namely trade unions.

Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We have found that producing mind maps of the chapter content is a useful approach to note taking and encourages students to reflect on the internal integration of the subject content of the chapter. We use a variety of vehicles to bridge student preparation and class-based activities to enhance their understanding of the chapter content and its overall relationship to managing human resources strategically. As standard, we would ask students to make a note of any queries arising from their reading and come to the teaching session prepared to raise them. Sometimes this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write their answers briefly in note format;

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•

complete the self check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. Pre-set questions that we have found useful for structuring student reading, preparatory activities and classroom discussion for the topic of managing the employment relationship include: 1. How would you define the employment relationship and set it into the SHRM context? 2. What are the principal strategic relationships between employee relations and corporate strategy and how could they be evidenced in practice? 3. What do you understand by the term strategic approaches to the management of the employment relationship? 4. How would you argue the case for and against the formal adoption of strategic employee relations by organisations?

In the classroom Clearly the approach adopted to ‘student preparation’ can be followed through into the classroom. A starting point that we find useful is to surface and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a snappy summary of key issues. Where preparing answers to self check and reflect questions has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, if preparing answers to self check and reflect questions was not part of preparatory work but consideration of the questions is to feature as part of the teaching session, we would favour the group approach as a more stimulating approach. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued. Where case study work has featured as part of preparatory activities, similar approaches to those suggested for self check and reflect questions can be adopted. Greater topicality can be achieved by capturing the big business news stories of the week, discussing the employee relations issues that are likely to arise and exploring how a strategic approach to the management of the employment relationship might be used effectively to address these issues.

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Follow-up work The pedagogic features adopted throughout this book are intended to offer a number of alternatives for follow-up work while at the same time leaving the lecturers free to add or substitute their own ideas. If they have not already been used as part of class activities, any prior preparation of answers to the self check and reflect questions and/or the questions suggested for student preparation and/or the chapter case ‘Strategic Approaches to the Employment Relationship Social Partnership: The example of the Republic of Ireland’ will serve as a useful reinforcement to chapter content. Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading.

Answers to Self-Check and Reflect Questions 12.1 Define the employment relationship and discuss the changes that have taken place to the relationship in recent years? The employment relationship at the simplest level is the interaction between the employer and the employee. You can focus on discussing industrial relations and employee relations and highlight the shift away from collectivism to individualism. SHRM has had a major impact in this area and you can use SHRM as a tool for focusing your responses to this question and the emergence of the concept of employee involvement and participation is closely linked to SHRM. Traditional industrial relations are still in operation but largely in the public sector and traditional industries. Employee relations operate in a wide range of industries and sectors and are often linked to non-unionised workplaces. 12.2 Fox (1966) clearly believed that the pluralistic perspective on employee relations was the most valid and realistic way to manage the employment relationship. Given the emergence of the HRM models of management in the 1980s do you believe that unitarism is a more appropriate way of managing the employment relationship in the twenty-first Century? You can characterise pluralism as reflecting adversarial relationships between employers, employees and trade unions. Highly formalised procedures would exist at the workplace or industry level. These procedures would be based on collective bargaining and joint consultation. Conflicts could occur over virtually everything and disruptions to work would occur frequently. This model is very closely associated with traditional personnel management and industrial relations and in the context of the private sector it operated in industries that have been in the decline over the last 20 years. This approach may be contrasted with employee relations, which in the rhetoric of HRM would lead us to believe, we are all unitarists and that all employers have highly committed employees as a consequence of employee involvement and participation. This led to the term ‘new’ being used in relation to unitarism and ‘old’ being used in relation to pluralism. The organisational reality is of course not quite as straightforward. The United Kingdom and Ireland, continental Europe and North America operate an employment relationship that is

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largely pluralistic in nature. In the United Kingdom and Ireland most public sector employees are managed in a pluralistic manner. 12.3 Choose an organisation with which you are familiar and, using Guest’s (1995) evaluation of the four possible approaches to the management of the employment relationship describe the current employment relationship. You should be able to identify, discuss and assess the four distinct types of management of the employment. In considering each approach to the management of the employment relationship approach you should be able to identify the key concepts and components of each approach and compare and contrast this with the policies and practices of the organisation they have chosen. You should attempt to evaluate the policies and practices of the organisation in relation to the four distinct approaches to the management of the employment relationship and decide which of the approaches is most prominent in the organisation. 12.4 Consider the arguments for and against the development and introduction of a partnership agreement in an organisation. You should be able to talk about the recent developments at national, industrial and organisational levels. In presenting arguments for and against the partnership model you should consider the elements required to develop a partnership agreement and the key stakeholders involved. The nature of the organisation you choose will have a major impact on how you answer this question. Factors to be included in your analysis are: the industry where companies operate, their key markets, products or services, the ownership of the organisation, the organisational culture, the size of the organisation, the structure of the organisation, previous relationships between the employer, employees and the union and the current methods for employee involvement and participation. The involvement of management is of vital importance and, depending on the organisation, can be viewed as an advantage or a disadvantage. 12.5 To what extent is the ‘new’ psychological’ contract a myth dreamed up by HR commentators to add a new dimension to discussions about SHRM? As with significant elements of the general theory of SHRM, there may be an element of overstatement here in that the idea or the rhetoric as it has referred to it in this chapter may be running somewhat ahead of the organisational reality. The emergence of the ‘new’ psychological contract can be considered as the consequence of two observable trends. The first is that all organisations have to be mindful of operating costs. In such a climate, the ‘promise’ of a job and career for life is an expensive one. The second trend is the desire that many employees have to take control of their lives. This means that the concept of working for one organisation throughout a 40-year career is becoming less and less appealing.

Answers to Case study questions 1. Outline the main driving factors for the development of social partnership in Ireland? 2. Why do you think it was so important to have a tripartite agreement between the national Government, employers and trade unions? 3. Why do you think it has been possible to develop and sustain social partnership in Ireland for such a long period? 4. Do you think it would be possible and/or beneficial for the UK to develop its own model of social partnership?

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The answers to this case study are presented in the form of a handout that can be used in answering the questions presented in the case study or for studying the subject of employee relations approaches in more depth.

Social Partnership Handout Broad aim: to understand the development of classical and competitive neo-corporatism and to examine social partnership in the Irish Republic against this theoretical background.

Question 1 Factors driving social partnership in Ireland Governments and Pay The Irish Government were seeking to have an influence on the pay and working conditions of its Citizens. The answer to this question arises from their role in management of national economies. In neutral terms, overall aim might be defined as the achievement, maintenance and enhancement of national prosperity – involving pursuit of objectives like low inflation, a balance of payments surplus, favourable currency exchange rates, full employment and so on. But there clearly are choices – political choices – to be made about, which will have priority. And an important influence will usually be the ideological disposition of the government. Its political approach might be: •

neo-liberal/individualistic (‘Thatcherite’);

•

social democratic (‘labour’/socialist);

•

communitarian (populist/‘green’/grass-roots);

•

or even corporatist (on which, see more later).

Approach may also depend on whether it has sectional interests, like unions or employers, to take care of. This is not to argue that governments have no scope for independent, autonomous action – that they are always prisoners of ideology and/or interest groups, or of the capitalist system itself. It is simply to note that we are dealing here with a matter of popular controversy – one at the core of the public policy-making process.

Employee Relations Policy Choices 'Bias' of System (political Inclination?) Liberal, or neoLiberal – unitarist (right wing?)

Position of Unions Weak

Strong

NeoLaissez Faire

Free Collective Bargaining (FCB)

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Corporatist – pluralist (left wing?)

Corporatism

Bargained or neoCorporatism

Neo-laissez faire Crouch uses 'liberal' in original 19th Century sense – as demanding the freeing of individuals from all forms of community, economic, moral and political restraints. In particular: ‘Freedom from interference by the state in the economy (in the 19th Century) meant allowing market forces to work without interference. Similarly, individualism meant liberty for the individual to grasp opportunities available to him; but it also meant being forced to remain an individual and not to combine with others ‘ (Emphasis added). Revived in Ronald Reagan’s America and Mrs Thatcher’s Britain in 1980s, as a product of neoliberalism, its three essential tenets are: 1. pursuit of individual self-interest is the engine of economic progress; 2. state must ensure that vested interests – especially trade unions – are not permitted to interfere, using essentially illegitimate collective power, with the totally free operation of markets; 3. no role for government in setting pay and conditions of employment, and no role for interest groups in formation of public policy. In late 1970s British unions were still strong – so it was necessary, to attain neo-laissez faire IR, for them to be weakened, using a number of measures: by legal restrictions on union power in workplace – help employers resist unionisation, and make it more difficult to engage in industrial action by ‘de-regulation’ of the labour market: no minimum wage; no ‘union labour only’ contracts; privatisation of state enterprises; tendering for public services; erosion of legal job security rights; accepting unemployment as method of wage regulation by ending ‘social partnership’: elimination of unions and employers from influence on formation of government social and economic policy.

Free collective bargaining To operate in their purest forms, both liberal and corporatist systems require a weak, or at least quiescent, trade union movement. It was the growing strength of trade unionism – the strength that people gained by facing the economic system not as individuals but as part of a combination (or collective) of people – which forced 19th century economic liberalism away from laissez faire individualism towards an accommodation with union-based collectivism. The product of this accommodation with the new power of the unions was encouragement of free collective bargaining (FCB) between employers and independent, representative unions.

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This was liberal in traditional ideological terms, but also liberal in a modern sense – meaning tolerant, progressive and defensive of diversity. In Britain and Ireland FCB also retained in one important respect the key liberal canon of ‘no state interventionism’: governments were to be – more or less – bystanders as regards industrial relations. FCB faith was based on conviction that both order on the streets and just as importantly, economic and social justice were most likely to be assured by unregulated free collective bargaining; and free meant: •

virtually total independence of industrial relations system from government control;

•

general distrust of law and its restrictive effects;

•

complete self-reliance and independence of TUs, employers and employers’ associations.

These ‘freedoms’ were regarded as so essential that the only real interventions by governments were: •

to offer further support for FCB;

•

to provide a substitute for it and/or;

•

to apply moral pressure.

Support: took form of state-funded conciliation and arbitration, designed to provide help when ‘normal’ bargaining had not produced agreement. Substitute: was represented in what later came to be known as Wages Councils, which set minimum wages in certain trades. Exhortation: the most a government operating a rigorous liberal collectivist FCB policy might do as regards wage levels was to urge the parties to moderation Corporatism

‘Classical’ Neo-Corporatism As we have already noted, neo-corporatism was generally influenced by a social democratic ideology, and was popular in Europe in 60s and 70s. It involved state and organisations of employers and workers working jointly to achieve social justice. And it usually included incomes (control) policies, and the effective redistribution of wealth. What actually provoked the European turn to neo-corporatism from 1960s onwards? Two things: •

high inflation, industrial militancy, low productivity;

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•

slow down in post-war boom – including a so-called ‘investment strike’, under which the captains of capital invested in property, for example, rather than entrepreneurial ventures.

In response, governments sought to change the behaviour of both the employers and the trade unions by giving them a role in policy-making. ‘Classical’ agreements usually involved increases in public spending – often funded by borrowing. Sometimes this also involved labour market regulation concessions to unions, such as: •

legislation protecting employees from arbitrary or unfair dismissal;

•

‘top-down’, representative employee involvement in organisational decision-making.

(In Ireland the late 1970s legislation requiring appointment of worker directors to boards of semi-state companies is a good example of this).

Competitive Neo-Corporatism But, as in Ireland, this tradition of neo-corporatism virtually withered on the vine in Europe in the 80s. Why? •

economic recession;

•

globalisation of markets;

•

ideological shift towards neo-liberal thinking.

But it revived in 1990s – in a different form. It was now about competitiveness, enterprise and cutting public expenditure. The focus of agreements now turned towards: •

pay deals consistent with national competitiveness;

•

sustainable levels of public expenditure;

•

reform of tax and social welfare systems;

•

measures to increase flexibility, skill and quantity of labour.

Union sides no longer claiming pacts as major, beneficial negotiating breakthroughs. Instead found themselves on defensive: ‘best that could be achieved in difficult economic conditions’. There was also effective abandonment by many governments of Keynesian demand management. This reflected not only an ideological move to the neo-liberal right, but also curtailed latitude that existed to use public spending to prime economic activity. In defence of absence of specific mechanisms to reduce inequality, poverty and want, the argument was that ‘a rising tide lifts all boats’ – in other words, everyone would benefit automatically from economic success. Instead of labour market regulation, new neo-corporatist pacts began to include de-regulation, in a variety of forms – including some of the mechanisms used by the Thatcher government in 1980s:

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•

on employee involvement, emphasis changed too, towards employers’ rather than workers’ interests;

•

direct, ‘bottom-up’, individualised, employee involvement, linked to promotion of company objectives, especially achieving competitive edge.

However, looking back at our policy choices, perhaps only serious choice now is between neolaissez faire and neo-corporatism? We shall now look at the case of social partnership in the Republic of Ireland Inherited policy: free collective bargaining.

Question 2 Back to National Agreements: The importance of a tripartite agreement? The role played by social partnership in Ireland’s current economic success cannot be overstated. In the space of a little over a decade the employee relations climate has been transformed from a confrontational win/lose model to one that is far closer to modern win/win corporate relationships. The tripartite bodies representing employers Irish Business Employers Confederation (IBEC), employees Irish Congress of Trade Unions (ICTU) and government continued their work, and the National Economic and Social Council (NESC) was to play key role in revival of neocorporatism. In 1986 it produced a comprehensive prescription for economic recovery including – most significantly in view of involvement of the unions in the NESC – the cutting of public expenditure. Implementation would, of course, only be possible with the agreement of the social partners – government, unions and employers. But why go back to partnership? For the unions there were several considerations: •

first, under tripartite National Understandings the weakest and lowest-paid members were protected by agreed minimum pay increases;

•

second, wage dispersion in the 1980s widened the gap between top and bottom, and threatened to undermine solidarity of TU movement;

•

thirdly, falling membership and increasing unemployment made leaders fear that what was happening to unions in Thatcher’s Britain might also occur in Ireland. A return to social partnership promised help on all these fronts.

For employers decentralised bargaining had been a mixed blessing. Number of strikes had fallen significantly, and trends in wage levels had begun to moderate. But all governments had relied on borrowing rather than cutting expenditure to meet social spending. And while pay increases outstripped inflation and thus threatened competitiveness, the ‘social costs’ of employment – taxation, pensions and social welfare – were also an increasing burden. Though the employers were not exactly inspired by the idea, then, centralised bargaining (‘neo-

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corporatism’ or ‘social partnership’ in other words) did seem to offer the possibility of linking economic and fiscal reform with pay determination, and preferably pay restraint Fianna Fáil (FF) and a new partnership. FF viewed the difficulties of the 1983–87 Coalition with more political concern than political pleasure. Main reason was that they were going to inherit those difficulties – as in due course they did, as a minority government formed in 1987. But the FF ‘social partnership’ inheritance had also been reasserting itself, and some careful wooing of ICTU figures in advance ensured that the unions, at any rate, were already on-side. The result was a 3-year tripartite agreement – the grandly-titled Programme for National Recovery (PNR). It set sharp limits on pay, with only a 3% per annum increase on first £120 per week of earnings, and 2% thereafter – with underpinning minimum of £4. The most significant features were (‘competitive’?) commitments to the control of public expenditure and a reduction in government borrowing. But PNR included other broadly expressed ‘classical’ commitments: •

to promote increased employment through industrial development;

•

to improve social welfare provision;

•

and to reduce direct taxation on lower paid workers covered by the PAYE system.

From PNR to PESP There was widespread recognition by employers and unions that the PNR had beneficial effects; so it was followed by a similar agreement, the Programme for Economic and Social Progress (PESP), covering the period up to 1993. This allowed of much the same percentage increases, but also permitted extra amount to be negotiated at enterprise or plant level. Although it seemed to be working well, there were some serious economic setbacks during the PESP period, including devaluation of the Ir£ that government had tried hard to resist As well as several pay-related crises, there were also major rows over income tax increases – and about cuts in social welfare benefits, which were argued by the unions to be in breach of the PESP. Yet the programme still held together, and also weathered change of government – when FF made run for a majority in a snap election in 1989, failed, and was obliged to make a coalition pact with the new Progressive Democrat party (PDs). The PDs, with only a very small number of TDs, had a ‘new right’, neo-liberal economic agenda. Yet this had no discernable effect on the government’s approach to PESP.

From PESP to Programme for Competitiveness and Work (PCW) In 1992 that Government was succeeded by a more left-leaning Fianna Fáil/Labour Coalition. Against the background of a recovering economy, a new agreement was fairly inevitable. So PESP was succeeded by Programme for Competitiveness and Work (PCW). Its tight pay 123 © Pearson Education Limited 2007

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provisions followed much the same pattern as in the two previous pacts, but more attention was given to non-pay issues. As title suggests, one of the main non-pay issues addressed by the PCW was unemployment. Another was employee involvement (EI); for ICTU now wanted more than the lip service paid to this in the PNR and PESP. Significantly, an ICTU internal report on new management methods seemed to endorse ‘bottom-up’ EI with a ‘competitive edge’ component. What was wanted was for partnership at national level to be complemented by partnership in the enterprise, the plant and the office. But while there were more words about participation in the PCW, IBEC (Irish Business and Employers’ Confederation – the successor to FUE) fought hard against anything too prescriptive. There was further disappointment for ICTU when post-agreement discussions produced little more. PCW ended on a sour note, with public service workers complaining loudly that they had done poorly in comparison with other groups.

P2000 − Making partnership a priority Although this made negotiation of a new agreement more difficult, the continuing economic success, which attended the PCW ensured, once again, that a deal would be done in the end. Negotiating this time with a Fine Gael (FG)/Labour/Democratic Left (‘Rainbow’) Coalition Government, ICTU set itself very different targets than those outlined for the PNR almost a decade before. As well as the obvious – better pay and tax relief – it demanded ‘mechanisms to develop partnership at the workplace level; and a focus on equality, long-term unemployment and social exclusion’. The tone was set by the name – Partnership 2000 (or P2000); it had a key part devoted to ‘developing partnership in the workplace’. ICTU saw it ‘as a watershed in the evolution of social partnership’ and believed ‘it would determine whether it develops or dies’. It was a last opportunity ‘to widen and deepen the national partnership process into a genuine partnership at the level of the workplace’. So implementation of chapter on partnership ‘is the most important challenge for all the parties’. The extent of new workplace partnership would be ‘the union benchmark when we come to assess its success or failure’. to meet the benchmark a National Centre for Partnership was established to promote partnership in enterprises and workplaces. But P2000 also included strong commitments to ‘promoting enterprise’ and the setting up of a National Competitiveness Council. Private sector companies were encouraged as well to reward employees by means of profit-sharing. Finally, a vexed labour market regulation question, concerning union recognition, was passed for resolution to a tripartite ‘High Level Group’. On to the equality, employment and ‘social inclusion’ aspects, it was argued that economic growth had accelerated in a period marked by increasing income inequality, low pay and high levels of relative income poverty (Allen 2001; Kirby 2002). In other words, there were too many marginalised people not enjoying any of the fruits of the ‘Celtic Tiger’. Adding a more traditional or ‘classical’ neo-corporatist dimension, then, P2000 laid stronger emphasis on dealing with such issues.

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New agreement contained Government commitments to spend £25m on a range of important social projects before 2000. Targeted specifically were the long-term unemployed, the educationally disadvantaged, those on low incomes and those living in the more deprived areas of the country. Where to after P2000? There were a number of other things to cheer supporters of social partnership Though anecdotal evidence suggested wage drift beyond agreed norms, a survey of 1,000 pay settlements confirmed that the level of adherence was ‘remarkably high’. And there were other achievements: •

agreement in broad terms to a procedure for union recognition;

•

unemployment had dropped sharply.

Programme for prosperity and fairness In January 2000 union leaders agreed that a new offer of 15%, plus another 10% in tax cuts, was the most they could obtain from the talks process. The new agreement was called the Programme for Prosperity and Fairness (PPF). Under final PPF terms, workers on basic national minimum wage (NMW) were to receive increases worth 18.65% over 33 months; workers on IR£200 would receive 16 3% and other workers 15.75%. Social Welfare Bill to give increases worth another £5 a week to workers earning under £200 per wk. The NMW started at IR£4.40 and rose to IR£4.70 in July 2001; it increased to IR£5 (€6.25) in October 2002 – when the agreement expired. Several interesting ‘non-pay’ parts to the deal, including agreement to increase of 1,500 primary school teachers. PPF also sought to deepen the workplace partnership measures begun under P2000. Built on too were earlier programmes involving the social partners in a range of areas of public policy, under the aegis of five ‘frameworks’. Arising from these, 20 working groups came into existence to address policy development and implementation in a number of areas: childcare; family-friendly work; housing; and gainsharing. Small wonder some of those involved complained of ‘partnership fatigue’!

Question 3 Why has social partnership remained in Ireland: arguments for and against. Stick with partnership?: no! On the neo-liberal side it was argued: •

firstly, the unions had ‘pushed their luck’ too far. Moreover, ICTU was no longer the authentic, majority voice of Irish workers; it now represented predominantly public sector employees;

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•

and it had failed to convince most investors – especially the US high-tech companies – to recognise trade unions;

•

secondly, it was claimed that the aims that prompted the birth of social partnership in the late 80s had been almost fully realised. Needed now was a dose of free market, laissez faire industrial relations – to sharpen up the act of the unions, management and employees;

•

thirdly, the pay agreement at the core of the PPF was becoming a fiction. Increases in the booming parts of the private sector appeared to be exceeding the PPF’s pay norms. And pay militancy was rising in the public sector. Could increases really be held to 2 – 3% in a highly successful economy with real labour shortages?;

•

fourthly, there was widespread ‘partnership fatigue’ arising from the 20+ working groups set up under the PPF on work, housing, gain sharing etc.

This demanded return to the ‘leaner’ and less complicated agreements of the late 80s and 90s. Stick with partnership?: yes! As against all that, three main pressures for a continuation of social partnership: •

firstly, a simple argument was that the cumulative benefits of social partnership were so obvious that it would foolish to throw them all away. It would be even more regrettable to abandon the uniquely Irish neo-corporatist model – one that incorporated both classical and competitive neo-corporatism, and represented, as it were, neo-liberalism with a social conscience;

•

secondly, there was some apprehension that a return to unfettered FCB would be too much of a shock for the industrial relations system. Associated worry that many managers and union officials were ill-equipped to deal with face-to-face negotiating at firm and plant level;

•

thirdly, and perhaps most telling, it was argued that retaining neo-corporatism was essential in face of an economic downturn. With so much US investment, Ireland is especially vulnerable to effects of the US recession of 2001, that was deepened by the 9/11 terrorist attacks. To make economic matters worse, soon after the 2002 General Election – which returned the FF/PD coalition for a second term – suspicions about looming problems in public finances were proved justified. Expenditure running well beyond expectations, but tax receipts appeared to be in serious decline too. This was not the right moment, so it was argued, to make any radical change of approach. Social partnership might be essential for economic stability.

Question 4 Bringing it all together Eight out of 25 EU member states came to pacts of a competitive neo-corporatist kind in the recent past (Belgium, Finland, Germany, Greece, Italy, The Netherlands, Portugal and Spain). But of course the new Irish pacts actually contained elements of both old and new neocorporatism: •

classical – fairness and social justice;

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•

competitive – recognition of the importance of success of the national economy.

Competitiveness obviously became a stronger component with passage of time, but issues of justice and fairness have not been lost sight of. The present Irish model of social partnership thus represents what we might call a ‘balanced’ version of neo-corporatism – unique to RoI; would surely be a mistake to let this major indigenous institutional achievement fall by the wayside. But was neo-corporatism/social partnership a major factor in the development of the Celtic Tiger?

What created the Celtic Tiger and can social partnership work in the United Kingdom? Cynics dismiss social partnership as causal factor; so let us try to evaluate what actually was responsible for recent Irish economic growth: •

European money (‘Euro-gold’) – OK, but this could only be used for infrastructural projects;

•

educated labour force – important, but shared with United Kingdom;

•

English speaking – once again shared, but Republic of Ireland is the only English-speaking country within the Eurozone;

•

Industrial Development Authority is good at selling Ireland – yes, but have to have a good product to be a good salesperson;

•

low corporation tax – a crucial advantage;

•

low social costs – yes, but social costs are even lower in the United Kingdom;

•

low value of the euro – this is the one no one talks about, but it must not be discounted!;

•

good government? – who knows!;

•

Favourable conjunction of circumstances? – in other words ‘luck’!

All these factors would play a part in the creation of a social partnership agreement in the United Kingdom. Table 12.1: Key policy elements sustaining progress factors the United Kingdom could consider in a social partnership agreement.

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Policy Area

Themes

Macro-economic

Public expenditure taxation Competitiveness and inflation

Building, maintaining and sharing economic

Infrastructure

Development and prosperity

The environment Adaptation to continuing change

Delivering a fair and inclusive society

Poverty and social inclusion Health and addressing health Inequalities Equality Access to quality public services Challenge of delivering a fair and inclusive society

Workplace relations and environment

Protecting employees rights ensuring greater equality Improving skills Promoting health and safety Achieving a better work - life balance Developing integrated policies for migrant workers Partnership in the workplace

Social partnership: two clear potential benefits for the United Kingdom: •

low inflation – a key factor early on;

•

psychological effect – arguably the most important in the long-term, for both the United Kingdom and for potential investors.

It seems impossible, then, to conclude other than that social partnership was key if not the key, to recent economic success of the Republic of Ireland and could be a key to future economic success in the United Kingdom. But as well as those relating to employee relations and economic results, there is another wider lesson to be learned by the United Kingdom from social partnership •

because the Irish experience shows that neo-corporatism is a real and demonstrably effective policy alternative to full-blooded neo-liberalism.

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That a social partnership/neo-corporatist Ireland and a free market/neo-laissez faire United States were both among the best performing economies 1990s and early 2000s is an adequate testimony to this.

Further Reading Essential piece is Cradden T, ‘Social Partnership in Ireland: ‘a rising tide lifts all boats?’, in Collins N & Cradden T (eds), Political Issues in Ireland Today, 3rd edn, Manchester: MUP, 2004. For a denser piece see Roche WK & Cradden T, ‘Neo-corporatism and social partnership’, in Adshead M & Millar M, Public Administration in Ireland, London: Routledge, 2003. For opposing views, see Allen K, The Celtic Tiger: The Myth of Social Partnership in Ireland, Manchester: MUP, 2000; and Kirby P, The Celtic Tiger in Distress, London: Palgrave, 2002. Also worth a look are: Teague P, ‘Pay Determination in the Republic of Ireland: Towards Social Corporatism?’, British Journal of Industrial Relations, Vol 33 No 2, 1995. Visser J, ‘Two Cheers for Corporatism, One for the Market: Industrial Relations, Wage Moderation and Job Growth in Holland’, British Journal of Industrial Relations, Vol 36 No 2, 1998. Irish Congress of Trade Unions website at [http://www.iol.ie/ictu].

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CHAPTER 13

Diversity management: concern for legislation or concern for strategy? Learning outcomes By the end of this chapter you should be able to: •

explain the differences between managing diversity and equal opportunities approaches to diversity management and the debates relating to these approaches;

•

explore the interdependence between managing diversity and equal opportunities approaches in managing human resources strategically;

•

evaluate the business case for diversity management;

•

be able to integrate diversity management with other SHRM issues such as organisational culture;

•

assess the implementation issues for organisations adopting diversity management as part of their strategy to manage human resources.

Summary •

Conceptualisations of diversity management within the literature can be broadly categorised into two groups: •

the equal opportunities approach, which has a legislative and compliance focus and is concerned with equality of status, opportunities and rights. This, it can be argued, is deeply rooted in traditional approaches to human resource management;

•

the managing diversity approach, which focuses upon an explicit holistic strategy of valuing differences, such as age, gender, social background, ethnicity and disability. This, it can be argued, is like SHRM, driven by organisational needs.

•

The business case claimed for a managing diversity approach includes a better public image for the organisation, a satisfying working environment for employees, improved employee relations, increased job satisfaction and higher employee morale, increased productivity and, for the organisation, improved competitive edge. It is argued that organisations will only survive and prosper in an increasingly competitive and dynamic global environment if they respond to the heterogeneity of their markets. However, there is limited empirical evidence to support these claims in either the UK or USA.

•

Despite a lack of evidence, it seems probable that the benefits of diversity management will only be realised within the context of the re-alignment of an organisation’s culture to one

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where diversity is valued. For this to happen, it will be necessary to persuade those in power that this will impact positively on organisational effectiveness. •

Empirical evidence suggests that, for many organisations, diversity management remains a theoretical concept rather than a strategic reality, combining equal opportunities and managing diversity approaches. The most frequent reason advanced for this is that organisations believe they are already undertaking sufficient investment through ensuring equality of opportunity. However, for organisations considering the implementation of a managing diversity approach, advice is available.

Teaching and learning suggestions Comment Issues of diversity and diversity management have received considerable coverage in the national press, particularly with regard to ethnicity, age and gender. It is also an area of SHRM where, most students often have firmly held personal beliefs regarding what is right and wrong. However, despite this, few have considered the implications of their beliefs for their own world of work, for organisations and in particular how these beliefs relate to recent European Union (EU) employment related legislation. In the current highly competitive labour market, the ability to attract and retain talented people is now rated higher than market share in the top 10 non-financial measures investors use to analyse company performance. Traditional markets for attracting talented people, however, are changing and becoming increasingly challenging for many organisations, owing to major shifts in the demographic composition of the workforce including age, gender and ethnicity. The topicality of this chapter’s material means that it is relatively easy to make it both relevant and exciting to students using recent news events to highlight these issues. EU enlargement and associated migration have considerable diversity implications for organisations both in the United Kingdom and elsewhere in the EU. Within organisations issues associated with the composition of organisations’ workforces and their management are a strategic imperative for Human Resource (HR) Managers and, as a consequence, their management a necessity. However, the ways in which such issues associated with workforce diversity are tackled and the approach adopted are varied. It is this variation that and the associated implications that form the focus of this chapter. The chapter starts by considering the different ways in which diversity management has been conceptualised. Building upon this equal opportunities and managing diversity approaches to diversity management are compared and contrasted and the debates relating to these approaches discussed. As part of this the question as to whether managing diversity represents a strategic shift from equal opportunities is addressed. After evaluating the business case for adopting diversity management, the issues for organisations wishing to implement a managing diversity approach to managing their human resources are assessed.

Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We have found that producing mind maps of the chapter content is a useful approach to note

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taking and encourages students to reflect on the internal integration of the subject content of the chapter. We use a variety of vehicles to bridge student preparation and class-based activities to enhance their understanding of the chapter content and its overall relationship to managing human resources strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come to the teaching session prepared to raise them. Sometimes this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write up their answers briefly in note format;

•

complete the self check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. Pre-set questions that we have found useful for structuring student reading, preparatory activities and classroom discussion for the topic of diversity management include: 1. What are the main differences between equal opportunities and managing diversity approaches? 2. Outline the key legislation with regard to equal opportunities and managing diversity since 1975. 3. What arguments have been put forward to support the business case for managing diversity?

In the classroom Clearly the approach adopted to ‘student preparation’ can be followed through into the classroom. A starting point that we find useful is to surface and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a short summary of key issues. Where preparing answers to self check and reflect questions has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, if preparing answers to self check and reflect questions was not part of preparatory work but consideration of the questions is to feature as part of the teaching session, we would favour the

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group approach as a more stimulating approach. In all cases student responses can be considered against our suggested answers, which themselves can be usefully critiqued. Where case study work has featured as part of preparatory activities, similar approaches to those suggested for self check and reflect questions can be adopted. If coming to the case afresh, there is unlikely to be time for groups to consider all four questions. Here we would suggest that groups major on one of the case questions only moving on to others if they have time. Equal opportunities and diversity is an area where every student has some experience irrespective of whether they are full or part time. Most full-time students will have accumulated work experience prior to and during their higher education studies and many will be following business-related courses, which incorporate a placement element. Therefore, we have found it both feasible and useful to surface these experiences during class discussion and to subject them to critical analysis to evaluate their strategic credentials.

Follow-up work The pedagogic features adopted throughout this book are intended to offer up a number of alternatives for follow-up work while at the same time leaving the lecturer free to add or substitute their own ideas. If they have not already been used as part of class activities, any prior preparation of answers to the self check and reflect questions and/or the questions suggested for student preparation and/or the chapter case ‘Making diversity an issue in leafy Elgarshire’ will serve as a useful reinforcement to chapter content. Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading.

Answers to Self-Check and Reflect Questions 13. 1 Note down the changes in the EU’s population highlighted by Figures 13.1 and 13.2. How are these predicted changes likely to impact upon the composition of the labour force in relation to full- and part-time work, age and gender? What implications do you consider these changes are likely to have for SHRP (strategic human resource planning)? What other demographic changes do you predict based upon your own knowledge of labour markets? The Eurostat (2005) data shown in Figures 13.1 and 13.2 indicate the following key trends in relation to full- and part-time work, age and gender: •

The overall population of working age (16–59) across the EU is due to fall from 228m at present to 203m in 2030.

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•

However, in the 60 plus age group, the population is set to rise from 83m in 2005 to 123m in 2030, and increase of more than 40%.

•

Over the next 25 years, the number of full-time workers in the EU is set to fall by 8%, but the number of long part-time work (20–31 hours per week) is predicted to remain constant.

•

Short part-time work (less than 19 hours), however, is set to rise by 5% across the EU.

•

Thus, general trends would indicate that over the next 25 years, the working population across the EU will be older, less reliant on full-time workers and a greater shift to more flexible forms of working, particularly short part-time work.

•

In terms of gender composition, employment growth will occur in the part- time sector, more typically associated with a female workforce.

As for other more general trends indicated by the above data, the following are frequently mentioned in the literature: •

a decline in the youngest labour market group, of 16–24-year olds.

•

in the UK, 80% of labour market growth by 2010 will be amongst women

•

by 2010 only 20% of the workforce will be white, able-bodied, male and under 45.

•

the above trends indicate that employers have little option but to broaden their view on the types of people to target in the labour force. Those relying on the so-called ‘traditional’ model of an employee as being white, able-bodied, male, under 45 and working full-time, are likely to find themselves facing severe skills shortages in the not too distant future.

13.2

What do you consider to be the strengths and limitations of the equal opportunities and the managing diversity approaches to diversity management?

Equal Opportunities Although your list may differ in the way it is worded from the one below we would expect you to have listed most of the following strengths: •

the equal opportunities movement, gaining legislative force in the 1970s, has focused attention on the organisational practice of equal opportunities, and through such attention has made practices like direct sex and race discrimination a rarity.

•

the movement has gained much from legislative backing, with Acts in relation to sex, race and disability being on the statute books for three decades. The area is a developing one, with new provision being made as circumstances require; for example, regulations to limit age discrimination and to protect against discrimination based on sexual orientation.

as well as the following limitations: •

treats everyone the same, and focuses on ‘disadvantaged’ groups; can mean people lose their individuality and that simply by being a member of a particular group discrimination is assumed to be an issue.

•

there has been little observable impact (except in the case of direct race and sex discrimination) on employment patterns, despite three decades of legislation. For example, men still account for the most senior management positions in the United Kingdom,

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women’s pay still lags behind that of men and those from ethnic minorities and the disabled have made few inroads into senior organisational positions. •

it is argued that a compliance-based model may mean that organisations while complying with the letter of the law, do not actually comply with the spirit of the law; the equality approach does not address this issue.

Diversity Management Although your list may differ in the way it is worded from the one below we would expect you to have listed most of the following strengths: •

It is a strategic approach to managing people, which does not try to suppress difference but actually seeks to identify it and value it.

•

Its focus on improving organisational performance through promoting practices designed to enhance individual productivity is seen as a key component of effective people management.

•

It is a move away from a compliance-based model, to a much more positive and businessfocused approach to ensuring workplace equality.

as well as the following limitations: •

Few examples exist of the approach actually delivering what it promises.

•

The business focus of ensuring maximum profit may be at odds with key principles of social justice and fairness

•

The extent of organisational change required to fully embrace the approach is considerable; in the current fast-paced business environment, organisations may be unable to resource initiatives with little to show in the way of short-term payback.

13.3 Outline the strengths and limitations for diversity management of the equal opportunities approach. The strengths for diversity management of the equal opportunities approach which you are likely to have outlined should include: •

the equal opportunities approach, based primarily on legislative provision, has meant that the issue of equality in employment has been on the organisational agenda for the past 30 years or so, and since the law applies to all but the smallest enterprises; few organisations will be unaware of the issue or of their obligations under the legislation

•

the equality approach has undoubtedly fallen out of favour in recent times, particularly with the addition of EU directives, making some organisations feel that this is an overly burdensome and highly regulated area. This makes the time ripe for an approach to equality; which shifts the focus from legal compliance to leveraging and valuing difference for organisational benefit; i.e. from an external imperative to an internal one. The agenda becomes a far more positive one, emphasising the value to be gained from valuing and embracing difference, rather than a punitive avoidance of legal penalty.

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The limitations for diversity management of equal opportunities should include: •

the approach may be negatively viewed by organisations used to the restrictive equal opportunities approach. The shift in mindset required from avoiding discrimination to actively valuing difference may be difficult to grasp, and more importantly to articulate organisationally in terms of practical measures that need to be taken to advance the agenda.

•

for some organisations the shift from an approach based on social justice, equity and fairness, to one where differences between individuals are valued simply because of their positive impact upon organisational performance, may seem morally questionable.

•

the equality approach has led to a plethora of legal regulation, and with the adoption of EU directives organisations have a considerable number of regulations to comply with. Organisations may in these circumstances feel they are doing enough, and that this is not an area to which further resources can be invested.

13.4 Outline the strengths and limitations for diversity management of the managing diversity approach. The strengths you have outlined are likely to include: •

a shift in the agenda from externally focused drivers for action to internally, business-linked drivers.

•

a more positive, strategic and ultimately holistic approach to the management of equality and difference.

•

closer contact and understanding with customer and employee markets.

•

the possibility of wider-scale culture change within the auspices of a diversity management programme.

Your limitations are likely to include: •

little empirical evidence, either in the United Kingdom, United States of America or Europe to support key contentions made.

•

a plethora of consultants in the area renaming a basic equality of opportunity approach as diversity management; organisations then believing there to be little difference.

•

the focus on the business case promotes a view that issues of social justice, equity and fairness are no longer important.

•

there is confusion as to the focus of interest; group, individual or both?

13.5 To what extent is it appropriate to support a positive climate for diversity management for purely business-focused reasons rather than as part of its cultural values? Those supporting the view that it is appropriate to support a positive climate for diversity management for purely business-focused reasons, may raise some of the following points to support their position:

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•

without articulating the financial return an organisation could gain from diversity management, in times of high competition, few organisations would commit resources to such programmes.

•

in tight labour markets, emphasis on the link between effective diversity management and access to new and emerging labour markets will be a powerful argument.

•

in times when customer satisfaction is at a premium, a link between a diverse workforce and an improved ability to meet customer requirements through improved understanding is of great value.

•

links to improving productivity, reducing turnover and absenteeism will all be highly persuasive to organisations seeking elusive competitive advantage.

Consequently the overall position of those with this view would be that diversity management is important, and clearly the right thing to do. However, senior managers in the organisation who are responsible for the effective utilisation of scarce resources are not going to commit considerable amounts of that resource to projects where the only benefit to be gained is that the company is considered to have done the right thing. Organisations are increasingly looking for strong financial justification before willing to commit resources to initiatives; and without a solid business case to support it; the diversity management agenda will be lost. Those who are uncomfortable with the linking of diversity management to purely businessfocused outcomes, rather than as part of cultural values would be likely to raise the following points: •

How can you actually do a cost/benefit analysis on what is right and what is wrong? Diversity management, valuing people for who they are, the contributions they can make and the difference in the perspectives, skills and experiences that they bring is simply the right thing to do. There is no need to go further and start trying to calculate exactly how right this is in terms of bottom-line profitability. Taking this position to its logical end, would firms actually start calculating how much they would save by not managing diversity effectively, and if it were more than the benefit they would gain; would this be advocated?

•

A diversity management programme, not underpinned by deeply held corporate values, becomes little more than a collection of initiatives that have little underlying rationale; people both inside and outside the organisation would soon see through this fairly cynical approach to the issue

•

If all that supports the adoption of a diversity management approach is some perceived business benefit, what happens when the results do not come quickly enough? Does the organisation stop valuing difference?

At the heart of this approach is the difficulty of taking moral issues, and framing them as strategic objectives capable of measurable financial return. The point here would be that diversity management should occur because it is simply right to treat people with dignity and respect. If this brings the business some financial benefit, then that is an added bonus, but the financial benefit should not be the reason why diversity is valued within the organisation.

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Answers to Case study questions 1. Do you consider Worcestershire County Council to be adopting a managing diversity or equal opportunities approach to diversity management? Give reasons for your answer. In order to answer this question, it is worth first reflecting on what is understood by managing diversity and equal opportunities approaches. The equal opportunities approach is based upon on compliance with legislation, reiterating the traditional arena of equality of status, opportunities and rights, valuing equality and avoiding unfair disadvantage. In contrast the managing diversity approach is based on an explicit strategy of valuing differences such as gender, age, social background, disability, personality, ethnicity and work style. These differences are an asset to work being done more efficiently and effectively and organisational goals being met. With regard to ethnicity, Worcestershire County Council’s employees reflect the composition of the county as a whole, the council complying with legislation. However, they have recognised that for some parts of the county there is a marked mismatch between ethnicity of employees and that of residents in receipt of services. In addition their workforce monitoring has highlighted a lack of women in more senior positions within the organisation. Alongside this the council’s Chief Officers Management Board has realised that to get the best from all employees, there was a need to recognise diversity. In the case it is stated that they were determined to address these issues and raise the awareness of all staff to the diversity of needs of those living in Worcestershire and of their employees. The approach that Worcestershire County Council has taken is to force employees to recognise that diversity issues are important, need to be addressed and, as part of this, to challenge widely held perceptions. This managing diversity approach, as illustrated by the diversity and equality training, is based on an explicit message that differences are to be valued and are an asset to meeting the needs of the population of Worcestershire. 2. How has legislation impacted upon Worcestershire County Council’s approach to diversity management? Worcestershire County Council are keen to be seen as not just ‘ticking boxes’ to meet legislative requirements, such as those set by the Disability Discrimination Act 1995 and the Race Relations Amendment Act 2000. Rather they wanted be taking actions that actually made a difference to those living in the county and working for the County Council. In addition to monitoring to assure compliance with equal opportunities legislation, Worcestershire County Council has focused upon development and training activities required in response to Race Relations Amendment Act 2000. However, alongside this it has also stressed that the County Council’s commitment to equality and dignity is much broader, the underpinning principles of the council’s approach consisting of four interrelated and overlapping phases embracing all diversity issues: •

Phase 1 – Capturing attention (awareness campaign)

•

Phase 2 – Addressing the issues (training)

•

Phase 3 – Operational briefings for managers

•

Phase 4 – Embedding the learning

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3. Do you agree with Worcestershire County Council’s phased approach to diversity management; what do you see as the key strengths and limitations of this approach? Obviously, there is no one right answer to this question. However, Worcestershire’s phased approach has been based upon the premise that people learn best when they are motivated and interested. Consequently all employees needed to know that the County Council was treating diversity and equality as special and important issues and had been provided with thought provoking information prior to commencing diversity awareness training (phase 2). This was the basis for the ongoing poster campaign. Subsequent to this diversity training commenced and is again still ongoing. Updates on this training and the associated successes can be found in the Council’s newsletter Equality News. Copies of this can be downloaded from http://worcestershire.whub.org.uk/home/wcc-chief-exec-equality-news The Council’s approach is both time consuming and expensive as the authority has over 17,500 employees. By not making diversity training compulsory, employees can opt out of being trained. Inevitably because of the time to train so many employees and the ongoing nature of training in a dynamic environment there will be a need to refresh and update people. Despite these concerns, the case suggests that diversity is becoming embedded within the County Council. The County Council has employed a Diversity Officer whose job is entirely concerned with diversity issues. Evidence that the phased approach is working include ongoing improvements to the ways in which services are delivered and the fact that both race and disability are issues of legitimate discussion amongst employees. 4. If you were Worcestershire County Council’s Diversity Officer, what specifically would you see as being the key focus of your role? What information/evidence do you think you would need to collect/disseminate to ensure the County Council makes progress towards its goal of better serving residents and of valuing diversity amongst its workforce to make a difference to people’s lives, and not just to comply with legislation? This work is currently being undertaken by the County Council and is set out in their Corporate Equalities Scheme document. The latest version of this, which will provide the most up to date answer to this question, can be downloaded as a .pdf file from http://worcestershire.whub.org.uk/ home/wccindex/wcc-chief-exec-equality-and-diversity.htm

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CHAPTER 14

Downsizing: proactive strategy or reactive workforce reduction? Learning outcomes By the end of this chapter you should be able to: •

explain the purpose of downsizing and analyse the problems associated with its use;

•

identify a range of organisational strategies to downsize and evaluate their implications;

•

discuss the significance of employee involvement and influence in relation to the implementation of downsizing;

•

describe the nature of survivors' reactions to downsizing and the existence of moderating variables affecting these, and evaluate their significance for organisations using this type of change strategy;

•

discuss the role of organisational theories and human resource interventions to provide strategies to manage the process of downsizing more effectively;

•

explore the implications of outsourcing for SHRM;

•

analyse the role downsizing plays in contributing to organisational HR strategies and the interrelationships with other HR interventions such as performance management, employee involvement and commitment and training and development.

Summary •

Downsizing is an organisational strategy to reduce the size of an organisation's workforce. Its use is likely to generate a range of reactions from those who remain in an organisation, which may lead to adverse consequences.

•

Three organisational strategies have been identified to achieve downsizing. These are: the workforce reduction strategy; organisation redesign strategy; and the systemic change strategy. An important distinction has also been drawn between the use of proactive and reactive approaches to downsizing. The use of a reactive, workforce reduction strategy has been found to impair, rather than improve, organisational performance. Even where this approach is not used there may still be a negative effect arising from the creation of negative survivors’ reactions and the loss of organisational competence.

•

Where organisations use methods to implement downsizing that emphasise managerial control at the expense of perceived influence by employees, this will generate further negative survivors' reactions leading to adverse consequences for the organisation.

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•

The incidence and strength of survivors' reactions are affected by the existence of moderating variables. These highlight the scope for downsizing organisations to intervene to seek to minimise their incidence or manage their effects.

•

A range of organisational theories, related to equity, organisational justice, job insecurity, job redesign and organisational stress, can be used to suggest appropriate human resource interventions to manage the process of downsizing more effectively, depending on the characteristics of the organisational context.

Teaching and learning suggestions Comment Downsizing was frequently in the news when we were preparing this chapter, the closure of MG Rover Cars Longbridge plant providing the case study. It is a major HR strategy used by organisations of all sizes. At a superficial level most students see downsizing as a reassuringly simple and inviting strategy to consider. Reducing an organisation's headcount is a more concrete idea to them than, say, realigning an organisation’s culture (Chapter 6) and appears to offer cost savings through fewer people being employed. However, although such a strategy may be easier for students to comprehend at this superficial level, in reality the process of downsizing is highly complex and can often generate a range of reactions that undermine the strategic objectives for downsizing. This chapter explores such reactions and their consequences for an organisation using this strategy. As a major organisational HR strategy, downsizing is also capable of promoting and contributing to other organisational strategies. Indeed, within the chapter we argue that the successful use of downsizing requires the implementation of and integration with other human resource strategies discussed in this book. Through doing this possible negative reactions to downsizing may be avoided or reduced and the greatest benefits from its use gained. The chapter therefore, focuses upon the human aspects of downsizing to maximise the positive and minimise the negative outcomes of using of this strategy.

Student preparation Prior to the class, we believe it is essential that students read and make notes from the chapter. We have found that producing mind maps of the chapter content is a useful approach to note taking and encourages students to reflect on the internal integration of the subject content of the chapter. We use a variety of vehicles to bridge student preparation and class-based activities to enhance their understanding of the chapter content and its overall relationship to managing human resources strategically. As standard, we would ask students to make a note of any queries arising from their reading and to come to the teaching session prepared to raise them. Sometimes this may be formalised by asking students to write down (as questions) the three issues addressed by the chapter where they would like further clarification and guidance. Students may also be asked to do one or more of the following: •

address pre-set questions and write their answers briefly in note format;

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•

complete the self check and reflect questions and come to the session prepared to share and discuss their responses; and

•

familiarise themselves with the chapter case study (or an alternative case supplied in advance) and come to the session prepared to tackle the case questions.

Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. Pre-set questions that we have found useful for structuring student reading, preparatory activities and classroom discussion for the topic of downsizing include: 1. What do you understand to be the main differences between downsizing and redundancy? 2. Outline the range of strategies that an organisation may choose when downsizing and the implications for both organisations and their employees. 3. What interventions may be used to help manage downsizing and how do these relate to equity theory, organisational justice, job insecurity, communication and the psychological contract?

In the classroom Clearly the approach adopted to ‘student preparation’ can be followed through into the classroom. A starting point that we find useful is to surface and discuss the issues arising from students’ preparatory reading. This avoids providing lecture input that simply repeats what students have already grasped, reinforces the value of reading as an essential prerequisite for class-based discussion and provides a platform from which further class-based activities can be launched. However, when adopting this approach, we find it useful, once student queries have been exhausted, to provide a short summary of key issues. Where preparing answers to self check and reflect questions has been set as part of preparation for the teaching session, at least two alternatives present themselves. First, students can be asked to contribute individual responses that are then subjected to plenary discussion. This is our preferred approach because it makes students more accountable for their personal learning and reserves any group work for case study analysis. Second, students can be formed into groups to share their individual answers and draw conclusions from their discussions. However, if preparing answers to self check and reflect questions was not part of preparatory work but consideration of the questions is to feature as part of the teaching session, we would favour the group approach as a more stimulating approach. In all cases student responses can be considered against our suggested answers which themselves can be usefully critiqued. Where case study work has featured as part of preparatory activities, similar approaches to those suggested for self check and reflect questions can be adopted. If coming to the case afresh, there is unlikely to be time for groups to consider all questions. Here we would suggest that groups major on one of the case questions only moving on to others if they have time. As already noted, downsizing is a strategy that most students will have heard about via the media. If at the time you are teaching this topic there is an organisational downsizing taking place, it may well be helpful to use this as an alternative case study. As part of this, students may wish to compare how the same events are reported by different media. Alternatively, you could obtain more recent newspaper reports to extend the case on MG Rover Cars at the end of the chapter.

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Follow-up work The pedagogic features adopted throughout this book are intended to offer up a number of alternatives for follow-up work while at the same time leaving the lecturer free to add or substitute their own ideas. If they have not already been used as part of class activities, any prior preparation of answers to the self check and reflect questions and/or the questions suggested for student preparation and/or the chapter case ‘The demise of MG Rover Cars’? will serve as a useful reinforcement to chapter content. Our outline answers to both self check and reflect questions and case study questions follow in the next two substantive sections of this chapter guide. There are also a number of follow-up study suggestions after the chapter summary that can be undertaken by students either individually or in groups and an extensive list of references provides many opportunities for directed further reading.

Answers to Self-Check and Reflect Questions 14.1 Using Shaw and Barrett-Power’s definition of downsizing (outlined earlier), which of the following events would you classify as downsizing methods: compulsory redundancy, early retirement, induced redeployment, job share, natural attrition, recruitment freeze, voluntary redundancy involuntary redeployment? Give reasons for your answer. The short answer to this question is that all of them are downsizing methods as they will all result in a reduction in the size of the workforce. Each will place demands upon those remaining in employment (the survivors) requiring these employees to cope and adapt. As you continue with your reading of this chapter, you will learn more about the implications of using each of these methods for both employees and the employer. 14.2 Why might the requirement to adopt a proactive downsizing strategy in order to minimise its negative consequences be difficult to achieve in practice? The literature on which this sub-section is based certainly points to the need for a proactive approach to downsizing as part of the means to minimise and manage negative survivors’ reactions that may adversely affect organisational objectives. However, the factors referred to in the literature (e.g. a strategic planning and environmental scanning capacity) that underpin a proactive approach may not be present in many organisations (Kozlowski et al., 1993). In addition, the existence of an integrated, HRM approach is more likely to exist in larger organisations or those that are part of a larger group of companies. Such managerial capability and competence may not be present in other organisations. These other types of organisations may have a tendency to muddle along and be more likely to adopt reactive approaches where environmental factors create pressures that cannot be ignored. This reactive approach may also be more symptomatic of organisations in decline. 14.3 Which factors related to the methods used to implement downsizing might affect managerial control and employee influence over the process? Targeting those to be made redundant, or who will be offered some inducement to accept voluntary severance, is one way of increasing managerial control over the implementation of downsizing. Targeting relates to the ability of an organisation's management to focus workforce reductions in areas (i.e. a particular function or layer) requiring action to overcome the effects of technological obsolescence, reduced product demand or for some other reason. The alternative to a targeted approach to workforce reductions is to engage in either unfocused or across-the-

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board reductions, perhaps related to a general cost reduction strategy. Such an alternative approach has been associated with cost reduction strategies, short-termism and a low level of managerial control. This approach is likely to lead to the types of post-downsizing organisational problems discussed in the main body of the chapter. The use of selection criteria offers a further means to exercise managerial control in relation to the downsizing process. Selection criteria may be used in relation to an ostensibly voluntary approach. While targeting (see above) may be used to identify work areas or groups for downsizing, the use of selection criteria, in relation to targeted areas, provides a check in relation to particular individuals whom the organisation wishes to retain. Selection criteria may also be used as the only filter where volunteers are sought from across the organisation. The alternative to any form of selection in relation to a voluntary approach to redundancy is made clear by Lewis (1993: 28): ‘the volunteer population may become an irresistible force and the pattern of volunteers may largely determine the distribution of actual redundancies’. The outcome of this lack of managerial control could be a mismatch between actual and required human resource profiles of the downsized organisation. 14.4 How would you react to the redundancy of colleagues in the organisation for which you work, or in an organisation for which you have worked? (Perhaps you have actually experienced this event. If you have, how did you react and why?) Your response to this question will clearly be personal to a certain extent. However, if you are persuaded by the theory being advanced in this chapter you will have made connections to the approach of the organisation in terms of its downsizing strategy. You will have also reflected on the methods used to implement downsizing, or more precisely given the question, the method of redundancy. Where the organisation simply used a workforce reduction strategy, without much thought about those who survived, or who would survive, this event, you may be expected to experience fairly negative reactions. Where the organisation did not consider those made redundant you may be expected to experience fairly strong or strong sympathetic reactions to those so affected. This may not be the case where you feel that those selected for redundancy were appropriately selected. This may be even more the case where they are fairly treated. However, there may be a number of reasons related to your psychological characteristics; the prevailing employment circumstances and the need for your redundant colleagues to find work; as well as the closeness of your working relationships, beliefs and values etc. why you would have, or did have, sympathetic reactions towards your colleagues. You can see what a potentially complex picture can emerge from this type of event. We hope that you do not have to experience this! Where you have to manage this situation we hope that the ideas in this chapter provide at least some help! 14.5 Outline how perceptions of distributive, procedural, informational and interpersonal treatment may impact positively on downsizing survivors’ reactions. Distributive treatment refers in this case to the outcomes of downsizing. It is therefore, related to employees’ perceptions regarding the outcomes downsizing decisions made. Where employees perceive that these outcomes are fair, such as in relation to individuals performance or in that they affect both employees and their managers equally they will perceive the downsizing more positively. The possibility of fair outcomes also impacts upon perceptions of the procedures through which these decisions were reached. Where negative reactions are created by outcomes that are seen as unfair, these may be reduced if the procedures by which they were reached are considered fair. This is related to the amount of employee involvement in the process such as through consultation and communication as well as providing employees with options such as voluntary redundancies.

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Millmore et al., Strategic Human Resource Management: Contemporary Issues, Instructor’s Manual

Interpersonal treatment, in particular by line managers has been shown to have considerable influence on employees’ perceptions. Where employees are treated sensitively by line managers they are likely to feel more positive about the downsizing. Sensitive treatment of those who are leaving has also been shown to impact positively on those who survive the downsizing (stayers). Finally, the provision of clear information about both downsizing decisions and the reasons for these decisions has also been shown to impact positively on reactions to the downsizing.

Answers to Case study questions One would hope that students will be answering these questions with the benefits of hindsight and other material, rather than just that contained in the three newspaper reports. However, from the extracts it is possible to develop answers to each of the four questions. 1. Outline the organisational downsizing strategy as adopted by Rover. MG Rover went into administration after Shanghai Automotive Industry Corporation pulled out of collaboration talks. Approximately 3,000 employees at MG Rover were made compulsory redundant. These employees did not receive the statutory 90 day notice period because of the sped of the redundancies. A few hundred MG Rover staff were retained by the administrators to look after the Longbridge factory site. As a result of the factory closure, a further 17,000 employees at suppliers of the factory also lost their jobs. 2. Outline the range of support offered to redundant Rover workers. Why do you believe this support was offered? A range of support was offered to redundant workers. This was part of a £150m package pledged by the government to help the workers at MG Rover and their suppliers who had lost jobs. It included: •

redundancy payments averaging £5,000 each;

•

retraining courses for those who had lost their jobs;

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setting up an office on the Longbridge site and the distribution of information packs to redundant workers by JobCentre Plus, the government employment and benefits agency;

•

holding a jobs fair on parkland beside the site;

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setting up a register of manufacturing vacancies.

The reasons for this support were, according to the newspaper extracts: •

statutory redundancy requirements;

•

the large number of workers upon whom the closure impacted;

•

the impact upon the local economy.

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Millmore et al., Strategic Human Resource Management: Contemporary Issues, Instructor’s Manual

3. Why did the UK Government become involved in the downsizing at Rover? One will never know for sure. It might be argued that as last UK owned major automotive manufacturer, MG Rover was of strategic importance. Others might feel it was due to the redundancies occurring when the Labour Government was campaigning for re-election and the marginal constituency of Redditch was close by! 4. What were the intended and unintended outcomes of the downsizing strategy adopted? Intended outcomes •

About 1,250 out of more than 5,000 workers who lost jobs when MG Rover collapsed in April had found new employment within 6 weeks of the downsizing.

•

MG Rover workers signed up for training courses.

Unintended outcomes •

The impact upon the local economy was less than expected due to the ‘tight labour market’ and the diversification strategy for purchasing components adopted by MG Rover’s previous owner, BMW.

•

The Labour government, which was seeking re-election when MG Rover collapsed, pledged £175m and the EU put up £40m. That totalled almost £36,000 per worker.

•

Workers who obtained employment were earning less in their new jobs than they did at the Longbridge plant

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