You are on page 1of 22

Unit 1: Definition & purpose of SHRM: In the past, organisations have tended to view people in three different ways:

as a cost, as a resource and as an asset. What many organisations are now realising is that their employees are central to the successful performance of the organisation and therefore an integrated and coherent approach to managing people is needed. During the last 15-20 years, however, an increasing number of organisations stated that people are their most important asset and the strategic management of people has gained equal standing in the organisations resource profile alongside finance and capital resources. The cost of employment in western economies is high In many sectors it is the major cost. Emerging debate centres upon the intellectual assets, the knowledge that can be mobilised for the benefit of the organisation. However, gaining access to, or control or ownership of this knowledge and experience is problematic: Work is becoming more insecure and flexible. The notion of organisational boundaries is sometimes less clear. Employees long-term relationships with organisations, the normal route to developing and securing access to expertise, can no longer be taken for granted. Even if change comes from a strategic response to the business environment or may be related to the goals of the organisation, people as well as systems and processes, are important. There are three challenges facing organisations that must be met if they are to gain the competitive advantage we referred to earlier (Mabey and Lawton, 1998): The challenge of managing intangible assets. This means the ability to access scarce skills and to cope with the implications of new forms of organisations. The challenge of managing strategic change, including trends towards flexibility in organisations and in job design, the break up of bureaucracies and of traditional structures of employment. These changes create major challenges for working attitudes and relationships and require a sustained and holistic approach to people management. The challenge of innovation in terms of what organisations produce by way of goods and services, and the way they approach the task. Development, innovation and creativity become core intangible assets, a focus for managing people strategically. In other words, bringing the design tasks of innovation together with a focus on innovatory behaviour. A strategic approach to HRM involves new ways of operating in organisations and demands new skills. These include the need to understand tacit knowledge, recognise core competencies and attend to stakeholder views, Tacit knowledge is not easily shared. It involves learning and skill, but not in a way that can be written down. Tacit knowledge consists often of habits and culture that we do not recognize in ourselves. It includes: learning from errors peoples reaction, anticipation. Learning from interacting with others; from customers needs and expectations. Learning from work routines.

Core competencies are those that are likely to be as important tomorrow as it is today. Example: analytical skill and problem solving. Linking people management and strategic management: An organisations response to external challenge can come from a cascade of environmental triggers. For example, responding to changing requirements in the marketplace will necessitate an evaluation of labour market supply and skills availability. The response can also arise from two other areas: Keeping pace with successful methodologies tried out in other locations for example, the trend towards Japanese management or practices such as Just in time (JIT), Business Excellence, and Total Quality Management (TQM). An assessment of the strengths and capabilities of the organisation That is, a bottom-up view of strategy formulation. It will help us, therefore, to try to classify strategy in order to gain an overview of the potential links between active business strategy and SHRM response and provide the first steps in defining the scope and nature of SHRM. We can classify strategy in several ways: Using the life cycle model of the product or service Human resource Introduction Growth Maturity Decline functions Recruitment, Attract best -Recruit adequate Encourage Plan and selection and technical/ numbers and mix sufficient turnover implement staffing professional talent of qualified to minimize workforce workers. lay-offs and reductions and -Management provide new reallocation succession openings. planning. Encourage -Manage rapid mobility as internal labour reorganizations market shift jobs around movements Compensation and Meet or exceed Meet external Control Tighter cost benefits labour market market but compensation control rates to attract consider internal needed talent equity effects. Establish formal compensation structures. Employee training Define future skill Mould effective Maintain flexibility Implement and development requirements and management team and skills of an retraining and begin establishing through ageing workforce career consulting career ladders management services development and organizational development Labour/employee Set basic employee Maintain labour Control labour Improve relations relations peace and costs and maintain productivity and philosophy and employee labour peace. achieve flexibility organization motivation and Improve in work rules. morale. productivity Negotiate job security and

employment adjustment policies The potential benefits of a strategic approach: Guests (1992) model of HRM is based around four goals of: Strategic integration with planning to ensure coherent HRM policies. Commitment of the employees to the organisation and to high performance. Flexibility of both organisational structure and functions, based on a multiskilled workforce. High quality of goods and services. This model is based on three dimensions commitment, flexibility and quality to ensure beneficial outcomes such as high job performance, coping with change, cost effectiveness and low levels of absence and low staff turnover. Approaches to the strategic management of people: The best practice view The notion of best practice - sometimes called 'high commitment' HRM - proposes that the adoption of certain best practices in HRM will result in better organizational performance. This view starts from the premise that a single set or bundle of HR policies and practices will lead to better organisational performance, sustained over a lengthy period, whatever the prevailing business circumstances. EXAMPLES: These practices included: providing employment security, selective hiring, extensive training, sharing information, self-managed teams, high pay based on company performance and the reduction of status differentials. However, there is a huge number of studies which provide evidence of best practices, usually implemented in coherent bundles, and therefore it is difficult to draw generalized conclusions about which is the 'best' way Some problematic aspects of this view are as follows: Perception of the effectiveness of those practices which emphasise skills of implementation. A suggestion that best practices do not fit business strategy, which is worrying when linked to the relevance of people management at the top of the organisation. A problem of real strategic choices HR is driven by outside factors which point us toward the next model of SHRM, the best fit view. Criticisms of the best practice view as a way of managing people have been constructed on the grounds of: Cost of implementation. Tensions between the need for production and cost minimisation on the one hand, and issues of flexibility, creativity and skills enhancement on the other. The restricted applicability of the model mainly to the western private sector, where there is wider scope for managerial choice legally and economically. The doubtful ability to assess the impact of HR interests using financial measures. The belief that it is easier to establish and sustain the model on greenfield sites. The best fit view Best fit argues that HRM improves performance where there is a close vertical fit between the HRM practices and the company's strategy. This link ensures close coherence between the HR people processes and policies and the external market or business strategy. The success of a best fit model depends on its ability to: Integrate into the strategic plans of the organisation. Provide horizontal or vertical integration of the key policy areas. How far organisational objectives will be met is dependent on: The level of fit between the business strategy and the environment at one level. The HR strategy and business strategy at a second level. The internal coherence of the policy. Best fit allows organisations to determine whether a hard or a soft approach needs to be taken given the prevailing circumstances. A hard view might include outsourcing, enhanced productivity, and emphasis on tighter contracting. A soft view relies on involvement, partnership and communication and sharing. Best fit integration Best fit integration is an open template to interpret the environment in which business operates and to evaluate the integrated reaction or responses that are necessary. Best practice differs in that the outcomes are not prescribed. Best practice does not emphasise fit or matching but is solution oriented. LEVEL OF INTEGRATION REQUIRED TO MEET THE BEST FIT MODEL (BULLER): A one-way response level where business strategy informs HR strategy. A two-way response level where the relationship between the two is interdependent but not fully integrated. A fully integrated, reciprocal level with top-down, bottom-up strategy formulation. EXAMPLES: COMPANY A: Differentiation strategy HR practices: select highly skilled/minimum controls/invest in training/appraise long-term/IT systems in place/economy of scope/Just in time. COMPANY B: Cost leadership HR practices: less attractive/reward high output/want predictable behaviour/many controls/appraise short term/minimum training/economy of scale/mass production. Resource-based approach Our third model of SHRM is a bottom-up view. There are significant problems with the principles of the two previous models: They represent rational and linear approaches to strategy. The emphasis on the fit of strategy, structure and HR policies does not focus on the distinctive resource capabilities of individuals within the organisation. The lack of evidence indicating that explicit HR strategies have an impact on organisational performance. A resource based model has a different perspective from other approaches. Whilst conventional HR approaches start with external factors such as threats and opportunities, the resource based view looks. first at the organisation and its potential, and develops ways to exploit or enhance the available resources. In a resource based model, the SHRM role becomes one of creating systems and procedures that focus not on external relationships but on how staff and their abilities are used. The resource based model recognises that many aspects of capability can be formally defined in skill terms and developed accordingly. However, the truly distinctive aspects are often hard to define and are formed through informal processes of learning in the workplace. ASPECTS OF THE COMPANYS ASEESTS UNDERPIN THE RESOURCE BASED APPROACH: Storeys view is that sustained competitive advantage derives from assets that add value, are unique or rare, are difficult to imitate and cannot be substituted. Mueller (1998) develops the resource-based view with five propositions concerning the organisations assets. Proposition 1 is that they must be developed in slow, incremental and uncertain ways, not in any linear or planned way. Proposition 2 is that they require broad-based commitment over a lengthy period, not a single initiative. Proposition 3 stresses the importance of routinising skill formation activities. Formal and informal learning activities must be effectively captured by the organisation. Proposition 4 concerns the development of cultures that will allow potential to be used and developed. Challenge rather than conformity, is encouraged as a strategic end, while balancing the need to store organisational value. Unit 2: Strategic HR departments:

HR departments and change Roles for HR personnel included: The development of expertise in scientific organisation of jobs. Recruitment and training activities. The development of legal expertise in various employment areas the reasons for uncertainty faced by HR personnel: The uncertainty of the core area of expertise, for example, the ability to influence and control employee behaviour. The difficulty of assessing or measuring the value of personnel activities. The lack of business awareness on the part of personnel specialists. The skills of people entering the profession. The welfare tradition questions managerial credentials it is employee-centred. WHAT THE HR DEPARTMENT SHOULD DO: Originally an American idea, it was based around some guiding principles from best practice models: Changing beliefs and assumptions, so that organisational culture is the key. Emphasis on strategy. Clear lines of management. Integration of key policies. Storey (1995) suggest that the HRM approach can be assessed in terms of: Tasks, where the key is best practice. Take up of integrated HR practices (the ability to manage beliefs and assumptions, the strategic importance attached to HR, line manager involvement). Value, where we need to ask whose interests HRM serves, whether there are management with a focus on business outcomes, or employee with a focus on developing potential and knowledge. Criticisms of some aspects of HRM: The diversion of communication away from unions toward individual employees. Work organisation based upon teams. Quality circles that excluded trade union control. The movement of pay systems away from collective bargaining to individual (exploitative) performance related pay systems.

ISSUES THAT NEED TO BE RECONCILED BETWEEN HR PERSONNEL & HRM: THE NEED: To incorporate professional HR/personnel practice. To allow for diversity of approach, balancing stakeholder needs. For acceptance of stakeholder interest by management. To facilitate employee commitment and knowledge employees need to develop their potential and commitment. To address issues of employee flexibility and innovation. To raise the profile of HR management. To upgrade the skill of HR managers. To market HR functions within organisations. HR personnel face a mixture of organisational challenges, and challenges to their own function in it. Whilst HR needs to raise its profile, facilitating change in the organisation, it must retain its specialist skills and be viewed as clearly adding value to the organisation. From the organisational perspective, HR policy must address organisational needs but at the same time attempt to integrate employee and other stakeholder interests. These various pulls may be in conflict with each other. HR professionals needed increased understanding of three concepts if their contribution to organisational change was to be of lasting significance in the face of pressures to become more business orientated and strategic: New organisational forms and psychological contracts. The need for partnership in the employment relationships. Pressure for flexibility at all levels of the organisation. The push for productivity on the one hand, and the increasing emphasis on the value of personal contribution on the other, often places major contradictions in trying to control work outcomes and costs while mobilising employee commitment. Organisations and employees face disillusionment. Some examples are as follows: The transfer of social costs from state/organisation to the individual, for example, the costs of development and career orientation. The deregulation of national government policies on employment and the social cost of reducing organisational options for training and employment. Economic determination threatening the optimistic view of HRM management that is based in investment and mutuality in the employment relationships. The obsolescence of management work in information societies and the impact on careers. Flexibility that impacts on culture, behaviour patterns and personal orientation to organisational goals that may cut across employment and organisational boundaries. The challenges/PROBLEMS facing HR specialists Torrington (1996) suggests that three challenges for personnel specialists arise from their confidence, identity and direction. Confidence Lack of confidence may stem from a series of criticisms of HR staff for being: Reactive rather than proactive. Not strategic. Not business focused. Too employee focused, working with unions. Identity For many, the HRM identity of personnel is simply a name change, and the substance of personnel activities has not changed. Direction This is significant. The degree of HR involvement in strategic policy making as opposed to implementation is problematic. Some argue that an organisations HR capability is too important to be left to HR specialists, suggesting that all managers must be involved. In this situation, personnel act as a technical and independent advisor to policymaking. Torrington (1998) concludes that the prospects for the strategic development of HR functions are threefold: HR is legitimately reactive and must create different solutions to the HR implications of change.

Management should not devolve entire responsibility for HR policy to line managers. This dilutes effective people management across the organisation. HR personnel must focus on the process of how people are employed, deployed, empowered and motivated, because preoccupation with organisational employment systems focus exclusively on performance. HOW HR DEPARTMENTS RESPOND TO SHRM CHALLENGES: Guest (1998) advocates personnel orientation towards what he calls a new orthodoxy based around: Community and partnership. Commitment and contracts. Guest stresses the need to create HR policies that: Reflect new divisions of labour that is, choice of where and how to work with organisations. Balance employee commitment to work, non-work activities and perhaps multiple organisations. Offer differing levels of commitment and flexible policies to fit these differing employee expectations . Offer contractual flexibility. Trends in the management of HR functions: Each of these has been adopted to address some of the historical criticisms of HR departments. Auditing performance: This is central to the setting up of service level agreements and clear expectations of HRs role. The objective of auditing HR function is to ensure that the investment in personnel and training can be justified in business terms. The advantages of audits are: Legitimacy and credibility / Value for money / Effectiveness of service delivery / Relevance of service delivery / Basis for adopting service focus. Devolution: The objective of devolution is to ensure a more business led personnel response to employment issues. It involves the reallocation of personnel activities from specialists either: To line managers / To other specialists, such as the financial controller or company secretary / To other locations away from the main headquarters of the organisation. Devolution of any of these activities can be a function of either a decision making authority or the day to day management of activities, or both. Hall & Torrington(1998) suggest that devolution of the following activities is most prevalent: Work organisation / Training / Recruitment and selection / Appraisal / Employee relations. However, there are no simple and straightforward criteria to guide devolution of activities. Organisations do not necessarily devolve the same policies or indeed to the same degree within the policy areas. However, some activities are more or less likely to be devolved. HR departments frequently retain strategic areas of the HR function such as policymaking, pay review processes and the design of appraisal schemes. It may also retain operational areas such as the monitoring of performance, provision of advice about disciplinary cases and the coordination of training. Activities that are likely to be devolved are the interview process, disciplinary interviews, job needs analyses and the negotiation of overtime and other work practices. Decentralisation of HR function: Generally, organisations tend to centralise activities to achieve greater control of processes and costs, whereas decentralised activities are thought to allow companies to become more flexible, to speed up decision making and to become closer to their customer base. A large organisation with a single product will tend towards greater centralisation while multiple products and/or markets will require decentralisation. There are implications too for the management of people. Centralised structures tend to emphasise the development of specialist skills and knowledge. Decentralised structures lend themselves well to developing flexible management and employee skills and cross-functional working. Hall & Torrington (1998) outline three different forms of decentralisation to illustrate the main issues of influence on HR decisions: Type A may have either a HR unit reporting directly to a head of department or one reporting indirectly to a central head of HR. Type B is the reverse of type A. It may have either a HR unit reporting directly to a central head of HR or one reporting indirectly to a head of department. Type C has only a HR unit reporting directly to a central head of HR. Reporting lines are important in determining whether HR activity is likely to be driven by professional priorities or by management needs. DISADVANTAGES OF DECENTRALISATION: services become fragmented and unintegrated, subject to short-term response, rather than longer-term development of organisation-wide competitiveness. Outsourcing: As with many business functions, outsourcing has become an important method of achieving flexibility and reducing costs. The arguments for outsourcing HR services can be summarised as follows: - Outside organisations can afford to retain a greater level of specialist knowledge that can be called upon when needed. - HR activities are not core skills and therefore can be more easily bought in without loss of competitiveness or risk to business performance. The business of the business is not HR management. - Professional skills have a greater impact when brought in. Outside consultants have a better change impact rather than insiders. However, like devolution we must be careful to look at what is being outsourced. Core activities such as maintaining employee records, operating grievance and discipline procedures, collective bargaining, recruitment, training, reward and so on have not been outsourced. These are seen as central functions, which are either dependent on internal relationships being established or are areas that are confidential or legally sensitive, centrality ensures internal accountability. Outsourcing is a critical step for the organisation that has longer term implications for the knowledge and commitment of one of its key functions. Any decision to do so would need to be based on a careful evaluation of costs, quality of service and impact on the longer term adaptability and flexibility of the organisation. This decision will have significant implications for the reaction and cooperation of line managers and other staff. In short, it is a matter of confidence, identification and trust in a key aspect of the business. HR service centres: technology and the new division of work: Bringing technology and new dimensions of work to personnel functions is a natural step. Using centralised call centre technology as well as Intranets to allow independent access by staff for advice, rather than via line managers or localised resources, brings a new dimension to providing HR functions in the following ways: - New technology has enabled computerised systems to improve the collection and categorisation of decision making data in HR. - New technology has provided opportunities to assist with the decentralisation of HR functions, job evaluation, and competence assessment. - Training needs can all be developed in standardised ways for line managers and individual staff. - Computer-based training can be tailored to the individual, and allow for self paced development and education. ROLES OF HR FUNCTION: ULRICH basic position is that the HR function must evolve or die and he strongly believes that it must embrace four key roles if it is to survive. These are: Multiple role model: Business focus. HR should be held responsible for defining the companys organisational architecture. Business focus / Results orientation and performance enhancement. Professionalism. Dozens of processes within HR can be done better, faster and cheaper, Ulrich says. Improving efficiency builds HRs credibility and enables it to advise other parts of the company on how to achieve similar gains. Professional practice/ new policies to support change or employee commitment. Employee perspective. It should be the responsibility of HR people to ensure that employees feel committed to the organisation and are contributing fully. This involves training line managers in how to get the best out of people, consulting on work processes, monitoring employee morale and acting as advocate for the employee point of view. Achieving commitment through partnership or involvement strategies in times of change Change orientation. HRs role in managing change, Ulrich says, is to replace resistance [to change] with resolve, planning with results, and fear of change with excitement about its possibilities. This means creating the right culture and, in particular, mapping out how to move from the present culture to the desired one.

1. 2. 3.

Diagnosing culture and competence change to support business change and maintenance of employee commitment Key competencies of HR professionals: Personal credibility / Ability to manage change / Ability to manage culture / Knowledge of HR practices / Understanding the business. Functions of HR: Developing people, bringing out talent, supporting the organisational strategy, and being corrective in situations where there are deficiencies. Evaluation of the HR Function: The key areas for evaluation of HR FUNCTIONS are: 1. HR Policy Formulation: Includes strategic policy and how well it supports organisational strategy and goals, and development of core competencies, culture change, etc. How well does policy support devolution of functions where appropriate (e.g. education and training, recruitment)? How well do the enabling policies (to develop skills, career management, rewards, recognition) work? 2. Planning: How effective is HR planning, recruitment planning, career planning, succession and workforce planning? How well is workforce diversity, job design, organisational structure and change planned? 3. Development: How effective is foundation and induction training, professional development, leadership and management training, career development, mentoring, staff assignments and movement? 4. Staff relations: Areas for assessment include management of industrial relations/employee relations, enterprise bargaining, grievance resolution, communication, promotion of teamwork. 5. Performance: Is there a business code of conduct (covering ethics) and how well is it adhered to? How effective is induction, how is performance managed, how are staff supervised, how effective is the appraisal programme? Are rewards and recognition programmes effective in enhancing performance? 6. Staffing Practices: How effective is appointment and selection? How competitive is remuneration (and does it attract staff of the right calibre to support organisational aims)? How effective is delegation? How effective and fair is the job classification system, work level standards? How flexible is the work environment and is it in keeping with technological developments? How equitable are staffing practices in promotion, rewards, separation? 7. Health and Safety: What level of training is there for occupational health and safety? How do you rate the work environment and culture? How is staff with disabilities and long-term illnesses supported? How well are injuries handled? - Three-tier approach: APAC adopts a three-tier approach to assessing the performance of the HR function. The starting point module one gathers fundamental data about the operation of the department, corporate statistics and cost-effectiveness. After analysis this module provides the benchmark from which future progress of the department may be measured. The results can also be compared through the APAC database with organisations of similar size and type to provide a broader perspective of what might be achieved. Module two (APSS) focuses on application: assessing reaction to the personnel service provided and the HR needs of user departments. Module three (APPP) recognises the need for fundamental professional standards by auditing policies and procedures. Unit 3: Employee resourcing strategies: planning and competence assessment: Principles of human resources planning require attention to fundamental concepts such as the importance of HR, integration of human resources and company objectives, efficiency and centralized decision-making. Personnel administration evolved from a primarily process-based function of the 1980s to an all-encompassing organizational component promoting the value of human capital. Human resources planning based on HR guiding principles ensures a well-structured component that synchronizes organizational philosophy and human resources strategy. Stressing HR Importance: One of the beginning principles of HR planning stresses the importance of human resources. Engaging leadership that understands the impact of a functional human resources department is the best way to adhere to this principle. The Encyclopedia for Business, 2nd Edition, states: "Business consultants note that modern human resource management is guided by several overriding principles. Perhaps the paramount principle is a simple recognition that human resources are the most important assets of an organization; a business cannot be successful without effectively managing this resource." One way to realize the importance of HR is to envision an organization with neither a productive workforce nor the type of support that human resources planning and management provides. Integrating Human Resources: Human resources serves the needs of the organization, top to bottom, including every member of its workforce. Therefore, integration of human resources functions with overall organizational goals is an HR principle that cannot be overlooked. The importance of integrating HR and company objectives builds on the previously mentioned principle: stressing the importance of human resources. Human resources activities that are merely an extension of management are signs of poor planning and failure to embrace forward-thinking ideas that improve the company's profitability. An "Entrepreneur" magazine article appropriately titled, "Integrating the Human Resource Function with the Business" reinforces this proposition when it states: "It is not enough for the human resource function to be responsive to management, "customer-oriented," or even aligned as partners with management." That said, a holistic approach to the integration principle of human resources planning ensures human resources will be fully committed to and a part of organizational goals. Processing HR: Human resources information technology (HRIT) contributes greatly to the functionality and accuracy of human resources activities. Many organizations purchase sophisticated human resources information systems (HRIS) that minimize, or even eliminate, human error in processing employment data. Smaller organizations sometimes rely on outsourcing their HRIS needs for managing processes such as recruitment, payroll and compensation. Technology supports an important principle of human resources planning -- human resources data processing in the most efficient and accurate way possible. Centralizing HR Functions: Tying together the principles of human resources planning requires centralizing the HR functions. Systematic processes and organization adds a component to HR that employees will appreciate. A one-stop shop for meeting the needs of the employer and employees unifies human resources activities and adds value to department functionality. Centralization involves the decision-making, staffing and organizing of HR functions; however, it also addresses the need for physical resources such as an applicant processing area, private conference and interviewing space, and storage for employment and medical-related files. The contribution of human resource planning Organisations are increasingly focusing on HR planning for reasons including: Supply of skills to address strategic and demographic change. Need to focus more on demand and supply from an external and internal perspective of the organisation. Value of using scenario planning to model the fit with future business environment. Aspects of organisational design significance for HR planning: The need to alter the way work is performed where securing the supply of some skills is important. This stimulates policy decisions on recruitment practice. A basis for looking at achieving flexibility in the workforce to meet cost requirements and to create environmental, work and authority structures to encourage retention of highly skilled employees. Models of Human Resource Planning The approach advocated by HR is the so called social science approach introduced by Bennison & Casson (1989). This is based on the concept of the manpower system and the manpower map forming the basis of management judgements about social factors: wastage, retirement, skill changes, behavioural/cultural requirements of staff and essentially the basis of the replacement policy. The important concepts behind the social science approach to planning are as follows: Wastage a broader term to include not only physical staff but also key skills, experience and perhaps even such additional aspects as commitment. In practical terms, this means high turnover. Profiling in terms of expansion and contraction of the business, key skills, attitudes and so on. This gives a better match between the activities of the business and the skills that staff possess, for example, IT/business consulting businesses moving from computer applications to knowledge based competencies.

1. 2.

Replacement Decisions about structuring/profiling of jobs, developing staff from within or buying in from outside, depending upon an assessment of the availability of those skills on the external environment. Human planning stages: 1. Reconciling future resourcing needs with future HR plans. 2. Considering and applying HR policy so as to have an impact upon the flows of human resources in an integrated way. This includes the pattern of engagement of staff and their movement through the organisation and the stages of exit. 3. Assessing the effectiveness of the HR policies in accessing, creating and using human resource capability. A model of the HR planning process The stages of HR planning process: 1. Investigation and analysis The organisation must gather knowledge about: The external environment and labour market, looking at for example, national training plans and the location of markets. The internal environment and labour market: the age and gender balance of the workforce, the number of employees, wastage rates and so on. The organisations systems, resources, culture, practices and industrial relations. Commercial performance requirements such as sales targets, product mix, market segments and profits. 2. Determination of demand This is one of the key areas of forecasting in the short, medium and long term. The organisation must determine the demand profile of skills, including their life cycle and decline, and the competence mix. 3. Determination of supply This is the second key area of forecasting. The organisation must determine the supply of skills both internally and externally. 4. Decision-making The organisation must then make plans to balance supply and demand of skills. The influences will include skill levels, development and the cost effectiveness of accessing a wider skill base. The areas in which decisions will be taken include: - recruitment - retirement and redundancy - selection and assessment outsourcing - promotion and reward - development and retraining - organisation development and culture - the type of employment contracts - performance management - employee relations. Professionalism in HR Planning Professionalism in HR planning is vital for organisational success. The first aspect of professionalism is understanding the customer, the customer requirements and providing customer satisfaction. PROFESSIONALISM IS INTEGRATED IN THE HR PLANNING STAGES Professionalism requires that HR practices be fair, open and transparent. Today, there is a legal obligation for organisations to ensure equality in the areas of race, disability, age, sexuality, gender and religion. Professionalism in this area requires the adoption of formalism in capturing customer requirements and selection criteria, and checking adherence against the agreed criteria. This applies to all aspects of HR practices including recruitment, selection, promotion, and separation. Professionalism is also enhanced by engendering, within the organisation as a whole, a culture of equality and respect. One way to promote this is to ensure workforce diversity training is provided to all levels of staff. Categorising HR Capability: Competence Models The role and function of competence assessment USES OF COMPETENCE MODELS: Systematically model jobs. Underpin change. Profile people for their development in jobs. Underpin selection decisions. Focus education and training, and personal development plans. Contribute to performance planning and reward decisions. Hammel & Prahaled (1994) talk of bundles of skills, emphasising a broader concept than purely skills themselves. This definition implies a mix of skills, knowledge, behaviour, information and experience of the organisation. Skill is used generally to describe a more tangible set of trainable or learnable tasks. Competence, with its broader coverage, is more difficult to define but is less easy to imitate and indeed develop. There are a number of terms used to expand the notion of competence. These include: Core competence unique to the organisation and its activities. Threshold competence needed to achieve satisfactory performance. Differentiator competence difficulttoimitate capability that gives competitive advantage. Emerging or decision competence the assessment of demand and supply. Life cycle competence matching competence to strategic changes in the business. Functional competence linking task performance based upon criteria, standards and range statements, outlining the contextual situations in which the task is performed. Personal behaviour/effectiveness competence for example, problem solving, communication skills, decision making, integral skills, learning effectiveness and so on. This is at the heart of the supplyside analysis strategy level of the HR plan. Organisations that operate strategically will attempt to define competence at each of these levels and for individual jobs. The results from this will be imported into individual job and personal profiles. Pedlar and Burgoyne In this model of the eleven qualities of a successful manager, you should note how important the personal and interpersonal aspects are. Of the eleven attributes only two might be described as traditional measures of competence, knowledge of organisational practice and professional knowhow and skill. The eleven qualities are: 1. Command of basic facts such as goals and plans of the organisation, and product knowledge 2. Relevant professional understanding technical, marketing and financial knowledge 3. Continuing sensitivity to events and being open to information 4. Analytical, problemsolving, decisionmaking skills 5. social skills and abilities interpersonal skills 6. emotional resilience and the ability to cope with stress 7. proactivity the inclination to respond purposefully to events 8. creativity: being able to come up with unique responses to situations 9. mental agility, grasping problems quickly 10. balanced learning habits and skills: being independent learners, the ability to think in the abstract the ability to use different learning processes and a wide view of the nature of management 11. selfknowledge the skill of introspection. WH Smith model This model is used to underpin graduate recruitment and development, and covers nine competences that are sought in each area are as follows: Written communication: Communicates easily on paper with speed and clarity.

Presents ideas concisely and in a structured way. Uses appropriate language and style. Grammar and spelling are accurate. Oral communication: Speaks to others with ease and clarity. Expresses ideas well and presents arguments in a logical way. Gives information and explanations which are clear and easily understood Listens actively to others. Leadership: Shows skill in directing group activities. Has natural authority and gains respect of others. Capable of building an effective team. Involves all team members, gives advice and help when required. Team membership: Fits in well as a peer and as a subordinate. Understands own role and the role of others within a team. Shares information and seeks help and advice when necessary. Offers suggestions and listens to the ideas of others. Planning and organising skills: Can make forward plans and forecasts. Can define objectives and allocate response to meetings. Sets realistic targets and decides priorities. Devises systems and monitors progress. Makes good use of time. Decision making: Evaluates alternative lines of action and makes appropriate decisions. Identifies degrees of urgency for decisions. Responds to situations quickly and demonstrates flexibility. Motivation: Shows energy and enthusiasm. Works hard and is ambitious. Able to work on own initiative with little detailed supervision. Sets own targets and is determined to achieve them. Personal strength: Is self confident and understands own strengths and weaknesses. Is realistic and willing to learn from past failures and successes. Is reliable, honest and conscientious. Can cope with pressure and control emotions. Analytical reasons: Can quickly and accurately comprehend verbal and numerical information. Able to analyse developments objectively and to reach logical conclusions. Can present well reasoned and persuasive arguments. Goldman (1998) identified 25 surface behaviours that emanate from five basic core capacities. These include self awareness, self regulation, motivation, empathy and social skills. Organisational competence Core competencies are seen as giving an organisation its competitive edge, and in many cases is viewed as essential to its survival. The terms core skills, core competencies and organisations capability DEFINITION: An organisations core skills, core competencies and distinctive capability make up its strategic core. Core skills are associated with an individual, core competencies with a team, and the organisations combination of core competencies make up its distinctive capability. This distinctive capability of the organisation is referred to as organisational competence. HR competencies such as: Intellectual ability: in a commercial environment, this translates to the ability to balance organisational objectives with market realities. Relational ability: ability to work in a team, relate easily and crossculturally, and show empathy. Professional knowledge: strong business knowledge in the relevant field (e.g. technology, finance, operations, marketing). Negotiating skills: ability to balance conflicting objectives from different parties. Flexibility: in moving from one role to another, mobility. Perseverance and determination: the ability to execute and achieve successful outcomes. Additionally at the management levels HR competencies include leadership, cultural awareness, communication, motivation. Applying competence models Nordhaug (1993) offers us a comprehensive view of competence, but it is used throughout the employment system. Meta-competences These are the most general competences and include: Literacy. Analytical capability. Creativity. Ability to communicate. Ability to cooperate. Ability to tolerate uncertainty. Negotiation skills. Industry competences These competences are not tied to any one firm in an industry: Knowledge of the industrys history, structure and development. Ability to analyse the operations and strategies of competitors. Knowledge about key persons, networks and alliances in the industry. Ability to relate to other companies in the industry. Intra-organisational competences These are organisationspecific competences:

Knowledge about colleagues. Knowledge of aspects of the organisational culture. Knowledge of networks, alliances and communication channels within the company. Familiarity with political dynamics within the organisation and its subunits. Knowledge of the firms strategy and goals. Standard technical competences These are competences with high task specificity but low firm or industry specificity: Typing or wordprocessing skills. Computing skills. Knowledge of accounting and budgeting principles. Craft and professional skills that can be applied across industries. Technical trade competences These competences are taskand industryspecific, but not specific to the organisation, for example: Skills in assembling computers. Bartending skills. Hairdressing skills. Unique competences These competences are firmand taskspecific: Skills related to particular tools crafted in the firm. Skills in repairing tailored technology. Skills in operating specialised filing or data systems. Skills related to the maintenance of specific organisational procedures. A key feature of organisational strategy has, therefore, been to focus on management competencies and management developmental needs. The following 11 highperformance management competencies were identified in an article The kind of competence for Rapid Change, Tony Cockerall, (Personnel Management, 1989): 1.Information search 2. Concept formation 3. Conceptual flexibility 4. Interpersonal search 5. Managing interaction 6. Developmental orientation 7. Impact 8. Selfconfidence 9. Presentation 10. Proactive orientation 11. Achievement orientation Unit 4: Performance management: PMS definition : Bevan & Thompson (1992) offer the following definition: PMS communicate a vision of the organizations objectives to the employees- PMS provide the departmental/business unit and individual performance targets that are drawn from the wider organizational objective- PMS provide a formal review process of how the objectives have been met- PMS establish the basis for identifying training, development and reward decisions as outcomes from the review process. What distinguish PMS from other systems: PMS have business-led outcomes that may be assessed against definite business objectives- The system is integrated with interlocking procedures and flows of information- There is a mix of quantitative and qualitative objectives- There is a focus not only on system design but also on the manner of implementation, that is, PMS are process/culture sensitive and as such, are flexible- PMS rely on a participative approach by managers and staff alike, which can align with other organizational processes, for example, employee relations, communications and decision-making processes. What makes PMS linked to the business strategy: objective setting- ongoing review of objectives- the development of personal improvement plans linked to training and development- formal appraisal with feedback-pay review- a competence-based organizational capability review. PMS Key features: The business led and linked objectives- The ongoing participation review process framed around a clear management style of open feedback- The definition of both formal training needs and job-based learning objectives linked to a capability and competence review, which can lead to a review of the wider HR policy. The key management processes that take place within PMS and link to HR planning are: Formulation of clear organizational objectives cascaded down to departmental, business unit or team level-Measurement of objectives-Appraisal decisions- Performance-related pay- Coaching and counseling staff at the job level to enhance-skill and learning capability- Success management or career management. CATEGORIES OF MANAGEMENT TECHNIQUES 1- 2 : THE PROCESS APPROACH :High performance is best secured by analyzing the work which needs to be done to achieve a predetermined result, and then designing the most efficient sequence or method of work activities. In short, to find the one best way. There is an assumption that employees will follow this method because, from an analytically logical viewpoint, it is patently obvious that it is the best way of working. THE PEOPLE APPROACH: High performance can be achieved only through people. So, if the right people are selected for the right jobs in the right numbers, if they are trained in the appropriate skills, and if they are effectively led and motivated, then they will inevitably work well. There is an assumption that; by and large, competent, motivated people will evolve their own best methods of working. MBO vs PMS : MBO : packaged system-Applied to managers-Emphasis on individual objectives- Emphasis on quantified performance measures-Jobs divided into key results areas (KRAs)-Objectives set for each KRA-Performance measures -Task and personal goals-Annual appraisal including discussion of new goals- Most schemes used complex paperwork-Schemes owned by specialists. PMS: Tailor-made systems-Applied to all staff-Emphasis on corporate goals and values-Inclusion of qualitative performance indicators-Jobs divided into principal accountabilities-Objectives set for each accountability-Performance indicators-Task and personal goals-Annual appraisal including discussion of new goals-Some schemes have complex paperwork-Schemes owned by line management. Fowler PMS problems: over-reliance on quantifiable objectives- what can be measured is what is done- lack of responsiveness to formalized objective setting, inflexibility. Flower MBO problems: isolated objectives- lack of ownership- overly formal, once yearly event- not embedded in development- over-emphasis on quantifiable objectives. PMS facilitates the strategic management of people by: A proactive process of evaluating organizational procedures and attitudes- Bottom line orientation and focus of staff in all that theydo alignment of organisational and individual goal- Management style changes for line managers- Balance of team and individual goals- Balancing bottom line operation with organizational process/qualitative focus. FOWLER He advocates greater attention to: - the fit of PMS with organisational culture - more flexible systems to support ongoing learning, participation and development - avoidance of overly formal recording systems - development of line manager skills: feedback, coaching/consultancy, and support - staff commitment to an ongoing improvement culture - attitudes/value/style change in organisations supported by well linked PMS. What PMS should do to be more effective :The history of the organization-Its management style- Its industrial relations tradition- Its size, formality and market sensitivity- The emphasis on reward and performance links-Performance versus development orientation/culture. The nature and scope of objectives: objectives are set to cover the need to: Develop competence (skill formation)-Meet targets (operational demands)-Create an appropriate corporate culture. However, Objectives can be defined at three levels: productivity and output related, job-related, and person-related Productivity/output related objectives: These are measurable and quantifiable output targets, for example: Reducing costs- Achieving sales targets- Meeting pre-set manufacturing volumes-Achieving percentage customer satisfaction levels on service delivery-Maintaining time targets on responding to enquiries in Service Centers. Job related targets: These involve meeting the main job/functional objectives set down in the job description for the specified level of competence: Main responsibilities and accountability achieved-Job description tasks met-Obligations and service relationships to internal and external customers met. An example for a manufacturing manager might be the responsibility for the timely provision of production plans. Person-related objectives: These involve behavioral outcomes in terms of how the job is performed, for example, contributing to teamwork and quality activities, or communicating with customers. Differences in the way that organizations specify and emphasize targets often reflect the nature of the business and the culture of the

organization. Some organizations concentrate on the outcomes and deliverables, others on improving process capability, leaving relationships as the basis for achieving better performance. Hence, there are some common trends in the nature of the performance relationships: Emphasis on qualitative, behavioral factors and the differentiation of individual and organizational performance. (You may recall the resource based view of the organization.) -Increasing bottom line (profit/cost) prioritization to be fed down to each employee- Importance of communicating organizational requirements in ways that individuals can align their activities and behavior The link to corporate objectives : Many commentators felt that the individualized form of PMS created a narrow focus on competitive activity, possibly based upon self-interest rather than teamwork and the wider organizational objectives. Therefore, objectives are now more often expressed on behalf of teams and rewards linked to team-based outcomes, as wenoted in the section above on person-related objectives. Employee appraisal schemes: (Usually, appraisal takes place annually between the manager and the employee. However, there are a number of trends that are changing the style and relationship of the appraisal.) Form: One important trend is to hold periodic reviews on a more regular basis. This allows for a more dynamic process of discussion and adjustment to objectives. Purpose: Fulfil two important aspects: Objectives should remain relevant and achievable -The process of dialogue allows for relationship building and coaching to take place. The design of appraisal schemes: 2 types . The first is control orientation, and the second is a developmental orientation. Control orientation: he starting point and assumption is often that somebody up there acting as a controlling authority is saying that we need to stimulate effective performance and develop targets, offering reward for above average achievement. This is often perceived by staff negatively. The them and Us attitudes are formalized through power to judges via paper work, which seals a view of how well somebody is perceived to work(as we mentioned above PMS are more in quantitative things , so even when it come to the control orientation we can see that they judges their employees through paper work. The control approach works best where clear targets are available, which can be objectively judged, and people are used to this results orientation Developmental orientation : This is an employee who genuinely wants to know how they are performing and what the organization thinks of their contribution and would, as a result, want to clarify their job role and enhance their career. The employee is addressing the matter for themselves. The situation moves from the employee as the starting point, not wanting to be told but helped through problems and limitations, whatever the source. The employee needs support to enhance contribution and the matching of their skills with organizational needs. Outcomes of developmental orientation : Development of co-operative behaviour rather thanresistance between appraisee and appraiser-Easier to confront issues and resolve problems in an open way-Can deal impersonally and objectively with performance issues without damaging relationships-High trust and integrity required if the identification ofpoor performance leads to penalties rather than assistance and support. The problem with this orientation is that it might also lead to few visible performance outcomes, although proponents might argue that implicit commitment generates improvement. n manager and employee. It is also a highly skilled counseling approach that not all managers are well-equipped attitudinally to adopt. Types of appraisal: Corbridge & Pilbeam (1998) offer a useful overview of the main types of appraisal, which include Top-down schemes: The most traditional form of appraisal, this emphasizes both subordinate feedback and the lead on objective setting coming from the top. The problems often cited with this form are: It stresses traditional organizational hierarchies-There may be a lack of impartiality, and favoritism- There can be a lack of full knowledge of the employee in flatter structure. Self-appraisal: Self appraisal is rarely used, as are independent forms of appraisal. It encourages greater ownership and participation in the appraisal scheme through selfreflection and helps ensure full preparation for the appraisal discussion. In an open environment it allows managers to shift from a directive, informing style to a counseling style, thereby assisting staff to form objectives and plans, moving from telling to selling to facilitating, which is seen as a creative and more effective level of satisfaction and ownership. Upward appraisal: it has been increasingly used to reflect the growing trend for organizations to recognize that they have a duty to provide effective working systems for employees. In upward appraisal, in a modest way, employees are invited to provide managers with a rating on such dimensions as effective communication, involvement in decision-making, clarity of objectives and goals, and so on. Often this rating is completed anonymously although more recent trends show managers conducting this process in staff focus groups as a basis for getting feedback on a range of management issues that impact upon staff. Peer appraisal: involves members of teams evaluating each other. One of the arguments for this type of system is the pressure to treat internal working relationships as internal customer relationships using similar feedback systems to external customer feedback techniques. this method of feedback can often be further developed into full service level agreements. It is however complex to run in order to get the multiple channels working and assimilated. There are also sensitivities involved and careful development of staff is required in using such schemes. Multi-directional appraisal: Also called 360degree appraisal, there are key similarities here with peer appraisal. However, the key difference is that multi-directional appraisal deliberately sets out to collect data from outside the immediate team and often from external customer feedback. Its key advantage is to overcome the criticisms of impracticalities and lack of knowledge of a single appraiser. As we have seen, it can be complex and, of course, it does expose staff to potentially hostile views, which may be outside of their total control. The term 360degree appraisal refers to the various sources of data: boss, peers, customers and reporting staff, in order to achieve a morecomprehensive understanding of the performance relationships. Problems with appraisals :Overtime to complete the paperwork- Vague objectives and inconsistent standards of objective setting-Emphasis on getting the review over rather than on the quality of the interview process- Dependence culture: manager judges and informs, staff await outcome rather than be proactive in its development-Narrow individual orientation that ignores wider feedback and operating context-Failure to really integrate appraisal issues within the wider organizational and operational reality. Trends in performance appraisal: the PMS system. Fletcher (1993) identifies a number of trends in performance appraisal within the broad PMS: Reduction of paperwork. Many schemes develop extensive forms and categories of questions for staff to prepare as part of the appraisal preparation and for managers to complete after the interview. Too much time is spent of form filling at the expense of quality of discussion- Clarity of objective setting. It is increasingly important to have precise, meaningful and auditable goals related to the business and not general or unaccountable objectives- Emphasis on the quality of the review discussion. The review interview is critical in terms of manager feedback, the quality of employee commitment to preparing for and contributing to a self-evaluation and discussion of organizational factors of performance- Greater involvement of staff in the process. Organizations are increasingly assessing levels of staff involvement, and encouragement to be involved by the manager. Unit 5: Reward Management: Definition In HRM a reward is generally defined as a scheme to support and reinforce desirable behaviour, such as wage rate that increases with the productivity of the worker. The Role of Reward systems: An Analytical Framework: Lawler (1984) laid down a nine-point framework for taking strategic decisions in his review of the strategic role of reward and organisational development.

These nine points will be used as a basis for analysing past decisions and laying out future policy.
Strategic issues in the design of reward systems

1. Base of rewards: Job based, person based, skill based.


2. Performance and incentivisation scope for progression: Individual, group or organisational criteria.

3. Market position: Position in sector: upper/mid/lower position. 4. Internal versus external comparison: Internal v external equity.
Strategic issues in the design of reward systems 5. Centralised versus decentralised reward : Decision making localisation. 6. Degree of pay hierarchy: Number of structures. - Integration of job structures. 7. Reward mix: Balance of pay and benefits. - Degree of choice. - Harmonisation. 8. Process issues: Communication policy: transparency. - Decision making: extent of vision, individual involvement in job, pay evaluation and pricing. 9. Reward systems consequences/integration: Link to prevailing business. - Flexibility. - Consistency with other HR systems. Base of Rewards

The main choices upon which to base pay are: The job a person does:
- The impersonal determination of generic skills derived from the job definition.

The personal contribution employees make within a job.


- It reflects the potential and growth of the jobholder. Base of Rewards

The level of skill and knowledge that people have within the job. -The level of training and skill enhancement to meet organisational objectives.
Performance and Incentivisation Scope for Progression This is a key plan item for all organisations. The following questions are frequent in most organisations:

Should they offer additional incentives over and above the base reward? What form should this take? How do they link incentives to the achievement of specific business strategies?

The most important question that we need to ask is : What are the best incentives for organisations and individuals?
Some examples of incentives

Individual bonuses: additional pay for achievement of above average work. Profit related pay: normally based on achievement of preset after tax profit figure.
Some examples of incentives

Performance related pay (PRP) : based upon the achievement of preset objectives normally linked to individual and functional objectives. Share option schemes: award of options to buy shares at a future date, based on a preferential rate, or the award of shares in the company.
Some issues of incentives

The amount and level of incentives. Individual versus collective incentives and the impact upon real performance. Short-run incentive and cash versus longer-term retention strategy.
Market Position

Rewards are usually aligned with supply and demand in the labour market. Job categories with a shortage of resources will command a higher pay structure. Reward policy needs to be formulated on the extent to which rewards are market driven rather than equitable.
Internal versus External Comparison

The organisation does benchmarking in order to compare its internal reward system with the other reward systems used by external organisations.
Centralised vs Decentralised Reward

Centralised reward:
It is used by organisations in order to keep a tight central control of reward decisions whereby all salaries rise by the same amount.

Decentralised reward:
In this case, local managers may be given discretion over the movement of pay for their staff or division. Centralised determination offers the prospect of creating internal equity and the ethos of a strong corporate culture, it has the disadvantage that it is normally associated with standardisation of pay grades based on job evaluation. As we have seen, these can limit innovative and flexible responses to employee contribution within job performance. On the other hand more localised responses are normally associated with a more responsive business focus and the market. It also allows scope to reward creative behaviour and assist with retention of key skills and talents in a way that centralised or systems-based approaches can fail to achieve. Degree of Pay Hierarchy

All reward systems depend upon a certain degree of pay hierarchy:


Managers receive higher pay than professional staff, who in turn receive higher pay than administrative staff.

In pay terms the trend has been to reduce the degree of hierarchy in pay systems by enhancing overlap and progression opportunities.
Trends in salary structures Reward and compensation schemes must, in order to achieve equity, attempt to include a reference to: Individual contribution based upon performance. The market. An evaluation of job complexity. There are a number of ways of creating a salary structure. The most typical for the purposes of illustrating trends in the strategic management of this element of the reward mix is a graded scale. The main features of a graded structure are as follows: 1. Jobs are allocated a salary grade based upon an assessment of the three criteria above contribution, market and job complexity. 2. A salary grade or band. Jobs within a grade are broadly similar in demand. A band will contain important control features: a maximum salary, a minimum entry point, a target or marketpoint at the midrange and a percentage range between the top and the bottom. Employees would need to obtain promotion to move from one grade to another. 3. Each grade will have a relationship with other associated grades within the structure. The rate of salary progression within a band has been a subject of critical review in recent years. Today, salary progression is generally driven by performance (and is not automatic at annual reviews). Organisations have also adopted flexibility to accelerate increments to reflect higher performance or market pressures. Advantages of graded structures

Job levels can be readily assessed and recognised. Effective control of salary budgets.
10

Transparent systems that are less biased in decision making.


Disadvantages of graded structures

Often seen as inflexible to individual contribution. Considered by some to be unreceptive to market pressures for certain jobs.
Reward Mix

Pay is normally seen as the most central feature of the Reward Strategy. However, increasingly, employees in western economies are paying greater attention to
certain benefits such as pensions.

Organization tend to have a balance of pay and benefits and use them strategically to increase the company performance. In organisations, benefits are normally associated with promoting retention over a longer term.
Examples of benefits Armstrong & Murliss (1989, p.257-8) have identified six categories of benefits addressing different employee and employer needs:

Pensions or deferred salary to the employees. Personal security. Work life balance which is currently much in the public eye of western economies. Intangible benefits. Financial assistance to support recruitment and retention; relocation costs, subsidised home mortgage loans, payment of fees, discounted staff uniform,
company products, low interest loans, telephone allowance.

Benefits related to status and job performance such as company cars, subsidised catering and sports and leisure facilities, travel and petrol allowances.
Through the reward mix The organisation would chose the benefits that it will offer to the employee in order to reinforce the organisational strategy. Process Issues There are two strategic issues in this case: Communication & transparency: Communication It is not only the content of reward strategies that can determine whether certain human resource outcomes are achieved. How organisations communicate their pay objectives will vary from an organisation to another since it will depend on the organisational culture. Where organisations create what are called open systems, pay structures are publicised, and so are decisions about overall increases in pay. Transparency Transparency of decision making and the criteria used to adjudge pay reviews contributes significantly to the debate on distributive justice and building a sense of commitment from a feeling of confidence and fairness in the allocation processes. Involvement in pay decisions Employees should be given voice in the design and management of reward processes. Organisations that offer greater involvement of employees in pay determination tend to develop a high involvement culture in all aspects of human resource management. Reward Systems: Consequences Integration

The final point raised by Lawler is the importance of integrating reward with the other HR systems. Reward objectives need to match changing HR objectives over time. Furthermore, the style of implementation is likely to have an impact on employee behaviour
and the performance culture of the organisation. Factors bringing harming effects on staff commitment and support?

Limited effects on performance; bad design and implementation will always harm SHRM outcomes. Low incentivisation for average performers. Organisations need to think creatively around a range of incentives to avoid this effect. Poor appreciation of cost effectiveness of incentive schemes Pay and culture most SHRM practitioners would accept that Viewing pay in isolation is unlikely to change behaviour.
Clearly reward goes to the heart of the central tension within SHRM, and that is more of a reason to include it within the decision-making framework of SHRM. The conclusion would seem to be that more sophistication is required in reward planning rather than less. QUESTION 5: SECTION B: Thinking about reward entirely within the performance management framework can be problematic, as reward in its broadest sense serves several purposes. For example, it has nonpay and intangible aspects that relate to motivation and recognition. This involves other areas of HR such as job design, structuring and development. These are dealt with elsewhere in the module. However, given our assertion about the meaning of strategy for HR, we must follow the central principle of integration. In this respect, reward system choices sit firmly within the performance relationship and it is under this heading that we shall address the reward choices available to HR strategists. The real problem is that managers continue to introduce pay systems as a single-issue initiative, expecting the new pay system to alter behaviour and bring about cultural change. It doesnt, unless supportive behaviour is already in place. By themselves, pay systems do not change organisational culture. They never have. The old adage was that pay systems should be designed to fit organisational contingency. The modern idea, that pay systems can change organisations, is an unfounded, optimistic aspiration. the problem often lies not in the interventions themselves, but in how these interventions are made. Unit 6: HR development strategies: In today's knowledge economy the attraction, retention and growth of talent is fundamental to achieving competitive advantage and high performance. Organisations pursuing a high performance culture recognise the criticality of Learning and Development in the context of the development of human capital and organisational capability more generally. Four broadbased HRD purposes of strategic learning and development: 2. Using HRD as a catalyst for change. This broadens the narrower, vocational perspective of HRD. 3. Using HRD as a basis for competitive advantage in terms of the HRD content and the way it is delivered. This sees HRD as a means of integrating business planning with human capability, from recruitment activity and learning through to longer term career planning. 4. Creation of a learning environment as a way of focusing individual learning needs towards organisational learning objectives on a continuous basis. This involves the creation of the so called learning organisation, where a range of self development, team based activities are utilised with the specific intention of enabling the organisation All these combined activities are aimed at releasing the potential (intangible) assets of the organisation and creating knowledge as a strategic asset.

11

These processes need to be managed if we are to consider HRD strategically, but how do we recognise a strategic approach? Burgoyne (1977) provides a longstanding set of principles for evaluation. An approach to HRD is strategic if it follows these principles: 1. Investment in VET and HRD contributes to the achievement of organisational objectives. 2. Line managers are actively involved in the diagnosis of training needs and the monitoring of development activities of staff. 3. VET/HRD is linked with other SHRM policies and procedures to achieve horizontal integration, discussed in Units 1 and 3. 4. Learning and development is matched to organisational learning objectives and the learner groups. 5. Employees are involved in, and own, the outcomes of the HRD needs analysis. Activities are relevant to their work. 6. Senior managers participate in, and promote, learning activities to establish a learning climate. SHRM practices that might support a learning environment: Induction with recruitment and selection processes this creates a culture of development. Appraisal and assessment; appraisal, feedback on performance, coaching, work targets for job development; feedback for career assessment decisions and development needs, for example, assessment centres for management development. Reward, focusing on skill development and contribution to workforce, team and performance enhancement. Career development, project and secondment experience to enhance managerial experience. The model is concerned with integrating and embedding training and education policies and processes within organisational life. It emphasises commitment from the top. HRD in the context of Organisational Development To understand the criticality of HRD in a highly competitive global marketplace, it must be set in the context of organisational development. Today there is an increased focus on organisational development in the quest for a highperformance culture. Learning and development is central in this equation. Organisational Development is undertaken to achieve a flexible and creative organisation that constantly seeks to improve and reinvent the way it carries out its business, and serves its customers. Organisational development has been described by French & Bell (1999) as a longterm effort to improve the organisation's visioning, empowerment, learning and problemsolving processes through the collaborative management of organisational culture. Thus learning is at the very heart of organisational development. To be successful, its people at all levels of the organisation need to understand the criticality of lifelong learning, not least, because of the rapidly changing global business environment that we operate in. Furthermore, the adoption of integrated working and knowledgebased practices requires Organisationwide learning unless the organisation as a whole embraces it, such efforts will fail. Developing a learning organisation that recognises knowledge as a strategic asset, as we have noted earlier, is no easy task. It often necessitates culture change. To successfully implement a learning culture, it is vital to align performance evaluation and reward processes with organisational learning goals. Leadership and Management Development Effective business leadership recognises that it is necessary to be highly focused on capturing the attention of its followers on factors that will change performance. In the learning context, effective communication and role modelling are vital. It is a case of actions speaking louder than words. The leader must demonstrate the importance of learning by demonstrating this through his or her own actions and behaviour. Coaching and mentoring are also recognised as critical tools in enhancing performance, learning or facilitating change initiatives. Coaching and mentoring skills are now seen by successful organisations as necessary skills for managers to be truly effective. The business benefits of a "coaching and mentoring culture" include attraction and retention of talent, and the encouragement of employees to think and work better together. A Problematic View of Strategic HRD Before moving on we need to take a brief look at the problems that may surround the establishment of a HRD culture. These are: The wider environment: As with our previous discussions about SHRM, HRD cannot be entirely divorced from the environmental context. Organisations sit within a national and international context. This external context will be shaped by factors such as the wider value placed upon educational and training by the state, employers and individuals. There will be a need to address deficiencies in each area, and pressures to cut costs. The evaluation of learning and development: The cost of learning and development programmes and the ability to evaluate its success has often led organisations to take a shortterm view and to see learning and development as a luxury or reward, when the business is generating profits, rather than a strategic process in itself. Strategicallythinking organisations will realise that learning and development is vital to organisational development, competitiveness, growth, market leadership and, in some cases, survival. It is also a key factor in employee motivation. However, the evaluation of the effectiveness of the learning and development can be hard to quantify. Generally the business case and effectiveness analysis will be undertaken prior to learning and development initiatives. Strategic organisations will also periodically compare the actual benefits vs. forecast benefits. The key measurements may be improvements in productivity, improvements in quality, increased sales wins, etc. However, a word of caution. Traditionally productivity has been measured at the individual level. But the shift in emphasis to a learning organisation and the promotion of teambased learning and knowledge collaboration, will not necessarily render benefits at the individual level but at a higher business level. It should, however, be noted that learning and development is only effective when the curriculum and learning initiative are appropriate and focused to business objectives and current culture. Often the volume of education days, the traditional basic measure of HRD success, does not address individual needs and many of the organisational prescriptions for training and development do not match workforce expectations. The value placed on HRD by staff: HRD is not seen neutrally by staff and often it is accepted rather than embraced enthusiastically. Sometimes managers create barriers by a failure to motivate trainees with effective and inclusive diagnosis. At other times the failure to allow learning to be transferred into workplace practice leads to low motivation and dilution of the upskilling and developmental outcomes. There is still a lack of clear evidence of strategic linkage in HRD terms with that of the business. Therefore, strategic outcomes and further longterm commitment to development are hard to achieve. The Role of Learning, Strategic HRD and the Learning Organisation Concept The role of learning Learning is a central process in achieving an SHRM approach. The process of introducing SHRM results in adaptation of organisational structures and systems, which results in learning about the organisation and its environmental forces and directions. So we can say that through learning, changes will result. Some commentators argue that the management of learning and of performance are closely associated. To explore this we shall look at the following important points: The concept of the learning organisation: One of the most widely used definitions of the LO is provided by Pedler et al (1988). A LO is: an organisation which facilitates the learning of all its members and continuously transforms itself. The key terms that perhaps define LOs are as follows: Adaptive learning developing skills in coping, reflecting and improving, typified by TQM models of continuous improvement. Sometimes this is called single loop learning as described by Argyris and Schon (1978). Generative Learning perhaps the defining quality of the LO where organisations develop a capacity to think radically and differently about themselves and their market. They question what they do and attempt to redefine their mission. Argyris and Schon (1978) describe this as double loop learning. Creative Tension a concept describing how the process of understanding and diagnosing the present can assist with developing a shared consensus of the future. How such a model can be used in the practice of managing learning and overcoming barriers: One of the most influential strategic models of the LO is the blueprint provided by Pedlar et al (1991). PAGE 321 PROBLEMS From your work to date you might have noted the following problems:

12

Managers skills and ability to provide the conditions and support for learning, for example, providing opportunities for coaching and counselling. Short-termism and little time spent at work on reflection and learning, to improve processes. Willingness of organisational sub-groups to share learning for self-protection, creating barriers to the sharing of information and knowledge. Different perceptions of what needs to be learnt or changed; the absence of consensus. Ability to learn particularly in generative ways organisations are often stuck in the past relying on past experience as a guide to best future practice. Emphasis on incremental versus radical change. Organisations are increasingly recognising the importance of working with customers, suppliers and communities but the extent to which experience and knowledge is personalised and made more widely accessible to organisational members is more variable. Finally, as Lant (1992) notes, the nature and origins of poor strategy formulation and decision-making often limit the impact of organisational learning. Managers are often unwilling or unable to learn, so unlearning paradoxically becomes a key feature of developing operative learning organisations. FEATURES of LO More recently, Burgoyne (1999) has responded to criticisms of the LO model by stressing that the key features are: Companies need to be aware of internal politics and question existing practices and beliefs. Managers need to be aware of where the collective learning process and knowledge reside in peoples heads, in technology or in archives. Strategies are required to enable collective learning, and centralisation may be the answer. The organisation must create its own development tools. Interests of stakeholders must not be in conflict. Issues of ownership of competence and intellectual property must be addressed. Processes are needed to deal with interaction between tacit and explicit knowledge. Are the difficulties in bringing tacit knowledge to the surface technical or political? IMPORTANCE: Maintaining levels of innovation and remaining competitive Being better placed to respond to external pressures Having the knowledge to better link resources to customer needs Improving quality of outputs at all levels Improving corporate image by becoming more people oriented Increasing the pace of change within the organization The process of learning, and how it can be designed to meet the requirements of the integrated approach to learning and change : The design of effective learning activities The success of the design will be a function of the nature of the learner and the match of what has to be learnt with a framework, maximising the effectiveness of learning. We shall briefly review some principles of learning to emphasise the need for flexibility in the learning strategies of organisations. These may be familiar to you from your previous studies. Our starting point is Kolb et al's (1974) learning cycle that focuses on an integrated and planned approach based on experience. The four stages of the cycle are as follows: 1. There is a concrete experience for the learner, a work experience or task performance. 2. The learner observes and reflects upon this experience. 3. Deeper analysis of the implications of the learning allows the formation of abstract concepts and generalisations. There are new ideas. The learner experiments and applies the new ideas to working experience. This is the central proposition for continuous learning. Honey & Mumford (1982) developed this model by associating with each stage An individual learning style or preference for learning: The activist (stage 1) learns best by trying something out, experiencing a new situation, discussing it with others and is often a risk taker. The activists philosophy is Ill try anything once. They enjoy brainstorming and the challenge of new experiences but become bored with longerterm consolidation of experiences. The reflector (stage 2) is good at analysis and listens to what other have to say, thinks through new ideas from many different perspectives and discusses them. They collect data, think about it thoroughly before coming to any conclusion, but tend to postpone reaching conclusions for as long as possible. Their motto is caution. They enjoy observing other people in action. The theorist (stage 3) likes to read and learn about something before trying it out and is good at amassing information in order to develop a theory. Theorists adapt and integrate observations into complex but sound theories. They are logical, tend to be perfectionists and are keen on basic assumptions, principles, theories, models and systems thinking. They tend to be detached and analytical, feeling uncomfortable with subjective judgements. The pragmatist (stage 4) is less interested in a theory than in its application in reality. Pragmatists are keen on trying out ideas, theories and techniques, which they actively seek out. They like to get on with things and tend to be impatient with openended discussions. They are essentially practical, downtoearth people who like making decisions and solving problems. They respond to problems and opportunities as a challenge. Effective manager behaviour to support individual and organisational learning can be summarised as follows. Effective managers: Draw out the strengths and weaknesses of staff. Reward risk, experimentation and questions. Continuously identify learning opportunities. Devote personal time to coaching and counselling activities beyond the annual review. Involve staff in organisation problems. Listen, and encourage staff to implement their own development needs. Developing Strategic HRD Policy One of the challenges that organisations now face is to recognise the relationship between the visibility and maturity of learning and development and the total environment of HRD within organisations. Patterns of development of strategic HRD policy. Source: Mabey C. Salaman G, Storey J. (1992) Pattern 1: The strategic management of HRD/VET suggests that the first challenge is to invest in formalised training, such as formal courses, both internal and external, and training day targets As line manager commitment increases, so does the visible level of training programmes. This moves the organisation from intermittent, nonstrategically aligned activity to institutionalised training, where investment and planning are clearly visible. The second level of challenge is to move the organisation from pattern 2 to 3 where a lot of development work is decentralised and devolved, but still working towards the fulfilment of integrated organisational and individual objectives using a mix of processes. Trends in Organisational Development & Learning: e-learning : The positive features of e-learning include: Accessible development. Self-paced learning. Devolved and decentralised learning. Time and space flexibility for learning. Self development emphasised. Growing use of Internet supports wider learning networks. The negative features of e-learning include: Control of design centralised and relatively inflexible. Interaction and experiential development not highly focused.

13

Provision of learner support may place increasing line manager demands over professional trainers. Unit 7: Managing employee relationships: Industrial relations definition: IR is normally associated with relations between trade unions representing employees collectively, and employers. These relations involve collective bargaining and collective agreements, which are incorporated into individual contracts of employment. IR is characterised by highly formalised rules and procedures, and formal authority for negotiation and resolving conflict. Employee Relations definition: ER is often seen, not so much as a substitute, but as a complementary and improved form of IR. It focuses on equal relationships between managers, union members and non-union employees. The emphasis shifts from a concentration on the collective bargaining process with all its formalisation, to a wider diversity of management/employee relations, which managers would argue improves the quality of dialogue and understanding in the workplace. Trends in Employee Relations: Area Trends UK Employment Equality Regulations / Occupational stress / Holiday pay as a legal right for all workers. Progressive shift away from collective relations and managers designing active strategies to deal directly with ER, hence the shift from IR to ER. USA Managing the partnership strategically for business and employer ends. Traditional SHRM unitary principles prevailing in the private sector organisations in particular. It should be noted that the public sector retains a highly regulated environment supported by trade unions. EU Reliance on a strong role for the state at the expense of enterprise management choice. Benefits of trade union membership: - Protection from job loss and redundancy - protection from unfair management decisions - a response to pressures by employers to reduce terms and conditions in response to productivity pressures - provides legal and other employment advice - companies dont represent an employees best interests. Disadvantages might include: - unions dont really have the power to stop management decisions and job losses - it is the success of the company that is most important to employees and their families - the company would hold union membership against the employee - some people dont believe in unions; they are very negative to change and growth. Effect of some features on ER: Features Effect on management/ER or management/union relations Organisation: size and Fragmentation of work; less likelihood of joining union and social isolation of employees the location of work Home-working and career mobility leads to individualisation of ER Economic structure: Move to smaller businesses less ability to organise labour change in industrial Move to smaller number of large global businesses concentration of labour and enhanced employer power base, SME growth Globalisation and internationalisation of union movement Pressure from low cost/low union membership producers to reduce costs Political and legal context Support for union and employment rights EU support for social partnership Legal platforms of human and employment rights Union role and EU Government role in securing rights Power of unions within EU and nation states to control multinational companies Individualised consumer societies Image and media coverage of unions Organisation of employees across national and virtual boundaries Multinational corporate dominance (MNC) Increasing business pressures in cost/innovation Power of MNC to shift capital away from union-orientated nation state to low cost producers Pressure to be customer and market responsive puts pressure onto extensive consultation and collective bargaining World Trade Organisation unites the possibility of universal labour and employee rights across trade blocks

Social and individual preference: propensity to join unions Globalisation

Managing ER: - Perspectives and Choices Storey (1998) uses both a systems and an agency perspective within which to set the management context for developing strategic ER. These perspectives create a set of dependent variables that determine the scope and nature of management choice in ER as determined by the strength or weakness of internal or external forces. For example, occupying a strong legal environmental and societal value system enables organisations to conduct ER at a regional or national level. Multinational organisations with global products may seek to take a more company led approach. Storey (1998) goes on to stress the importance of management choice as a function of the degree of regulation and the source of the procedures and rules to shape that choice. Possible models of management Salamon (2000) puts forward three possible management models. Systems actor In this model managers seek to maintain stability through a framework of institutions, processes and rules through which the organisation can respond to the environment. Strategic actor Management can exercise purposeful discretion or choice in making decision (goals and strategies) in relating IR strategies and business strategies. Agent of capital Market laws of the capitalist system constrain management to a view of labour as a factor of production, cost and efficiency. The method of legitimising its authority to the workforce will vary according to market circumstances, for example, direct control, joint determination of rules or responsible autonomy. WHEN MANAGEMENT ADOPTS THESE APPROACHES: - If there is high demand for knowledge workers, use an ER strategy of high involvement and individual orientation. Employees have no need for union protection. - If there is high demand for labour with high flexibility, use an IR strategy securing commitment through agreement. There may be an alienation risk from flexibility, supporting union membership. - If there is low demand for labour and high employer vulnerability, employers may attempt union recognition or opt to avoid or reduce recognition. WHY MANAGERS SHOULD DEAL WITH UNIONS:

14

Salamon (2000) suggests that management choice is mediated through three types of rationality. Here Salamon is attempting to determine why and on what basis management might choose to deal with trade unions in a collaborative way as opposed to resisting them. The three types of rationality are: 1. Material interest which is intended to secure management interests such as cost control. 2. Moral idealistic values Matters of principles such as social responsibility. Unions have a legitimate place in the organisation to secure fairness and equity, while managements prerogative is to manage. 3. Technocratic values Policy design to maximise the utility of technology, manufacturing systems and service delivery a pragmatic view. - Employers have identified that effective ER has produced more efficient, effective and democratic work relations that fit the empowering business culture. A voluntary arrangement is seen as a better base for co-operative relations rather than an enforced legal deal later. OPPORTUNITIES OF PARTNERSHIP BETWEEN THE CO. & UNIONS: Increased flexibility, honesty and trust in relationships. Better-quality, faster decision-making. The development of an adult relationship in which company and union could move in the same direction. Decisions that were more likely to be readily accepted within the company. Positive public relations. Strategic Variables: - Recognising trade unions: The objective is much the same, to build a sense of commitment of the union to organisational success rather than retain a sense of third party interest. New Industrial Relations (NIR) : BASSETT (1986) New Industrial Relations is characterised by: Single union/single table. Extended compulsory arbitration. No strike/no disruption. Broad based consultation. Defined and limited bargaining. Emphasis on tasks based involvement. How employers are attempting to secure more effective union relations without alienating or turning non-union employees towards trade unions: This applies to ER and indeed the effective process of ER, be it through participation, negotiation or joint consultation, is especially important in developing an effective corporate culture. - Collective bargaining: Definition by Salamon: Collective bargaining is a method of determining terms of employment and regulating the employment relationship, which utilises the process of negotiation between representatives of management and employees and results in an agreement which may uniformly be applied across a group of employees. Unions have been encouraged to operate as one union within each organisation to avoid rivalries. the level of bargaining is shifting from national, regional and industry level to the level of the enterprise. This is a twofold shift: First from multiemployer to single employer bargaining. Then from multi establishment (company) to single establishment bargaining. ADVANTAGES OF DECENTRALISED BARGAINING: At the location/company level: - It develops a greater sense of ownership of agreements and the need to establish positive relations to address business and employee needs. Realistic partnerships exist at all levels of employee, trade union and management representation with this level of bargaining. - Collective agreements arising from single employer bargaining are likely to be more responsive to market conditions and the needs of the partners, specifically their working practices, efficiency, flexibility and employee priorities such as pay, security, training and so on. At Multi employer, national level: - They control costs and establish a rate for a job, which can reduce scope for conflict and division between comparable jobs. - They promote collective ownership of pay and conditions at the expense of fragmentation and individuality. - They offer a powerful unified management face to unions in collective bargaining. However, they can also: > Create minimum standards and fail to recognise the need to invest in labour market growth areas. > Sufficiently recognise and allow employees to share in company success. > Be responsive to the organisational need for structure, process and work practice flexibility in segmented markets and customer groups. > Be inflationary, as one of several types of bargaining. ROLES OF MULTI EMPLOYER BARGAINING: The picture of collective bargaining is a little more complicated. Rarely is bargaining conducted exclusively at national or local level. As Salamon (2000) shows, national or multiemployer bargaining normally fulfils one or more of these roles: It provides a minimum or safety net pay such as the UK minimum wage. It establishes a floor on which high rates can coexist at the company level. It determines actual pay rates, for example in the public sector. Both employers and trade unions are making key decisions about the use of collective bargaining, and the size and level of bargaining to underpin wider strategic goals. - Involvement and participation: To fulfil the wider function, that is distributive and governance, collective bargaining needs to deal with the following: Substantive terms and conditions: economic pay, hours, holidays. Procedural rules: management/employee relations, balancing employer and employee interests for control/change and protection in terms of working practice. Disclosure of information to empower parties, building trust. Styles of bargaining philosophy to achieve mutual dependence. The options in bargaining may be: Conjunctive: coercive through the use of power. Cooperative: concessions are exchanged. Transactional: acceptance and distribution. Integrative: seeking commonality of purpose, problem solving. Methods that organisations have used to enhance involvement and participation at a consultative, collective level:

15

Industrial democracy. Designed to put worker representatives on the Board of Directors in the 1970s to democratise the workplace, the experiments never really worked and do not really match employees, unions or market led economies. Works councils. Works councils are a relatively recent introduction to the ER/IR agenda. They have been introduced by an EU directive as a statutory means of supporting cooperative relations between employers and employees/unions, to enhance organisational performance. - Conflict resolution: At the individual level grievance procedures (employee orientated) and disciplinary procedures (employer orientated) provide a framework of governance or rules by which matters will be dealt with. It is a set of procedural rules to ensure that conflict is handled in a transparent way and that each party recognises the legitimacy of the other to raise matters of concern and have them dealt with fairly and openly. Positive aspects of disciplinary procedures: 1. Procedures enable employees to channel disagreements into structured discussion and provide a framework of rights to have a disagreement properly heard. In this way it is hoped that disagreements do not tend to create long term damage to the employment relationship. 2. Procedures provide confidence within the employee relations system between the parties, empowering them to resolve their differences without recourse to industrial action such as strikes. 3. Procedures provide a basis for internal government within an organisation each party is given rights, power is divided where management has agreed or has been obliged to recognise a trade union for collective bargaining purposes. Both parties will seek to establish collective agreements for bargaining over the work practices, and terms and conditions of employment. However, the parties may disagree. You will have noted in your earlier studies that in employee relations unions may sometimes act as an intermediary between the employee and the employer, this is collective relations. How choices about conflict resolution fit into our development of a strategic perspective on managing employee relations is built around two central issues: 1.Procedural rules: Storeys model places extensive emphasis on industrial relations procedures as the antithesis of the SHRM outcomes of speedy customer focused decisions flexible organisation structures and work practices based upon a clear corporate culture based upon continuous empowerment. 2.The extent to which organisations develop effective procedures and methods for building internal consensus and resolution of conflict. Partnership agreements: We have been building up to defining what we mean by partnership for some time. In the UK, the Involvement and Participation Association (IPA) launched a project in 1992: Towards industrial partnerships: A new Approach to Relationships at Work (IPA 1992). The document was endorsed by a joint body of employers and trade union leaders. The document identified three commitments and four building blocks. The commitments were: Parties subscribe to the success of the enterprise. Building trust and greater employee involvement. Recognising the legitimate role and responsibility of the parties. The building blocks were: Employees need employment security and employers need to maximise job/organisational flexibility. Success should be shared by the organisation and its employees. Staff should be widely informed and consulted at the company level on matters affecting their employment. Employee interests (voice) need representing. Trade union leadership perspectives Marks (1998) restates the TUC terms for partnership: Employment security. Employee voice. Fair reward. Investment in training. He emphasises the need for a change in corporate governance that aims to improve fundamentally workplace relationships of trust, respect and leadership commitment. This, he believes, leads to a sense of insecurity and lack of commitment and identity within organisations. He criticises organisational shorttermism and lack of longerterm investment that promotes an enhanced stakeholding. A stakeholder company might be described as an organisation that balances the interests and roles of shareholders, employees, customers and suppliers, and other interested parties such as government and the community, the public. Marks (1998) identifies the criteria against which the TUC measure a stakeholder company as follows: Legal duties of directors to reflect interests of employees, suppliers and customers. Partnerships supporting SHRM. Quality standards for the customer. Community involvement recruitment to reflect local community. Job security and flexibility bargaining. Financial participation in SHRM by employees. Commitment to develop workforce skill. Unit 8: Managing change: culture and performance: Organisational Development: OD is more than a set of techniques employed by managers to attempt to change the attitudes and behaviour of staff toward corporate objectives. It not only describes methods that managers can use but also sets a philosophy, a value system in terms of how change should be managed. Aspects of managing change: An assessment of culture and the possibility of change. The assumptions behind change in organisations and an introduction to change strategies. Introducing and using OD stages as a particular strategy for long term change. A comment on the role of SHRM within change management. Employee climate This can be described as the intersection of people to organisations and employee to the manager relationship. This is made up of several interactions personal and organisational goals, formal structure and its impact on behaviour, the process of management decision making, conflict resolution and communication in terms of securing commitment and goal alignment, leadership style, etc. Employee Commitment: Three pillar model of commitment I Sense of belonging to the organisation - II Sense of excitement in the job III Confidence in management leadership Drennan (1989) suggests several prerequisites to this including clear goals and direction, clear focus on team work, management time on developmental activity, visible and continuous communication of goals and feedback on progress. Organisational conflict

16

There are contrasting views of conflict. Mostly organisations determine conflict as destructive and seek to minimise or suppress conflict as damaging. This could, from an employee relations perspective be seen as a unitary view whereby common interests prevail. Alternatively organisations can view conflict more positively as a creative and innovatory force. The identification of sources of conflict and the confrontation through problem solving and high involvement strategies are important change management skills. The rationale being that organisations should focus less on performance reducing compromises and avoidance, but focus on diligent processes of resolving through evaluation of information and involvement of staff in the outcomes. Employees may not always like the outcome but the objectivity of the process may go a long way to improving commitment to the result and reduce resistance. Confidence in organisational governance procedures is an important element in building trust and commitment a key commodity in effective organisational change. Management development: The manager as coach and counsellor are also important functions to get the best from staff and build their trust, confidence, capability and commitment. The manager is now expected to be skilled in the art of facilitation whereby he / she can move the organisation forward through continuous improvement. The skills behind Total Quality Management, Business Process Re-engineering. The importance of creating effective models of organisational management competencies is a critical task for HR planners and career planners whereby job related profiles and individual competence profiles are carefully drawn up to reflect the strategic behavioural priorities. The methods of developing effective managers, emphasising the personal competencies follows a rather similar pattern to the broad goals of learning.The main focus being continuing professional development strongly led by the individual ownership. Whilst management education can be formerly trained via MBA programmes and short courses we see an increasing concentration on learning through doing special project based work both within and external to the organisation that is formally set up for development. Job rotation and strategic job moves within the career system are other ways to broaden management staff to the challenges of change. Many international organisations use international placements and development projects to enhance the cross cultural and strategic management competence of staff to survive and prosper in global markets for example. Role of HR in Organisational Development: The ability of a company to rapidly adapt to changing business circumstances is what delivers competitive advantage in todays global marketplace. HR plays a key role in this strategic context.Organisational development, through the establishment of appropriate organisational culture and change management. At a highlevel the role of HR in organisational development will include: Working with the business to align the OD strategy with key corporate objectives. Promoting (communicating, inspiring and motivating) a high performance people management culture. Designing OD frameworks such as PMS and rewards system to help deliver changes. Integrating OD into employee communications, HR development, team working, collaboration and other aspects of high performance working. HR planning to build appropriate organisations skills, competencies and capacity. Assisting the business in establishing priorities for learning and development (refer to Unit 6 also). Managing knowledge about OD activities across the organisation, and managing relationships across functional/ divisional/ business unit boundaries to share development activities. We notice that education, learning and development play a vital role in OD. Employer of Choice organisations: With the shift in labour trends, every business needs to examine how to attract and retain good employees. A key part of HR's strategy must therefore be to have an organisation designated as, what is termed, an Employer of Choice. This is a goal pursued by many strategically thinking companies as they seek to attract and retain talent in the context of OD. The term Employer of Choice is used for organisations with the status and reputation as a leading choice employer amongst world class candidates. 'Employer of choice' organisations are designated as such, because of their positive working environment characterised by compensation, corporate culture, benefits and training. 'Employer of choice' organisations attract talent and retain key employees. They provide employees with an attractive and fulfilling working environment that balances work life with personal life (work life balance), they provide an environment where employees feel valued and respected.Perceptions of a positive environment is also greatly influenced by an organisation's track record in the area of ethical standards and corporate social responsibility. Ethical dimensions: Organisational development also has an ethical dimension. It requires ethical sensitivities in issues relating to equality, diversity management, flexible labour, voluntary and involuntary employee separations resulting from restructuring and downsizing, performance management and rewards. The pull from the business may often be in conflict with employee welfare, and HR's role is in fairly balancing the conflicts and taking an ethical stance. HR also plays a vital role in establishing an ethical organisational culture by communicating codes of ethical conduct, providing training in ethics, monitoring compliance to ethical standards and managing compliance. Workforce diversity An important role for HR in organisational development is the promotion of workforce diversity. Leading organisations are now focusing on diversity as an asset to be leveraged, and not as something to be managed or paid lip service to. Such organisations view workforce diversity as adding richness, synergy, and, most of all, business value. Accepting this point, and gaining its acceptance in others, is perhaps the most essential leadership competency for leveraging diversity. It is a key part of organisational development. Without this competency, no organizational diversity effort can have a lasting positive impact. HOW TO PROMOTE DIVERSITY? Prioritising workforce diversity requires the setting of diversity objectives including cultural awareness and acceptance, work/life balance, integration of people with disabilities and the advancement of women, and building a diverse management team. Managers, in particular, should be made aware of the value of workforce diversity and the enormous business benefits of capitalising on the skills and talents inherent in all segments of the community. Corporate social responsibility: Today corporate social responsibility is another key part of organisational development, and a key leadership area for HR. Being socially responsible can improve financial performance and access to capital, enhance brand image and sales, attract and retain a quality workforce, improve decision-making on critical issues, help organisations manage risks more efficiently and reduce long-term costs. HR has a clear role in demonstrating the business case and leading the organisation in CSR initiatives. Culture: Culture and organisational performance: Culture is frequently described as a set of shared meanings that influence or determine behaviour. The possibility that managers can design and develop an effective corporate culture is often at the heart of the strategic implementation debate. For example, it presupposes that organisations can in some way align individual and group values within the organisation, which will positively influence commitment to the organisation. In this sense, the potential impact on organisational performance is enormous. The idea that culture can be owned and managed is a contestable factor, but certainly as an idea, it sits at the heart of current organisational thinking about how to enhance performance. The argument for organisational analysis is that all organisations have cultures, culture builds consensus and unity of purpose, which can motivate staff. Therefore: 1. Individual and group performance will increase through consensus 2. Managers should attempt to manage culture. TRADITIONS IN CULTURE: Japanese organisations and their particular styles of managing. This involves team working, continuous improvement, consensus decision making, multi skilling and high emphasis on development and empowerment. American include individualism, self reliance, family values within organisations, accountability, entrepreneurship, emphasis on informal client and committed action, and keeping things simple in decision making, communication and tasks. You should also note the close relationship that structural control, coordination and job design can have as an influence on culture, particularly through: Standardisation of jobs and flexibility of job and thinking. Formalisation of communication channels and flows. Division of labour between departments or teams. Terms and conditions and the degree of rules and the ability to work beyond contract.

17

The components and levels of culture, focusing on the models of Bate (1992) and Hofstede (1980): Purpose: The models of Bate (1992) and Hofstede (1980) are ways of describing attitudes and behaviours that permeate organisational life. The diagnosis and management of culture is about understanding and trying to influence behaviour to secure superior commitment and flexibility and enhanced performance. Bates model of culture identified a relationship between organisational culture and effective organisational problem solving. He devised a model of culture based upon the following: - Unemotionality The extent to which personal relationships are explored and evaluated, the ability to surface and resolve conflict. - Depersonalisation Avoidance of blame culture and the impact on problem solving and performance enhancement. - Subordination The degree of accountability, empowerment and involvement of staff in management functions. - Conservatism Receptiveness to change and to learning and experimentation. - Isolationism Personal and group territory and willingness to develop interdisciplinary/agency/organisation problem solving approach - Antipathy The degree of adversarial relationships: unitary/plural and alignment with organisation goals. The primacy of corporate or stakeholder interest and the integration of people with strategy. Hofstedes (1980) model of culture : (America: H H L L, Asian: L L H H) 1. Power distance (PDI) This is the extent to which members of society and organisations accept or highlight the distribution of power and authority, for example, clear status and hierarchy as opposed to equality and empowerment. 2.Uncertainty avoidance (UAI) This the degree to which members of society and organisations feel threatened by change and ambiguous situations, and set up planning systems to avoid uncertainty, for example, rulebased procedures and careful planning as opposed to flexible, responsive, risktaking behaviour. 3.Individualism (IDV) This is the extent to which people believe that the wellbeing of the family (organisation family) is more important than their own interests. 4.Masculinity (MAS) This is the extent to which achievement through successful acquisition of possessions, money and promotion prevail over the caring and nurturing values of social relations. For example, performance related pay, individualism and the success of individual objectives as opposed to teams, learning and organisation based reward. Strong and weak culture: Strong culture often results from a stable group or organisational membership, or very clearly defined ways of working that can be taught to new members, where this group has learnt to cope with and possibly survive some difficult working problems. Strong cultures are often associated with positive values. For example, the shared experience and effective internal adaptation of working methods that members accept can often lead to higher levels of performance. Weak cultures are associated with shifting membership with few shared experiences, with little alignment or commitment or shared values. Arguably it will be easier for organisations with weak cultures to shape their cultures and change their focused and corporate viewpoint. Culture changes the opportunities and difficulties: Etzioni (1988) made the point that there were three employee cultural orientations to employment achieved through structural design: Coercion: I have to work for the organisation. Economic: I work at a transactional level wages for job defined output. Personal involvement: I value the work I do and the organisations product or service. I am committed to going beyond contract to achieve personal and organisational goals. These motivations are important, and the aim of SHRM is to move employees towards the third model personal involvement orientation, where employees bring to bear their full engagement. Organisations face conceptual and empirical difficulties in creating strong corporate cultures. Conceptual problems include the following: Ideologically, corporate culture is viewed as the enhancement of management control at the expense of employees, which promotes resistance and can reduce the cooperative and consensual outcomes. Corporate culture can deny stakeholder interests if they deviate from the management view. Culture is formed primarily through social interaction, adaptation and not exclusively through management prescription of ways to perform and behaviours to adopt. Employees nationally become members of separate subcultures or interact with groups that will hold separate identities. Culture is not a product but an insecure outcome of a continuous process of social interaction. How do we develop committed employees? How do we develop their potential and identity? What forms of job design, organisational structures, leadership style and HR practices will secure change in culture? Change Management: Change management strategies and their impact: Framework for managing change: Best practice view of change management Commitment from top Stakeholder

Technology and culture alignment Continual learning User involvement and business outcomes Alignment and integration between business, organisational and specialists Communication

-HR policy lever -HRD to support change -Role of managers in development -Employee relations strategy -Team based structure -Learning organisation model -Completion modelling and alignment -HR planning -Balance of training and development -Performance management systems -Focus on style of HR -Implementation -Via an explicit HR strategy and change strategy -Clear alignment of HR policy goals on skills -Competence, performance and style (learning and change)

Assumptions, intentions and perceptions of change: Not all employees will rationally accept or indeed rationally resist. Understanding more about this complexity is the key to successful change. Assumptions, intentions and perceptions of change are important to the quality of outcomes and will inform the design of the strategy. Change management assumptions Implications Assumptions about intentions of change Arrangements made for scanning, filtering Is change and responding to signals for change Exceptional or endemic? Behavioural readiness to do things differently Threatening or desirable? Cultural responsiveness to do things differently Deviant or normal? Assumptions about implementing change Perceptions about the rightness, speed, Is change scope and pace of change strategy Controllable or controlling? Attention given to historical, cultural and Rational or relational? political (internal and external) contexts

18

Discrete or multifaceted? Arrangements made to cater for systemic repercussions Assumptions about interpretation of change Allowances made for differing versions of Is change change process Directional or reciprocal? Credence given to different choices and Managing people or managing meaning? evaluation of change outcomes Problem-solving or pattern-seeking? Extent to which differing views, predispositions, ideologies explored and understood Types of change and their impact on strategy: Incremental. Adapting and improving existing practice. For example, Business Process Reengineering and new team based structures may require skills and attitudinal change based on revised jobs and employee networks. Transitional. This suggests wider ranging restructuring of the organisation, even the breaking up of the organisation into smaller business units or decentralising the organisation and the break up of specialist central departments. Such initiatives create new job structures and new patterns of accountability and power within organisations. Transformational. Under this condition all aspects of the organisation are changed: core values, leadership, decision making and power redistribution. The implication of this is fundamental review of the knowledge learning process and culture of the organisation. The change process: organisational development process: Change is a complex process. However, organisations need to try to make sense of change for management and employees, so it is frequently programmed into a series of steps or stages. Wide involvement in and communication of the change project can assist with employee understanding of what and how change can be achieved. BECKARD Organisational development (OD) FEATURES sets these stages in a neat future oriented way. 1. Determine the future state: where do we want to be? STEP 1: Agree organisational purpose and mission: The first stage, agreeing the organisational purpose and mission, is determined by the trigger for change. Internal triggers for change could be: Restructuring of business units and job structure. Quality improvements. Revised service levels. Development change. Product innovation. External triggers for change could be: Internationalisation. Market driven triggers: product, cost and customer technology driven. Competitive restructuring, joint ventures, mergers and so on. 2. Diagnosing the present state: where are we now? Step 2: Assess the outer and inner context What sort of information do we need to understand the present state? The following is a checklist of data to be collected and evaluated in order to assess the extent to which we need to change now or in the future: Outer context forecasting the impact on internal activities The economy - Suppliers availability and quality - Government policy - Existing competition and new entrants - Customer needs/expectations - Shareholder perspective - Public opinion - Legal environment - Media concerns and values Technology - Market and product innovation. Inner context Skills and knowledge of people and their adaptability - Culture and relationships - Learning ability - Flexibility and work methods - Business process efficiency - Structures and job design - Competence. Step 3: Gathering data: Price (1987) introduces an interesting way of ordering the data gathering process. The data collection cube suggests that we need to understand strategic pressures, emerging and core tasks that add value and the association of attitudes and culture that will achieve these. In other words, it addresses the what and how aspects of employee contribution. The Organisational Development process demands that understanding peoples perceptions and feelings will help us to judge their likely reaction to our intended change, which will inform us of the likely issues we need to address in the strategy. Step 4: Gaining involvement The OD approach, as we saw in the unit on learning organisations, is to advocate a participative approach where the speed of change permits. Therefore, how we conduct the diagnosis will, it is argued, affect the overall outcome of the change itself and commitment of staff to the outcomes. In itself the process of involvement and participation is likely to send cultural signals about what the organisation wants from its staff and how it wants them to behave and perform. So how can we best maximise the involvement of staff in the diagnosis of the present state? Pugh (1993) identifies six rules for maximising involvement in the change process: Rule 1: Work hard at establishing the need for change as a basis for building commitment and acceptability. Rule 2: Think out and think through the change, looking at the change from the recipients point of view, for example, the impact upon relationships, power, resources, job content/interest, and job autonomy/authority. Rule 3: Invite change through informal discussions to get feedback and participation. Rule 4: Positively encourage those concerned to give their objections. Surfacing problems early enables organisations to deal with them before they start to hinder the change strategy in progress. Rule 5: Be prepared to change yourself. This is another take on unlearning by managers and avoidance of groupthink that we came across before. Rule 6: Monitor the change and reinforce it. Part of this relates to the communication we came across earlier. Communication of successes and using HR policies to reinforce or stabilise the change are critical, for example, new development appraisal and performance systems can reinforce learning based cultures. Pugh (1993) recognises implicitly the role of subculture and interest groups and the need to focus on reaction and sources of resistance. Pugh (1993) assumes that employees only partly align their votes with the corporate goal. The whole change process is about surfacing noncorporate views and attempting to resolve them to the mutual benefit of the individual and the organisation. The gathering of data, surfacing these issues and including them in the diagnosis, is critical to the success of the change process.

19

Managing the transition Step 5: Targets for change & step 6: Implement change and developmental activities The targets can be framed around the choice and levels we discussed earlier in the unit. Two models illustrate the generic approach for these steps. Remember that in organisationwide strategic change, we are likely to employ a range of techniques directed toward different levels and groups, depending upon such factors as recognition of the need for change, resistance and support for change. Sequence and timing of interventions is important. Step 7: Evaluate and reinforce change You may have gathered already that however problematic culture change may be in organisations, success is likely to emerge from two important factors: Carefully planned design of strategy. Importance of the process how we implement to secure involvement and commitment to change, and to promote the individual and collective need to change. What distinguishes HRled change from projectbased change is the OD philosophy that supports change. It assumes that change is not only technically complex, but requires a high degree of emotional involvement in the process. It also assumes that the problems are complex and unbounded. Bounded problems tend to involve: Clear priorities. A clear problem. Available data. Limited people involvement. Limited timescale. Clear issues. Unbounded problems however tend to involve: Varied interests. Unclear problems or no clear solutions. Not knowing what needs to be known. Uncertainty. Complicated and contextual issues. Sample: For a developmental activity to be deemed strategic organizations need to shift the focus from training to a learning approach. Nowadays, organisations have to deal with several challenges and difficulties such as changing business environments, hard and increasing competition between firms, unpredictable economic conditions and the increasing chase for talents. In order to respond to these problems and to succeed, organisations are beginning to centre their attention on HR. The companys HR and more specifically its people are now considered as an asset and a source of competitive advantage. Organisations are training and developing their employees in order to exploit the whole potential of their HR. This provides the employees with skills, knowledge and abilities that will lead to positive results. However, experts, managers and employees are starting to think that training is no longer enough. In order for the organisation to keep its competitive advantage and to maintain its employees competitive, it must adapt a learning approach to human resources development. Let us first define the two terms: According to Donaldson and Scannel (2000), training is an attempt to transfer skills and knowledge to trainees in such a way that the trainees accept and use those skills in the performance of their jobs while learning is a lifelong process in which experience leads to changes within the individual. According to Sims 2002, Training is considered as planned learning experiences that teach employees to perform their current jobs. Training focuses on present jobs Learning is a change in behavior resulting from experience. Learning is the act of acquiring knowledge or skill. It is a mental activity by which skills, habits, ideas, attitudes, and ideals are acquired, retained, and utilized, resulting in the progressive adaptation and modification of behavior. Based on the definitions above, we can assume that training is more focused on short-term acquisition of knowledge, skills and abilities. Trainings are planned learning activities. It is clear that training is not enough to ensure the success of the organization and it is enough to keep the workforce at pace with the changes in the business environment. Training alone is not enough to develop and prepare the employees for their present and future responsibilities. Organisations are beginning to adapt a learning approach to employee development. Organizations must encourage learning through both formal and informal circumstances. Organizations must encourage employees to continue learning inside and outside their work settings. Thus, Human Resource Development (HRD) and lifelong learning emerged. HRD is the field of study and practice responsible for fostering of long-term, work related learning capacity at the individual, group, and organizational levels. As such, it includes but is not limited to training, career development, and organizational development. According to Nadler and Wiggs (1986) HRD is a comprehensive learning system that releases the organizations human potential; a system that is both experience and experiential, on-the-job experiences that are keyed to the organizations reason for survival. From the discussion above, it can be said that HRD is primarily a learning approach to employee development. As such it facilitates organizational learning through training and development of individuals, groups, and organization as a whole. HRD is composed of a series, a lifelong learning that aims to increase the capability of the employees and the organization through performance based activities. HRD can then be described as a comprehensive learning system designed to enhance individual performance for improving organizational efficiency. HRD purposes of strategic learning and development. 1. Using HRD as a catalyst for change. This broadens the narrower, vocational perspective of HRD. 2. Using HRD as a basis for competitive advantage in terms of the HRD content and the way it is delivered. This sees HRD as a means of integrating business planning with human capability, from recruitment activity and learning through to longer term career planning 3. Creation of a learning environment as a way of focusing individual learning needs towards organisational learning objectives on a continuous basis. This involves the creation of the socalled learning organisation, where a range of selfdevelopment, teambased activities are utilised with the specific intention of enabling the organisation to challenge and improve work processes and outputs. Developmental activities that support business objectives: Through the alignment of development objectives with organisational needs (across four strategic purposes), behavioural skills and knowledge gaps are diagnosed and addressed in an integrated way. Courses, events, and work assignments are regarded as opportunities for development. Development is recognised as being more than courses. Managers and employees recognise the need for investment in qualifying courses (education) and broader developmental activity to address employer and employee needs. - The development of people is in line with the organisations aims and objectives. : The organisation has clear priorities that link the development of people to its aims and objectives at organisation, team and individual level. People clearly understand what their development activities should achieve, both for them and the organisation. Continuous learning is an ongoing acquisition of new skills, which happens as the person senses the need for updating, as opposed to a less frequent, massive reskilling process. Continuous learning focuses on helping the employees to develop and update their knowledge and skills. Continuous learning also requires employees to understand the relationship between their jobs and work units and the companys mission. Furthermore, lifelong learning emerged as a new approach to developing employees: Continuous learning is an ongoing acquisition of new skills, which happens as the person senses the need for updating, as opposed to a less frequent, massive reskilling process. Continuous learning focuses on helping the employees to develop and

20

update their knowledge and skills. Continuous learning also requires employees to understand the relationship between their jobs and work units and the companys mission. Integrated Reward Management: Integrated reward management is an approach to reward management that provides for reward policies and practices to be treated as a coherent whole in which the parts contribute in conjunction with one another to ensure that the contribution people make to achieving organizational, departmental and team goals is recognized and rewarded. It consists of a related set of activities that impinge and impact on all aspects of the business and the HRM practices within it. In an integrated approach each individual element of reward supports the other to reinforce organizational objectives. Integration takes three forms: - Strategic integration: the vertical integration of reward strategy with business strategy. - HRM integration: the horizontal integration of reward strategies with other HR strategies, especially those concerned with high performance, engagement, talent management and learning and development. - Reward integration: the internal integration of reward to ensure that its various aspects cohere and that a total reward philosophy is adopted that means a full range of mutually supporting financial and non-financial rewards is used. PMS & SHRM: Definition: Performance management is about directing and supporting employees to work as effectively and efficiently as possible in line with the needs of the organization (Williams 2002). Performance management helps organizations sustain or improve performance, promote greater consistency in performance evaluation, and provide high-quality feedback. Performance management helps organizations link evaluations to employee development and to a merit-based compensation plan. Moreover, it form a basis for coaching and counseling, permits individual input during the evaluation process, and allows for a blend of qualitative and quantitative expectations of job demands and factors that reveal how well the job is done (Gilley and Maycunich, 2000). Some managers oppose any form of performance management system, claiming that communication between people, getting people to talk to one another, is all that is needed. This is not realistic, even in micro businesses, but it does enable managers to avoid confronting incompetence, and everyone else to avoid accountability. Most organisations today list as their major HR concern difficulties in getting and keeping skilled staff. As routine jobs have been automated or moved offshore those that remain have become more complex, requiring above average abilities. In most organisations performance management is primarily an annual event, a form completed prior to the end of the financial year. The form is filed and in most cases will not be touched again until the next review the following year. The performance appraisal may or may not be referred to at the annual pay review. It is not surprising then that research consistently indicates that most performance management systems are of poor quality and poorly executed. The company needs to have some pre-requisites before implementing PMS. This will make the PMS more efficient and adequate to the company. Pre-requisites of effective performance management systems. Some studies has shown that performance management systems are not satisfactory in most businesses. Simply adopting a new system, new templates, new procedures is not enough to make performance management effective. There are some basic pre-requisites at an organisational level: A. Clear purpose : To achieve this every organisation must have a clear idea of critical success factors, as well as a performance management culture, meaning an emphasis on individual accountability and results. In order to develop the capacity to perform, there must also be a comprehensive capability analysis, especially where there is a known knowledge and skills gap in the industry or organisation. The performance management system must be able to identify, facilitate and track individual development and succession planning. 2. Business performance management culture If performance is not monitored at the organisational level, then reviewing the performance of individuals is meaningless. A business performance management culture means that senior management values and insists on measurement of those business factors that are critical to the success of the organisation. 3. Alignment A means of ensuring the effort of every individual is aligned with the organisation, that each individual understands their contribution and its importance. This is easier said than done, often there are conflicts between departments such as operations and sales. 4. Fairness Perceptions of fairness are based on comparisons. Typically staff compare their inputs, such as expertise and effort, their job performance and their compensation with others. The key factor in ensuring that staff feel their compensation is fair is procedural justice. Staff need to feel that the method used to determine relative pay is fair. 5. Meaning A performance management system must be seen to accomplish its purpose; to communicate expectations, reward top performance, and address skills and knowledge gaps. That means the system must be capable of capturing accurate and relevant data with sufficient frequency to enable objective reporting. This enables decisions on the basis of facts rather than opinions or even personal preferences. 6. Commitment There must be commitment to performance management from all levels. Senior management and Human Resources staff, if the organisation has HR staff, must require proper and regular use of the programme. Requirement to use alone is not sufficient, the integrity of the system must be monitored and reports published. 7. System integrity Designing a performance management system is only the first step. Once designed and introduced there must be a mechanism for ensuring that the system is working. This means ensuring that the system is being used according to the defined procedures, and with the correct frequency. Twelve steps to successfully implementing a performance management system Step 1 Check that strategy and values are clear. The organisation must publish clear values and promote them to every individual staff member. It isn.t necessary to hang them in the foyer . they are not for visitors. Values inform, or in fact may derive from, strategy. A value proposition is a statement of those specific factors that make your products and services more desirable than those of the competition. It may be better technology, customer service, it may be value, it may be responsiveness, it may be marketing and sales expertise that give you the advantage. Whatever the factors may be, again there is a need to keep them in focus as a priority for everyone. Step 2 Outline organisational objectives. All organisations have objectives. They should not be secret. Staff must be aware of how their role contributes to the achievement of these objectives. Individual staff don.t need to know the details of sales budgets but they do need to know the organisational objectives are, for example, to improve the customer retention rate, to increase sales, to acquire new customers. If the organisation shows to the employees the organisational objectives and the hierarchy of contributing objectives, they can select personal objectives that will align to the organisational ones, and they will understand the importance of their contribution. Step 3 Update job descriptions A frequently quoted reason for not having job descriptions is that people will do only what is written there. That may be true of some people, especially if they become disillusioned at work. Probably the most frequent reason for not using job descriptions, and for not referring to job descriptions in performance reviews, is the difficulty in keeping them up to date. Job descriptions need to be written precisely, so that they communicate the activities and the results that are expected. Generally the more senior the role the more emphasis on results rather than tasks, and vice versa for more junior roles. The job description must also make clear how the accountability will be measured. The language you use plays a huge part in determining peoples behaviour at work. Vagueness gives staff the opportunity to blame their managers, departmental systems, each other, the environment, and to avoid individual accountability.

21

The job description should include an outline of key tasks in each accountability, phrased as activities, starting with verbs. Step 4 Ensure everyone has a current job description. Quality job descriptions are the first line of defence. Ensure each individual has a current job description, and that it is readily accessible to them. Over time people drift away from their original understanding of requirements so that little by little critical aspects of the job can be overlooked. It is essential that job requirements are reviewed regularly. not just once a year. Step 5 Performance Planning While the job description is an overview of day to day performance requirements, organisations often have specific periodic and short term objectives and budgets they wish individuals and teams to achieve. It is well established that staff with goals outperform those who have no goals. The best way to manage goals is within an individual performance plan. If you use a team approach, then it is the team which is held accountable, rather than any one individual. Just as with the job description the performance plan needs to be carefully written, or it will be worthless. Step 6 Plan for feedback Feedback must be objective. The ability to give unbiased feedback is dependent on the quality of the expected results and measures in job descriptions and objectives. If expectations are vague then you cannot give meaningful feedback. There are many ways of capturing the data you need for feedback. The supervisor relationship is central. Of course you can.t give feedback if you don.t know what the staff member is doing. There must be a regular but informal process of observing performance. Step 7 Have a clear methodology to deal with poor performance It is vital then that managers have a diagnostic system for analysing the causes of poor performance, with a view to first identifying and eliminating environmental factors. If after a structured analysis the reasons for the poor performance are personal factors, the poor performance must be confronted. The system must meet the legal requirements of documentation, non discrimination, fair procedures, such as giving staff the right of reply, and a realistic opportunity to improve. Step 8 Plan to align the consequences With the shortage of skilled staff today in many roles and industries it is vital to retain top performers. There must be a transparent and systematic means of differentially rewarding top performers if they are not to be disillusioned. Step 9 Evaluation Competency evaluation is a development strategy. Obviously people need skills and knowledge in order to undertake work activities, and any review of performance should include an evaluation of the required capability and development needs Step 10 Evaluation process How often should a review take place? So long as there is ongoing informal feedback an annual review is sufficient. We have seen that most staff are sceptical of the review process. To gain staff confidence the review process must be totally open and transparent with strict adherence to clear evaluation criteria. Step 11 Implementation The best system in the world is useless if no-one uses it. Resistance to change is part of the culture in most organisations. The best change management strategy is multifaceted, including communication and education supported by regulation and example. Senior management must make performance management a requirement and itself part of the review process. It goes without saying that they should not exclude themselves, but be clearly seen to actively use and support the performance management system. Most staff are untrained in performance management concepts. The first step is to educate staff and managers about the importance of performance management. Next the performance management procedures and documents need to be fully explained and guidelines distributed. For staff an effective system means clearer expectations, feedback and recognition based on actual results, and therefore a more enjoyable, rewarding and less stressful workplace. For managers it means their area of responsibility will have fewer staff problems, better staff satisfaction and retention rates, improved staff productivity and performance and better business results. In turn they can expect to be appropriately recognised and rewarded. Step 12 Ensuring the integrity of the performance management process This means regular checking on the level of performance management activity, the amount of dialogue and recording of objective performance data and subjective feedback. It means checking the quality of job descriptions and the alignment of objectives. It means checking that performance reviews are conducted as scheduled and according to procedures and the quality of comments and ratings therein. Link to SHRM: In the recent years, Strategic Human Resource Management (SHRM) increased in popularity among researchers, practitioners, and managers. SHRM can be defined as the process of linking the human resource functions with the strategic objectives of the organization in order to improve performance Performance management is the integration of performance appraisal systems with broader HRM systems as a means of aligning employees work behaviors with the organizations goals. Thus, a performance management system consists of the processes used to identify, encourage, measure, evaluate, improve, and reward employee performance at work (Sims, 2002). As an instrument of strategic human resource management (SHRM), a system of performance management is predicted on the need to take the wide, strategic goals of the organization, and translate them into goals for smaller groups and individuals (Mabey et al 1998). PMS supports the achievement of SHRM. The key assumptions that enable it to support SHRM are: - Control of the input and output of staff against objectives predetermined by the organisational system. - Development of staff to achieve performance enhancement and in support of performance objectives. - To align the attitude, values and policies of employees with the organisational needs and objectives.

22