Unit 2

Human resources

Human resources

All the people working in a business

Workforce/HR planning

A process that identifies current and future HR needs to ensure that staffing is sufficient, qualified, and competent enough to achieve the organization’s objectives.

Key parts of HR planning

• Recuritment

• Training

• Appraisal

• Termination or dismissal

Recruitment

Hiring the right person for the right job

Training

Rnsuring an employee receives proper professional development

• Example: acquires the necessary set of skills needed to complete the tasks efficiently

Appraisal

Evaluating an employee’s job performance

Termination or dismissal

Managing the situation of employee’s voluntary or involuntary leave

Labour turnover

A measure used in HR planning of how many people leave a business over a given period of time, usually expressed as a percentage of the total labour force.

Labour turnover formula

(Numbeber of staff leaving over a year/Average number of staff employed in a year) x 100

High labour turnover

• This means that there is a reason why staff do not stay in the firm for a long period of time

• Perhaps there is an aspect of the business that demotivates the workforce and lowers their productivity (resulting in extra costs for the business as it constantly needs to be on a lookout for new staff)

• High labour turnover suggests that staff may only be staying for a short time for a certain reason

• There may be a key factor such as motivation, packages etc. that are affecting retention

• Staff hired may be incompetent

• Remuneration packages might not be competitive

Low labour turnober

• Fresh blood may encourage innovation and new ideas\

• Existing employees are loyal to the business, and likely more motivated to work.

• Managers have recruited the right people for the right job.

• A very low labour turnover means that the business is stable but also lacks progress; ‘fresh blood’ in the business is important to stimulate innovations and new ideas

• Suggests good workforce planning and recruitment

Reasons why people leave their jobs

• CLAMPS

  • Challenge, Location, Advancement, Money, Pride, (Job) Security

• Poor morale, which is seen in:

  • Militant workforce

  • Frequent union representation to management

  • Low suggestion rates

  • Widespread rumours

External factors that influence human resource planning

Can impact the size and availability of the pool of potential employees for the business

• Technological change

• Demographic change

• Changes in labour mobility

• The state of the economy

• New communication technologies

• Government

Internal factors that influence human resource planning

The changes from within the business itself

• Changes in business organisation

• Changes in labour raltions

• Business finance

• Structure of business

• Morale of workforce

• Leadership style of managers

Steps of recruitment

• Identification

• Application

• Selection

Identification

• Recruitment starts with defining the job description

• Details the basic roles and responsibilities of a job and a person specification

• To communicate what skills, qualifications and experience candidates need for the job

Application

• To find the best applicants, businsesses make a job advert

• Communicating the job description and person specification to inform potential canditdates

• The job advert should be placed so that it reaches its target audience

• The business can decide to process the applications externally - Hire a recruitment agency to handle the application process for them

Selection

• After some time the applicants may be shortlisted based on how well they fit the job

• Interviews may be schedules in order to select the best applicant

Internal recruitment

Hiring people from within the firm to fill a new position

External recruitment

The process of hiring people from outside the organisation

Internal recruitment pros

• Cost effective

• Less time needed to acclimate to company culture

• Less risk

• Motivational

Internal recruitment cons

• Fewer applicants

• Time consuming

• No new ideas

• Internal politics

External recruitment pros

• New blood (wide range of experiences)

• Larger pool of applicants

External recruitment cons

• Even more time consuming

• Expensive

• Uncertainty

Training

• Process of providing opportunities for workers to acquire skills and knowledge

• Training is the improvement of task-specific skills

• Development involves enhancing personal skills that improve workforce flexibility

Training benefits

• Improve efficiency and effectivity

• Less wastage

• Higher morale

• Adapt to change easily

• Flexible workforce

Training drawbacks

• Cost

• Employees may leave since they are qualified for better jobs

Types of training

• Induction

• On the job

• Off the job

• Mentoring

• Cognitive

• Behavioural

Induction training

• The training received when first starting a job, this is a type of on the job training

• Introduction to company policies, general info

• May involve meeting other personnel, touring the premises, etc.

Induction training advantages

• Establishes expectations and good working habits from the start

• Helps new workers understand the corporate culture

• Speeds up settling in process

• Morale is boosted when new recruits feel more confident

Induction training disadvantages

• Can be time consuming

• Key staff need to be freed from their duties

• Information overload for new recruits

• Induction can be lengthy in large firms

On the job training

• Done while the employee is doing their normal job while at the workplace

• Learn from coworkers by experience

• May involve being mentored by or shadowing senior managers

• Example: A senior employee helps the junior employee comprehend all the

  tasks and acquire new skills needed to carry out the job efficiently

On the job training advantages

• Cost effective: using in-house specialists

• Training is more relevant as it is specifically for the firm

• Reduces disruption to daily operations as it is on site

• Helps establish relationships and promote teamwork

• The location is convenient for workers and trainers

On the job training disadvantages

• Trainees may pick up bad practices

• Internal trainers may lack up to date training

• Trainers cannot complete their own work whilst training new workers

• May be incomplete due to a lack of resources

• Productivity may be low until all skills are learnt

Off the job training

• Happens outside working hours, where the employees are being trained away from the job

• This could involve workshops, conferences etc

  Learn from specialists from third party

  • Example: university, speakers

Off the job training advantages

• Experts who may not exist internally are able to be used

• A wider range of training can be provided

• There are no distractions from colleagues at an offsite venue

• Networking can take place, so employees can meet new people

Off the job training disadvantages

• There is a potential loss of output whilst workers attend the offsite training course

• Hiring specialist trainers can be very expensive, and transport/accommodation costs may add cost

• It is debatable whether all skills are transferable to the business

• Finding time for staff to get off work can be difficult

Mentoring

• Another type of OTJ training involving a dyad of a mentor and a mentee

• The mentor shares their experiences with the mentee to help them gain skills and knowledge

Mentoring advantages

• Synergy is created as it shares personal experiences

• Mentoring can be informal/formal

• Good mentors create a positive environment for mentees to act without fear of punishment

Mentoring disadvantages

• There is a potential loss of output whilst workers attend the offsite training course

• Hiring specialist trainers can be very expensive, and transport/accommodation costs may add cost

• It is debatable whether all skills are transferable to the business

• Finding time for staff to get off work can be difficult

Cognitive training

• Focuses on helping employees develop their thinking and processing skills

• This type of training is of crucial importance for businesses that require their employees to make quick, wise and effective decisions, link investment banking, marketing departments of companies etc.

• Theoretical training in the hopes of improving overall intelligence

Cognitive training advantages

• Helps workers improve their mental processes acquire new knowledge, aid decision-making and solve work-related problems

• Improves brain function (memory, reasoning, etc.)

• Knowledge may apply to a wide variety of situations

Cognitive training disadvantages

• May not cater for workers with different goals

• Can be expensive

• Might not meet the needs of an organisation

• Difficult to measure effects of the training

• May not be immediately practical/applicable

Behavioural training

• Focuses on helping employees develop certain interpersonal skills such as stress management, communication, dealing with emotions etc.

• Practical training in order to improve employee attitudes/behaviours

Behavioural training advantages

• May make for more competent and assertive employees

• Improves customer and intra-company relations

Behavioural training disadvantages

• Costly

• Difficult to track progress

Staff appraisal

The processes of reviewing the performance of employees against pre-set objectives

Reasons for appraisal

• Assess performance in line with job description and targets

  • Identify hindrances

  • Identify training needed

• Reflect on performance (areas for improvement)

• Praise good performance

• Set new goals/targets

Drawbacks of appraisal

• May be costly and time consuming (thus isn’t done often), subjective, offensive, and biased (especially when appraising someone higher up)

Appraisal methods

• Formative

• Summative

• 360 degree

• Self-appraisal

• Essay

• Rating system

• Peer

• MBO (Management by objectives)

• Upwards

Formative appraisal

• An ongoing process that focuses on giving the employees recognition for what they have done well and indicating possible mistakes so that they can learn from them

• Appraisal during a specific job process

• Used to get feedback to guide improvement

Summative appraisal

• Measures an employee’s performance based on standards set by the business, making it easy for the business to sum up how a particular employee performed against the standards

• Usually done at the end of a particular project

• Compares the performance of an employee to a benchmark

360 degree appraisal

• Feedback on the employee’s performance is not only received from the manager, but also from co-workers (appraisal from multiple perspectives)

• This type of appraisal is usually combined with one of the previous two to give another perspective on the performance

• Subjective, influenced by group norms, time consuming

Self-appraisal

• Employees reflect on their own performance by rating themselves on various performance indicators

• Need for employees to set targets for improvement

• This type of appraisal is usually combined with those explained earlier

Essay appraisal

• Written appraisal on employee’s strengths and weaknesses

• Flexible and more applicable when employees are put in different situations

• Open-ended, subjective and takes a lot of time to train appraisers, and to appraise each employee

Rating system

• Highly structured scale of employee performance

• Faster to carry out, structured, equal treatment

• Some traits assessed may not be relevant, perceived meaning of scale descriptors may not be universal

Peer appraisal

• Same level employees on the business hierarchy appraises you

• Appraiser and appraisee are familiar with requirements for job

• Might be reluctant to criticize peers

Upwards appraisal

• Employee appraises seniors

• Subjective, appraiser afraid of appraisees

MBO (Management by Objectives)

• Base all appraisal on how well employee has met his own objectives as determined by employer and appraiser

• Objectives must be realistic

Termination

• Happens when employees leave the business at the end of their contract because they want to work on their professional development, change career, retire etc.

• These employees expect to receive a reference from their ex-employer

Dismissal

• Happens when an employee has broken some of the terms of their contract, which could be due to missing work, poor discipline, dishonesty etc.

• These employees do not receive a reference from their ex-employer

• Must have valid reason which is included in the contract

  • Otherwise, unfair dismissal – company may be sued

• Valid reasons include:

  • Employee incompetence or misconduct

  • Breach of legal requirements/contract

Redundancy

• Happens when a job is no longer required, making the employee redundant through no fault of her own

• Causes can be, e.g., a drop in production, a merger or takeover, automation etc.

• Occurs when there is a change in company structure, downsizing, etc.

• Company cannot afford to pay employee or job stops existing

  • Voluntary – employee volunteers to be made redundant in exchange for a redundancy package (compensation)

  • Involuntary – may be done through LIFO or retention by merit

Common steps in the process of dismissal

• Issue advisory letter

• Counselling – strategies for improvement

• Dialogue concerning consequences

• Dismissal and Redundancies

• Monitor (paper trail)

Work practices

• Teleworking

• Flexitime

• Migration for work

• Portfolio working

• Part-time employment

• Migration of workers

Teleworking

Employees work a set amount of hours at the office and the remainder from home

Flexitime

Employee has to work a set amount of hours per week, the allocation of time spent completely depends on employee’s preferences

Migration for work

Due to better infrastructure and better connectivity of the whole world, people can easily migrate daily, sometimes even great distances, for work

Portfolio working

A person employed in a number of different jobs, carried out simultaneously, usually on a part-time or temporary basis

Migration of workers

A person who works in a country or state of which he/she is not a national

Flexible work structures advantages

• Increased flexibility for both

  • Work from afar

  • Flexible and extended work hours

• Company needs only to train core employees

• Employees exercise more autonomy

• Less office overhead expense

Flexible work structures disadvantages

• Requires investment in ICT, which may be unreliable

• Employees are harder to control

• Less job security for employees

Outsourcing

The process of trnsferring internal business activities to an external firm in order to reduce costs

• e.g. business outsources bookkeeping duties to accounting firms

Outsourcing reasons

• Activities are not the core function of the business

• Business lacks the specific skills

• Cost reduction

Outsourcing advantages

• They may carry out work to higher quality standards

• They will bid for work (i.e., try to give you the best price)

• Reduces labour costs when workers are outside the business

• Allows the business to concentrate on core functions

Outsourcing disadvantages

• To cut costs, subcontractors may ‘cut corners’ (unethical)

• Quality management can become more difficult (Quality inconsistency)

• Subcontractors must be monitored to ensure quality standards are being met

• Outsourcing may cause redundancies

• May be unethical due to the exploitation of workers in LEDCs

• Requires effective two-way communication, coordination and mutual trust

Offshoring

• Relocating business activities and processes abroad

• Usually done in countries with low minimum wage

Offshoring reasons

• Cut down labor costs

• Enter new markets in growing countries

• Overcome political limitations and regulations

Offshoring advantages

• Companies can benefit from external factors such as currency exchange

• Cheaper wage costs overseas

• Overseas locations may have better access to raw materials

• Stimulate host country’s economy (job opportunities, trade, etc.)

• Help the business expand and gain exposure

• Business has access to large talent pool

Offshoring disadvantages

• To cut costs, subcontractors may be ‘cutting corners’ (unethical)

• Quality management can become more difficult.

• May be unethical due to the exploitation of workers in LEDCs.

• Companies have been seen to evade tax by doing this.

Reshoring

The transfer of business operations back to their countries of origin

Bringing back offshore/outsourced personnel and services back to the original location

Reshoring reasons

• Foreign labor costs are increasing

• Problems with delivery/logistics

Reshoring advantages

• Greater control

• Increased proximity to customers/shorter supply chain

• Product quality may increase

Reshoring disadvantages

• May still be more costly

• Local country may lack the labor supply

Innovation

• Company must hire innovative people and foster the environment for innovation

• Involves training and development costs

• Innovation also affects HR itself

  • Outsourcing, offshoring, Shamrock organization

Cultural differences

• HR must manage cultural diversity within the company

  • Productivity may be affected due to conflicts arising from culture

• Need to raise awareness on cultural differences between employees

• May imply behavioral training is needed

Ethical considerations

• Need to follow anti-discrimination laws

  • e.g. racial, sex, disability, etc.

• Equal pay

• Health and safety at work

  • Costs for training employees and ensuring a safe environment

  • May benefit from lower absenteeism, better image, and fewer compensation claims

Motivation

• Desire, effort, and passion to achieve something

• Classified as intrinsic or extrinsic

Employer objectives

• Motivation

• Minimize cost

• Prestige

• Better recruitment

• Reduced labour turnover

• Control

Employee objectives

• Purchasing power

• Recognition

• Compensation – high direct earnings, pensions, fringe benefits

Taylor’s theory

• Employees are primarily motivated by money

• Productivity can be improved by aligning output and efficiency targets with remuneration

• Division of labour (scientific management): breaking down different aspects of a job or task and assigning different people to each particular part of the work.

• Piece rate system: workers are paid a standard level of output and receive a higher rating they exceed that level.

Taylor’s theory drawbacks

• Ignores the non-physical contributions of workers

• Hard to measure in some professions

• Ignores non-financial factors that motivate people

• Fails to acknowledge that workers can be innovative and independent

• Entails monotonous tasks, leading to employee dissatisfaction

• Sets clear goals for the workforce and the consequences of their work are transparent

• Gives workers a sense of target

• Does not take into account individual differences

• Views workers as machines with only financial needs

Maslow’s Hierarchy of Needs

• Physiological/basic

  • Satisfied by payment

• Security/safety – predictability and order

  • Satisfied by job security, maternity leave, fringe benefits

• Social/love/belonging

  • Satisfied by teamworking, anti-discrimination

• Esteem/ego – recognition and self-respect

  • Satisfied by training and development, delegation, promotion

• Self-actualisation

  • Satisfied by giving freedom to employees

Needs must be satisfied from the bottom up (basic to self-actualisation)

Maslow’s Hierarchy of Needs advantages

• Based on the level an employee is on, business can see what rewards are suitable for him

• Workers feel like they are being taken care of, which increases productivity and motivation.

Maslow’s Hierarchy of Needs disadvantages

• Difficult for business to decide on a specific reward

• Difficult to determine when a particular level of needs has been satisfied

• Not feasible for all jobs to provide all levels of the hierarchy

• The levels of the hierarchy are difficult to quantify

• Freelance workers do not have many of these things, but can still be motivated and successful

• The model neglects to suggest what happens to people with all of these things, such as Bill Gates

Herzberg’s Theory

Two factors affected motivation

• Hygiene/maintenance factors (physical)

  • Factors that meet basic needs

  • Does not motivate but demotivates if not met

• Motivators (psychological)

  • Achievement, recognition, responsibility, and advancement leads to higher satisfaction

  • Democratic management style must be used

  • Involves job enlargement, enrichment, empowerment (see below)

Movement vs. motivation

• Movement – doing something because it needs to be done

  • Based on extrinsic motivation

• Motivation – doing something because you want to

  • Based on intrinsic motivation

  • More important

• Individualism in terms of motivation

Herzberg’s Theory advantages

• Job enrichment

• Makes clear for the business what needs to be done in order to remove dissatisfaction and improve motivation

Herzberg’s Theory disadvantages

• Job enrichment may be expensive and difficult to organise

• Workers may get used to improved pay/conditions and take these things for granted

• Does not apply to all occupations such as low skilled/ paid jobs

• Research sample included only high skilled workers, therefore findings don’t necessarily apply

• Not all employees want extra responsibility or stress

Adam’s Equity Theory

• Workers naturally compare their efforts/rewards to others in the workplace

• Employees should receive remuneration that reflects his efforts and competence

• Workers will be motivated if their remuneration is fair relative to others

• Inequality is by caused poor job analysis and evaluation

Degrees of equity

• Equity norm: workers expect an equitable remuneration for their contribution in their jobs

• Social comparison: workers determine what is fair based on comparisons of their inputs and outcomes with those of their peers

• Cognitive distortions: workers who feel undercompensated become demotivated so might withdraw any goodwill, resulting in altering their effort or outputs

Adam’s Equity Theory drawbacks

• Equity is subjective

• Some people may be more sensitive to equity

• Neglects to include demographic, psychological, and cultural variables

• Scale of equity can only be so useful