HUMAN RESOURCE MANAGEMENT
STUDY GUIDE
PROGRAMME
:
MBA Year 1
CREDIT POINTS
:
20 points
NOTIONAL LEARNING
:
200 hours over 1 semester
TUTOR SUPPORT
:
hrm@mancosa.co.za
Copyright © 2013
MANAGEMENT COLLEGE OF SOUTHERN AFRICA
All rights reserved; no part of this book may be reproduced in any form or by any means, including
photocopying machines, without the written permission of the publisher
REF: HRM 2013
Human Resource Management
TABLE OF CONTENTS
Section
Title of Section
Page
Introduction
3 - 10
1
Introduction to Human Resource Management
11 - 40
2
Human Resource Strategy and Business Strategy
41 - 67
3
Human Resource Planning
68 - 90
4
Recruitment, Selection and Induction
91 - 122
5
Employee Training and Development
123 – 157
6
Performance Management
158 – 183
7
Compensation
184 – 209
8
Employee Benefits and Services
210 - 232
9
Human Resource Strategy and Employee Relations
233 – 253
10
Career Planning
254 – 272
11
Bibliography
273 - 279
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INTRODUCTION
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AIMS OF THIS MODULE
The broad aims of this module are to:
•
Introduce the learner to the field of human resource management.
•
Develop the learner’s understanding of the integration of human resource strategy and
business strategy.
•
Develop the learner’s understanding of human resource planning.
•
Develop the learner’s understanding of the HRM practices of recruitment and selection.
•
Develop the learner’s understanding of employee training and development.
•
Develop the learner’s understanding of performance management.
•
Develop the learner’s understanding of the HRM practices of compensation and the provision
of employee benefits and services.
•
Develop the learner’s understanding of employment relations within the Southern African
context.
•
Develop the learner’s understanding of career management.
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Introduction
This module, Human Resource Management, forms an integral part of the MANCOSA Master of
Business Administration (MBA) qualification and serves to introduce the learner to the
fundamentals of the field of human resource management. The module explores the integration
of human resource strategy and business strategy, as well as human resource planning,
recruitment and selection, employee training and development, performance management,
compensation, employee benefits and services, employment relations and career management.
Contents and Structure
Section 1: Introduction to Human Resource Management
This first section introduces the learner to the field of human resource management (HRM). In
this section a definition of HRM is formulated, the aims of HRM are explored and the place of
HRM within the enterprise is examined. HRM functions and the role of the HR manager are also
given attention. This section also explores the nature of strategic human resource management,
human resource career opportunities as well as current HRM issues and challenges.
Section 2: Human Resource Strategy and Business Strategy
Section 2 explores the integration of human resource strategy and business strategy. Here the
importance of the relationship between HR strategy and business strategy is examined. The
manner in which HR strategy may be integrated into the process of business strategy
formulation, implementation and evaluation is explored. This section also studies the
competencies required by the HR manager to successfully participate in and contribute to the
strategic management process.
Section 3: Human Resource Planning
This third section examines human resource planning. The nature of HR planning, the process of
HR planning and current issues impacting on HR planning are explored.
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Section 4: Recruitment, Selection and Induction
Section 4 explores the HR practices of recruitment, selection and induction. In this section the
nature of recruitment, recruitment policies, factors influencing recruitment and recruitment
sources are studied. The factors affecting selection decisions and the selection process are also
explored. The objectives and benefits of an induction programme are studied. The planning,
design, implementation and evaluation of an induction programme are also explored.
Section 5: Employee Training and Development
This section examines employee training and development. A distinction is made between the
concepts training and development. The training process is examined, and the impact of the
South African context on training within South African organisations is explored. The various
approaches to development are also examined.
Section 6: Performance Management
Section 6 focuses on performance management.
Performance management is defined, the
performance management process is explored and the various approaches to performance
management are investigated.
Section 7: Compensation
This section focuses on the HRM practice of compensation. The nature of compensation and
factors influencing the determination of compensation are investigated.
This section also
explores compensation levels, the development of a compensation structure and challenges to
compensation systems. Incentive compensation systems are also investigated.
Section 8: Employee Benefits and Services
Section 8 focuses on employee benefits and services. The nature of employee benefits and
services is explored and the reasons for growth in employee benefits and services are
investigated. This section also examines the different types of benefits and services. The
administration of benefits and services is also studied.
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Section 9: Human Resource Management and Employment Relations
Section 9 focuses on employment relations. The nature of employment relations is studied
and it is established that it is a “living” field of study that revolves around and is played out
daily in workplaces around the world.
Section 10: Career Management
This section explores the area of career management. The nature of the career in the twentyfirst century is explored and the importance of career management is established. The
various career stages, career planning and career development are also explored.
How to Use This Module
This module should be studied using this Study Guide and the prescribed textbooks. You
should read about the topic that you intend to study in the appropriate section of this Study
Guide before you start reading in detail in the prescribed textbooks. Ensure that you make
your own notes/summaries as you work through both the textbooks and this Study Guide.
At the commencement of each section of this Study Guide you will find a list of learning
outcomes. These learning outcomes outline the main points that you should understand when
you have completed the section with its supporting chapters in the prescribed textbook.
Avoid reading all the material at once. Each study session should be no longer than two hours
without a break.
As you work through the Study Guide you will come across:
•
Think Points
•
Activities
•
Reading Activities
•
Self Check Activities
•
Study Group Discussion Activities
•
Sample Examination Questions
These are designed to help you study and prepare for the examination.
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?
THINK POINT
A think point asks you to stop and think about an issue. Sometimes you are asked to
apply a concept to your own experience or to think of an example.
ACTIVITY
You may come across activities which ask you to carry out specific tasks. The aim of
these activities is to give you an opportunity to apply what you have learnt and / or
explore an issue relevant to the particular section.
READING ACTIVITY
Most sections of this Study Guide contain at least one reading activity. The reading
activity requires that you read one or more of the recommended journal articles and
then answer questions relevant to that journal article. The majority of the
recommended journal articles are available from the Emerald library facility which
learners may access via Mancosa’s website.
SELF CHECK ACTIVITY
You will come across self-assessment questions which will test your understanding of
what you have learnt so far. Answers to these questions are given at the end of each
section.
You should refer to the Study Guide and prescribed textbooks when
attempting to answer the self check activities.
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STUDY GROUP DISCUSSION ACTIVITY
Study group discussion activities are provided at the end of each section of this Study
Guide. You must have worked through the relevant section and supporting chapters in
the prescribed textbooks prior to meeting as a study group.
The study group
discussion activities provide an opportunity for learners to apply what they have
learnt, to share experiences with fellow learners and to learn from each other.
SAMPLE EXAMINATION QUESTIONS
Sample examination questions are provided at the end of each section. These provide
the learner with an understanding of the type of questions which may be asked in the
examination.
Reading
•
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGraw-Hill.
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford University
Press Southern Africa.
•
Recommended Reading
Each section has a list of recommended books and recommended journal articles, which
allow you to develop an understanding of the issues beyond the perspective of the
prescribed textbooks and Study Guide. The majority of recommended journal articles
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listed per section are available from the Emerald online library facility which is accessible
via Mancosa’s website.
Module Assessment
•
Assignment: You will be required to complete and submit an assignment. This
assignment is assessed as part of your coursework. Therefore, it is very important that you
complete it.
•
Examination: An examination will be written at the end of the semester. The assessment
strategy will focus on application of theory to practice.
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SECTION 1
INTRODUCTION TO
HUMAN RESOURCE MANAGEMENT
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CONTENTS
Learning Outcomes
Reading
1.1 Introduction
1.2 Definition of Human Resource Management
1.3 The Place of Human Resource Management within an Enterprise
1.4 Human Resource Management Functions and The Role of the HR Manager
1.5 Strategic Human Resource Management
1.6 Human Resource Career Opportunities
1.7 Current Trends and Challenges
1.8 Summary
Self Check Activity
Study Group Discussion Activity
Sample Examination Question
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the learner should be able to
demonstrate a basic understanding of the field of human resource management (HRM). This
overall outcome will be achieved through the learner’s mastery of the following specific
outcomes, in that the learner will be able to:
1.
Define human resource management.
2.
Identify and discuss the place of human resource management within the enterprise.
3.
Identify and discuss human resource management functions.
4.
Identify and critically discuss the role of the human resource manager.
5.
Explain the nature of strategic human resource management.
6.
Identify various human resource career opportunities.
7.
Identify and critically discuss current trends and challenges in the field of human
resource management.
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READING
Reading
•
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGrawHill. (pp 2 – 68) Chapter 1
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (2 – 33) Chapter 1
Recommended Reading:
Books
•
George, J.M. & Jones, G.R. (2006) Contemporary Management: Creating
Value in Organisations. 4th Ed. Boston: McGraw-Hill International Edition. Pp
525 – 569 (Chapter 15).
•
Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. & Hatfield, R.D. (2006)
Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp
2 – 38 (Chapter 1).
•
Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. & Pilbeam, E.
(2007). Human Resource Management: Fresh Perspectives. 1 – 41 (Chapter 1
& 2).
•
Snell, S. & Bohlander, G. (2007) Human Resource Management. Mason:
Thomson. pp 3 – 44 (Chapter 1).
Journals
•
Gbadamosi, G. (2003) “HRM and the Commitment Rhetoric: Challenges
for Africa.” Management Decision. Vol. 41, No. 3, pp 274 – 280.
•
Voermans, M. and van Veldhoven, M (2007) “Attitude towards e-HRM: an
empirical study at Philips” Personnel Review. Vol. 36, No. 6, pp 887 – 902.
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1.1
Introduction
This section, the first section of the Human Resource Management module, introduces the
learner to the concept of human resource management (HRM). The following issues are
examined:
•
Definition of human resource management
•
Place of human resource management in the enterprise
•
Human resource management functions and the role of the human resource manager
•
Strategic human resource management
•
Human resource career opportunities
•
Current HRM trends and challenges
1.2
Definition of Human Resource Management
ACTIVITY
From your experience as an employee and/or manager within an organisation,
develop a definition of human resource management.
Comment on Activity
Various management and Human Resources specialists define Human Resource Management
(HRM) differently, placing emphasis on different aspects of HRM. Some definitions include:
•
“Human resource management (HRM) refers to the policies, practices and systems that
influence employees’ behaviour, attitudes and performance. Many companies refer to
HRM as involving ‘people practices’” (Noe, Hollenbeck, Gerhart & Wright, 2012).
•
“the process of managing human talent to achieve an organisation’s objectives” (Snell &
Bohlander, 2007: 4).
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•
“the productive use of people in achieving the organisation’s strategic objectives and the
satisfaction of individual employees needs” (Nel, Werner, Haasbroek, Poisat, Sono &
Schultz, 2011).
Nel et al (2011) also emphasise the need for HRM to create fit between four dynamic
components of the organisation:
•
The environment
•
The organisation
•
The individual
•
The job
These organisational components, and their inter-relation, are diagrammatically represented
in Figure 1.1 below.
ENVIRONMENT
Economic
Social
Political
Technological
THE
ORGANISATION
INDIVIDUAL
Size
Culture
Structure
Human Resources
Policy
Technology
Abilities
Knowledge
Personality
Values
THE JOB
Challenge
Variety
Autonomy
FIT
Figure 1.1:
Human Resources Management: The Inter-Relation of Four Dynamic
Components (Nel et al, 2008)
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1.3
The Place of Human Resources Management within an Enterprise
ACTIVITY
Based on your experience of the human resource management function within the
organisation, provide a diagrammatic representation of the place of HRM within
the enterprise.
Comment on Activity
Human resource management occupies a functional place within the organisation’s structure,
as depicted in Figure 1.2. This diagram depicts the line authority vested in the HR Manager,
where he/she holds a position of authority which provides for the issuing of instructions to
his/her subordinates.
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GENERAL
MANAGER
MARKETING
MANAGER
HR
MANAGER
PRODUCTION
MANAGER
FINANCIAL
MANAGER
Manager:
Compensation
Benefits
Manager:
Training &
Development
Manager:
Recruitment &
Selection
Manager:
Employee Relations
Figure 1.2:
The Place of the Human Resource Management Function in an Organisation
(adapted from Nel et al, 2008: 9).
Human resource management may also be depicted as occupying the heart of the organisation
(see Figure 1.3), where functional authority and staff authority are exercised. Functional
authority gives the HR manager the right to issue enforceable HRM-related instructions to
individuals and departments throughout the organisation. On the other hand, staff authority
enables the HR manager to issue advice (which is not enforceable) to various entities within
the organisation.
THE ORGANISATION
TOP
MANAGEMENT
MARKETING
DEPARTMENT
R&D
DEPARTMENT
LOWER
MANAGEMENT
TASK TEAMS
Functional
Authority
OPERATIONS
DEPARTMENT
HUMAN
RESOURCE
MANAGEMENT
MIDDLE
MANAGEMENT
Staff
Authority
FINANCE
DEPARTMENT
EMPLOYEES
Figure 1.3:
Human Resource Management – Functional and Staff Authority
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1.4
Human Resource Management Functions and The Role of the HR Manager
George and Jones (2006) identify the functions and activities of Human Resource
Management to include:
HRM Functions
Activities Performed by HR Manager
HR Planning
Job Analysis
Recruitment and Selection
External and Internal Recruitment
Administering the Selection Process
Outsourcing to meet HR needs
Classroom based training
Training and development
On-the-job training
Varied work experiences
Formal Education
Performance Appraisal and
Feedback
Compensation
Employee Relations
Trait, behavioural and result appraisals
Objective and subjective appraisals
Effective performance feedback
Determining pay level, pay structure and benefits
Administering wages and salaries
Union engagement
Collective bargaining
Responsibilities of HR Departments
In order to effectively carry out these functions within the organisation, the HR Manager and
his/her department need to fulfill the following roles:
•
A Service Role which incorporates the everyday functions of the HR department, which
includes activities relating to recruitment, selection, training and compensation;
•
A Control Role which is more strategic in nature and could involve, for example, an
analysis of key HRM outputs such as labour turnover;
•
An Advisory Role which involves the provision of expert HRM related advice to various
parties within the organisation (Snell & Bohlander, 2007).
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Ulrich’s Future Roles for HR
Dave Ulrich (cited in Nel et al, 2011) identifies the following roles which the HR
professional will need to fulfill to assist the organisation to compete in an increasingly
dynamic and changing environment. HRM professionals will need to focus on the creation of
value for the enterprise, and create mechanisms which provide for rapid business results. The
roles are:
•
Strategy Execution Partner: which involves the HRM function in:
o Defining an organisational structure;
o Conducting an organisational audit;
o Identifying methods for renovating parts of the organisational architecture;
o Taking stock of its own (HR) work and set clear priorities.
•
Administrative Expert through improving and automating administrative systems.
•
Employee Champion which would involve being an advocate for employees.
Change Agent which would involve building the organisation’s capacity to adapt to cope
with and embrace change (Nel et al, 2011)
1.5
Strategic Human Resource Management
Ulrich emphasised the need for the HRM professional to fulfill four roles which will assist
the organisation with the creation and maintenance of its competitive advantage.
While in
the past the focus of HR was an administrative one, more recently HR has been recognised as
being critical to the organisation’s overall strategy (Grobler, Wärnich, Carrell, Elbert &
Hatfield, 2006). Table 1.1 below distinguishes between the traditional approach to HR and
the more recent strategic approach.
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Dimensions
Strategic HRM
Planning and
Strategy
Formulation
Traditional HRM
Participates in overall formulation of Involved in operational
company strategy.
planning only
Aligns HR functions to company
strategy
Authority
Scope
HR Director afforded high status and HR Manager has medium
authority
status and authority
Concerned with all managers and Concerned mainly with
employees
hourly, operational and
administrative employees
Decision-
Involved in strategic decision making
Involved in operational
decision making only
Making
Integration
Table 1.1:
Fully
integrated
with
other Moderate
to
limited
organisational functions (marketing,
integration
with
finance, operations, etc.)
organisational functions
other
Differences between Strategic HRM and Traditional HRM (adapted from
Grobler et al, 2006: 6).
Strategic HRM will be addressed in greater depth in Section 2 of this Study Guide.
1.6
Human Resource Career Opportunities
?
THINK POINT
What types of human resource career opportunities exist within your organisation?
An HR professional may enter into the HRM field through various types of positions.
Various generalist and specialist HR positions exist throughout all levels of the organisation.
These include positions in:
Employee relations
Recruitment and selection
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Organisational development
Training and development
Performance management
Compensation and benefits
1.7
Current HRM Trends and Challenges
Given the dynamic and competitive nature of the current business environment, HRM is
currently affected by a number of trends and challenges.
1.7.1
HRM Trends
A summary of the HR trends identified by HR Future (2006) are provided below. It is likely
that the student of HRM identify at least one of these trends in the organisation in which he /
she works.
•
Global Labour Shortage: A growing labour shortage is a trend across the world. In
the United States it is expected that by 2010 approximately 10 million jobs will be
unfilled. This will provide qualified employees with the power to choose the job and
organisation which most fulfills them.
It is also likely that organisations will
outsource certain functions to organisations in countries such as India and China (HR
Future, 2006).
•
Skills Gaps: There are deficiencies in key skills required by organisations which
result in poor performance and a loss of competitive advantage. Organisations will
have to invest considerably in training and development to address these skills gaps
(HR Future, 2006).
•
Retention of Key Talent: Research from the USA shows that an employee’s average
tenure with a company is 3.6 years. As organisations compete on human capital it is
imperative that companies find ways to retain their talent through recognition and
reward strategies (HR Future, 2006).
•
Loss of Organisational Knowledge: When staff leave an organisation, they take with
them organisational knowledge which is then lost to the organisation. To address this
it is important that organisations put in place measures to retain such knowledge (HR
Future, 2006).
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•
Employee Self-Service & Online Forms: The intranet is being used more and more
to provide Human Resource services to employees. Employees and management now
submit HR related forms (such as leave applications) on line which saves time and
money. This requires that HR departments invest in and maintain a suitable IT
infrastructure which will enable them to deliver online services.
•
Older Retirement Age: Many employees from the “baby boomer” generation will
continue to work past their retirement age. The reason for this is that they do not have
the funds to stop work and that they are still fit and well to continue to work (HR
Future, 2006).
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1.7.2
HRM Challenges
HRM
CHALLENGES
Sustainability
Challenge
Technology
Challenge
Global
Challenge
Figure 1.4: HRM Challenges
1.7.2.1 Sustainability Challenge
Noe et al (2012) define sustainability as “the ability of a company to service and succeed in a
dynamic competitive environment”. Sustainability depends on an organisation’s ability to
meet the needs of its stakeholders, as well as the ability to deal with social and economic
changes.
?
THINK POINT
Think about the organisation in which you are currently employed. What is the
sustainability challenges facing your organisation?
What implications do these
sustainability challenges have for your organisation’s HRM practices?
Comment on Think Point
Some of the commonly experienced sustainability challenges are described below:
•
Economic Changes:
Many organisations now have to work within an uncertain economic environment. Some
of the challenges which economic changes bring about for organisations include:
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o Competition Amongst Organisations for Employees: Research shows that within the
USA employment is expected to increase by 18.9 million (13%) between 2004 and
2014. New employees will need to fill vacant positions within organisations due to
retirement, death and disability. The projected fastest growing occupations within the
USA include network systems and data communications analysts, medical assistants,
physical assistants as well as computer software engineering applications.
o
Valuing of Intangible Assets and Human Capital: A company’s value comprises its
financial assets, its physical assets and its intangible assets which include human
capital, intellectual capital, social capital and customer capital. In the knowledge
economy it is the organisation’s intangible assets which provide for competitive
advantage (Noe et al, 2012). One way in which a company can increase its intangible
assets is through the recruitment and selection of knowledge workers who contribute
and apply specialised knowledge in the manufacture of a company’s product or the
rendering of a service. Adopting a learning organisation philosophy will also assist an
organisation in growing its intangible assets (Noe et al, 2008).
o Changes in Employment Expectations: In the past, employees expected to receive job
security and opportunities for promotion in exchange for their time, effort and skills.
However, given the change with which organisations are constantly faced, job
security and promotion opportunities can no longer be guaranteed. Organisations now
demand high levels of performance and longer working hours without job security
from employees and employees expect flexible working schedules, more autonomy,
comfortable working conditions, financial incentives as well as training and
development opportunities (Noe et al, 2012) in return.
o Employee Engagement:
Employee engagement refers to “the degree to which
employees are fully involved in their work and the strength of their job and company
commitment” (Noe et al, 2012). Organisations have concerns about employee
engagement as it directly impacts competitive advantage.
o Talent Management:
This involves the attraction, selection, development and
motivation of employees. One of the key challenges experienced with respect to talent
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management is the development of employees into high potential managers and then
retaining them in high level positions (Noe et al, 2012).
o Alternative Work Arrangements: This involves the use of contract workers, temporary
workers and independent contractors as and when required.
o Demanding Work but Greater Flexibility: The globalisation of the world economy
and the emergence of e-commerce have resulted in the 40 hour work week becoming
obsolete. Employees are expected to work longer hours and this is made possible
through technological aides (laptops, PDAs, cellphones, etc.). This results in greater
employee stress and lower satisfaction. To offset the negative impact of demanding
work, some employers try to provide employees with greater flexibility to ease the
pressure of trying to balance work and life activities, while at the same time
increasing productivity and satisfaction (Noe et al, 2012).
•
Meeting Needs of Stakeholders, Shareholders, Customers, Employees and Community
In order for an organisation to be sustainable, it needs to meet the needs of its
stakeholders:
o Balanced Scorecard: This is “a means of performance measurement that gives
managers a chance to look at their company from the perspectives of internal and
external customers, employees and shareholders” (Noe et al, 2012). It is important
that the balanced scorecard links Human Resource Management to the business
strategy, so that it may evaluate the extent to which HRM is contributing to the
achievement of the organisation’s goals.
o Social Responsibility: Companies that implement social, ethical and environmental
responsibility initiatives improve their image in the marketplace, which in turn
contributes to their sustainability (Noe et al, 2012).
•
Customer Service & Quality Emphasis
Due to high levels of competition and knowledgeable customers, customers are in a
position to demand excellent service. This requires that organisations meet and exceed
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these demands so as to attract and retain customers. To ensure their sustainability, many
organisations implement quality standards such as Total Quality Management (TQM),
Malcolm Baldrige National Quality Award, ISO 9000:2000 and the Six Sigma Process
(Noe et al, 2012).
•
Workforce Diversity & Changing Demographics
The following three changes to the demographics and diversity of the workforce have
been predicted:
o Aging Workforce: Forecasts in the USA predict that by 2014 the total size of their
country’s workforce will be 162 million of which 34 million workers will be 55 years
and older. This represents a 49% increase in the 55 years and older age group since
2004. The implications for HRM are that considerable attention will need to be given
to career plateauing, retirement planning and the upskilling of older workers (Noe et
al, 2012). While this is the situation that pertains to the United States, it may well be
different in African countries.
o Diversity of Workforce: The workforce of today is increasingly diverse in terms of
race, gender as well as disability.
o Influence of Immigration: Many industries rely on immigrants (often times illegal
immigrants) for labour intensive and / or short term contract work.
The changing nature of the workforce requires HRM practices that ensure that the talents
of a diversity of employees are optimally utilised.
•
Legal & Ethical Issues
Countries across the world have numerous pieces of legislation which impact on HRM
practices.
HRM issues which these pieces of legislation focus on include equal
opportunity, health and safety as well as pay and benefits. It is important that HRM
practices support the implementation of the relevant pieces of legislation, so as to avoid
court battles and costs (Noe et al, 2012).
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1.7.2.2 The Global Challenge
?
THINK POINT
Think about the organisation in which you are currently employed. What are the
global challenges facing your organisation?
What implications do these global
challenges have for your organisation’s HRM practices?
Comment on Think Point
For many organisations expansion into the global market is important for creating and
sustaining a competitive advantage. Further, the global economy does not only affect
organisations with international operations, but affects local organisations who buy materials
from international organisations (Noe et al, 2012).
•
Entering International Markets:
Organisations can enter into international markets
through exporting their products overseas, establishing manufacturing facilities
internationally, entering into alliances with foreign countries and offering products and
services through e-commerce.
•
Offshoring: this refers to the “exporting of jobs from developed countries, such as the
United States, to countries where labour and other costs are lower” (Noe et al, 2008: 41).
Countries to which jobs are often offshored include India, China and Russia. The main
reason for offshoring jobs is to reduce labour costs - for example, a computer programmer
in India earns $10 per hour while a computer programmer in the United States earns $60
per hour. Another key reason for offshoring jobs is to capitalise on the available, highly
skilled and motivated labour pool in some of the developing countries. Offshoring does,
however, have its disadvantages which include the costs associated with working with
different languages, cultures and time zones (Noe et al, 2012).
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1.7.2.3 The Technology Challenge
?
THINK POINT
Think about the organisation in which you are currently employed. What is the
technology challenges facing your organisation?
What implications do these
technology challenges have for your organisation’s HRM practices?
Comment on Think Point
Advancements in technology have resulted in changes to the way in which we plan our work,
the way in which we communicate, as well as the location of our work. For example,
electronic and networked calendars facilitate employees’ setting up of meetings; cell phones
provide organisation’s with 24 hour access to their employees; and laptops enable us to work
from home, from hotels and from airports. These changes in how and where employees work
has a significant impact on HRM practices.
•
How and Where People Work
The internet, PDAs, iPods and cellular phones have lead to changes in many aspects of
HRM. Employees are able to access a considerable range of information and resources
via the internet, and they are able to communicate with experts through newsgroups. As a
result of technological advancement, telecommuting is becoming an option for many
employees. Telecommuting has the advantages of reducing traffic, air pollution,
providing for family-friendly work practices as well as increasing employee productivity
(Noe et al, 2012).
However, technological advancement has also resulted, in some
instances, in employees being on call 24 hours a day, 7 days a week.
•
High Performance Work Systems
High performance work systems refer to “work systems that maximise the fit between the
company’s social system and technical system” (Noe et al, 2012).
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o Working in Teams: Work teams are now frequently used within organisations to offer
high levels of quality and service to customers. The work teams perform many of the
responsibilities which would have previously been executed by a manager, such as
selecting of new team members, scheduling the team’s work and coordinating the
team’s activities with customers and other teams within the organisation. The use of
work designs such as work teams requires new HRM practices such as providing
compensation and rewards linked to team and company performance; providing
ongoing upskilling to team members; and ensuring that team members have
competence in selecting new team members (Noe et al, 2012).
o Changes in Skills Requirements: New technologies which form part of a high
performance work system require that employees have sufficient technical skills to
work with the technological equipment (Noe et al, 2012).
o Working in Partnerships: Technology has enabled organisations to form partnerships
with one or more other companies. Virtual teams are often used as the basis of the
partnership. Virtual teams are “separated by time, geographic distance, culture and /
or organisational boundaries and rely exclusively on technology for interaction
between team members”. (Noe et al, 2012).
o Changes in Company Structure and Reporting Relationships: In the traditional
organisation, managers were responsible for the dissemination of information and the
making of decisions. However, technology allows employees to have immediate
access to information which allows them to make decisions rather than wait for the
manager’s decision.
Technology provides for the “adaptive organisation” where
employees are constantly learning and improving performance and traditional
boundaries between management and employees, and employees and customers, are
no longer relevant (Noe et al, 2012).
o Human Resource Information Systems (HRIS): A Human Resource Information
System (HRIS) is “a system used to acquire, store, manipulate, analyse, retrieve, and
distribute HR information” (Noe et al, 2012). An HRIS is used to store large amounts
of employee data, and is also used to distribute information to employees regarding
human resource issues. The HRIS can support the organisation in strategic decision
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making and can assist the HR Department with day to day decision making (Noe et al,
2012).
o Increased Use and Availability of e-HRM: Electronic HRM or e-HRM provides for
the “processing and transmission of digitised information used in HRM” (Noe et al,
2012). e-HRM has the following implications for HRM practices:
Recruitment: Jobs can be posted online and candidates can apply for jobs online.
Selection: Online simulations can be used to measure a candidate’s ability to deal
with business challenges.
Training: Employees can engage in online learning, allowing them to update their
skills from any location at any time.
Compensation and Benefits: Employees may review their salary and bonus
information on line. They may also seek information about various benefit plans
(Noe et al, 2012).
READING
Read the following journal article and answer the questions which follow.
•
Voermans, M. and van Veldhoven, M (2007) “Attitude towards e-HRM: an
empirical study at Philips” Personnel Review. Vol. 36, No. 6, pp 887 – 902.
In the space below, provide a summary of the key points that were made in the journal
article.
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Comment on Reading Activity
Voermans and van Veldhoven (2007) conducted research into the implementation of an eHRM system at Philips Electronics Netherlands and Philips Netherlands, the staff
complement of which was 1000 employees all together. The e-HRM system includes a
performance management system, enables employees to view their salary slips online and
includes a learning and development tool.
Voermans and van Veldhonven’s (2007) research focused on whether employees
favoured the introduction of the e-HRM system. It was found that those employees who
viewed the role of HR to be a strategic partner, change agent or administrative expert
favoured the introduction of e-HRM. However, those employees who viewed the role of
HR as being primarily that of a change agent opposed the introduction of e-HRM. The
opposition from these employees could possibly be a result of the fear that the e-HRM
would result in a loss of personal contact with HR specialists (which is a key component
of being a change agent).
The research also showed employees who found the system easy to use and who were
backed up with good IT support were very positive about the e-HRM system (Voermans
and van Veldhonven, 2007). Experienced user support was found to be important to
managers.
Voermans and Veldhonven (2007) conclude that if the image and perceptions around IT
within an organisation are generally positive, the introduction of an e-HRM system is
likely to be favourably received by employees. However, if the image of IT within an
organisation is poor, employees will take quite some time to establish trust in a new eHRM system
Voermans and Veldhonven (2007) also comment that HR professionals generally leave
the creation of an e-HRM system to the technical specialists. However, they emphasise
that this is a missed opportunity and HRM should actively participate in the creation of
the e-HRM system.
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1.7.3
HRM and African Specific Challenges
READING
Read the following journal article and answer the questions which follow.
•
Gbadamosi, G. (2003) “HRM and the Commitment Rhetoric: Challenges
for Africa.” New Mandate for Human Resources’. Management Decision. Vol.
41, No. 3, pp 274 – 280.
In the space below, summarise the Gadamosi’s HRM challenge for Africa.
Comment on Reading Activity
Gbadosmosi (2003) asserts that “western management concepts and writings have dominated the
thinking of academics and managers in Africa for a long time. Such writings have not shown
how culture might be taken into account in the managerial practice. Many Africans would claim
that there are indigenous management practices in Africa…Africans, for example, have a
systematic approach based on historical and practical experience to solving human problems,
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and often strive to move from the real to the idea….the need to understand the values of the
average African worker who are the teeming majority of employees that the African manager –
local or foreign – must deal with is thus imperative” (Gbadamosi, 2003: 274).
Gbadosmosi (2003) identifies organisational commitment to be a topical HRM issue as it has a
significant impact on employee performance and organisational effectiveness. “Committed
employee behaviour is at the heart of HRM and is a central feature that distinguishes HRM from
traditional personnel management” (Gbadosmosi, 2003: 274).
The African context is highly communalistic which requires that African managers focus on
inter-personal issues. In seeking to foster organisational commitment amongst its employees, the
African manager should address the following:
•
The African manager should focus not only on the career advancement and job
environment of employees, but should also show an interest in non-work activities which
impact on an employee’s performance (Gbadosmosi, 2003).
•
If employee commitment is voluntary and dynamic, the manager’s style should be
dynamic and persuasive.
•
Relationships at work are important across the globe, and particularly within Africa. The
African manager needs to therefore foster positive working relations with and between
his / her African employees.
•
Managerial communication must be consistent and regular.
•
Managerial practice must be dynamic and cautious in managing change. This is because
the employee with a high level of organisational commitment will resist change which
they perceive to be harmful to the organisation and will embrace change which they
perceive to be beneficial for the organisation.
•
The African manager must understand and address socio-cultural influences in his
managerial practice (Gbadosmosi, 2003).
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1.8
Summary
This section provided the learner with an introduction to the study of Human Resource
Management (HRM). A definition of human resource management was investigated. The place
of HRM, the functions of the HR department, the role of the HR manager, and HR career
opportunities were also investigated. In closing, current trends and challenges for the function of
HRM were studied.
SELF CHECK ACTIVITY
Check your understanding of some of the principles and theory addressed in this section by
answering the questions below.
1. Sizwe, the HR Director at Nenaca Pharmaceuticals has emailed the Marketing Director, the
Operations Director and the Financial Director instructing them that their departmental
performance management process must be completed by the end of the month. He
emphasises that no extensions will be allowed. Sizwe’s instruction to the Marketing,
Operations and Financial Directors is an example of:
2.
A.
Functional Authority
B.
Staff Authority
C.
Both A and B
D.
None of the above
Ismail, the Marketing Director at Nenaca Pharmaceuticals meets with Sizwe to discuss
how he should deal with one of his Sales Manager’s poor levels of performance. Sizwe
advises that before issuing formal warnings to the Sales Manager, a training needs
analysis should be conducted for the Sales Manager and he should be sent on
appropriate training to address the identified needs.
Sizwe’s advice to the Marketing Director is an example of :
A.
Functional Authority
B.
Staff Authority
C.
Both A and B
D.
None of the above
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3. After his meeting with Ismail, Sizwe conducts a workshop for the employees of the
Operations Department. The purpose of the workshop is to discuss the pending
restructuring of the department and to provide employees with the necessary competence
to cope with the pending changes. This is the third workshop of this nature which
Sizwe has conducted for the Operations Department thus far. He has been conducting
them on a monthly basis, but as the restructuring is to be implemented within two weeks
he feels that he will need to hold them more frequently from now on.
In conducting the “change workshops” for employees within the Operations Department,
identify the HR role that Sizwe is fulfilling:
A.
Administrative Expert
B.
Employee Champion
C.
Change Agent
D.
All of the above
4. Krishnie, the HR Manager of Team Build, is concerned about the status which HRM
holds within her organisation, a construction company. There is no HR Director position
and as a result, HR never participates in the strategic planning of the organisation.
Furthermore, her work tends to be limited to processing leave forms and maintaining
employee records.
Based on the information presented in the case study, what approach to HR does Team
Build follow?
A.
Strategic HRM
B.
Expert HRM
C.
Traditional HRM
D.
None of the above
5. Dewald, the CEO of Modern Furniture, a furniture manufacturing company, is
concerned about the rising cost of labour. Dudu, the HR Director suggests that the
company’s manufacturing operations be moved to India as the cost of labour is cheaper
there.
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Dudu’s suggestion is an example of :
A.
Onshoring
B.
Offshoring
C.
Immigration
D.
Alternative work arrangements
Answers to Self-Check Questions
1.
A
2.
B
3.
C
4.
C
5.
B
STUDY GROUP DISCUSSION
For this section, your Study Group is required to compare and contrast the HRM approach
adopted within the different organisations of team members. Prior to the Study Group
meeting, each individual team member must prepare a summary of the following with respect
to their organisation’s HRM approach:
Structure of the HR Department
Size of the HR Department in relation to size of total workforce
Approach adopted towards HRM (e.g. strategic approach, traditional approach)
Management and employee’s perceptions of the HRM Department
Key challenges confronting the organisation, and your HR Department’s approach to
dealing with these challenges
At the Study Group meeting each individual team member must be given the opportunity to
present the information on HRM within their organisation. The differences between
organisations must be critically discussed by the Study Group.
Record your notes on the Study Group discussion in the space provided below.
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This Study Group Discussion activity provides the Study Group with an opportunity to reflect on
and compare different organisational approaches to HRM. Group members, in sharing their
experiences will learn from each other which in turn will enable them to better understand and
respond to HRM practices within their own organisations.
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SAMPLE EXAMINATION QUESTIONS
Instructions:
Read the case study below and then answer the questions which follow.
Pumla has recently been appointed to the position of HR Director at the ‘Box Company’,
a manufacturer of cardboard and plastic boxes used by various manufacturers to
package their goods. The Box Company comprises 500 employees. The position of HR
Director within the Box Company is a new one – while an HR Department did exist prior
to Pumla’s appointment, it was staffed only by three HR administrators who were
responsible for administrative processes such as processing leave forms and printing
payslips.
The position of HR Director was created at the advice of Sipho, a management
consultant who was brought into the organisation to assess the reason behind the low
levels of employee motivation. One of Sipho’s key recommendations was that the Box
Company expand the HR Department to include an HR Director and a number of HR
consultants so that the HR needs of both the organisation and the employees can
adequately be addressed.
When Pumla accepted the position she knew that it was not going to be easy. In
particular she was concerned about turning around the way in which both employees and
managers perceive HR.
Indeed, prior to her appointment, HR was simply a lowly
administrative function and Pumla knew that many people within the organisation still
viewed it this way. Thabani, the CEO, shares Pumla’s concerns and so he has asked her
to join each of the departmental meetings in the coming week. During the meetings she
will be given a 15 minute slot to inform employees of the Box Company’s changed
approach to Human Resources Management.
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1.
Write the speech which Pumla will deliver to each department and in which she
will outline:
1.1
How the Box Company’s new strategic approach to HRM differs from the
previous traditional approach.
1.2
The various roles of the new HR Department.
1.3
The challenges facing HRM in organisations generally, which are likely
to be relevant to the Box Company as well.
(25 marks)
Guidelines for the Answering of the Examination Questions:
•
The length of your answer should be guided by the mark allocation.
Generally one coherent point / fact equals one mark.
•
The following sections of this Study Guide are relevant to the sample examination
question:
o
Question 1.1: Section 1.5 (Strategic HRM)
o
Question 1.2: Section 1.4 (Role of the HR Manager)
o
Question 1.3: Section 1.7.2 (HRM Challenges)
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SECTION 2
HUMAN RESOURCE STRATEGY
AND
BUSINESS STRATEGY
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CONTENTS
Learning Outcomes
Reading
2.1 Introduction
2.2 The Importance of the Relationship Between HR and Business Strategy
2.3 Linking HR Strategy with Business Strategy
2.3.1
Strategy Formulation
2.3.2
Strategy Implementation
2.3.3
Strategy Evaluation and Control
2.3.4
Consolidation
2.4 Strategic Human Resource Management Competencies
2.5 Summary
Self Check Activity
Study Group Discussion Activity
Sample Examination Question
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the learner should be able to
demonstrate a holistic understanding of the integration of human resource strategy and
business strategy. This overall outcome will be achieved through the learner’s mastery of the
following specific outcomes:
1.
Explain the importance of integrating a company’s human resource strategy with
overall business strategy.
2.
Explain the strategic management process.
3.
Discuss the strategic management phases of strategy formulation, strategy
implementation and strategy evaluation and control.
4.
Critically discuss the function and role of human resource management within the
strategic management process.
5.
Discuss the various human resource practices associated with the various generic and
directional strategies.
6.
Identify and discuss the competencies which an HR professional requires to effectively
participate in the strategic management process.
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•
READING
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGrawHill. (pp 70 – 104) Chapter 2
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (466 - 487) Chapter 16
Recommended Reading:
Books
•
Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. & Hatfield, R.D. (2006)
Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp
2 - 8 (Chapter 1).
•
Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. & Pilbeam, E.
(2007). Human Resource Management: Fresh Perspectives. 15 – 41 (Chapter
2).
•
Snell, S. & Bohlander, G. (2007) Human Resource Management. Mason:
Thomson. pp 47 - 89 (Chapter 2).
Journals
•
Bergeron, C. (2004) “Build a Talent Strategy to Achieve your Desired
Business Results.” Handbook of Business Strategy. pp 133- 139.
•
Human Resource Management (2004) “Maximizing the Return on HR
Investment: The benefits and challenges of global strategic human resource
management.” Human Resource Management. International Digest.Vol. 12,
No. 3, pp 8 – 10.
•
Pollitt, D. (2006) “Raise a Glass to HR at Wolverhampton & Dudley
Breweries” Human Resource Management International Digest. pp 9 - 12.
•
Sheehan, C. (2005) “A Model for HRM Strategic Integration.” Personnel
Review. Vol. 34, No. 2, pp 192 – 209.
•
Wang, D.S. & Shyu, C.L. (2008) “Will the Strategic Fit between Business and
HRM
Strategy
Influence
HRM
Effectiveness
and
Organisational
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2.1
Introduction
Section 1 introduced the student to the field of Human Resource Management (HRM). This
section examines the relation between Human Resource Strategy and Business Strategy. The
following will be studied:
•
The importance of the relationship between HR and business strategy
•
Linking HR strategy and business strategy
o Strategy formulation
o Strategy implementation
o Strategy evaluation and control
•
2.2
Strategic human resource management competencies
The Importance of the Relationship Between HR and Business Strategy
Strategic management may be defined as managing the “pattern or plan that integrates an
organisation’s major goals, policies, and action sequences into a cohesive whole” (Quinn
cited in Noe et al, 2012). On the other hand, strategic human resource management (SHRM)
may be defined as “the pattern of planned human resource deployments and activities
intended to enable an organisation to achieve its goals” (Friedman & Strickler cited in Noe
et al, 2012). Thus HRM is critical in supporting the formulation and implementation of
strategy.
Golden and Ramanujam (cited in Noe et al, 2012) identify four levels of integration between
the HRM function and the strategic management function which may emerge within
organisations. These are:
•
Administrative Linkage which is the lowest level of integration. Here the HR function is
primarily focused on day-to-day activities. The HR function is divorced from the strategic
management process.
•
One-Way Linkage which involves the strategic management function in simply
informing the HR function of the strategic plan (this does not constitute strategic HRM).
•
Two-Way Linkage which allows for sequential consideration of HR issues during the
strategy formulation process in that the HR function is informed of the various strategies
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which are being considered and the HR executive provides input as to the HR
implications. Once the strategic plan has been determined, the HR function prepares
various programmes to support the implementation of the strategy.
•
Integrative Linkage is dynamic and is based on continuing interaction between the
strategic management and HRM function.
The HR function forms part of the strategic
management team, and actively participates in the formulation and implementation of
strategy.
Administrative
Linkage
One-Way
Linkage
Two-Way
Linkage
Integrative
Linkage
Strategic
Planning
Strategic
Planning
Strategic
Planning
Strategic
Planning
HRM
Function
HRM
Function
HRM
Function
HRM
Function
Figure 2.1: Linkages of Strategic Planning and HRM (Noe et al, 2008)
2.3
Linking HR Strategy with Business Strategy
Strategic management involves three phases:
•
Strategy formulation
•
Strategy implementation
•
Strategy evaluation and control
HR strategy issues need to be considered during each of these strategic phases.
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2.3.1
Strategy Formulation
?
THINK POINT
Think about the organisation in which you are currently employed. What is involved
in strategy formulation in your organisation? Is HR involved at all?
Comment on Think Point
The formulation of strategy involves the consideration and establishment of five major
components, which are depicted in Figure 2.2. These components include the:
Organisation’s Mission which specifies the organisation’s reason for existence.
Organisation’s Strategic Goals which specify what the organisation aims to achieve in
the medium and long term.
External Analysis which provides information as to the threats and opportunities which
exist for the company within the external environment.
Internal Analysis which provides information as to the strengths and weaknesses of the
company’s resources.
Strategic Choice which is the organisation’s chosen strategy and specifies the way in
which the mission and strategic goals are to be achieved.
It is important to note that in the consideration of the five components discussed above, it is
critical that input from the HRM function is considered and that people-related issues are
contemplated (Noe et al, 2012). For example, if an IT organisation were to conduct an
external analysis at this point in time, a major external threat would be the considerable lack
of skilled IT professionals within the labour market.
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EXTERNAL
ANALYSIS
Opportunities
Threats
VISION AND
MISSION
STRATEGIC
GOALS
STRATEGIC
CHOICE
INTERNAL
ANALYSIS
Strengths
Weaknesses
HR INPUT
Figure 2.2: Strategy Formulation (adapted from Noe et al, 2010:81).
2.3.2
Strategy Implementation
Once an organisation has completed the strategy formulation phase, the implementation of
strategy needs to take place. Noe et al (2012) argue that five variables influence the success
of strategy implementation:
Organisational structure
Types of information and information systems
Task design
Selection, training and development of people
Reward systems
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The importance of HRM in strategy implementation is reflected in the first fact that HRM is
directly responsible for the latter three variables and is in a position to influence the former
two variables.
The involvement of the HRM function in strategy implementation is depicted in the Figure
2.3 below.
HUMAN RESOURCE
PRACTICES
STRATEGIC
CHOICE
HUMAN
RESOURCE
NEEDS
Skills
Behaviour
Culture
Recruitment
Training
Performance Management
Labour Relations
Employee Relations
Incentives
Benefits
Job Analysis
Job Design
Selection
Development
Pay Structure
FIRM’S
PERFORMANCE
Productivity
Quality
Profitability
HUMAN
RESOURCE
CAPABILITY
HUMAN
RESOURCE
ACTIONS
Skills
Abilities
Knowledge
Behaviours
Results
(Productivity,
Absenteeism,
Turnover)
Figure 2.3: Strategy Implementation (from Noe et al , 2012:86)
As shown in Figure 2.3 the choice of strategies (made during the strategy implementation
phase) determine the organisation’s HR needs. These HR needs give rise to specific HR
practices (such as job analysis and design, recruitment and selection, etc.) which in turn
provide the organisation with HR capability and behaviours.
This HR capability and
behaviours enable the organisation to perform in accordance with the organisation’s chosen
strategies.
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2.3.2.1 Types of Strategies and HR Practice
The type(s) of strategies employed will impact on the nature of the HR practices
implemented by the HRM function within an organisation.
Table 1.1 below provides an overview of the various strategies and the supporting HRM
practices which they require.
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Strategy
Description of Strategy
Impact on HR Practices
•
Focus on efficiency requires specific definition of skills requirements
and investment in training in these areas
Overall Cost
Leadership
Overall cost leadership focuses on
•
compensation component
becoming the lowest cost producer
in the industry (Noe et al, 2012)
Behavioural performance management with large performance-based
•
Promote internally
•
Develop internally consistent pay systems with high differential between
subordinates and superiors
A differentiation strategy focuses
•
Seek efficiency through worker participation
•
Broad job descriptions to allow for creativity
•
May recruit from outside and provide for limited socialisation of new
recruits
on creating a difference between
Differentiation
Concentration
Strategies
the organisation’s product and/or
•
Provide broad career paths
service at its competitors (Noe et al,
•
Cooperation is the focus on training and development activities
2012)
•
Compensation influenced by external equity and recruiting needs
•
Results-based performance management systems
Strategy is focused on increasing
•
Retention of current skills
market share, reducing costs, or
•
Training focused on maintaining current skills
creating and maintaining a market
•
Compensation focused on retaining employees who have the required
niche for products and services (Noe
et al, 2012)
existing skills
•
Behaviour-based performance appraisals (due to stable environment)
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Strategy
Internal
Growth
Strategies
Description of Strategy
Impact on HR Practices
•
Company must constantly hire, transfer and promote individuals
•
Expansion into new markets requires changes in skills or prospective
employees
Internal growth strategies focus on
new product and market
•
Combination of behaviour-based and results-based appraisals
development, innovation and joint
•
Compensation structured as an incentive for achieving growth goals
ventures (Noe et al, 2012).
•
Training needs dependent on how the company decides to grow
internally (e.g. growth through innovation and product development –
training technical in nature)
Mergers and acquisitions involve a
•
Training in conflict resolution
Mergers &
consolidation of organisations
•
HR programmes to integrate and standardise culture and practices across
Acquisitions
within industries or even across
the company’s business
industries (Noe et al, 2012).
Downsizing is a strategy which
•
focuses on the planned elimination
Downsizing
Surgical reduction of the workforce through the offering of early
retirement programmes, retrenchment packages, etc
of considerable numbers of staff, in
•
Boost morale of ‘survivor’ employees
the
•
Compensation programmes linked to the company’s success (e.g.
interests
of
organisational
effectiveness (Noe et al, 2012).
gainsharing plans)
Table 1.1: Overview of Organisational Strategies and their Impact on HRM practices (Noe et al, 2012).
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2.3.3
Strategy Evaluation and Control
Strategy evaluation and control is the final phase in the strategic management process and
requires both the strategic management function as well as the HRM function in constantly
monitoring the effectiveness of the strategy and implementation process (Noe et al, 2012).
2.3.4
Consolidation
The following reading activity serves to consolidate the learner’s understanding of the
integration of HR strategy and the strategic management process.
READING ACTIVITY
Read the following article and then answer the questions that follow. (This article
is available from the Emerald online library facility which all Mancosa learners
have access to via the MANCOSA website).
•
Pollitt, D. (2006) “Raise a Glass to HR at Wolverhampton and Dudley
Breweries” Human Resource Management International Digest. pp 9 - 12.
1.
According to Pollitt (2006), what two key business strategies did
Wolverhampton and Dudley Breweries formulate and implement?
2.
Evaluate the involvement of an HR Manager in strategy formulation and
strategy implementation.
3.
Discuss the strategies and initiatives that were put in place to support the
implementation of the business strategy.
4.
Was HR’s involvement in strategy formulation and implementation
effective? Justify your answer.
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Comment on Reading Activity
Model answers to the questions put forward in the above Reading Activity are provided
below.
Question 1: Business Strategy
Wolverhampton and Dudley Breweries implemented both the strategies of Merger and
Acquisition as well as Downsizing.
Question 2: HR Senior Manager
Wolverhampton and Dudley Breweries’ most senior HR representative, the HR Director, was
actively involved in
both the organisation’s strategy formulation and strategy
implementation. Indeed it is stated in the article that “HR played a key part from the start,
with Steve Rowlands, group HR Director, being a member of the senior steering group that
was set up to plan and oversee the acquisition process” (Pollitt, 2006: 9).
Question 3: HR Strategies and Initiatives
In implementing the business strategy of downsizing, the HR strategies implemented were
“consultative arrangements” and “people processes necessary to achieve more than 750 job
losses” (Pollitt, 2006: 9) from a staff complement of 1,900. The HR processes implemented
were effective and no industrial action resulted.
The downsizing did, however, result in the survivors having negative perceptions of the
company, seeing it as cost dominated and hard nosed (Pollitt, 2006: 9) and employee morale
was down. HR strategies to address the impact of the downsizing strategy on surviving
employees and to address the people issues created by the mergers and acquisitions include:
•
The restructuring of the organisation into three key trading divisions with new names,
structures and cultures resulting in the old divisions between employees (as a result of
the merger) falling away as all employees had something new and fresh with which to
identify (Pollitt, 2006). This resulted in employees being open to other changes.
•
The HR team introduced and defined fundamental behaviours for the group which
were referred to as ‘FIT’: fairness, integrity and transparency (Pollitt, 2006).
•
HR gradually harmonised the disparate employee benefits amongst the staff and
management (which were the result of different benefit structures in the organisations
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that were merged). Changes to the benefits provided were also based on feedback
provided by employees in an employee survey. These include:
o Full employee assistance programmes
o More social events such as family days
o Improved long-service and retirement awards
o Improvements in provision for maternity and paternity responsibilities
o Congratulation awards for employees getting married, having babies or
completing further education courses
o The establishment of staff shop facilities and family food discounts at the
organisation’s pubs (Pollitt, 2006)
These changes were also introduced to change the view of many employees that
Wolverhampton and Dudley breweries was hierarchical, traditional and remote.
Other changes that were introduced to address this negative perception were the
removal of all reserved (named) parking spaces as well as the refurbishment of
offices as open plan offices (Pollitt, 2006).
The company also started life long learning seminars which addressed everything
from hair care to salsa dancing – “while there is no direct link to company
performance, other than through improved morale, it got many employees back into
learning who had been missing out and who now feel confident to attend our more
mainstream programs” (Pollitt, 2006: 11)
Question 4: Value of HR’s Involvement
HR’s involvement in the strategy formulation and implementation was invaluable. At the
2004 Human Resource Excellence Awards, Wolverhampton and Dudley Breweries received
commendation for best HR contribution to merger and acquisition integration. An employee
survey conducted in 2004 showed that employee morale had improved significantly since the
merger and acquisitions. The organisation’s HR Director, Steve Rowland asserts that “a key
factor in this transformation has been the HR strategies and initiatives developed in order to
address employee engagement, allowing old prejudices to be replaced with a new identity
and optimism where the results really do speak for themselves” (Pollitt, 2006: 12).
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2.4
Strategic Human Resource Management Competencies
ACTIVITY
1. Within your organisation, what competencies would an HR professional
require in order to make a valuable contribution to the strategic management
Comment on Think Point
process?
2. Outline the six key competencies which the Society for Human Resource
Management (SHRM) identifies for HR professionals (for information in this
regard, go to www.shrm.org/competencies/benefits.asp or consult page 7-8 of
Noe et al [2010]).
3. How do the competencies which you identified (in your response to question
1) compare with the competencies identified for the HR professional by the
Society for Human Resource Management (SHRM)?
4. Will the competencies identified for the HR professional by the SHRM enable
the HR professional to fulfil a strategic role within an organisation?
Substantiate your answer.
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Comment on Activity
The Society for Human Resource Management identifies six competencies for the HR
profession, as depicted in Figure 2.4 below. These competencies have been identified through
the Human Resource Competency Study which has been identifying HR competencies for over
fifteen years (Noe et al, 2008).
Organisation
Capabilities
Talent Manager
/
Organizational
Designer
Systems &
Processes
Culture &
Change Steward
Operational
Executor
Relationships
Figure 2.4:
Strategy
Architect
Business Ally
Credible
Activist
HR Professional Competencies
(from SHRM www.shrm.org/competencies/benefits.asp, 2008)
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According to the SHRM, the competencies which HR professionals require include the
following:
•
Credible Activist: HR professionals need to be credible and respected. They should have
a point of view and challenge assumptions while keeping commitments (SHRM, 2008).
•
Operational Executor: HR professionals need to be able to efficiently and effectively
administer the day to day work of HRM (SHRM, 2008).
•
Business Ally: HR professionals must understand the internal business as well as the
external factors which impact on business success.
•
Talent Managers / Organisational Designers: HR professionals need to be able to
develop individual employees, teams and the organisation which they support (SHRM,
2008).
•
Culture & Change Stewards: HR professionals must have the competence to understand
and evolve an organisation through periods of change.
•
Strategy Architects: HR professionals need to be effective business partners and should
work together with the organisation to formulate and implement competitive business
strategies (SHRM, 2008).
The competency of “Strategy Architect”, supported by the competencies of “Culture & Change
Steward”, “Business Ally” and “Credible Activist” will enable the HR professional to fulfill a
strategic role within the organisation.
2.5
Summary
This section has provided an overview of HR Strategy and Business Strategy. In so doing, the
importance of integrating a company’s HRM into its business strategy was established. The
strategic management process was examined and the implications for HRM at each stage in this
process were explored.
In closing, the competencies required by the HR professional to
successfully participate in an organisation’s strategic management process, were examined.
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SELF CHECK ACTIVITY
Check your understanding of some of the principles and theory addressed in this section by
answering the questions below.
1. ‘Packaging Inc.’ is a manufacturing company which manufactures packaging materials.
Packaging has recently adopted an “overall cost leadership strategy.”
Which of the following HR practices would support the implementation of this strategy?
A.
Promote internally
B.
Seek efficiency through worker participation
C.
Behavioural management with large performance based pay component
D.
All of the above
2. ‘The Recycled Packaging Company’ is ‘Packaging Inc’s’ competitor. The Executive
Committee has recently conducted their annual Strategic Planning workshop where it
was decided that the company would now adopt as strategy of differentiation.
Which of the following HR practices would be most suitable to support the
implementation of a strategy of differentiation?
A.
Narrow job descriptions
B.
Limited socialisation of new recruits
C.
Narrow career paths
D.
Seek efficiency through worker participation
3. Bongani is the HR Director at ‘The Recycled Packaging Company’. He is part of the
Executive Committee and was an active participant in the determination of the
company’s new differentiation strategy at the recent Strategic Planning workshop.
Bongani’s involvement in the generation of the company’s strategy is an example of
which of the following types of linkages between the HRM function and the strategic
planning function?
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A.
Administrative Linkage
B.
One-Way Linkage
C.
Two-Way Linkage
D.
Integrative Linkage
4. During the Strategic Planning Workshop for ‘The Recycled Packaging Company’, as
part of the strategy formulation process, the Executive conducted an external analysis.
What is an ‘external analysis’?
A.
An analysis of the organisation’s strengths and weaknesses
B.
An analysis of threats to and opportunities for the organisation
C.
Neither A nor B
D.
Both A and B
5. The constant monitoring of the effectiveness of the strategy and implementation process
is known as ______________.
A.
Strategy Formulation
B.
Strategy Implementation
C.
Strategy Evaluation and Control
D.
None of the above
Answers to Self-Check Questions
1.
D
2.
B
3.
D
4.
B
5.
C
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STUDY GROUP DISCUSSION
For this section, your Study Group is required to compare and contrast the integration of
business strategy and human resource strategy within the different organisations of the Study
Group members.
Prior to the Study Group meeting, each individual team member must prepare a summary of
the following with respect to their organisation’s integration of business strategy with HR
strategy. To adequately address some of the following questions, study group members may
need to consult their organisation’s CEO, HR Director, and / or other relevant management
representative.
Outline the business strategy of your organisation.
Do your organisation’s HR strategies overtly support the implementation of the
business strategy? Justify your answer.
What is the status of HR within your organisation? Does your organisation have an HR
Director and is this position regarded to be of equal status to the other directors’
positions?
Based on your answers to the questions above, what type of linkage is there between your
organisation’s strategic planning and the HRM function?
At the Study Group meeting, each individual team member must be given the opportunity to
present the information on their organisation’s integration of strategic planning with the
HRM function. The differences between organisations must be critically discussed by the
Study Group.
Record your notes on the Study Group discussion in the space provided below.
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This Study Group Discussion activity provides the Study Group with an opportunity to reflect on
and compare different organisational approaches to the integration of HRM and strategic
management. Group members, in sharing their experiences, will learn from each other, which in
turn will enable them to better understand and respond to strategic HRM practices within their
own organisation.
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SAMPLE EXAMINATION QUESTIONS
Instructions:
Read the case study below taken from your prescribed text, Noe et al (2010: 100-101) and then
answer the questions which follow.
In 1994 top executives at Delta Airlines faced a crucial strategic decision. Delta, which had
established an unrivalled reputation within the industry for having highly committed employees
who delivered the highest quality customer service, had lost over $10 per share for two straight
years. A large portion of its financial trouble was due to the $491 million acquisition of Pan Am
in 1991, which was followed by the Gulf War (driving up fuel costs) and the early 1990s
recession (causing people to fly less). Its costs per available seat mile (the cost to fly one
passenger one mile) were 9.26 cents, among the highest in the industry. In addition, it was
threatened by new discount competitors with significantly lower costs – in particular, Valujet,
which flew out of Delta’s Atlanta hub.
How could Delta survive and thrive in such an
environment? Determining the strategy for doing so was the top executives’ challenge.
Chairman and chief executive officer Ron Allen embarked upon the “Leadership 7.5” strategy,
whose goal was to reduce the cost per available seat mile to 7.5 cents, comparable with
Southwest Airlines. Implementing this strategy required a significant downsizing over three
years, trimming 11,458 people from its 69,555 employee workforce (the latter number
representing an 8 percent reduction from two years earlier).
Many experienced customer
service representatives were laid off and replaced with lower paid, inexperienced, part-time
workers. Cleaning service of planes as well as baggage handling was outsourced, resulting in
layoffs of long-term Delta employees.
The numbers of maintenance workers and flight
attendants were reduced substantially.
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The results of the strategy were mixed as financial performance improved but operational
performance plummeted. Since it began its cost cutting, its stock price more than doubled in just
over two years and its debt was upgraded. On the other hand, customer complaints about dirty
airplanes rose from 219 in 1993 to 358 in 1994 and 634 in 1995. On-time performance was so
bad that passengers joked that Delta stands for “Doesn’t Ever Leave the Airport.” Delta slipped
from fourth to seventh among the top ten carriers in baggage handling. Employee morale hit an
all time low, and unions were beginning to make headway toward organising some of Delta’s
employee groups. In 1996 CEO Allen was quoted as saying, “This has tested our people. There
have been some morale problems. But so be it. You go back to the question of survival, and it
makes the decision very easy.”
Shortly after, employees began donning cynical “so be it” buttons. Delta’s board saw union
organisers stirring blue –collar discontent, employee morale destroyed, the customer reputation
in near shambles, and senior managers exiting the company in droves. Less than one year later,
Allen was fired despite Delta’s financial turnaround. His firing was “not because the company
was going broke, but because its spirit was broken.”
Delta’s Leadership 7.5 strategy destroyed the firm’s core competence of a highly experienced,
highly skilled, and highly committed workforce that delivered the highest quality customer
service in the industry. HRM might have affected the strategy by pointing out the negative
impact that this strategy would have on the firm. Given the strategy and competitive
environment, Delta might have sought to implement the cost cutting differently to reduce the cost
structure but preserve its source of differentiation.
The present state of Delta provides further support to these conclusions. With the family
atmosphere dissolved and the bond between management and rank-and-file employees broken,
employees have begun to seek other ways to gain voice and security. By Fall 2001, Delta had
two union organising drives under way with both the flight attendants and the mechanics. In
addition, labour costs have been driven up as a result of the union activity. The pilots signed a
lucrative five year contract that will place them at the highest pay in the industry. In an effort to
head off the organising drive, the mechanics were recently given raises to similarly put them at
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the industry top. Now the flight attendants are seeking industry-leading pay regardless of but
certainly encouraged by the union drive.
(from: Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2010) Human Resource Management: Gaining a
Competitive Advantage 7th Ed. McGraw-Hill. pp 100-101).
1.
Critically discuss Allen’s approach to integrating HR and overall business strategy during
the strategy planning / formulation phase.
2.
(10 marks)
Critically discuss Allen’s approach to integrating HR and overall business strategy during
the strategy implementation phase.
(10 marks)
Guidelines for the Answering of the Examination Questions:
•
The length of your answer should be guided by the mark allocation.
Generally one coherent point / fact equals one mark.
•
The following sections of this Study Guide are relevant to the sample examination
question:
o
Question 1: Section 2.2 and 2.3.1
o
Question 2: Section 2.2. and 2.3.2
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Suggested Answers to Sample Examination Questions
Question 1 – Integration of Strategy and HRM During Strategy Formulation Phase
While the case study does state that “HRM might have affected the strategy by pointing out the
negative impact that this strategy would have on the firm” (Noe et al, 2008: 94), there is no
evidence in the case to suggest that Allen even considered the input of the HR department when
formulating the company’s strategy. The relationship between strategy planning and HRM
therefore appears to be an administrative one which is the lowest level of integration, where the
HR function is divorced from the strategy management process (Golden & Ramanuajam cited in
Noe et al, 2010).
However, there is evidence in the case that Delta’s human resources were a highly committed,
customer-focused and competent workforce. Thus, the workforce could be regarded as the
resource which could have provided for Delta’s competitive advantage. It is probable that this
would have been brought to Allen’s attention if the company’s HR department had been
involved in the formulation of strategy. Indeed, the HR department could have pointed out to
Allen that:
•
Delta’s existing highly committed workforce is a source of the company’s competitive
advantage. Delta could have used this as the basis for a strategy which differentiated itself
from its competitors.
•
Alternatively, a strategy which reduced costs without sacrificing the workforce could have
been considered. The workforce could have been drawn into the process and asked to come
up with ways to perform certain tasks more efficiently.
Question 2 – Integration of Strategy and HRM during Strategy Implementation Phase
While there is no evidence to suggest that Allen consulted with the HRM function in formulating
Delta’s strategy, the HRM function would have been involved in the implementation of Allen’s
downsizing strategy.
From the evidence provided in the case it is suggested that the HR
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department would have primarily been involved in administering workforce reduction
programmes such as early retirements and retrenchments.
However, no evidence is provided in the case of the HR Department adopting a more holistic
role in implementing the strategy, such as the provision of outplacement services, interventions
to boost the morale of survivor employees, effective communication with the employees
regarding the downsizing initiative, and so on.
For strategy implementation then, there appears to be a one-way linkage between the
organisation’s strategic management and HRM.
A one-way linkage is where management
simply informs HRM of the strategy plan (Golden & Ramanuajam cited in Noe et al, 2010).
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SECTION 3
HUMAN RESOURCE PLANNING
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CONTENTS
Learning Outcomes
Readings
3.1 Introduction
3.2 The Nature of Human Resource Planning
3.3 The Process of Human Resource Planning
3.3.1
Forecasting
3.3.2
Goal Setting and Strategic Planning
3.3.3
Programme Implementation and Evaluation
3.4 Current Issues Impacting on Human Resource Planning
3.4.1
Employment Equity and Skills Development
3.4.2
Strategic Management and HR Planning
3.5 Summary
Self-Check Activity
Study Group Discussion Activity
Sample Examination Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the learner should be able to
demonstrate a holistic understanding of Human Resource Planning and its application. This
overall outcome will be achieved through the learner’s mastery of the following specific
outcomes:
1.
Explain the concept of human resource planning.
2.
Critically discuss the importance of human resource planning for organisations.
3.
Identify, critically discuss and apply the process of human resource planning.
4.
Integrate employment equity and skills development issues with human resource
planning.
5.
Integrate human resource planning into the organisation’s strategic management
process.
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Reading
•
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGrawHill. (pp 192-212) Chapter 5
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (160-183) Chapter 5
Recommended Reading:
Books
•
Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. and Hatfield, R.D. (2006)
Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp
104 – 113 (Chapter 4).
•
Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. & Pilbeam, E.
(2007). Human Resource Management: Fresh Perspectives. 68 – 78 (Chapter
3).
•
Snell, S. and Bohlander, G. (2007) Human Resource Management. Mason:
Thomson. pp 46 – 84 (Chapter 2).
Journals
•
Human Resource Management (2004) “From Baby Boomer to Ticking Time
Bomb: Why companies must face up to an impending skills shortage.” Human
Resource Management. Vol. 12, No. 3, pp 23 – 26.
•
Marshall, R. (2005) “Reinvest, recruit and rebuild to protect the future of IT.”
Human Resource Management International Digest. Vol. 13, No. 6, pp 3 – 5.
•
Phillips, C. (2007) “Today’s Talent Contest: The Battle for Talent in the UK
is Hotting Up.” Human Resource Management International Digest. Vol. 15,
No. 3, pp 3- 5.
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3.1
Introduction
This section investigates the concept of Human Resource (HR) Planning and will examine:
•
The nature of HR planning
•
The process of HR planning
•
3.2
o
Forecasting
o
Goal setting and strategic planning
o
Programme implementation and evaluation
Current issues impacting on HR planning
o
Employment equity and skills development
o
Strategic management and HR planning
The Nature of HR Planning
Organisations engage in the process of human resource planning to determine the future
supply, and demand for, human resources so as to gain or maintain competitive advantage.
A definition provided by Snell and Bohlander (2007: 48) asserts that Human Resource
Planning is “the process of anticipating and providing for the movement of people into,
within, and out of an organisation.”, while Nel et al (2011) maintains that HR Planning
“ensures that a predetermined amount of employees with appropriate skills, knowledge, and
abilities are available at a specified time in the future…HR planning therefore systematically
identifies what is needed to be able to guarantee their availability”.
Human resource planning is an important activity in that in provides for:
•
More effective and efficient use of people at work
•
Greater employee satisfaction
•
Better developed employees
•
More effective employment equity planning (Kleynhans et al, 2007; Grobler et al, 2006).
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3.3
The Process of HR Planning
Human resource planning generally follows the process depicted in Figure 3.l:
FORECASTS OF
LABOUR
DEMAND
FORECASTS OF
LABOUR
SUPPLY
FORECASTS OF LABOUR
SURPLUS OR SHORTAGE
GOAL SETTING & STRATEGIC
PLANNING
PROGRAMME IMPLEMENTATION
& EVALUATION
Figure 3.1: The Human Resources Planning Process (from Noe et al, 2012: 195)
3.3.1
Phase 1: Forecasting
The first phase of the HR planning process involves forecasting so as to determine labour
demand and labour supply. The forecasting techniques which may be used range from
sophisticated statistical models (involving, for example, regression analysis) to relatively
unrefined expert estimates (Snell and Bohlander, 2007).
The figures established from the labour demand and labour supply forecasts will be used to
determine potential labour shortages or labour surpluses for particular job categories (Noe et
al, 2008).
3.3.2
Phase 2: Goal Setting and Strategic Planning
The forecasted labour surplus and labour shortages will be used to determine measurable
goals for each particular skill area or job category (Noe et al, 2012). The organisation will
then need to choose a strategy which will provide for the achievement of the set goals.
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These strategies may include:
•
Strategies for reducing an expected labour surplus
•
Strategies for avoiding an expected labour shortage (Noe et al, 2012)
3.3.2.1 Options for Reducing Expected Labour Surplus
OPTION
SPEED
HUMAN SUFFERING
1. Downsizing
Fast
High
2. Pay reductions
Fast
High
3. Demotions
Fast
High
4. Transfers
Fast
Moderate
5. Work sharing
Fast
Moderate
6. Hiring freeze
Slow
Low
7. Natural attrition
Slow
Low
8. Early retirement
Slow
Low
9. Retraining
Slow
Low
Table 3.1 Options for Reducing an Expected Labour Surplus (from Noe et al, 2010:199)
3.3.2.2 Options for Avoiding an Expected Labour Shortage
REVOCABILITY
OPTION
SPEED
(i.e. how easily the change
can be undone)
1. Overtime
Fast
High
2. Temporary employees
Fast
High
3. Outsourcing
Fast
High
4. Retained transfers
Slow
High
5. Turnover reductions
Slow
Moderate
6. New external hires
Slow
Low
7. Technological innovation
Slow
Low
Table 3.1 Options for Avoiding an Expected Labour Shortage (from Noe et al, 2010:199)
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ACTIVITY
A number of strategies to address anticipated labour shortages and labour
surpluses are indicated in the tables above.
1.
Chose one of the strategies listed in the tables above which your
organisation has previously used to address a labour shortage or labour
surplus.
2.
Was the strategy which your organisation chose, effective in addressing
the labour shortage or labour surplus?
3.
In retrospect, could your organisation have selected a better, alternative
HRM strategy to address the labour shortage or labour surplus? Provide
reasons for your answer.
Comment on Activity
Learners’ responses will differ given the varied nature of the organisations in which they
work. It is important to point out that phase 2 of the Human Resource Planning process is
critical as the strategy options available to the HR Planner are varied, differing in terms of
their expense, speed, effectiveness, amount of human suffering and revocability. It is critical
that the HR Planner seeks to make the best choice of strategy at this stage. Noe et al (2012)
point out that “unfortunately for many workers, in the past decade the typical organisational
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response to a surplus of labour has been downsizing, which is fast but high in human
suffering…the widespread use of downsizing is a contributing factor in the largest number of
bankruptcies ever recorded in the United States.
Beyond the economic impact, the
psychological impact spills over and affects families, increasing the rates of divorce, child
abuse, and drug and alcohol addiction” (Noe et al, 2012). These points to the need for HR
Planners to thoroughly work through the HR Planning process as well as the various
strategies available to them, and avoid using “quick fixes”.
3.3.3
Phase 3: Programme Implementation and Evaluation
This phase involves the implementation of strategy so as to achieve the goals set in phase 2
of the HR planning process. It also involves the evaluation of the results of the planning
process (Noe et al, 2012).
Some of the questions which need to be asked during the
evaluation phase are “Was the anticipated labour surplus / shortage avoided?” and “In
retrospect, were the best HR strategies chosen to avert the anticipated labour surplus /
shortage?”
3.4
Current Issues Impacting on HR Planning
Issues currently impacting HR planning are that of
•
Employment Equity within the South African and Namibian context and Skills
Development within the South African context, and
•
3.4.1
The ageing workforce
Employment Equity and Skills Development
South Africa’s Employment Equity Act of 1998 and Skills Development Act of 1998, and
Namibia’s Affirmative Action Act of 1998 impact on the practice of human resource
planning within South African and Namibian organisations.
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ACTIVITY
This activity has been designed to accommodate the context of South African
learners, Namibian learners as well as learners from other countries other than
Namibia and South Africa.
South African Learners:
Consider the implementation of the Employment Equity Act and Skills
Development Act within your organisation. How have the activities associated
with the implementation of these two pieces of legislation affected your
organisation’s approach to HR Planning?
Namibian Learners:
Consider the implementation of the Affirmative Action Act within your
organisation. How have the activities associated with the implementation of this
legislation affected your organisation’s approach to HR Planning?
Learners from Countries Other than Namibia and South Africa:
Consider your organisation’s affirmative action / equal opportunities policy
(written or unwritten). How has this policy impacted on your organisation’s
approach to HR Planning?
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Comment on Activity
The South African Context
The Employment Equity Act requires South African organisations to develop Employment
Equity Plans, ranging between one and five years. The Employment Equity Plans serve to
provide a mechanism to introduce individuals from previously disadvantaged groups into
organisations (RSA, 1998a), and in so doing impact on the HR planning of the company.
The Skills Development Act of 1998 also impacts on the HR planning of the South African
organisation in that it provides incentives for organisations to develop Workplace Skills
Plans to address both skills shortages particular to the workplace as well as to the sector in
which the organisation operates (RSA, 1998b).
The Namibian Context
As with South Africa, Namibia’s Affirmative Action Act of 1998 requires that organisations
develop an Employment Equity Plan, providing goals and objectives to increase the
representivity of previously disadvantaged individuals within the organisation’s workforce
(Republic of Namibia, 1998).
These impacts significantly on the HR planning of the
organisation.
Countries without Employment Equity / Affirmative Action Legislation
Although countries other than South Africa and Namibia may not have Employment Equity
or Affirmative Action legislation, learners may find that their organisations have an equal
opportunity policy, which may be written and unwritten. The purpose of such an equal
opportunity policy would be to increase the representivity of previously marginalised or
disadvantaged groups such as women and people with disabilities. This would have an
impact on the HR Planning of an organisation.
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3.4.2
The Ageing Workforce
READING ACTIVITY
Read the following article:
Human Resource Management (2004) “From Baby Boomer to Ticking Time
•
Bomb.” Human Resource Management. Vol. 12, No. 3, pp 23 – 26.
1.
According to the article, what impact is the current ageing workforce
having on organisations?
2.
What can be done in terms of HR planning to address the negative impact
of the ageing workforce?
Comment on Reading Activity
The journal has conducted a review of three articles written by Arkin, Brown as well as
Rappaport, Bancroft and Okum all of which focus on the ageing workforce and how this is to
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affect HR planning going forward. “These are the days when those ‘baby boomers’ may have
already retired, or are thinking about it and companies, not just in the UK and the USA, but
throughout the world, are having to take a whole new look at recruiting, training and retaining
staff” (Human Resource Management, 2004: 23). ‘Baby-boomer’ refers to an individual who
was born between the years 1945 – 1955, a period when there was a sharp increase in the
birthrate.
While the baby-boomer generation have retired, or are getting ready to retire, “fewer younger
and mid career people are coming through the system” (Human Resource Management, 2004:
23).
The challenge, therefore, for companies is to find ways to retain older and more
experienced staff. While many older employees may not wish to work for longer than they had
originally planned, their retirement savings are usually insufficient and so they often have to
continue working for a number of years.
As a means of retaining the skills of employees at retirement age, companies often offer phased
retirement, allowing the employee to work part-time. Another, phased retirement option is
where an employee at retirement age may be allowed to take as much time off as he / she pleases
except during exceptionally busy times (Human Resource Management, 2004). Alternatively
the employee could be retained by the company in a less demanding role.
So as to address and prepare for the impact of the aging workforce, Rappaport et al (cited in
Human Resource Management, 2004: 24) advises organisations to “begin with an assessment of
the impact of the projected demographic and labour market changes on its own workforce and
the resulting implications for the talent it needs to execute its business strategy….by
understanding what talent the organisation will possess and what talent it will or will not be
able to obtain outside the organisation, a company can identify areas of vulnerability and make
the business case for addressing them”.
Employee development would be one way of addressing the “areas of vulnerability” which
Rappaport et al (cited in Human Resource Management, 2004: 24) speak about. However,
Brown (cited in Human Resource Management, 2004) cautions that employee development is a
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long term process. The article concludes by asserting that “many organisations will be hoping
they will have the right amount of time left to defuse that ticking baby boomer time bomb”
(Human Resource Management, 2004: 25).
?
THINK POINT
The Human Resource Management (2004) journal article on the ageing workforce
which you have just reviewed was based on research conducted in the USA and UK.
While the ageing workforce is certainly relevant to the African context, do you think
that there are other factors which may make the management and retention of the ageing
workforce in Africa more complex than in countries such as the USA and UK.
Comment on Think Point
There are a number of factors which certainly will impact on and make the management of the
ageing workforce more complex within the African context. Two factors which will have a
significant impact in this regard are:
•
Employment Equity / Affirmative Action: As discussed in section 3.4.1 countries such as
South Africa and Namibia are legally required to implement Employment Equity measures,
the ultimate aim of which is to achieve workforce representation which mirrors the
economically active population of the region (RSA, 1998a, Republic of Namibia, 1998). It is
probable that a large percentage of an organisation’s ageing workforce is representative of
the non-designated group (i.e. white males), which presents a challenge as their retention
would impede organisational progress in terms of meeting Employment Equity goals.
However, this could potentially be overcome through contracting (rather than full time)
employment and through extending their role to include coaching and mentoring of younger
employees from the designated groups (i.e. African, Indian, Coloured, Women and People
with Disabilities) within the company.
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•
HIV / AIDS: According to Avert, an international AIDS charity, Sub-Saharan Africa is the
worst affected in the world by the AIDS epidemic (www.avert.org, 2008) Although this
region has just over 10% of the world’s population, 67% the region’s people are living with
HIV. As at the end of 2007, the total number of people living with HIV / AIDS in this
region was 22 million. In 2007, AIDS killed approximately 1.5 million people in SubSaharan Africa. Although ARV’s can extend survival and provide many years of healthy
living, ARV’s are unavailable to most people in this region (www.avert.org, 2008).
The HIV / AIDs epidemic in Africa could therefore further complicate HR Planning around
the ageing workforce. Indeed, HIV / AIDS infection and affection of employees throughout
a company will impact on HR planning.
3.5
Summary
This section has served to investigate the concept of Human Resource Planning. In so doing the
nature and importance of HR planning was examined and the HR planning process was studied.
Current issues impacting on HR planning, such as Employment Equity / Affirmative Action and
Skills Development (within the South African and Namibian context) as well as the impact of
the ageing workforce on HR planning, were explored.
SELF CHECK ACTIVITY
Check your understanding of some of the principles and theory addressed in this section by
answering the questions below.
1. Thabani, the HR Director at Airmachines Inc, a manufacturer of light aircraft, is busy
updating the organisation’s HR Plan. Thabani has used various techniques to identify
that in three years time, Airmachines Inc.’s labour demand for aircraft artisans will
exceed the labour supply.
Identify the step in the HR planning process with which Thabani is busy:
A.
Forecasting
B.
Goal setting and strategic planning
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C.
Programme implementation and evaluation
D.
None of the above
2. After thinking about what to do about the pending aircraft artisan shortage which the
company will experience in three years time Thabani decides that he is not going to do
anything about it at this stage. When the labour shortage does arise in three years times
there are strategies which can be implemented very fast which can address the shortage
almost immediately..
Which of the following HR strategies could Thabani use to quickly address the aircraft
artisan labour shortage as and when it arises?
A.
External hires
B.
Overtime
C.
Temporary Employees
D.
Both B and C
3. Thabani informs Edward, the CEO of Airmachines Inc. about the aircraft artisan
shortage which the organisation is to experience in three years time.
“Don’t worry about it Edward,” says Thabani, “I have strategies to address the labour
shortage as and when it arises.”
“But Thabani, what strategies could you possibly use to address the labour shortage only
as and when it arises! Just the other day I received information that the number of
qualified aircraft artisans coming out of the educational system is declining every year. I
definitely think we need to start addressing this pending labour shortage immediately!”
Which of the following HR strategies is a longer term one to addressing the pending
aircraft artisan shortage at Aircraft Inc.?
A.
External hires
B.
Overtime
C.
Temporary Employees
D.
Both B and C
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4. In conducting his HR Planning, Thabani also becomes aware that it two years time
Aircraft Inc. will have a surplus of administration staff. Thabani is loath to start a
downsizing exercise in this area as he knows the damaging impact which retrenchments
can have not only on the individual who is to be retrenched and his / her family, but also
on the ‘surviving’ staff who will remain at Aircraft Inc.
Which of the following are longer terms strategies that Thabani could use to address the
surplus of administration staff?
A.
Hiring freeze
B.
Natural attrition
C.
Demotions
D.
Both A and B
5. Through conducting the HR Planning exercise, Thabani realises that all three of Aircraft
Inc.’s aircraft designers are scheduled to go on retirement the following year.
Thabani starts to panic, as he knows that there is shortage of experienced and qualified
aircraft designers in the external labour pool. “The only option that I have is to try to
get these aircraft designers to continue to work for us for a couple more years,” thinks
Thabani. “But how do I go about getting them to stay as I am sure that they are looking
forward to their retirement!”
Which of the following could Thabani use to try and get the aircraft designers to continue
to work for Aircraft Inc.?
A.
Provide them with information on their retirement funds, showing them how it
will be impossible to maintain their current standard of living on their pension.
B.
Providing them with ‘phased’ retirement by contracting them on a part-time basis
C.
Both A and B
D.
Neither A nor B
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Answers to Self-Check Questions
1.
A
2.
D
3.
A
4.
D
5.
C
STUDY GROUP DISCUSSION
For this section, your Study Group is required to compare and contrast the HR Planning
practices within the different organisations of the Study Group members.
Prior to the Study Group meeting, each individual team member must prepare a
summary of the following with respect to their organisation’s HR Planning practices. To
adequately address some of the following questions, study group members may
need to consult their organisation’s CEO, HR Director, and / or other relevant
management or Human Resources representative.
Describe the approach which your organisation adopts towards HR Planning (i.e. is it
ad hoc, or is it executed on a regular basis using a definite process and techniques).
What areas in your organisation are experiencing a labour shortage and what
strategies are being used to address this labour shortage?
What areas in your organisation are experiencing a labour surplus and what strategies
are being used to address this labour surplus?
Does your organisation’s HR Planning support the implementation of Employment
Equity / Affirmative Action / Equal Opportunity? Provide reasons for your answer.
Do you believe that your organisation’s HR Planning process is effective?
Justify your answer.
Make recommendations as to how you could improve your organisation’s HR
Planning process.
At the Study Group meeting each individual team member must be given the opportunity
to present the information on their organisation’s HR Planning practices.
The
differences between organisations must be critically discussed by the Study Group.
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Record your notes on the Study Group discussion in the space provided below.
This Study Group discussion activity provides the Study Group with an opportunity to reflect
on and compare different organisational approaches to HR planning. Group members, in
sharing their experiences, will learn from each other which in turn will enable them to better
understand and respond to HR planning practices within their own organisation.
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SAMPLE EXAMINATION QUESTIONS
Instructions:
Read the case study below taken from your prescribed text, Noe et al (2010: 225-226) and
then answer the questions which follow.
Southwest Airlines: Focused on Take-Offs, Not Lay-Offs
In the summer of 2001, the airline industry was facing severe problems due to slumping
business travel and vacationer demand. In fact, Northwest Airlines announced draconian
cuts in both schedules and service; Midway Airlines declared bankruptcy in August of that
year, citing a “calamitous” decline in air traffic. However, as bad as things were, they soon
got worse.
The September 11, 2001 terrorist attacks on New York and Washington DC devastated the
whole nation, but few segments of the economy felt the impact as dramatically as the already
struggling airline industry. Even after reducing scheduled flights by more than 20 percent,
most planes were taking off with fewer than half their seats filled, and airline shares lost a
third of their value on the stock exchange. Most airlines needed to cut costs drastically in
order to make ends meet, and over 100,000 employees were eventually laid off from
American Airlines, United Airlines, US Airways, Continental Airlines, and America West.
Southwest Airlines bucked this trend however. Indeed, despite the regular ups and downs of
the airline industry, in its 30 years of operation, Southwest had never laid off employees;
remarkably, it was able to maintain this record even during the difficult Fall 2001 period.
Southwest’s no-layoff policy is one of the core values that underlie its human resource
strategy, and insiders stress that it is one of the main reasons why the Southwest workforce is
so fiercely loyal, productive and flexible.
The high productivity of these workers keeps labour costs low, and these savings are passed
on to consumers in the form of lower prices that are sometimes half those offered by
competitors. High levels of job security also promote a willingness on the part of Southwest
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employees to be innovative on the job without fearing that they will be punished for any
mistakes. Southwest also finds that satisfied employees help create satisfied customers and
can even help in recruiting new employees when economic conditions are conducive to
growth.
In order to keep this perfect no-layoff record in 2001, Southwest executives assembled into an
emergency command and control centre in Dallas and brainstormed methods other than
layoffs that could reduce costs. Decisions were made to delay the planned purchase of new
planes, as well as to scrap ongoing plans to renovate the company’s headquarters. The
company which had no debt and over a billion dollars in cash, also leaned heavily on this
“rainy-day” fund to help get through tough times. It was a difficult and painful process, but
as CEO Jim Parker noted, “We are willing to suffer some damage, even to our stock price, to
protect the jobs of our people.”
(from: Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2010) Human Resource Management:
Gaining a Competitive Advantage 6th Ed. McGraw-Hill. pp 225 -226).
1.
Discuss the process of HR Planning.
Where possible, use examples from the
Southwest Airlines case study to illustrate components of the HR Planning process.
(10 marks)
2.
In the case study it is stated that “Southwest’s no-layoff policy is one of the core
values that underlie its human resource strategy.” Critically discuss Southwest’s
decision not to utilise the downsizing strategy.
(10 marks)
Guidelines for the Answering of the Examination Questions:
•
The length of your answer should be guided by the mark allocation.
Generally one coherent point / fact equals one mark.
•
The following sections of this Study Guide (and corresponding sections in the
prescribed text) are relevant to the sample examination questions:
o
Question 1: Section 3.3
o
Question 2: Section 3.3.2
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Suggested Answers to Sample Examination Questions
Question 1 – Process of HR Planning, Using Examples from Southwest Airlines Case.
The HR Planning process entails three key phases:
•
Phase 1: Forecasting
During the phase of forecasting, the HR manager attempts to determine labour supply and
demand for the various positions within the organisation (Noe et al, 2010). Forecasting
may be implemented using both statistical and judgemental methods. Statistical methods
are useful when there is appropriate historical data available (e.g. the company’s
employment trends), while judgemental methods are appropriate where there is limited or
no historical data available (Noe et al, 2010).
While there are no overt references to Southwest Airlines engaging in forecasting in the
case study, factors are mentioned which would have been considered by the airline during
the forecasting phase. These include the decline in business and vacation travel as well
as the September 11 2001 terrorist attacks on Washington DC and New York.
•
Phase 2: Goal Setting & Strategic Planning
The information obtained from the phase of forecasting will lead to the setting of specific
goals and the selection of strategies.
To address an anticipated labour surplus the
strategies of downsizing, pay reductions, demotions, natural attrition, early retirement and
retraining may be applied (Noe et al, 2010). To address an anticipated labour shortage
the strategies of overtime, hiring of temporary employees, technological innovation and
turnover reductions may be applied (Noe et al, 2010).
In terms of Southwest’s practices with respect to this phase of HR planning, Southwest’s
decisions were guided by their “no lay-offs” policy.
Instead of implementing HR
strategies to decrease the size of the workforce during difficult times in 2001, Southwest
halted the purchase of new planes and stopped the refurbishment of its headquarters.
● Phase 3: Programme Implementation & Evaluation
During this stage, the strategies selected during phase 2 of the HR Planning process are
applied. The effectiveness of the strategies in addressing the labour shortage or surplus
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should be monitored on an ongoing basis (Noe et al, 2010). On completion, the results
achieved through the process should be reviewed.
The Southwest Airlines case study notes that organisation’s protection of employees’
jobs leads to positive results in that it provides for more productive employees, who are
innovative on the job. This contributes to the organisation’s long term sustainability.
Question 2 – Southwest’s Decision Not to Utilize the Downsizing Strategy
Based on the information provided in the case, Southwest’s decision not to utilise the
downsizing strategy has proved effective. Indeed, Noe et al (2010) argue that “although the
jury is still out on whether downsizing efforts have enhanced organisational effectiveness,
some early indications are that the results have not lived up to expectations...one study of 52
Fortune 100 firms shows that most firms that announce a downsizing campaign show worse,
rather than better, financial performance in the following years.” It appears that the more
an organisation relies on its human capital as the source of its competitive advantage, the
more negative the impact of downsizing on the organisation’s performance (Noe et al, 2010).
One of the reasons why downsizings have been found to fail is that the ‘survivors’ (the staff
who remain in the organisation) become self-absorbed, risk aversive and narrow minded.
Motivation and productivity suffer as a result (Noe et al, 2010). It has also been noted that
while downsizing may bring about short term cost savings, the long term impact can be very
negative if not managed properly as it leads to the loss of talent while disrupting
organisational networks which provided the organisation with creativity and flexibility (Noe
et al, 2010). If Southwest’s “no lay-offs” policy is reviewed in relation to this statement we
see that the organisation suffered in the short term (through halting the purchase of new
planes and stopping the refurbishing of offices) but would benefit in the long term through
demonstrating that they value and are committed to their personnel.
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SECTION 4
RECRUITMENT, SELECTION AND INDUCTION
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CONTENTS
Learning Outcomes
Reading
4.1 Introduction
4.2 Recruitment
4.2.1 The Nature of Recruitment
4.2.2
Recruitment Policy
4.2.3
Factors Influencing Recruitment
4.2.4
Recruitment Sources
4.2.5
Advantages and Disadvantages of Internal and External Recruitment
4.3 Selection
4.4
4.3.1
Factors Influencing Selection Decisions
4.3.2
Selection Process
Induction
4.4.1
Introduction
4.4.2
The objectives and benefits of induction
4.4.3
Planning, designing and implementing the induction programme
4.4.4
4.5
4.4.3.1
Planning the induction programme
4.4.3.2
Designing the induction programme
4.4.3.3
Implementing the induction programme
Follow-up and evaluation of the induction programme
Summary
Self Check Activity
Study Group Discussion Activity
Sample Examination Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the learner should be able to
demonstrate a holistic understanding of the HRM practices of Recruitment and Selection.
This overall outcome will be achieved through the learner’s mastery of the following specific
outcomes:
1. Demonstrate an understanding of the nature of recruitment and its application.
2. Identify and apply the various recruitment policies organisations may adopt.
3. Identify and critically discuss the factors influencing recruitment within an organisation.
4. Critically discuss the various sources from which an organisation may draw job
applicants.
5. Demonstrate an understanding of the nature of selection and its application.
6. Identify and critically discuss the factors influencing selection within an organisation.
7. Critically discuss and effectively apply the selection process within an organisation.
8. Distinguish between the concepts of induction, orientation and socialisation.
9. Explain the objectives and benefits of an induction programme.
10. Plan, design, implement and evaluate an induction programme.
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READING
Reading
•
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGrawHill. (pp 212 – 229) Chapter 5 and (pp 230-267) Chapter 6
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (pp 169-183) Chapter5 ; (pp184-205)
Chapter 6; (pp 207-229) Chapter 7
Recommended Reading:
Books
•
Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. & Hatfield, R.D. (2006)
Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp
166 – 205 (Chapter 6) and pp 206 – 215 (Chapter 7).
•
Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. & Pilbeam, E.
(2007). Human Resource Management: Fresh Perspectives. pp 79 – 111
(Chapter 4).
•
Snell, S. & Bohlander, G. (2007) Human Resource Management. Mason:
Thomson. pp 170 – 231 (Chapter 5) and pp 232 – 278 (Chapter 6).
Journals
•
Johnson, A., Winter, P.A., Reio Jr,T.G., Thompson, H.L. & Petrosko, J.M.
(2007) “Managerial Recruitment: the Influence of Personality and Ideal
Candidate Characteristics.” Journal of Management Development. Vol. 27,
No. 6, pp 631 – 648.
•
Pollitt, D. (2007) “Boots has the Prescription for Simpler Staff Recruitment.”
Human Resource Management International Digest. Vol. 15, No. 2, pp 27 –
29.
•
Pollitt, D. (2005) “E-Recruitment gets the Nike Tick of Approval.” Human
Resource Management International Digest. Vol. 13, No. 2, pp 33 – 35.
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Journals
•
Richardson, J., McBey, K. & McKenna, S. (2008) “Integrating Realistic Job
Previews and Realistic Living Conditions Previews: Realistic Recruitment for
Internationally Mobile Knowledge Workers.” Personnel Review. Vol. 37, No. 5,
pp 490 – 508.
•
Sekiguchi, T. (2007) “A Contingency Perspective of the Importance of PJ Fit and
PO Fit in Employee Selection.” Journal of Managerial Psychology. Vol. 22, No.
2, pp 118 – 131.
•
Tipper, J. (2004) “How to Increase Diversity through your Recruitment
Practices.” Industrial and Commercial Training. Vol. 36, No. 4, pp 158 – 161.
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4.1
Introduction
Section 3 of this module focused on the activity of Human Resource Planning. Following on
the activity of Human Resource Planning are the activities of Recruitment and Selection,
which are to be the focus of this section of the module.
The following recruitment and selection related issues will be examined in this section:
•
Recruitment
o The nature of recruitment
o Recruitment policies
o Factors influencing recruitment
o Recruitment sources
•
Selection
o Factors affecting selection decisions
o The selection process
4.2
Recruitment
This section examines the nature of recruitment, recruitment policies, factors influencing
recruitment as well as recruitment sources.
4.2.1
The Nature of Recruitment
Noe et al (2012) define recruitment as “…the practice or activity carried on by the
organisation with the primary purpose of identifying and attracting potential employees.” On
the other hand, Snell and Bohlander (2007: 172) define recruitment as “…the process of
locating potential individuals who might join an organisation and encouraging them to apply
for existing or anticipated job openings”.
It also needs to be noted that recruitment is an activity that is related to, and influenced by,
the human resource planning activity, discussed in section 3 of this Study Guide, in that if an
organisation identifies a labour surplus through HR planning, management would want to
reduce the supply of labour and therefore recruitment would not be appropriate for the
organisation at that stage.
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4.2.2
Recruitment Policy
An organisation’s recruitment policy outlines the objectives of the recruitment process and
provides guidelines as to how the recruitment process should be carried out (Nel et al, 2011).
ACTIVITY
Contact your organisation’s HR Manager and request a copy of your
organisation’s recruitment policy.
Read through and analyse the recruitment
policy.
1. Identify the characteristics of your organisation’s approach to recruitment.
2. In your opinion is your organisation’s recruitment policy appropriate? In
other words, is there ‘fit’ or ‘congruence’ between the recruitment policy and
the organisation’s activities and environment?
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Comment on Activity
Organisational recruitment policies can be characterised by a number of factors including:
•
Internal vs External Recruiting
Organisations differ in the extent to which they ‘promote from within’. A policy of
internal recruiting provides greater opportunities for the advancement of the
organisation’s existing employees (Noe et al, 2012).
•
Extrinsic and Intrinsic Rewards
A ‘lead-the-market’ approach to pay involves the organisation in providing remuneration
which is higher than the market average. Those organisations who adopt this approach
have a significant advantage in the market (Noe et al, 2012). Organisations that compete
for job applicants based on pay do so through offering not only extrinsic financial
rewards, but intrinsic rewards as well (Noe et al, 2012).
•
Employment-At-Will Policies
Employment-at-will policies state that either an employer or an employee can terminate
the employment relationship at any time, regardless of cause (Noe et al, 2012). However,
depending on the country in which a company operates, such a policy may be in
contravention of the country’s labour legislation.
•
Image Advertising
Organisations may have a policy of advertising to promote themselves as a good place to
work (Noe et al, 2012). Such advertising is important for organisations that operate
within highly competitive labour markets.
•
Employment Equity & Affirmative Action
While an Affirmative Action policy serves to address past discriminatory recruitment
practices, an Employment Equity policy serves to prevent future discrimination in
recruitment practices (Nel et al, 2012).
In South Africa, the legislation requires
organisations that employ more than 50 employees to exercise an employment equity
policy. In Namibia, organisations employing more than 25 employees are required to
formally implement affirmative action.
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•
Person-Organisation Fit versus Diversity
Certain organisations may choose to follow a recruitment policy which provides for
optimum fit between the organisation’s culture and the recruit. On the other hand,
organisations may follow a recruitment policy which promotes the employment of
diverse individuals so as to enrich the composition and the creativity of its workforce.
4.2.3
Factors Influencing Recruitment
Both external and internal factors influence an organisation’s recruitment practices.
4.2.3.1
External Factors
External factors influencing recruitment include:
•
Government and Trade Union Limitations
Countries, such as South Africa, have put in place equal rights legislation to address
unfair recruitment practices. Trade Unions often participate in the recruitment process so
as to ensure that the process is fair (Nel et al, 2011)
•
Labour Market Conditions
Labour market conditions significantly impact an organisation’s choice of recruitment
programme (Nel et al, 2010). For example, if there is an undersupply of skills within the
labour market, an intensive and multi-pronged recruitment programme would need to be
implemented.
4.2.3.2
Internal Factors
Internal factors which influence recruitment include:
•
Organisational Policy
Organisational recruitment policies with regards to internal versus external recruitment,
employment equity, diversity versus person-organisation fit, etc. (see section 4.2.2) will
influence the nature of the organisation’s recruitment.
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•
The Image of the Organisation
The public image of the organisation, as well as the image which the prospective
employee has of the organisation, will impact on the organisation’s recruitment
programme (Nel, et al, 2011).
•
Recruitment Requirements
It is important that the organisation, through effective job analysis, job descriptions and
job specifications, sets out realistic requirements for the potential job incumbent. Should
unrealistic requirements be set, the success of the recruitment programme will be
impeded?
4.2.4
Recruitment Sources
Due to the expansive nature of the labour market, the source from which an organisation
recruits potential employees is a critical aspect of its overall recruitment strategy.
?
THINK POINT
Consider the organisations for which you have worked. What source mechanisms
were used in your recruitment? (i.e. did you submit your CV electronically in
response to an internet advertisement, or did you register with a private
employment agency?) In your opinion, how effective were these recruitment
sources?
Comment on Think Point
There are a number of sources from which an organisation can draw recruits. It is important,
however, that organisations select their recruitment sources carefully as different sources
present the organisation with different types of recruits. For example, using the internet as a
recruitment source for computer programmers would be more effective than advertising in a
local newspaper as programmers spend much of their time browsing the internet.
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4.2.4.1
Internal Recruitment Sources and Methods
Using internal recruitment sources presents the organisation with a number of advantages,
which include:
•
The organisation is familiar with the performance of the applicants;
•
The applicants have a better understanding of the organisation and the vacant position if
compared to outside applicants; and
•
The filling of vacancies proves to be cheaper and faster (Noe et al, 2012).
The disadvantages associated with internal recruitment sources and methods include:
•
‘In-breeding’ and stale ideas are cultivated as a result of the homogenous workforce;
•
Political infighting may occur between employees;
•
A strong management development programme is required (Noe et al, 2012).
Internal recruitment sources include:
•
Promotion and transfer of present employees
•
Job advertisements circulated to present employees
•
Personal records to identify present employees with potential
•
Skills inventories which provide information on the qualification, skills, performance and
experience of present employees (Nel et al, 2011).
•
Referrals from current employees
•
Former employees, which include those who were laid off previously or have worked
seasonally (Nel et al, 2011)
4.2.4.2
External Sources and Methods
External recruitment sources present the organisation with the following advantages:
•
Entry-level and specialised upper-level positions often require that the organisation look
externally, as the skills required of these positions may not exist within the organisation
•
Introducing outsiders into the organisation will provide for new ideas (Noe et al, 2012)
and it provides for greater diversity.
The disadvantages of external sources and methods of recruitment include:
•
Loss of time and productivity due to the new employee adjusting to the organisation
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•
Existing employees do not strive for promotion; and
•
The new employee may struggle to “fit” with the rest of the organisation (Nel et al,
2011).
External recruitment sources include:
•
Employment agencies
•
Advertisements (placed in newspapers, trade magazines and the internet)
•
Customers, who are familiar with the organisation. The customer could either apply for
the position him / herself, or provide a referral.
•
Direct mail is used to attract the attention of professionals who are usually happily
employed and would not ordinarily be seeking another position. The advertisement for
the position could take the form of an attractive flyer included in a professional or trade
journal (Nel et al, 2011).
•
Campus recruitment (Nel et al, 2010).
4.2.4.3
E-Recruitment
E-Recruitment is an external method of recruitment, but is being discussed in a separate
section as it is a recent but commonly used method to recruit staff. E-recruitment “also
known as online recruitment refers to the process of recruiting via the intranet (internally)
and the internet (externally)” (Nel et al, 2011).
?
THINK POINT
Does the organisation for which you work utilise e-recruitment?
What do you think the benefits of e-recruitment would be?
Comment on Think Point
Nel et al (2011) identifies that e-recruitment is growing very fast. The benefits of using erecruitment include:
•
Job advertisements receive exposure locally, nationally and internationally
•
Reduced advertising costs
•
Information about job vacancies is available 24 hours a day
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•
There is no limit to the length of the advert (unlike with newspapers where even small
adverts are costly), and
•
Online communication devices are used between the organisation and applicant (Nel
et al, 2011)
READING ACTIVITY
Read the following article and then answer the questions that follow. (This article
is available from the Emerald online library facility which all Mancosa learners
have access to via Mancosa’s website).
•
Pollitt, D. (2005) “E-Recruitment gets the Nike Tick of Approval.” Human
Resource Management International Digest. Vol. 13, No. 2, pp 33 – 35.
1.
What were the reasons behind Nike’s implementation of an e-recruitment
strategy?
2.
Describe the key features of the e-recruitment system which Nike
implemented.
3.
How has the e-recruitment system improved Nike’s recruitment practices?
4.
What lessons has Nike learned from the process of setting up an erecruitment system?
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Comment on Reading Activity
Reasons behind Nike’s Implementation of an E-Recruitment Strategy
Despite the growth in Nike’s recruitment team from five staff to nine staff, the organisation
was not coping with the large number of applications for positions. Over 800 applications
were received every month. Nike’s staffing manager, Rolien Hoogers, explained the extent of
Nike’s inability to cope with all the applications received: “we have a firm policy that each
applicant is a potential employee and customer and so we must respond appropriately , in an
individual letter where possible…we were finding it increasingly hard to do that, and we
were losing track of where CVs were in the company…we were concerned about how well we
were protecting applicants’ personal information, and there were mistakes, such as us
calling someone in for an interview who was already due to come in later that day” (Pollitt,
2005: 33).
Furthermore, a review of Nike’s recruitment practices show that the organisation had to:
•
Standardise its HR processes to reduce duplication and improve efficiency;
•
Reduce the cost per hire; and
•
Improve the overall quality of the talent recruited into the organisation (Pollitt, 2005).
Key Features of Nike’s E-Recruitment System
Nike’s e-recruitment system is known as ‘ActiveRecruiter’. Its key features are:
•
It integrates with Nike’s PeopleSoft IT programmes.
•
External job applicants may apply for specific jobs or general speculative job
opportunities via Nike’s website.
•
Nike’s website is linked with external web-based recruitment organisations as a
further mechanism to attract job applications.
•
Nike’s existing employees may apply for positions through the company’s intranet;
•
More senior positions are advertised not only on the website but also in newspapers
and with employment agencies.
•
ActiveRecruiter allows applicants to attach their CV when applying online. As a
result there are no hard copy CVs at Nike and line managers are able to view an
applicant’s CV in soft copy (Pollitt, 2005).
•
ActiveRecruiter holds 8,500 CVs of previous applicants on a database and applicants
in this database are automatically asked to update their CV every six months.
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•
ActiveRecruiter is able to search for competencies amongst applicants’ CVs which
provides for a better quality shortlist of applicants (Pollitt, 2005).
•
Managers receive updates electronically as to the current status of their job openings.
•
ActiveRecruiter has resulted in the staffing team having fewer administrative tasks.
Improvements to Nike’s Recruitment Practices
The e-recruitment system has brought about substantial improvements to Nike’s recruitment
practices. Specific improvements include:
•
There has been a saving of approximately 54% in recruitment costs since the
introduction of the system.
•
There has been less reliance on recruitment agencies.
•
Within a period of a year, 556 positions were filled with 235 internal Nike applicants,
144 external applicants through ActiveRecruiter, 60 through the company’s referral
bonus and 35 through recruitment agencies (Pollitt, 2005).
•
The time taken to fill vacancies has been reduced from 62 days to 42 days.
Lessons Learned
The three key lessons which Nike has learned from the implementation of the e-recruitment
system are:
•
Recruiters should be involved in the development of the e-recruitment system from an
early stage;
•
Involving the recruiters in the process is beneficial in terms of change management
and addressing any potential resistance to change from the recruiters; and
•
Communication is imperative to the successful implementation of the system. It is
particularly important that users of the system see the benefits (Pollitt, 2005).
In summary, section 4.2 has focused on the HRM activity of recruitment. In so doing, the
nature of recruitment, recruitment policies, factors influencing recruitment, recruitment
sources and methods as well as e-recruitment have been examined. Section 4.3 will focus on
the related activity of selection.
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4.3
Selection
This section will focus on the HR activity of selection. In so doing, the factors influencing
selection decisions and the selection process will be examined.
Selection may be defined as “…the process of choosing individuals who have relevant
qualifications to fill existing or projected job openings” (Snell and Bohlander, 2007: 234). In
more simplistic terms, selection “involves choosing the best applicant to fill a position” (Grobler
et al, 2006: 182).
4.3.1
Factors Influencing Selection Decisions
Nel et al (2011) identify both internal and external environmental factors which influence
selection decisions.
?
THINK POINT
In your experience, what are the internal and external factors which influence
selection programmes and decisions within your organisation?
Comment on Think Point
The various internal and external environmental factors impacting on selection programmes and
decisions are discussed below in section 4.3.1.1 and section 4.3.1.2.
4.3.1.1 Internal Environmental Factors
Internal environmental factors which influence selection decisions include:
•
The size of the organisation where the smaller the organisation, the more informal the
selection process and decision
•
The type of the organisation where greater complexity requires more sophisticated selection
techniques
•
The nature of social pressure emerging from, for example, legislation and trade unions
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•
The Applicant pool for a certain job, where larger numbers would require the selection
programme to be relatively sophisticated
•
Speed of decision making, as a slow decision making process may, for example, bring
production to a stand still, and
•
Selection methods can also impact the entire process. Those selection methods which are
chosen are determined by a number of factors including the abilities of the staff involved in
the selection process, the cost of various selection assessments and the complexities of the
administration (Nel et al, 2011)
4.3.1.2 External Environmental Factors
External environmental factors which impact on selection decisions include:
•
The nature of the labour market where, for example, in the instance that there are few
individuals with the skills required, the selection process would be unsophisticated and short.
•
Trade unions where employees who belong to a trade union, can make certain demands in
accordance with the trade union contract (Nel et al, 2011).
•
Government regulations where, for example, legislation may affect the manner in which the
selection process is executed (Nel et al, 2011). Grobler et al (2006: 183) indicates that in the
South African context, labour legislation has a significant impact on the manner in which
organisations conduct selection activities.
Indeed, the legislation stipulates that an
organisation that either directly or indirectly discriminates against a job applicant will be
regarded to have committed an unfair labour practice.
Therefore South African
organisations need to ensure that their recruitment and selection practices are consistent and
equitable and do not discriminate against applicants. Nel et al (2011) points out that this
would, for example, require organisations:
To conduct effective job analyses in order to develop solid and realistic job requirements
and selection criteria;
To give attention to the manner in which job advertisements are formulated;
To handle applicants in a consistent manner;
In interviewing applicants to:
o Carefully phrase questions;
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o Avoid potentially risky questions (e.g. questions which enquire about age, sexual
preference, disability, etc.);
Structure the interview around job dimensions;
To only administer tests which are valid and job related (Nel et al, 2011; Grobler et al,
2006).
4.3.2
Selection Process
The HR activity of selection may be understood as a process.
ACTIVITY
Provide a diagrammatic representation of the process which the practice of
selection follows within your particular organisation.
Comment on
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Comment on Activity
A diagrammatic representation of the selection process is provided in Figure 4.1 below:
PRELIMINARY
SCREENING
Provisional Selection Interview
Application Form
SELECTION METHODS
Testing
Interview
Reference Checking
Medical Examination
APPOINTMENT
Figure 4.1: The Selection Process
As indicated in Figure 4.1, the selection process consists of three main steps. The following
provides a brief description of each of the steps:
•
Phase 1: Preliminary Screening
This represents the first phase in the selection process and involves the provisional selection
interview and the completion of a company application form.
The provisional selection interview usually lasts in the region of 10 minutes and is used to
determine whether the applicant meets the minimum requirements (Nel et al, 2011).
The application form is designed to meet the needs and requirements of the organisation, and
provides information as to the applicant’s qualifications, experience, interests, etc. (Nel et al,
2011).
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Applicants who are judged to have the minimum requirements, based on the provisional
selection interview and completed application form, will proceed to the next phase of the
selection process.
•
Phase 2: Selection Methods
During this phase of the selection process various selection methods are applied including
testing, interviews, reference checking and the medical examination.
One of the most widely used selection tools is the Interview (Nel et al, 2011). The interview
provides for face-to-face communication, and allows the interviewer to gain considerable
information about the applicant’s background, experience, attitude, value and interests. It
also provides the applicant with an opportunity to find out more about the job and the
organisation (Nel et al, 2011). Interviews may be structured, semi-structured or unstructured.
Employment Tests which could assist the organisation with selection include assessments to
measure cognitive aptitude, psychomotor, job knowledge, work sample, vocational interest
and personality (Nel et al, 2011). Assessments centres are useful in gathering information as
to the performance of potential managers and supervisors.
In South Africa clause 8 of the Employment Equity Act of 1998 states that psychological and
other testing of job applicants is prohibited unless it can be proven that the test being used is:
o Valid and reliable (and has been scientifically proven to be so);
o May be applied in a fair manner to all job candidates; and
o Is not biased against any group (Grobler et al, 2008: 290).
Reference checking is a further selection method, where the organisation seeks information
about the performance of an applicant in previous positions (Nel et al, 2011).
The medical examination is usually the last selection method which is administered in the
selection process. The medical examination serves to determine the general state of the
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applicant’s health, but also tests for specific illnesses such as cardiovascular problems (Nel et
al, 2011).
•
Phase 3: Appointment
The final phase in the selection process involves making a choice between the applicants.
Various selection strategies can be utilised to assist the organisation in making this decision
(Nel et al, 2011). These strategies include the compensatory selection strategy and the
multiple hurdles strategy (Grobler et al, 2006: 199). The multiple hurdles strategy requires
that the applicant ‘pass’ each hurdle in the selection process (e.g. provisional interview,
application blank, etc.) while the compensatory selection strategy takes each applicant
through each step in the selection process before making the final selection decision (Grobler
et al, 2006: 199).
In summary, section 4.3 has focused on the HRM activity of Selection. Factors influencing
selection as well as the selection process were examined.
4.4
Induction
Starting a new job is considered to be one of the most stressful life experiences and a proper
induction process that is sensitive to the anxieties, uncertainties and needs of a new employee is
of the utmost importance.
Although induction means to introduce, or to initiate, it is only part of the process that
endeavours to acclimatise the employee into the organisation and turn him into a productive
worker. Orientation means to become familiar with or adjusted to facts or circumstances. It is the
process of informing new employees about what is expected of them in the job and helping them
cope with the stresses of transition. Socialisation means to adapt to life in society. In the
organisation, socialisation is the process of instilling in all employees the prevailing attitudes,
standards, values and patterns of behaviour expected by the organisation and its departments.
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4.4.1 The Objectives and Benefits of Induction
The induction programme helps the new employee to understand the social, technical and
cultural aspects of the workplace and speeds up the socialisation process.
Grobler et al (2006: 207) identifies the goals of the induction programme to be:
•
Acquainting the new employee with the procedures relevant to the job
•
Introducing the employee to co-workers
•
Assisting the employee in understanding how his / her jobs fits into the overall
organisational picture
•
Providing employees with an understanding of the goals of the organisation and the
preferred means by which these goals need to be attained
•
Understanding the basic requirements of the job
•
Providing the employee with insight into the behavioural patterns expected for effective
job performance (Grobler et al, 2006: 207)
?
THINK POINT
Think about the induction processes which you have experienced as a new recruit within
an organisation. Based on your experience, what would you say are the benefits of
induction?
Comment on Think Point
According to Nel et al, (2011) the main benefits of a successful induction process are:
•
A reduction in reality shock and cognitive dissonance
•
An alleviation of employee anxieties
•
Creation of positive work values and a reduction in start up costs, and
•
An improvement in relationships between managers and subordinates
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4.4.2 Planning, Designing and Implementing the Induction Programme
4.4.2.1 Planning the Induction Programme
Research has shown that in many organisations 50% of voluntary resignations occur within the
first six months after organisational entry, often because employee expectations are not met.
Most companies base their induction programmes on what they think the employee should know,
however the most common questions that new employees have should form the basis of the
induction (Nel et al, 2011). According to Cascio and Aguinis (cited in Nel et al 2011) these
question are usually:
•
What are the expectations of this company regarding the services I can offer?
•
Who is my boss and what is he / she like?
•
What kind of social behaviour is regarded as a norm in this company?
•
Will I be able to carry out the technical aspects of my job?
•
What is my future with this company?
4.4.2.2. Designing the Induction Programme
The induction programme must be based on a good balance between the company’s and the
employee’s needs. A concise yet comprehensive programme can be achieved by reviewing the:
•
The target audience
•
Essential and desirable information
•
The literacy level of the employees (Nel et al, 2011).
4.4.2.3. Implementing the Induction Programme
It is desirable for each new employee to receive an induction kit, or a packet of information to
supplement the verbal and visual induction programme. Material that could be included:
•
Company organisation chart
•
Map of company facilities
•
Copy of policy and procedures handbook
•
List of holidays and fringe benefits
•
Copies of performance appraisal forms, dates and procedures
•
Emergency and accident prevention procedures
•
Sample copy of company newsletter or magazine
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•
Telephone numbers and locations of key company personnel (Nel et al, 2008: 268)
4.4.3 Follow-Up and Evaluation of the Induction Programme
Many companies make the mistake of believing that once a new employee has attended the
induction programme, nothing more is needed from the supervisor or manager. Instead, regular
checks should be initiated and conducted by the line manager after the employee has been on the
job one day and again after one week. A follow up check by the HR representative should be
effected after one month (Nel et al, 2011)
4.5
Summary
Section 4 has focused on the HRM activities of Recruitment, Selection and Induction. In
investigating Recruitment, the nature of recruitment, recruitment policies, and factors
influencing recruitment and recruitment sources and methods were examined. In the sub-section
on Selection, the factors influencing selection, as well as the selection process were examined. In
the sub-section on Induction, the objectives and benefits of the induction programme were
discussed. The planning, design and implementation of an induction programme was also
examined.
Section 5 of this module will focus on Employee Training & Development.
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SELF CHECK ACTIVITY
Check your understanding of some of the principles and theory addressed in this section
by answering the questions below.
1. ‘First Clothing’, a manufacturer of sportswear, has recently changed its recruitment
strategy to one which is internally focused.
Which of the following are advantages of an internal approach to recruitment?
A.
The organisation is familiar with the performance of the applicants
B.
In-breeding of ideas occurs
C.
The filling of vacancies is cheaper and faster
D.
A and C
2. Which of the following are disadvantages of an internal approach to recruitment?
A.
The organisation is familiar with the performance of the applicants
B.
In-breeding of ideas occurs
C.
The filling of vacancies is cheaper and faster
D.
A and C
3. First Clothing decides to implement an e-recruitment system to facilitate its internally
focused recruitment strategy. However the HR Director is not 100% convinced about
the benefits of an e-recruitment system.
Which of the following are benefits of an e-recruitment system?
A.
Information about job vacancies is available during business hours
B.
Advertising costs are reduced
C.
There is no limit to the length of the advertisement, as there is with newspaper
ads
D.
Both B and C
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4. In response to the a job advertisement for the position of Production Supervisor,
John, the HR Director receives over 100 enquiries about the position in just one day.
These enquiries form part of the Preliminary Screening stage of the selection
process.
What is ordinarily involved in the Preliminary Screening phase of the selection
process?
A.
Provisional Selection Interview
B.
Completion of an Application Blank
C.
Reference Checking
D.
Both A and B
5. The selection process for the position of Production Supervisor at First Clothing has
been completed and the final decision has been made. Josie is the applicant who
Demonstrated the best fit with both the job and the organisation. It is Josie’s first
day at First Clothing and she is to attend an induction programme.
Which of the following are the main benefits of a successful induction process?
A.
Alleviation of employee anxieties
B.
Establishment of good working relationships between managers and
subordinates
C.
Reduction in employee start-up costs
D.
All of the above
Answers to Self-Check Questions
1.
D
2.
B
3.
D
4.
D
5.
D
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STUDY GROUP DISCUSSION
For this section, your Study Group is required to compare and contrast the HR Planning
practices within the different organisations of the Study Group members.
Preparation
Prior to the Study Group meeting, each individual group member must prepare the
following with respect to their organisation’s Recruitment and Selection Practices:
•
Meet with your organisation’s HR Manager or HR Consultant responsible for
Recruitment and Selection. During this meeting, find out the following information:
o
Does the organisation follow a primarily internal or external approach to
recruitment?
o
How does the organisation’s approach to recruitment support the business
strategy?
o
What selection methods are commonly used by the organisation?
o
How does the organisation’s approach to selection support the business
strategy?
At the Study Group Meeting
At the Study Group meeting each individual group member must be given the opportunity
to present the information on their organisation’s Recruitment and Selection practices.
The differences between organisations must be critically discussed by the Study Group.
Particular attention should be given to whether or not recruitment and selection practices
are supportive of the greater organisational strategy.
Record your notes on the Study Group discussion in the space provided below.
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This Study Group Discussion activity provides the Study Group with an opportunity to reflect
on and compare different organisational approaches to Recruitment and Selection. Group
members, in sharing their experiences will learn from each other which in turn will enable
them to better understand and respond to Recruitment and Selection practices within their
own organisation.
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SAMPLE EXAMINATION QUESTIONS
Instructions:
Read the case study below taken from your prescribed text, Nel et al (2008: 233) and then
answer the questions which follow.
George completed his bachelor’s degree four years ago at one of South Africa’s top
universities, with HRM as one of his two majors. He was employed as an HR manager by
one of the largest internet software companies in Africa, Soft Specials Dot Com that
specialises in B2B network software. They have been in business since 1990, and with the
boom in electronics especially in the software industry they have grown at a rate of 150 %
per year. George has done so well in recruiting the right person for the right job in the right
role that he was promoted to HR Director at the group head office six months ago. The
labour turnover is only 2%, which is actually alarming for George, but he knows it is because
of their excellent remuneration packages and other benefits. They also promote internally
and everybody knows that he or she will get rewarded if he or she works hard in the
organisation. George has recently promoted one of his best candidates, Mthunzi, to fill his
vacancy as HR manager.
George has just been called in by the CEO to help Mthunzi, the new HR manager, at Soft
Specials Dot Com. George was informed that the labour turnover had jumped up to 20% in
the last six months since he had been promoted. The very first thought that came into
George’s mind was “Have I made a mistake by promoting Mthunzi to HR manager?”
Customer demand to license Soft Specials Dot Com’s software boomed so much in the last 2
years that more than 80 new software programmers have been taken on to help develop a
new range of software products. Soft Specials Dot Com’s growth has been so swift that the
company still operates informally, its organisational structure is loose and flexible, and
programmers are encouraged to find solutions to problems as they go along. Although this
structure worked well in the past, George has been told that problems are arising.
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George knows that his job now will be to solve some management problems that have arisen
because of the rapid growth, and also the serious increase in labour turnover, all of a
sudden. George also learned that there have been increasing complaints from employees
that good performance is not being recognised in the organisation, and those they do not feel
equitably treated lately. Moreover, there have been complaints about getting managers to
listen to new ideas and to act on them. A bad atmosphere is developing in the company and
recently several talented employees have left. George can sense a negative organisational
culture developing.
(from: Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B. (2008) Human Resource
Management. 7th Edition. Cape Town: Oxford University Press Southern Africa. P 233).
1.
Soft Specials Dot Com has operated very informally and it is likely that there is no
recruitment and selection policy which Mthunzi could utilise to guide his recruitment
process.You are required to develop a recruitment and selection policy for George to
give to Mthunzi which will prevent some of the bad recruitment decisions which
Mthunzi has
made over the past few months.
(20 marks)
2.
Could the labour turnover at Soft Specials Dot Com be improved at all through the
implementation of an induction programme? Provide reasons for your answer.
(5 marks)
What key issues should be covered in an induction programme at Soft Specials Dot
Com?
(5 marks)
Guidelines for the Answering of the Examination Questions:
•
The length of your answer should be guided by the mark allocation.
Generally one coherent point / fact equals one mark.
•
The following sections of this Study Guide (and corresponding sections in the
prescribed text) are relevant to the sample examination question:
o
Question 1: Section 4.2 and 4.3
o
Question 2: Section 4.4
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Suggested Answers to Sample Examination Questions
Question 1 – Recruitment & Selection Policy.
Recruitment and Selection Policy for Soft Specials Dot Com
1. Human capital is recognised to be critical to Soft Specials Dot Com’s ability to fulfill
its business strategy and achieve competitive advantage in the market.
Our
recruitment and selection policy has been developed to support the effective
implementation of our business strategy.
2.
Recruitment Principles:
The following principles will guide Soft Specials Dot Com’s recruitment practices:
2.1 Our recruitment practices will be in line with legislative requirements.
2.2 So as to promote innovativeness and a diversity of ideas within our business, Soft
Specials Dot Com will in the first instance, seek to recruit from the external labour
market.
2.3 In areas where there is a limited supply of human capital in the external labour
market, Soft Specials Dot Com, will recruit from within. Appropriate training and
development programmes will be offered to existing employees who show
potential in this regard.
2.4 Soft Specials Dot Com will seek to be an ‘Employer of Choice’ as a means to
attract a high calibre of interested applicants to our organisation.
2.5 In line with our core business, and so as to attract suitable applicants, erecruitment will be our primary method of recruitment. This will be supported by
the use of recruitment agencies as and when needed.
3. Selection Principles:
The following selection principles will guide Soft Specials Dot Com’s selection
practices:
3.1 Various selection methods will be used in an effort to seek an optimal fit between
the person which we recruit and Soft Specials Dot Com’s organisational culture.
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3.2 The selection strategy that will be employed will be a multiple hurdles strategy
3.3 The selection process that will be implemented will be thorough and will involve:
•
An online application form, supported by a CV
•
A panel interview involving the direct superior, the HR consultant and a
technical specialist
•
An appropriate employment test
•
The checking of at least two references
Question 2 – Induction
While it is doubtful that an induction programme could dramatically bring down the high
labour turnover at Soft Specials Dot Com, it is likely that, if it is well designed, an induction
programme will have a positive impact on the labour turnover rate. Indeed the purpose of an
induction programme is to socialise new employees into the workplace and in so doing
reduce the employee’s reality shock and cognitive dissonance, reduce anxieties, as well as
create positive working relationships between the new employee and his manager and peers
(Nel et al, 2008: 262).
For Soft Specials Dot Com’s induction programme to be effective, it is important that the
following is addressed:
•
Address from the CEO or key senior manager in which information about the company’s
background and culture is provided. The CEO / senior manager should also detail the
company’s expectations of employees
•
Soft Specials Dot Com’s organisational chart
•
Map of the company facilities
•
Copy of policy and procedure handbooks (if available)
•
Emergency and accident prevention procedures
•
Sample copy of company newsletter
•
Telephone numbers and locations of key personnel (Nel et al, 2008: 268)
•
Information on the new employee’s job and people with whom he / she will be working
Such information will assist the new employee in easily settling into his / her role within the
organisation, and may contribute to preventing, or at least delaying, the dissatisfaction
amongst employees which is being expressed in the case study.
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SECTION 5
EMPLOYEE TRAINING AND DEVELOPMENT
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CONTENTS
Learning Outcomes
Reading
5.1 Introduction
5.2 The Concepts: Training and Development
5.3 Training
5.3.1
The Training Process
5.3.2
Training Within the South African Context
5.4 Development
5.4.1 Formal Education Programmes
5.4.2
Assessment
5.4.3
Job Experiences
5.4.4
Interpersonal Relationships
5.5 Summary
Self Check Activity
Study Group Discussion Activity
Sample Examination Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the learner should be able to
demonstrate a holistic and practical understanding of employee training and development
within organisations. This overall outcome will be achieved through the learner’s mastery of
the following specific outcomes:
1. Distinguish between the concepts of training and development.
2. Identify, critically discuss and apply the training process.
3. Discuss and conduct a training needs analysis.
4. Discuss and manage the design, development and delivery of training.
5. Critically discuss and manage the evaluation of training.
6. Critically discuss the impact of the South African context on training.
7. Identify, critically discuss and effectively utilise the development approaches of formal
education, assessment, job experiences and interpersonal relationships.
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READING
Reading
•
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGrawHill. (pp 268 – 336) Chapter 7; (pp 394-438) Chapter 9
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (356-404) Chapter 13
Recommended Reading:
Books
•
Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. and Hatfield, R.D. (2006)
Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp
300 – 347 (Chapter 10).
•
Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. and Pilbeam, E.
(2007). Human Resource Management: Fresh Perspectives. pp 113 – 139
(Chapter 5).
•
Meyer, M. & Orpen, M. (2007) Occupationally-Directed Education, Training
and Development Practices. Johannesburg: Lexis Nexis.
•
Snell, S. & Bohlander, G. (2007) Human Resource Management. Mason:
Thomson. pp 280 – 329 (Chapter 7).
Journals
•
Auluck, R.K. (2007) “Mere Nip and Tuck? Training and Development’s
Changing Role.” Industrial and Commercial Training. Vol. 39, No. 1, pp 27 –
34.
•
Brinkerhoff, R.O. (2006) “Increasing Impact of Training Investments: An
Evaluation Strategy for Building Organisational Learning Capability.”
Industrial and Commercial Training. Vol. 38, No. 6, pp 302 – 307.
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Recommended Reading (continued):
Journals
•
Shaw, S. & Farhurst, D. (2008) “Engaging a new Generation of Graduates.”
Education and Training. Vol. 50, No. 5, 2008, pp 366 – 378.
•
Skinner, D., Saunders, M.N.K. and Beresford, R. (2004) “Towards a Shared
Understanding of Skill Shortages: Differing Perceptions of Training and
Development Needs.” Education and Training. Vol. 46, No. 4, pp 182 – 193.
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5.1
Introduction
This section will explore the HR practices of Employee Training and Development. The
following will be examined:
•
The concepts: training and development
•
Training
o The Training Process
Needs Assessment
Employees’ Readiness for Training
Creating a Learning Environment
Ensuring Transfer of Training
Selecting Training Methods
Evaluating Training Programmes
o Training in the South African context
•
Development
o Approaches to development
5.2
Formal education
Assessment
Job experiences
Interpersonal relationships
The Concepts: Training and Development
A distinction can be made between the related concepts, Training and Development.
?
THINK POINT
Consider the Training and Development initiatives within your organisation.
What activities are labelled as ‘training’ and which initiatives generally receive
the ‘development’ label?
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Comment on Think Point
Grobler et al (2006: 300) identify training as being task oriented and focused on improving
the learner’s job performance. Development, on the other hand, is argued to be directed
towards “creating ongoing learning opportunities so that employees can improve over a
longer period of time and learn skills other than those required in the current job”
(Kleynhans et al, 2007: 117).
Snell and Bohlander’s (2006: 282) distinction between the concepts of training and
development focuses on the orientation of the learning intervention. It is argued that training
“tends to more narrowly focused and oriented towards short term performance concerns”
(Snell and Bohlander, 2006: 282) while development is future-oriented and focuses on
“broadening an individuals skills for future responsibilities” (Snell and Bohlander, 2006:
282).
5.3
Training
Training may be defined as the “planned effort by a company to facilitate employees’
learning of job-related competencies.
These competencies include knowledge, skills or
behaviour that are critical for successful job performance” (Noe et al, 2008: 267). As has
been indicated throughout this Study Guide, in the dynamic business environment of today, a
company’s human resources provide the intellectual capital necessary to enable the firm to
successfully compete within its industry.
In order to ensure that the organisation’s
intellectual capital is maintained, training is necessary.
5.3.1
The Training Process
The training process refers to a systematic approach for developing training programmes
designed to contribute to competitiveness. Figure 5.1 below represents the six steps of this
process, which emphasises effective training practices (Noe et al, 2012: 275)
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Needs
Assessment
Employee’s
Readiness for
Training
Creating a
Learning
Environment
Ensuring Transfer
of Training
Selecting
Training Methods
Evaluating
Training
Programmes
o
Organisational Analysis
o
Person analysis
o
Task analysis
o
Attitudes and Motivation
o
Basic Skills
o
Identification of objectives and outcomes
o
Meaningful material
o
Practice
o
Feedback
o
Observation of others
o
Administering and coordination of programme
o
Self Management Strategies
o
Peer and Manager Support
o
Presentational Methods
o
Hands-On Methods
o
Group Methods
o
Identification of Training Outcomes
& Evaluation Design
o
Cost Benefit Analysis
Figure 5.1: The Training Process (Noe et al, 2012: 275)
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5.3.1.1 Needs Assessment
Needs assessment is the first stage in the training process and involves a procedure to
determine whether training will indeed address the problem which has been identified. The
process involved in conducting a needs assessment is summarised in Figure 5.2.
REASONS
TO CONDUCT
NEEDS ANALYSIS
•
•
•
•
•
•
•
Legislation
Lack of basic
skills
Poor
performance
New technology
Customer
requests
Higher
performance
standards
New jobs
Figure 5.2:
ORGANISATION
ANALYSIS
(What is the context?)
PERSON
ANALYSIS
(Who needs training?)
TASK
ANALYSIS
(In what do they need
training?)
OUTCOMES
•
•
•
•
•
•
What trainees
need to learn
Who receives
training
Type of training
Frequency of
training
Buy-versus-build
decision
Training vs other
HR options such
as selection or job
redesign
The Training Needs Analysis Process (adapted from Noe et al, 2012:276)
As can be seen from Figure 5.2, the needs analysis process starts with the identification of a
‘pressure point’ such as poor performance, new technology or job redesign. This pressure
point prompts the conducting of a needs analysis, which involves the following:
•
Organisational analysis where aspects of the organisational context (such as the firm’s
strategic impact, the training resources available and the support of managers and peers)
are considered (Noe et al, 2012).
•
Person analysis where the employees who require training are identified (Noe et al,
2012).
•
Task analysis which involves identifying the tasks, knowledge, behaviour and skills
which need to be emphasised in conducting the training (Noe et al, 2012)
The organisational, task and person analysis will produce certain outcomes which will direct
the organisations approach to training (Noe et al, 2012). The outcomes may indeed show
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that the problem initially identified cannot be solved by training, but rather by another HR
intervention, such as job redesign.
5.3.1.2
Ensuring Employees’ Readiness for Training
The second step of the training process involves evaluating an employee’s readiness for the
training.
?
THINK POINT
Think about a successful and an unsuccessful training experience that you have had.
Did your readiness for the training have any impact on the success / effectiveness of
your training experience?
Comment on Think Point
A number of research studies have shown that an employee’s motivation to learn impacts on
“knowledge gain, behaviour change, or skill acquisition in training programmes” (Noe et al,
2012). Managers can facilitate an employee’s motivation to learn through ensuring the
following for the employee:
•
Self-Efficacy: refers to an employee’s belief that they can successfully learn and master
the outcomes of the training programme. Managers should facilitate employees selfefficacy by making it clear that the training is a positive, learning experience and is not to
be used to expose any performance gaps which the employee may have (Noe et al, 2012).
It is also important for an employee’s self-efficacy for them to understand the purpose of
the training, before attending the actual training.
•
Understanding of the Benefits and Consequences of Training: It is important that
employees understand the potential job-related, personal and career benefits which may
result from the training (Noe et al, 2012).
•
Awareness of Training Needs, Career Interests and Goals: Employees need to have an
understanding of their areas of strength and weakness in terms of their existing
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competence so that they are able to chose training programmes which address their areas
of weakness (Noe et al, 2012).
•
Understanding of Work Environment Characteristics: To enhance an employee’s
motivation to learn, it is important that he / she has sufficient social support from his / her
colleagues and managers. Having the right tools, equipment, materials and time relevant
to the new skill being learnt is important for the employee’s successful achievement of
competence (Noe et al, 2012).
•
Ensuring Employees have a Basic Level of Skill:
Having fundamental cognitive,
reading, writing and communication skills are imperative for the success of an employee
on a training programme. It is important therefore that managers do not place employees
on training programmes which require a higher level of cognitive and communication
competency than that which the employee currently possesses (Noe et al, 2012).
5.3.1.3
Creating a Learning Environment
?
THINK POINT
Consider the various learning experiences which you have had through your
lifetime. In particular, think about what you learnt at:
•
Primary school
•
High / Secondary school
•
College
•
University
•
On-the-job training
•
Training workshops at your workplace
Out of all the learning experiences that you have reflected on, identify the one from
which you believe that you learnt the most.
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Comment on Think Point
Educational and industrial psychologists have identified the conditions required for an
employee’s learning to be optimal. These conditions are indicated in Figure 5.3 below. All
training programmes need to fulfill these conditions if learning is to take place. It is likely
that these conditions were not met for the learner at school. Ideally, however, they should
have been met in training workshops at the workplace.
Commit Training
Content to
Memory
Need to Know
Why They Should
Learn
Experience &
Interact with
Others
Meaningful
Training Content
Good Programme
Coordination &
Administration
Feedback
Opportunities for
Practice
Figure 5.3:
5.3.1.4
Conditions for Learning (Noe et al, 2012: 286)
Ensuring Transfer of Training
?
THINK POINT
Think about a job related training programme which you attended at the
organisation for which you work. Such a training programme could be an end user IT
programme (e.g. MS Word), a continuing professional development programme (e.g.
Tax Update) or an interpersonal skills programme (e.g. Communication Skills).
After attending the actual training workshop, did you apply the skills which you had
learnt in the performance of your job? Provide reasons for your answer.
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Think Point
Frequently, employees attend training, but fail to apply what they have learnt in the
performance of their jobs. This is often because the factors required for the transfer of the
learning to the job are not present in the work environment.
The factors within the work environment necessary for the transfer of training include:
•
Climate for Transfer, which refers to the employee’s perceptions of the work
environment which will facilitate or inhibit their application of learning.
•
Technological support
•
Manager support: Managers need to not only stress the importance and relevance of
employees attending a particular training programme, but they should also support the
application of skills learnt in the performance of the job (Noe et al, 2012).
•
Peer support: This can take the form of two or more employees, who are also
enrolled on the training intervention, forming a support network to aid each other in
the development of skills (Noe et al, 2012).
•
Self management skills: These can be developed through the training programme
where employees develop action plans as to how they will apply their skills.
•
5.3.1.5
Opportunities to use learned capability (Noe et al, 2012)
Selecting Training Methods
It is important that appropriate training methods are chosen so as to ensure an optimal
learning experience.
ACTIVITY
Consider the training which you received within the organisations for which you
have worked.
Identify the various training methods which were used, and
comment on the effectiveness of each.
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Comment on Activity
Training methodologies may be divided into three groups:
•
Presentation Methods where learners are passive recipients of information
•
Hands-on-Methods where the learner is actively involved in the learning, and
•
Group Building Methods where learners work together to build a team identity
(Noe et al, 2012)
Examples of the methods used in each of these categories are provided in the tables below:
Method
Classroom
Instruction
•
•
•
Distance
Learning
•
•
Audiovisual
Techniques
Method
On-the-Job
Training
Presentation Methods
(Noe et al, 2012; 291-295)
Description
Trainer lectures the group
May include question and answer sessions,
discussion and case studies to provide for
participation
Used by geographically dispersed
companies
Two-way communication between learners
and trainer
Includes audio conferencing,
videoconferencing and docuconferencing
• Includes overheads, slides, video
• Rarely used alone
Advantages
• Least expensive
• Least time-consuming
• Large number of learners
• Company saves on travel costs
• Employees at remote locations
have the opportunity to receive
training
• Video provides trainer with
flexibility
• Video exposes trainees to actual
problems
Hands on Methods
(Noe et al, 2012, pp 295-304)
Description
• Philosophy: employees learn by observing •
peers or supervisors and imitate their
behaviour
• Used to train new recruits, and to upgrade
skills of experienced employees
• Forms include apprenticeships (or
•
learnerships) and self-directed learning
Advantages
Advantages of self-directed
learning include the learner
learns at own pace and receives
feedback on learning
performance
Advantages of apprenticeships
include the learner being able to
earn pay while he/she learns
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Method
•
Simulations
•
Business
Games and
Case Studies
Web-Based
Training
Method
•
•
•
Hands on Methods
(Noe et al, 2012, pp 295 – 304)
Description
Method that represents real life situation
•
and learners observe the impact of their
decisions
•
Used to develop technical and management
skills
Used for management skills development
•
Case studies present business scenarios for
analysis
•
Games require learners to gather
information, analyse it and make decisions •
• Refers to training that is delivered over the
internet and intranet
• Supports virtual reality, interactions &
animation
Stimulate learning as learners
are actively involved
Games mimic competitive
nature of business
Cases assist in developing
higher order intellectual skills
• Ability to deliver training to
learners anywhere in the world
• Ease of updating training
programmes
Group Building Methods
(Noe et al, 2012, pp 304-310)
Description
•
Adventure
Learning
• Development of teamwork and leadership
skills using structured outdoor activities
• May involve challenging physical activities
•
Team
Training
• Promotes the ability of team members to
work together effectively
• Usually uses multiple methods
•
Action
Learning
• Provides groups with a problem which they
are required to solve and for which they are
required to produce an action plan
Advantages
Learners need not be afraid of
the impact of wrong decisions
Errors are not as costly
•
Advantages
Participants report that they
gain an improved
understanding of themselves
and their interactions with coworkers
Provides for the development
of procedures to address team
issues, coordinate information
gathering, and support
individual team members.
Appears to maximise learning
as it involves real-time
problems
Useful for identifying
dysfunctional team dynamics
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5.3.1.6
Evaluation of Training
The final phase in the training process involves the evaluation of training. Given that
training is conducted to assist firms in gaining competitive advantage, it is important that the
effectiveness of training interventions is evaluated.
Four Criteria for Evaluation
Snell and Bohlander (2007: 311) identify four criteria which may be used to evaluate
training. These are:
•
Criterion 1: Reaction
This stage is the simplest stage and measures the learner’s opinions about the training
programme.
•
Criterion 2: Learning
This involves measuring the change in knowledge, skills and attitudes as a result of the
learner attending the training programme (Snell & Bohlander, 2007: 312). The trainer
may consider using a pre-test/post-test with control group assessment design to ensure
that changes in knowledge, skills and attitudes did indeed result from the training
programme.
•
Criterion 3: Behaviour
This stage measures the actual on-the-job changes in behaviour which result from
attending the training programme (Snell and, 2007: 313). It is recommended that this
appraisal of behaviour should be made by a couple of individuals including the learner,
his superior, his subordinates and his peers. Such an appraisal should only be conducted
three months after the training was presented.
•
Criterion 4: Results
This stage focuses on how the training intervention has impacted on the organisation.
The questions which are investigated include “How much did quality improve because of
the training?” and “How much has it contributed to profits?”(Snell & Bohlander, 2007:
313).
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READING
Read the following journal article and then answer the questions which follow.
•
Brinkerhoff, R.O. (2006) “Increasing Impact of Training Investments: An
Evaluation Strategy for Building Organisational Learning Capability.”
Industrial and Commercial Training. Vol. 38, No. 6, pp 302 – 307.
1. Discuss Brinkerhoff’s (2006) critique of typical training evaluation methods
Comment on Reading Activity
2. Discuss Brinkerhoff’s (2006) Success Case Method Evaluation Strategy and
identify the manner in which it supports organisational strategy.
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Comment on Reading Activity
Brinkerhoff (2006) notes that the impact of training is dependent on the manner in which the
training is implemented. Two organisations may implement the same training programme
but its impact is likely to differ. Brinkerhoff identifies that organisations differ in the way
that they “make use of training, the way it is organised, planned, implemented and above all,
followed up and supported…some companies are reaping huge returns on investment in
learning by changing the way we conceptualise and manage their training process…others,
stuck in the older paradigm as ‘delivery of learning programmes’ continue to waste millions,
and fail to leverage their large investments in learning and training” (Brinkerhoff, 2006:
303).
Critique of Typical Training Evaluation Methods
Brinkerhoff (2006) asserts that the best results a company can achieve through training are
increased capability in employees. The real value from training “comes when capability is
transformed into improved job performance…training that is well learned, but never used, or
poorly used, produces no value for the business that invested in the training….this issue is, in
a nutshell, the challenge for increasing the return on training investments” (Brinkerhoff,
2006: 303). In other words, ensuring performance from improved capability is in effect a
performance management challenge. It is imperative therefore that training is implemented
in conjunction with an aligned performance management system (Brinkerhoff, 2006: 303).
As Brinkerhoff (2006) asserts “the reality is that … performance system factors are the
principal determinants of impact from training and can, if they are not aligned and
integrated, easily overwhelm even the very best of training” (p 303).
Brinkerhoff (2006) identifies that the key challenge for organisations is “how to leverage
learning consistently, quickly, and effectively into improved performance” (Brinkerhoff,
2006: 304). Indeed, this is not something which occurs in typical organisations where the
translation of learning / capability into performance, and therefore impact, amounts to less
than 15%. What organisations therefore require is not an evaluation method which keeps
uncovering the poor impact of training, but rather a strategy and method for changing the
poor impact of training (Brinkerhoff, 2006). Such a strategy should identify and address
factors which prevent the translation of learning to performance on the job, as well as inform
various stakeholders (e.g. supervisors, management, etc.) within the organisation as to what
is required from them to support the application of learning.
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Re-Defining the Evaluation Process
Brinkerhoff (2006) advises that the following training evaluation process, known as the
‘Success Case Method’ should be followed:
•
Survey of the Most Successful Trainees: Those trainees who were most successful in
applying what they had learnt during the training are interviewed.
During these
interviews the training system factors (e.g. timing of training, opportunities to apply
learning, managerial support) which supported the employees’ in applying what they had
learnt are identified (Brinkerhoff, 2006).
•
Survey of the Most Unsuccessful Trainees: The most unsuccessful trainees, in terms of
applying what they have learnt on the job, are also interviewed.
These interviews
determine the factors which inhibited the employees’ application of newly acquired skills
(Brinkerhoff, 2006).
The results of these surveys provide the organisation with information regarding “what
worked, what did not, what worthwhile results have been achieved, and most importantly,
what can be done to get better results from future efforts” (Brinkerhoff, 2006: 305).
Brinkerhoff (2006) concludes by asserting that the Success Case Method is effective in
supporting the achievement of the organisation’s overall strategy.
He asserts that
“evaluation of training, when embedded in a coherent and constructive strategic framework
like the one presented, is a powerful tool for organisational learning and capability
building” (Brinkerhoff, 2006: 307).
3.2
Training within the South African Context
Training and development within South Africa is currently in a state of flux. Legislation,
such as the SAQA Act of 1995, the Skills Development Act of 1998 and the Skills
Development Levies Act of 1999 have been promulgated to bring about improvements to the
effectiveness of learning initiatives within enterprises. The focus of this legislation is to
address the weaknesses of South Africa’s past training and development system, so as to
contribute to the rebuilding of the economy (Grobler, 2006: 327).
The implementation of the SAQA Act, the Skills Development Act and Skills Development
Levies Act has not been without its challenges. As a result, as at September 2008, a proposed
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new piece of legislation, known as the ‘Skills Development Amendment Bill’ has been under
discussion. This bill aims to bring further changes to the manner in which training is
implemented and governed within South Africa.
?
THINK POINT
Consider the education, training and development system which you have
experienced within South Africa, or the country of your choice, over the past 15 to
20 years. What characteristics of this system did you find to be limiting?
Comment on Think Point
The ‘new’ education, training and development system which is currently being built in
South Africa strives to address the weaknesses of the past system. The following table
provides an indication as to how the ‘new’ system addresses the weaknesses of the ‘old’
system.
Past System
New System
Varying
quality
between
training
providers and training programmes
A national quality management system has
been put in place to ensure consistent quality
across all training providers and training
programmes
Focus on inputs and content
Focus has shift to outputs or outcomes
Learners rated against each other (norm
based assessment)
Learners assessed against a national standard
Teacher/trainer-centred
Learner centred
No recognition of prior learning
Recognition of prior learning (RPL) – learners
are able to gain credit for knowledge and skills
they acquire informally
Ad
hoc
reporting
achievements
of
learning
A national record of learning database has
been established to ensure centralised and
consistent reporting of learning achievements
Table 5.2: The difference between the ‘past’ and ‘new’ training system within South Africa
(Meyer and Orpen, 2007)
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5.3.2.1
The National Qualifications Framework (NQF)
The NQF is a framework on which standards and qualifications, agreed to by education and
training stakeholders throughout the country are registered. Registered unit standards and
qualifications are structured in such a manner that learners are able, on successful completion
of accredited prerequisites, to move between components of the delivery system. It further
allows for multiple pathways to the same learning end. The NQF is essentially a quality
assurance system with the development and registration of standards and qualifications as the
first important step in implementing a quality education and training system in South Africa.
The bodies responsible for quality assurance are called Education and Training Quality
Assurance Bodies (Nel et al.; 2011: 363)
Figure 5.3 The National Qualifications Framework (NQF) structure (Nel et al. ; 2011: 364)
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5.4
Development
As identified in sub-section 5.2, development interventions are future oriented and serve to
develop skills within employees which will enable them to move into jobs that possibly do
not yet exist (Nel et al, 2011)
?
THINK POINT
Outline the development interventions that are implemented within your organization.
Comment on Think Point
Development interventions include formal education programmes, assessment, job
experiences and interpersonal relationships. Each of these is discussed in sections 5.4.1 –
5.4.4 below.
5.4.1
Formal Education Programmes
Formal education programmes include:
•
Off-site and in-house programmes customised for the organisation’s employees
•
Short courses presented by universities and/or consultants
•
Executive MBA programmes, and
•
General public university programmes (Noe et al,2012)
5.4.2
Assessment
According to Noe et al (2012) assessment involves “collecting information and providing
feedback to employees about their behaviour, communication style, or skills”. Assessment is
frequently used to identify employees with managerial potential.
Organisations vary in their use of assessment methods. Popular methods, however, include:
•
The Myers-Briggs Type Indicator
•
The Assessment Centre
•
Benchmarks
•
Performance Appraisals and 360 Degree Feedback Systems
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5.4.3
Job Experiences
Job experiences refer to “relationships, problems, demands, tasks, or other features that
employees face in their jobs” (Noe et al, 2012). Job experiences may be used for employee
development in various ways including:
•
Job enlargement where the employee’s existing job is expanded horizontally so as to
include a greater variety of activities
•
Job enrichment where the employee’s existing job is expanded vertically so as to
provide the employee with greater challenge and responsibility
•
Job rotation where the employee moves among jobs within a particular department
•
Transfers, Promotions and Downward Moves, and
•
Temporary Assignments with Other Organisations
5.4.4
Interpersonal Relationships
Development can also occur through the establishment of interpersonal relationships through
mentoring and coaching programmes.
A mentor is “an experienced, productive senior employee who helps develop a less
experienced employee” (Noe et al, 2012). On the other hand, a coach may be defined as “a
peer or a manager who works with an employee to motivate him, help him develop skills and
provide reinforcement and feedback” (Noe et al, 2012).
A mentor may provide career support and / or psychosocial support to the employee (Noe et
al, 2012). Key factors for the success of a mentorship programme include:
•
Voluntary participation in the mentorship programme by both mentor and protégé
•
A mentor’s past record in developing employees is a key factor in his / her selection for a
mentorship programme
•
The matching of mentor to protégé is based on the degree to which the mentor’s skills
can meet the protégé’s needs
•
There is an evaluation of the mentorship programme (Noe et al, 2012)
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Coaching may take the form of:
•
one-on-one sessions with the employee for the purpose of giving feedback
•
pairing an employee with an expert in an area who helps the employee develop relevant
job related skills, and
•
facilitating an employee’s access to relevant mentors, training programmes and job
experiences which the employee would not have been in a position to access without the
coach’s help (Noe et al, 2012)
In summary, this sub-section examined the practice of development.
The development
approaches of formal education, assessment, job experiences and interpersonal relationships
were studied.
5.5
Summary
This section has focused on Employee Training and Development. The concepts of training
and development were examined. In investigating the activity of Training, the training
process as well as South Africa’s approach to training was studied. In investigating the
activity of Development the various development activities of assessment, job experience,
formal education and interpersonal relations were examined.
The following section, Section 6, will focus on the HRM issue of Performance Management.
SELF CHECK ACTIVITY 1
Read the following scenario taken from Noe et al (2010: 451).
“Your boss is interested in hiring a consultant to help identify potential managers
among current employees of a fast food restaurant. The manager’s job is to help wait
on customers and prepare food during busy times, oversee all aspects of restaurant
operations (including scheduling, maintenance, on-the-job training, and food
purchase), and help motivate employees to provide high-quality service. The manager
is also responsible for resolving disputes that might occur between employees. The
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position involves working under stress and coordinating several activities at a time.
She asks you to outline the type of job assessment programme you believe would do
the best job of identifying employees who will be successful managers” (Noe et al, 2010:
451).
Use your knowledge of assessment to formulate an answer to your boss’s question in
the space provided below.
SELF CHECK ACTIVITY 2
Check your understanding of some of the principles and theory addressed in this section
by answering the questions below.
1. Twenty-First Consulting, a management consultancy, has decided to implement a
Customer Service Excellence workshop for its entire staff. The workshop will be five
days in duration.
The Customer Service Excellence workshop which is to be implemented for all
staff is an example of
A.
Training
B.
Development
C.
Assessment
D.
Both B and C
2. Tshepo, the HR Director at Twenty-First Consulting, came to the decision that all
staff needed to attend the Customer Service Excellence workshop after the recent
Executive Committee Strategic Planning session. During this Strategic Planning
session, it was decided that one of the organisation’s objectives for the next two
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years would be to improve customer service in an attempt to gain competitive
advantage in the market.
Tshepo reached the decision to implement a Customer Service Excellence workshop
as a result of:
A.
Organisational Analysis
B.
Person Analysis
C.
Task Analysis
D.
Performance Analysis
3. The staff in Tshepo’s department is reluctant to attend the Customer Service
Excellence Training and one of the reasons for this is that the training involves an
assessment. A few of the HR Consultants and HR Administrators have voiced that it
has been years since they have undergone an assessment and they are concerned that
they will not do as well as expected. Tshepo attempts to address his staff’s fears by
explaining that the training is to be a positive experience and is not meant to be
punitive. Furthermore, he expresses his confidence in all of the HR staff’s ability to
succeed and indeed excel in the assessment.
Tshepo’s efforts described above are an example of which of the following stages of
training?
A.
Needs assessment
B.
Ensuring the employee’s readiness for training
C.
Creating a learning environment
D.
Ensuring transfer of training
4. Tshepo is busy working with the service provider, Training Today, to determine the
outcomes and structure of the Customer Service Excellence training programme.
Tshepo is adamant that the training programme should incorporate business games
and case studies.
Business games and case studies are an example of which of the following clusters of
training methods?
A.
Hands of Methods
B.
Presentation Methods
C.
Group Building methods
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D.
Input methods
5. Tshepo has decided that on completion of the training, an evaluation will be
conducted. This evaluation will involve getting the participants to fill out a
“smile sheet” on completion of the workshop indicating their level of satisfaction
with the training.
Tshepo’s intention is to utilise which of the following criteria to evaluate the
effectiveness of the training?
A.
Reaction
B.
Learning
C.
Behaviour
D.
Results
Answers to Self Check Activities
Self Check Activity 1
Model Answer
The assessment approach which would best suit this scenario is the Myers-Briggs Type
Indicator (MBTI).
The MBTI would provide the consultant with an indicator of the
employee’s personality (Noe et al, 2010:420) and this would provide valuable information as
to whether or not the particular employee would be able to operate effectively within the
high-pressured and stressful job of a fast-food restaurant manager.
The consultant may also consider the assessment approach of the assessment centre, where
multiple assessors would evaluate the employee’s performance on a number of exercises
(Noe et al, 2010: 422). The exercises would provide the consultant with information as to the
employee’s administrative and interpersonal skills.
A further assessment approach which the consultant may consider is benchmarks. This is
“an instrument designed to measure the factors that are important to being a successful
manager” (Noe et al, 2010: 424). The items measured by this instrument include the
employee’s competence in dealing with subordinates, creating a productive work
environment and utilising resources.
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Answers Self Check Activity 2
1.
A
2.
A
3.
B
4.
A
5.
A
STUDY GROUP DISCUSSION
For this section, your Study Group is required to compare and contrast Training
experiences of the different Study Group members.
Preparation
Prior to the Study Group meeting, each individual group member must prepare the
following with respect to their experience of training:
•
Select two work related training interventions in which you have participated. The
one training intervention should have been very successful, while the other training
intervention which you choose should have been poor.
o
Identify the factors which made the one training intervention successful
o
Identify the factors which made the other training intervention unsuccessful
At the Study Group Meeting
At the Study Group meeting each individual group member must be given the opportunity
to present a successful and unsuccessful training intervention which they have
experienced.
Based on the presentations and discussions of each group member’s training experiences,
the Study Group should then prepare a one – two page guideline entitled “Training:
Factors for Success”
Record your notes on the Study Group discussion in the space provided below.
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This Study Group Discussion activity provides the Study Group with an opportunity to reflect
on and compare different training experiences. Group members, in sharing their experiences
will learn from each other which in turn will enable them to better understand and respond to
training practices within their own organisation.
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SAMPLE EXAMINATION QUESTIONS
Instructions:
Read the case study below taken from your prescribed text, Noe et al (2010: 271-272) and
then answer the questions which follow.
Learning Isn’t Perishable at Wegman’s Food Markets
At Wegman’s Food Markets, learning is how the company differentiates itself from other
supermarkets. Learning is not part of competitive advantage: it is the competitive strategy.
Wegman’s Food Market is known as much for carrying 700 different types of cheeses as it is
for being one of the best companies to work for. In 2007 Wegmans was named to Fortune
magazine’s 2006 list of the ‘100 Best Companies to Work For’, ranked number 3. This marks
the tenth consecutive year Wegmans has appeared on the annual list and its fifth year ranked
among the top 10. Wegmans makes a considerable investment in training. The company
recently branched out of its traditional locations in New York, Pennsylvania, and New Jersey
to open to stores in Virginia. The company spent more than $1 million training staff.
Because the level of service is as important as is productive knowledge, Wegmans offers
classroom training as well as hands-on training. Because Wegmans is a food business,
learning with the five senses is very important. Employees are put through rigorous courses
in areas such as operations, product knowledge, and cooking. But employees first receive
training about the products they are selling, what makes them good, and how to prepare
them.
Wegmans believes that with knowledge, employees can provide real value to
customers. Part of the company’s strategy is to help customers understand the products so
they will buy a new product. Wegmans mails Menu magazine to about 1 million addresses
four times a year. It has recipes, cooking techniques, and product advice. Customers come
to the stores looking for products needed for the recipes and tips on how to prepare them. As
a result, cooking coaches and sales staff go through a session each week on how to make a
meal of the week.
This training increases their product knowledge and makes them
comfortable selling products.
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Wegmans wants to teach people the company values. The values include caring and trust.
Wegmans tries to find people who will care about the customers and care about their
Wegmans teammates. High food safety standards are also important and are emphasised in
technical training. Wegmans also has special programmes for teenagers who work in the
stores. For example, the company has an apprenticeship programme with about 250 people
in it each year. The apprentices take on a team project on some aspect of the department
they are working in. After studying for five months, the teams give presentations. The
company also offers a work-study programme which offers more than 1,500 hours of paid,
school-supervised work experience, supported by related instruction at school. Students may
receive high school credit for this experience.
With the support of a mentor, students
complete structured rotations through a variety of departments – bakery, produce, seafood,
and other departments – based on career interests. The students learn and enhance their
customer service, teamwork, product knowledge, food safety, and technical skills. Students in
their last rotation during senior year in high school focus on gaining new experience in
merchandising, product preparation, selling skills, and department sales concepts and finish
off the programme by completing a senior research project. Students who successfully finish
the programme receive either a full-time employment opportunity or, if attending college, a
Scholarship Award and an opportunity to compete for the Store Operations Summer
Internship programme immediately after high school graduation.
Why does Wegmans invest time and money in training students? Wegmans has a lot of young
adults working in the stores and they are responsible for making a difference to customers
providing excellent service. How does Wegmans Food Markets measure the return on its
investment in training? CEO Danny Wegman says, “People are continuing to learn and
have more confidence. We don’t have a formula for measuring that, but we ask ourselves
‘Are we being successful as a company? Are we getting good feedback from our people on
the various courses we are offering? Do they feel they [the courses] are relevant to their
successes as individuals and part of the company?”
(from: Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2010) Human Resource Management:
Gaining a Competitive Advantage 6th Ed. McGraw-Hill. pp 271-272)
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1.
Critically discuss how Wegmans Food Market’s approach to training contributes to
the achievement of the organisation’s strategy.
2.
(10 marks)
The case states that CEO Danny Wegman says “People are continuing to learn and
have more confidence. We don’t have a formula for measuring that, but we ask
ourselves ‘Are we being successful as a company?’ ‘Are we getting good feedback
from our people on the various courses we are offering?’
‘Do they feel [the
courses] are relevant to their successes as individuals.’”
Critically discuss Wegman’s approach to evaluating training from the perspective of
Brinkerhoff’s (2006) Success Case Method
2.
(10 marks)
Guidelines for the Answering of the Examination Questions:
•
The length of your answer should be guided by the mark allocation.
Generally one coherent point / fact equals one mark.
•
The following sections of this Study Guide (and corresponding sections in the
prescribed text) are relevant to the sample examination question:
o
Question 1: Section 5.3.1, particularly Section 5.3.1.1
o
Question 2: Section 5.3.1.6
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Suggested Answers to Sample Examination Questions
Question 1 – Organisational Strategy & Training
Wegmans approaches training as a critical component of its strategy. Indeed, it is stated at
the beginning of the case study that “learning is how the company differentiates itself from
other supermarkets”.
Indeed, Wegmans uses training in the following ways to differentiate itself from other
supermarkets:
•
Employees are able to offer a high level of service given their thorough product
knowledge which has been developed through training. For example, employees are
put through rigorous training interventions which focus on operations, product
knowledge and high food safety standards. This training enables the employees to,
for example, provide customers with tips on how to utilise products in recipes.
•
Wegmans also implements apprenticeships for scholars (teenagers) which results in
scholars either receiving fulltime employment at Wegmans on completion of their
schooling or receiving a scholarship.
•
Wegmans’ intense focus on the development of its employees results in a positive
working and learning environment which in turn promotes motivation and high
performance. This has also lead to Wegmans being acknowledged in the ‘100 Best
Companies to Work For’.
It may therefore be argued that Wegmans’ implements ‘high-leverage’ training which “is
linked to strategic business goals and has top management support” (Noe et al, 2010: 273).
There is also evidence in the case study which suggests that Wegmans adopts a ‘continuous
learning’
approach, which refers to a learning system “that requires employees to
understand the entire work process and expects them to acquire new skills, apply them on the
job, and share what they have learned with other employees” (Noe et al, 2010: 273). Indeed
there is evidence in the case study to show that employees develop an understanding of the
entire work process (e.g. students undergo structured rotations in various departments under
the guidance of a mentor) and that they are required to apply the new skills which they have
learnt on the job (e.g. advising customers on how to make the ‘meal of the week’ or
providing tips on the use of a product, based on the training which they have received).
There is, however, no overt evidence in the case study that employees are encouraged to
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share what they have learned with other employees. If this is something which Wegmans has
not yet encouraged their staff to do, it is recommended that they do so as to further leverage
the strategic benefit of the training implemented.
Question 2 – Evaluation of Training
CEO Danny Wegman’s stages that “people are continuing to learn and have more
confidence. We don’t have a formula for measuring that, but we ask ourselves ‘Are we being
successful as a company?’ ‘Are we getting good feedback from our people on the various
courses we are offering?’ ‘Do they feel the [courses] are relevant to their successes as
individuals?’” In response to this statement, from Brinkerhoff’s (2006) perspective, it is
important that the impact of training is fully understood. While Wegmans is certainly an
example of an organisation which has strategically used training to improve its competitive
advantage, it would be useful for the organisation to implement a formal training impact
assessment so as to ascertain and maximise the benefit of all training interventions
implemented.
Brinkerhoff (2006) stresses that the real value of training is only realised once the learnings
from the training intervention are applied in the workplace situation. It would therefore be
beneficial for Wegmans’ to apply Brinkerhoff’s (2006) Success Case Method. This would
involve conducting the following process for each of the training interventions implemented:
•
Survey of the Most Successful Trainees: Those employees (trainees) who were most
successful in applying on-the-job what they had learnt during the training (e.g. cooking
training) are interviewed. During these interviews the training system factors (e.g. timing
of training, opportunities to apply learning, managerial support) which supported the
employees in applying what they had learnt are identified (Brinkerhoff, 2006).
•
Survey of the Most Unsuccessful Trainees: The most unsuccessful employees (trainees),
in terms of applying what they have learnt on the job, are also interviewed. These
interviews determine the factors which inhibited the employees’ application of newly
acquired skills (Brinkerhoff, 2006).
The results of these two surveys will provide Wegmans with information regarding “what
worked, what did not, what worthwhile results have been achieved, and most importantly,
what can be done to get better results from future efforts” (Brinkerhoff, 2006: 305). Such
results will enable to Wegmans to better align and maximise the impact of those training
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areas which the Success Case Method reveals are not currently having the impact which is
expected. In so doing, Wegmans would be better able to leverage its training so as to gain
greater competitive advantage.
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SECTION 6
PERFORMANCE MANAGEMENT
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CONTENTS
Learning Outcomes
Reading
6.1 Introduction
6.2 Performance Management Defined
6.3 The Performance Management Process
6.4 Purposes of Performance Management
6.5 Approaches to Performance Management
6.5.1
Comparative Approach
6.5.2
Attribute Approach
6.5.3
Behavioural Approach
6.5.4
Results Approach
6.5.5
Quality Approach
6.6 Summary
Self Check Activity
Study Group Discussion Activity
Sample Examination Question
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the learner should be able to
demonstrate a comprehensive understanding of performance management and its application
within organisations. This overall outcome will be achieved through the learner’s mastery of
the following specific outcomes:
1.
Define performance management.
2.
Distinguish between performance management and performance appraisal.
3.
Identify and discuss the three purposes of performance management within
organisations.
4.
Critically discuss the performance management process and its integration with the
organisation’s strategy.
5.
Discuss, evaluate and implement the comparative, attribute, behavioural, results and
quality approaches to performance management.
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READING
Reading
•
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGrawHill. (pp 338-392) Chapter 8
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (348-407) Chapter 8
Recommended Reading:
Books
•
Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. & Hatfield, R.D. (2006)
Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp
262 – 299 (Chapter 9).
•
Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. & Pilbeam, E.
(2007). Human Resource Management: Fresh Perspectives. pp 141 - 170
(Chapter 6).
•
Snell, S. and Bohlander, G. (2007) Human Resource Management. Mason:
Thomson. pp 330 – 375 (Chapter 8).
Journals
•
Andersen, B., Henriksen, B. and Aarseth, W. (2006) “Holistic Performance
Management:
An
Integrated
Framework.”
International
Journal
of
Productivity and Performance Management. Vol. 55, No. 1, 2006, pp 61 – 78.
•
Ahn, H. (2005) “Insights from Research: How to Individualise your Balanced
Scorecard.” Measuring Business Excellence. Vol. 9, No. 1, pp 5 – 12.
•
De Waal, A.A. (2003) “The Future of the Balanced Scorecard: An Interview
with Professor Dr Robert S. Kaplan.” Measuring Business Success. Vol. 7,
No. 1, pp 30 – 35.
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6.1
Introduction
This section focuses on Performance Management. In so doing, the following will be
examined:
•
Performance management defined
•
The performance management process
•
Purposes of performance management
•
Performance management approaches
6.2
Performance Management Defined
Noe et al (2010) define performance management as “the process through which managers
ensure that employees’ activities and outputs are congruent with the organisation’s goals”.
This definition emphasises the need for performance management to be aligned to the
strategy of the organisation.
?
THINK POINT
What, in your opinion, is the difference between Performance Management and
Performance Appraisal?
Comment on Think Point
Noe et al (2010) emphasise that performance appraisal is only a component of performance
management as it involves the administrative and relatively isolated duty of measuring
aspects of an employee’s performance. As indicated in Figure 6.1 on the following page,
performance management is a broader concept than performance appraisal in that it provides
not only for the measurement of performance (performance appraisal), but the defining of
performance according to organisational goals as well as the provision of performance
feedback.
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SPECIFICATION
OF
PERFORMANCE
CRITERIA
Figure 6.1:
6.3
PERFORMANCE
APPRAISAL
(Performance
Measurement)
PERFORMANCE
FEEDBACK
Performance Management (Noe et al, 2010 : 351)
The Performance Management Model
As indicated in section 6.2 above, it is important for an organisation to align its performance
management system to the overall strategy of the organisation.
ACTIVITY
Consider performance management within your organisation.
1.
Describe your organisation’s performance management system.
2.
Does the design of your organisation’s performance management system
support the overall strategy of the organisation? Provide reasons for your
answer.
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Comment on Activity
Noe et al (2008:343) stress that performance management is critical to gaining and sustaining
competitive advantage and therefore it is important that the organisation’s performance
management system is aligned to the overall organisational strategy and goals.
Organisational
Strategy
Individual
Attributes
Individual
Behaviour
Objective
Results
Situational
Constraints
Figure 6.2:
The Performance Management Model (from Noe et al, 2010: 354)
Figure 6.2 provides an overview of a model of performance management within the
organisation. This particular model identifies the individual employee, with his / her relevant
attributes such as knowledge, skills and personality (Noe et al, 2010). So as to perform, the
individual employee needs to translate his individual attributes into individual behaviour.
This behaviour will then lead to results. For example, a car sales person who possesses
interpersonal skills and product knowledge will be able to use these attributes to positively
interact with customers and provide them with important information regarding the motor
vehicle which they are interested in purchasing. A car sales person who is able to apply his /
her attributes effectively will achieve good sales (results).
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Figure 6.1 also highlights the impact of the organisational strategy on the performance of
individual employees. It is imperative, for the success of the organisation, that individual
behaviours are directed towards the achievement of organisational goals (Noe et al, 2010).
The model also recognises that situational constraints will impact on individual employee’s
abilities to achieve effective results.
6.4
Purposes of Performance Management
?
THINK POINT
Based on your experience of performance management within the organisation in
which you work, what do you think is the purpose of performance management?
Comment on Think Point
Performance management essentially has three purposes:
•
Strategic purpose
•
Administrative purpose
•
Developmental purpose
Strategic Purpose
A performance management system serves to link employee performance to the overall
organisational strategy and organisational objectives (Noe et al, 2012). However, research
has shown that very few organisations utilise performance management in a manner which
supports the strategy of the organisation.
This strategic purpose may be achieved through designing evaluation mechanisms which
define employee performance in terms of the organisation’s strategy and goals.
It is
important, however, that the performance management system is sufficiently flexible so as to
adapt to changes in the organisational strategies and goals (Noe et al, 2012).
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Administrative Purpose
Performance management systems provide information which assists organisations with
administrative decisions relating to issues such as to salary administration (pay raises),
layoffs and promotions (Noe et al, 2012).
Developmental Purpose
Performance management systems provide information about employee strengths and
weaknesses and in so doing identify employee developmental needs (Noe et al, 2012).
6.5
Approaches to Performance Management
There are a number of approaches to performance management (Noe et al, 2012)
•
The comparative approach
•
The attribute approach
•
The behavioural approach
•
The results approach
•
The quality approach
ACTIVITY
Consider the performance management system which your organisation utilises
(which you described in section 6.3).
1.
What, in your opinion, are the strengths of your organisation’s
performance management system?
2.
What, in your opinion, are the weaknesses of your organisation’s
performance management system?
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Comment on Activity
The various approaches to performance management each have their own respective
strengths and weaknesses.
These will be identified in the discussion of the various
performance management systems below.
6.5.1
Comparative Approach
The comparative approach measures an individual’s performance by comparing his/her
performance to the performance of others.
Three techniques adopt the comparative
approach:
•
Ranking where the supervisor ranks his subordinates from best performer to worst
performer
•
Forced Distribution where employees are ranked in groups
•
Paired Comparison where the supervisor compares ‘every employee with every other
employee in the work group, giving an employee a score of 1 every time she is considered
to be the higher performer’ (Noe et al, 2012)
?
THINK POINT
What, in your opinion, are the strengths and weaknesses of the comparative
approach to performance management?
Comment on Think Point
The main strength of the comparative approach is that it is useful when employee
performance needs to be differentiated. This approach also eliminates the problems of
leniency, strictness and central tendency, which is valuable in making administrative
decisions (Noe et al, 2012).
However, the weaknesses of the comparative approach include:
•
The techniques are not linked to the overall strategy of the organisation
•
The ratings are subjective and therefore the validity and reliability of the assessment is
dependent on the rater himself
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•
The techniques do not provide the specific information necessary for feedback purposes
•
The techniques do not measure performance against absolute standards of performance
(Noe et al, 2012)
6.5.2
The Attribute Approach
The attribute approach focuses on the identification of employee attributes necessary for the
organisation’s success. The employee is measured against these attributes (Noe et al, 2012).
This approach includes techniques such as:
•
Graphic Rating Scales where the supervisor rates the subordinate on particular traits and
characteristics, and
•
Mixed Standard Scales where the supervisor rates the subordinate against relevant
performance dimensions (Noe et al, 2012).
?
THINK POINT
In your opinion, what are the strengths and weaknesses of the attribute approach?
Comment on Think Point
The strengths of the attribute-based techniques include:
•
They are commonly used by organisations as they are easy to develop and can be
generalised across a range of jobs, and
•
If designed properly, they can be reliable and valid (Noe et al, 2012)
The weaknesses of the attribute approach to performance management include:
•
The techniques provide for little strategic congruence
•
Performance standards are usually vague and may be interpreted differently by different
raters (providing for low validity and reliability)
•
The techniques do not provide specific and relevant performance feedback information,
and
•
The techniques may bring about defensiveness in employees (Noe et al, 2012)
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6.5.3
The Behavioural Approach
The behavioural approach defines behaviours necessary for effective performance in a
particular job. In assessing performance, managers identify the extent to which a subordinate
has exhibited the required behaviours (Noe et al, 2012).
Behavioural-based techniques
include:
•
Critical Incidents
•
Behaviourally Anchored Rating Scales
•
Behavioural Observation Scales
•
Organisational Behaviour Modification
•
Assessment Centres (Noe et al, 2012)
?
THINK POINT
What strengths and weaknesses of the behavioural approach can you identify?
Comment on Think Point
The strengths of behavioural approach include:
•
It provides for the linking of the organisational strategy and goals to the behaviour
required of the employee necessary for strategy implementation
•
It provides employees with specific feedback about their performance
•
The techniques used rely on thorough job analysis which in turn ensures reliability and
validity, and
•
Acceptability of this approach by employees and managers is usually high
(Noe et al, 2012)
The weaknesses of the behavioural approach include:
•
Behaviours and behaviour measured need to be monitored and revised to ensure that they
are linked to the organisational strategy (which regularly changes)
•
It assumes that there is ‘one best way’ to do the job, and
•
It is least suited to complex jobs (Noe et al, 2012)
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6.5.4
The Results Approach
This approach is based on the premise that results are the one best indicator of how a
subordinate’s performance has contributed to organisational success (Noe et al, 2012).
Results-based techniques include:
•
Management By Objectives (MBO) where goal setting is cascaded down throughout the
organisation and the goals become the standard against which an employee’s
performance is measured, and
•
Productivity Measurement and Evaluation Systems (PROMES) which involves a
process of motivating employees to higher productivity (Noe et al, 2012).
•
Balanced Scorecards, which may be used to manage the performance of individual
employees, teams, business units as well as the organisation itself (Snell and Bohlander,
2007:358). The appraisal considers four related categories:
o Financial
o Customer
o Processes
o Learning
The Balanced Scorecard enables managers to translate organisational goals into business
unit, team and individual employee goals for each of the above categories (Snell and
Bohlander, 2007: 359).
READING ACTIVITY
Read the following journal article which documents an interview with Robert
Kaplan, who may be argued to be the most influential thinker in the field of
performance management. Then answer the questions which follow:
•
De Waal, A.A. (2003) “The Future of the Balanced Scorecard: An Interview
with Professor Dr Robert S. Kaplan.” Measuring Business Success. Vol. 7,
No. 1, pp 30 – 35.
1. According to Kaplan, why is the balanced scorecard approach to performance
management so successful?
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2. How does Kaplan respond to the criticism that the balanced scorecard is a
management fad?
3.
How does Kaplan view the future of the balanced scorecard?
Comment on Reading Activity
Model responses to the questions posed in the Reading Activity above are provided
below.
Success of Balanced Scorecard
Kaplan argues that the success of the balanced scorecard is that it is the first performance
management approach that “links vision and strategy to employees’ everyday actions by
translating the abstract strategy into clear strategic priorities and initiatives and relating
these to clear tangible strategic outcomes the organisation and its employees have to
strive for: satisfied shareholders, delighted customers, efficient and effective processes
and a motivated workforce” (De Waal, 2003: 31). In so doing, the balanced scorecard
“makes strategy everyone’s job” (De Waal, 2003: 31).
Is the Balanced Scorecard a Management Fad?
Kaplan is quite adamant that the balanced scorecard is not a management fad, and he
supports this with evidence about the growing use of the balanced scorecard. Kaplan
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reports that more and more large organisations are using the balanced scorecard and that
it is being used more and more in Asia.
Kaplan also indicates that non-profit
organisations are showing great interest in implementing the balanced scorecard as well
(De Waal, 2003: 31).
Future of the Balanced Scorecard
Kaplan believes that the balanced scorecard will still be in use even in ten years
following the interview (i.e. 2013) which is documented in the journal article. However,
he indicates that it is likely that the balanced scorecard will increasingly be used together
with the strategy map which will assist organisations and employees in fully
understanding and implementing their strategy (De Waal, 2003: 33). The strategy map is
essentially a “logical architecture that defines strategy by specifying the relationships
between shareholders, customers, business processes and competencies. A strategy map
makes sure that the balanced scorecard is linked to the organisation’s strategy” (De
Waal, 2003: 34).
?
THINK POINT
Comment
Think
Point
Inon
your
opinion,
what are the strengths and weaknesses of the results approach?
Comment on Think Point
The strengths of the results approach include:
•
Subjectivity is minimised as objective and quantifiable indicators of performance are
used
•
Usually highly acceptable to both supervisors and subordinates, and
•
An employee’s results (performance) are linked to organisational strategy (Noe et al,
2012)
The weaknesses of result-based techniques include:
•
Objective measurements may be deficient in that they may be influenced by factors
beyond the employee’s control (such as an economic recession), and
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Employees may only focus on the performance criteria against which they are to be
•
measured (Noe et al, 2012)
6.5.5
The Quality Approach
The focus of the quality approach is on improving customer satisfaction through a customer
orientation and the prevention of errors (Noe et al, 2012). The design of a quality-based
performance management system should focus on:
•
The assessment of employee and system factors;
•
The relationship between managers and employees in solving performance problems;
•
Internal and external customers in setting standards and measuring performance; and
•
Using a number of sources to evaluate employee and system factors (Noe et al, 2012).
The strengths of the quality approach include:
•
It incorporates and capitalises on the strengths of both the attribute and results approach
to performance measurement; and
•
It adopts a systems approach to performance measurement (Noe et al, 2012).
However, a possible weakness of the quality approach would be that organisations may be
hesitant to adopt it as a result of their long established use of more traditional approaches.
6.5.6
The Multi-Rater Approach
Many organisations adopt a 360-degree feedback approach to performance measurement
where information on an employee’s performance is not only provided by the employee’s
immediate supervisor, but by those people whom he/she deals with on a day to day basis (e.g.
customers, subordinates, coworkers, suppliers, consultants) (Snell and Bohlander, 2007:
343).
This approach allows employees to receive an accurate view of their performance as
“different people see different things” (Snell and Bohlander, 2007: 343). This approach
usually involves the administration of a questionnaire to a number of people with whom the
employee interacts, in which they indicate how well the employee performs in a number of
behavioural areas (Nel et al, 2011).
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?
THINK POINT
In your opinion, what are the strengths and weaknesses of the 360 degree
approach?
Comment on Think Point
The strengths of the 360 degree approach include:
•
As the employee is appraised from multiple perspectives, the approach is more
comprehensive than other approaches (Snell & Bohlander, 2007: 345).
•
The information produced is quality information.
•
There is an emphasis on internal and external customers as well as the team.
•
Bias and prejudice is lessened as the appraisal is not dependent on one person’s view
alone.
•
Feedback from people other than the manager contributes considerably to an
employee’s development (Snell & Bohlander, 2007: 345).
The weaknesses of the 360 degree approach include:
•
It is a complex system in that numerous appraisals need to be combined.
•
It can be intimidating, resulting in resentment on the part of the employee being
appraised (Snell & Bohlander, 2007: 345).
•
Appraisals from differing individuals may be different and confusing.
•
Considerable training is required to ensure that the system works as it should.
•
Employees could undermine the reliability of the approach through colluding in terms
of the appraisals which they are to give each other (Snell & Bohlander, 2007: 345).
In summary, this section has focused on the various approaches towards performance
measurement: the comparative approach, the attribute approach, the behavioural approach,
the results approach, the quality approach and the multi-rater approach.
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6.6
Summary
This section investigated Performance Management.
process of performance management was examined.
The concept was defined and the
The purposes of performance
management were also given attention, as were the various approaches to performance
management.
Section 7 will investigate the HRM function of Compensation.
SELF CHECK ACTIVITY
Check your understanding of some of the principles and theory addressed in this section by
answering the questions below.
1. Pavesh, the Store Manager of Trends Furniture is about to conduct the annual round of
performance appraisals for his staff. The performance appraisal form which he is to use
looks as follows:
TRENDS FURNITURE
PERFORMANCE APPRAISAL FORM
Name of Staff Member:
Name of Manager Appraising Staff Member:
Date:
Performance
Dimension
Knowledge
Communication
Team Work
Interpersonal
Skills
Initiative
Excellent
Commendable
Adequate
Poor
4
4
4
4
3
3
3
3
2
2
2
2
1
1
1
1
4
3
2
1
Based on the information provided in the Performance Appraisal Form above, which of
the following techniques is Pavesh using to appraise his staff’s performance?
A.
Paired Comparison
B.
Graphic Rating Scale
C.
Critical Incidents
D.
Behavioural Observation Scale
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2. Mpho, the Assistant Store Manager at Trends Furniture, meets with Pavesh for lunch.
Pavesh shows Mpho the performance appraisal form which he is going to use in
conducting the upcoming performance appraisals in his store.
Mpho is not very
impressed with the performance appraisal form and informs Pavesh that she has a better
one. Later that day when Mpho gets back to her office, she emails Pavesh an example of
a form which she believes would be a better performance appraisal tool than the one
which Pavesh has developed. Mpho’s performance appraisal form looks as follows:
TRENDS FURNITURE
PERFORMANCE APPRAISAL FORM
Name of Staff Member:
Name of Manager Appraising Staff Member:
Date:
Serving Customers
Customers are greeted within 20 seconds of arriving at the store.
Almost
Almost
1
2
3
4
5
Never
Always
Customers are served in a professional, yet friendly, manner
Almost
Almost
1
2
3
4
5
Never
Always
Customers with special requests are provided with feedback within 4 hours of
requesting the product.
Almost
Almost
1
2
3
4
5
Never
Always
Total:
Key:
Poor
Below Adequate
Adequate
Good
Excellent
0-5
4-6
7- 9
10 – 12
13 - 15
Which of the following performance management techniques does Mpho’s form support?
A.
Paired Comparison
B.
Graphic Rating Scale
C.
Critical Incidents
D.
Behavioural Observation Scale
3. After perusing Mpho’s performance appraisal form, Pavesh realises that he should
ideally get some professional advice regarding the performance management system
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which he is to implement. So he phones Betty, who was a close friend of his during
university and currently is employed as the HR Manager responsible performance
management at a large bank. Betty asks Pavesh a number of questions before advising
him to adopt a 360 degree approach to performance management.
Which of the following are strengths of the 360 degree approach to performance
management?
A.
It is more comprehensive than other approaches
B.
Bias and prejudice is lessened
C.
There is an emphasis on internal and external customers
D.
All of the above
4. Pavesh decides to go ahead with Betty’s recommendation and adopt a 360 degree
approach to performance management. He calls a general staff meeting to inform the
staff of the pending performance appraisals. During the staff meeting, a group of sales
consultants start questioning Pavesh about the purpose of the performance appraisal. In
particular the sales consultants want to know what the results of the performance
appraisal will be used for. Pavesh explains, “the primary purpose of implementing this
performance appraisal is to provide me with information regarding your performance –
this will assist in determining bonuses and increases which are due in three months
time.”
The purpose of Pavesh implementing the performance appraisal is an example of :
A.
Strategic Purpose
B.
Developmental Purpose
C.
Administrative Purpose
D.
All of the above
5. Josie is a junior sales consultant at Trends Furniture. She has recently attended a
“Delight Your Customers!” training workshop during which she developed skills in the
latest customer service methods. However, Josie is now frustrated – following the
training workshop Josie approached Nicholas, a senior sales consultant and her boss at
Trends Furniture. Josie suggested a few ideas to Nicholas as to how she and her
department could go about delivering a higher level of service to customers. However,
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Nicholas was not keen on introducing the new customer service initiatives which Josie
was suggesting, indicating that he believed them to be a waste of time.
Nicholas is a barrier to Josie implementing new customer service methods in the store.
This is an example of which of the following components of Noe et al’s (2008)
Performance Management Model:
A.
Organisational Strategy
B.
Individual Attributes
C.
Objective Results
D.
Situational Constraints
Answers Self Check Activity 2
1.
B
2.
D
3.
D
4.
C
5.
D
STUDY GROUP DISCUSSION
For this section, your Study Group is required to compare and contrast the Performance
Management Systems from the different organisations in which the Study Group
members work.
Preparation
Prior to the Study Group meeting, each individual group member must prepare the
following with respect to their organisation’s approach to performance management (you
may need to consult your HR Manager in doing this preparation if you have not
previously received training on and applied the performance management system):
•
Source your organisation’s performance management policy and procedure. If there
is no policy and procedure, prepare a flowchart indicating how the performance
management process is implemented within your organisation.
•
Source the tools that are used to implement the performance management process
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(e.g. appraisal questionnaires, appraisal reports, etc.)
•
Reflect on and make notes on the strengths and weaknesses of the performance
management system.
At the Study Group Meeting
At the Study Group meeting each individual group member must be given the opportunity
to present their organisation’s performance management approach. The performance
management policies, procedures and tools should be perused by the group.
On completion of each individual presentation, the group should critique the performance
management system and should identify the key approach which it follows (e.g.
comparative approach, results approach, etc.). The group should discuss whether the
approach followed is the one which is the most appropriate for the organisation.
Following the group discussions of the various performance management approaches, it
would be useful for the group to prepare a one-two page summary document entitled
“Guidelines for the Implementation of an Effective Performance Management System”.
Record your notes on the Study Group discussion in the space provided below.
This Study Group Discussion activity provides the Study Group with an opportunity to reflect
on and compare different experiences of implementing performance management within
organisations. Group members, in sharing their experiences will learn from each other which
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in turn will enable them to better understand and respond to performance management
practices within their own organisation.
SAMPLE EXAMINATION QUESTIONS
Instructions:
Read the case study below taken from your prescribed text, Nel et al (2008: 508) and then
answer the questions which follow.
In the Dark on 360 Degree Feedback
Based on his strong technical background and sound track record as a successful manager,
Ed Scott was hired to manage a technical department at Allitech, a company of 850
employees, producing high-fibre optics. After four years at Allitech, Ed’s department had
accomplished its objectives and he received good performance reviews and bonuses each
year. Ed had just completed a major project, when his manager, Julian Haynes, suggested
that Ed participate in the senior management 360 degree feedback programme. The multirater feedback programme was used only for senior managers and Ed was unsure whether to
feel excited and flattered to be included in the top management’s evaluation programme, or
whether he should be apprehensive of its possible outcomes. He knew that, while under
stress, he had been a little hard on a few poor-performing workers.
He still believed
however, that he had an excellent reputation, and assumed his feedback would reflect that.
Ed was shocked when he read the feedback from the 19 people who had completed the
questionnaire as part of the review. Five of the eight people who reported to him commented
that they disliked his management style so much, that they would take a transfer out of his
department if the chance arose. The remaining reviews emanated from senior managers,
internal customers (in the form of other departmental heads), and external clients of the
company. Of these, four respondents gave him an excellent review, and the rest were mixed
in their responses.
Ed Scott was astonished that some people no longer considered him to be a good manager.
He wondered whether he had been subjected to the 360 degree process because Julian felt
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threatened by him, or because some of his more competitive colleagues were trying to
undermine him. Although there was some truth in the feedback, Ed felt harassed by the
experience. However, he agreed to work with a consultant to address some of the problems
which helped him to realise that he would have to work on his management style. For
example, he learnt that when he reprimanded a few workers, it affected the morale of the
whole team.
Nevertheless, long after the multi-rater feedback issue had been laid to rest, Ed still felt
aggrieved by the whole affair. Six months later, he left Allitech for another company. Other
factors entered into his decision, but the 360 degree feedback definitely played a big role.
(from: Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B. (2008) Human Resource
Management. 7th Edition. Cape Town: Oxford University Press Southern Africa. p 508).
1.
Why was the 360 degree performance approach not successful for Ed?
(5 marks)
2.
What other performance management approaches (other than the 360 degree
performance approach) would have been useful, and perhaps even more appropriate,
for Ed?
(5 marks)
Guidelines for the Answering of the Examination Questions:
•
The length of your answer should be guided by the mark allocation.
Generally one coherent point / fact equals one mark.
•
The following sections of this Study Guide (and corresponding sections in the
prescribed text) are relevant to the sample examination question:
o
Question 1: Section 6.5.6
o
Question 2: Section 6.5
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Suggested Answers to Sample Examination Questions
Question 1 - Why was the 360 degree performance approach not successful for Ed?
Snell and Bohlander (2007: 345) identify that a key weakness of the 360 degree system is
that “feedback can be intimidating and cause resentment if the employee feels that the
respondents have ‘ganged up.’” This is exactly what Ed experienced and it ultimately led to
him leaving the organisation six months after receiving the 360 degree feedback. The
feedback which Ed received was unexpected and dashed his belief that he was perceived as a
“good manager”. Ed seems to have essentially only focused on the negative feedback
received, to his and the organisation’s detriment.
Question 2 - What other performance management approaches (other than the 360 degree
performance approach) would have been useful, and perhaps even more appropriate, for
Ed?
Alternative performance management approaches which would have perhaps been more
useful for Ed than the 360 degree feedback system would be:
•
The Balanced Scorecard, which is a results oriented approach to performance
management and provides for the setting of goals and assessment from the
perspective of the following four categories: Financial, Customer, Processes and
Learning. (Nel et al, 2008:508). This approach translates organisational strategy into
departmental, team and individual goals which are objective and quantifiable.
•
Management by Objectives could also have been used for Ed in place of the 360
degree feedback system.
This is a performance management technique “that
provides for an initial goal-setting phase, based on the formation long range
organisational objectives that are cascaded through to departmental goals and finally
individualized goals (Nel et al, 2008:501).
The benefit of utilising either of the above results oriented performance management
approaches is that subjectivity is minimised and performance is judged against quantifiable,
objective indicators. (Noe et al, 2010).
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SECTION 7
COMPENSATION
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CONTENTS
Learning Outcomes
Reading
7.1 Introduction
7.2 The Nature of Compensation
7.3 Factors Influencing the Determination of Compensation
7.4 Compensation Structures and Levels
7.4.1 Job Structure Development
7.4.2
Pay Structure Development
7.5 Challenges to Compensation Systems
7.5.1
Job-Based Compensation
7.5.2
Executive Pay
7.6 Incentive Compensation Systems
7.6.1
Types of Incentive Compensation Systems
7.6.2
Ensuring the Effectiveness of Incentive Compensation Systems
7.7 Summary
Self Check Activity
Group Discussion Activity
Sample Examination Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the learner should be able to
demonstrate a comprehensive understanding of the HR practice of compensation. This
overall outcome will be achieved through the learner’s mastery of the following specific
outcomes:
1.
Define the HR practice of compensation.
2.
Identify and critically discuss and address the factors influencing the
determination of compensation.
3.
Identify, discuss and apply compensation structures and levels.
4.
Identify and critically discuss current challenges to compensation systems.
5.
Discuss, evaluate and effectively apply the various incentive-based compensation
systems.
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READING
Reading
•
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGrawHill. (pp 480-518) Chapter 11 and (pp 520-554) Chapter 12
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (pp498-539) Chapter 11 and (pp 540-577)
Recommended Reading:
Books
•
Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. and Hatfield, R.D. (2006)
Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp
350 - 385 (Chapter 11).
•
Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. and Pilbeam, E.
(2007). Human Resource Management: Fresh Perspectives. pp 193 - 208
(Chapter 8).
•
Snell, S. & Bohlander, G. (2007) Human Resource Management. Mason:
Thomson. pp 376 – 413 (Chapter 9).
Journals
•
Adams, S.M., Gupta, A., Haughton, D.M. & Leeth, J.D. (2007) “Gender
Differences in CEO Compensation: Evidence from the USA” Women in
Management Review. Vol. 22, No. 3, pp 208 – 224.
•
Hoi, C.K. & Robin, A. (2004) “The Design of Incentive Compensation for
Directors.” Corporate Governance. Vol. 4, No. 3, pp 47 – 53.
•
Nourayi, M.N. and Mintz, S.M. (2008) “Tenure, Firm’s Performance and
CEO’s Compensation.” Managerial Finance. Vol. 34, No. 8, pp 524 – 536.
•
Petra, S.T. & Dorata, N.T. (2008) “Corporate Governance and Chief
Executive Officer Compensation.” Corporate Governance. Vol. 8, No. 2, pp
141 – 152.
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READING (continued)
Recommended Reading (continued)
Journals (continued)
•
Williamson, J.A. and Kleiner, B.H. (2004) “The Use of Options in
Compensation Packages.” Management Research News. Vol 27, No. 4/5, pp
23 – 31).
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7.1
Introduction
In this section the HR practice of Compensation is investigated. The following issues are
examined:
•
The nature of compensation
•
Factors influencing the determination of compensation
•
Compensation structures and levels
•
Developing a compensation structure
•
Challenges to compensation systems
•
Incentive compensation systems
o Types of incentive compensation systems
o Ensuring the effectiveness of incentive compensation systems
7.2
The Nature of Compensation
Grobler et al (2006: 35) identifies that “the term compensation is often used interchangeably
with wage and salary administration; however the term compensation is actually a broader
concept…compensation refers not only to extrinsic rewards such as salary and benefits, but
also to intrinsic rewards such as achieving personal goals, autonomy and more challenging
job opportunities.”
Snell and Bohlander (2007: 378) make use of the term “strategic compensation planning”
which refers to “the compensation of employees in ways that enhance motivation and
growth, while at the same time aligning their efforts with the objectives, philosophies and
culture of the organisation.” Indeed, Noe et al (2008: 486) emphasise the need to align the
compensation strategy to the overall organisational strategy.
Ideally, the compensation
system should promote the organisational culture and employee behaviours necessary for the
achievement of the organisation’s strategic goals
7.3
Factors Influencing the Determination of Compensation
Compensation has a considerable impact on employee attitudes and behaviour and is critical
to assisting the organisation in attaining its strategic goals (Noe et al, 2012).
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?
THINK POINT
Outline the factors that influence the approach to compensation in your
organization.
Comment on Think Point
Noe et al (2012) emphasise how Equity Theory influences compensation. Equity theory
argues that “a person compares her own ratio of perceived outcomes (e.g. pay, benefits,
working conditions) to perceived inputs (e.g. effort, ability, experience) to the ratio of a
comparison other” (Noe et al, 2012). If equity is perceived, no change will occur in the
employee’s behaviour or attitudes. However, if inequity is perceived, the employee will take
steps to restore equity through, for example, reducing the amount of effort he/she exerts.
The implication which Equity Theory has for compensation is that employees’ behaviour and
attitudes will be affected if inequity with other employees is perceived.
The types of
comparisons which are possible include:
•
External equity: where comparisons are made with employees holding similar positions
within other organisations
•
Internal equity: where comparisons are not only made with employees performing the
same job, but with employees in different jobs and at different levels within the same
organisation
Snell & Bohlander (2007: 384 – 388) identify external and internal factors which influence
the organisation’s choice of compensation system, as outlined in Figure 7.1.
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COMPENSATION SYSTEM
Influenced by
EXTERNAL
ENVIRONMENTAL
FACTORS
•
•
•
•
Labour Market
Economic Conditions
Government
Influences
Union Influences
INTERNAL
ENVIRONMENTAL
FACTORS
•
•
•
Organisational strategy
& goals
Labour Budget
Compensation Decision
Makers
Figure 7.1: Internal and External Factors Influencing Compensation
As identified in Figure 7.1 above, the External Environmental Factors which influence the
organisation’s choice of compensation system include:
•
The Labour Market where supply and demand may impact on levels of pay, e.g. higher
levels of pay may apply if few skilled employees are available within the job market
(Snell and Bohlander, 2007: 387).
•
Economic Conditions where high degrees of competitiveness within industries
negatively affect the ability of the organisation to pay high wages.
•
Government Influences where legislation, such as the Basic Conditions of Employment
Act in South Africa, controls and guides issues such as minimum wage and overtime pay.
•
Union Influences where unions affect compensation levels through entering into
negotiations with management (Snell and Bohlander, 2007:388).
Internal Environmental Factors which influence an organisation’s approach to
compensation include:
•
Organisational Strategy and Goals where the compensation approach adopted by the
organisation should support the effective implementation of the company’s strategy
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•
Labour Budget where the amount of money available within the organisation for
employee compensation during a given year is specified
•
Compensation Decision Makers which includes top management and possibly the
organisation’s employees (Snell and Bohlander, 2007: 384)
7.4
Compensation Structures and Levels
When developing compensation structures and levels it is important that the organisation
considers:
•
Current market pressures, which include product market competition and labour market
competition;
•
Whether the organisation views the employee as a resource (rather than just a cost);
•
Whether the organisation wishes to pay at, below or above the market; and
•
Whether the organisation wishes to conduct a pay survey so as to benchmark its practices
against those of the competition (Noe et al, 2012)
The development of compensation structures and levels requires the development of job
structures on which the development of pay structures is based.
7.4.1
Job Structure Development
A job structure is based on internal comparisons between jobs and serves to delineate the
relative worth of various jobs in the organisation (Noe et al, 2012).
Job structure
development is dependent on a process of job evaluation.
ACTIVITY
Consider your organisation.
1.
Identify the system of job evaluation used by your organisation (consider
Peromnes, Paterson, Hay, the ‘Q’ method).
2.
What does this job evaluation system mean to you? How does it impact on
you?
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Comment on Activity
Job evaluation is an administrative procedure which is used to measure job worth (Noe et al,
2012). A job evaluation system identifies compensatable factors which are the
“characteristics of jobs that an organisation values and chooses to pay for” (Noe et al,
2012). These compensatable factors are weighted during job evaluation so as to indicate their
value to the organisation. Compensatable factors include:
•
Job complexity
•
Required experience
•
Required education
•
Working conditions
•
Responsibility (Noe et al, 2012).
Job evaluation usually involves committees in rating particular jobs on the compensable
factors.
Various job evaluation systems are in operation. These include the Peromnes system which
was developed by SA Breweries, the Paterson decision making band model, the Hay method
which was developed in the 1950s in the USA and the Q-method developed by the National
Institute for Personnel Research (Nel et al, 2011).
7.4.2
Pay Structure Development
Noe et al (2012) assert that different organisations differ in respect to the emphasis which is
placed on internal and external factors when developing pay structures. Three pay structure
approaches may be identified. These are based on:
• Market Survey Data where compensation is structured according to what similar
organisations are paying similar positions
•
Pay Policy Line where compensation structuring is based on a combination of internal
and external compensation related information.
•
Pay Grades where jobs are classified into a number of pay grades. The pay grades
specify the pay range for particular categories of jobs (Noe et al, 2012).
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ACTIVITY
Consider the following scenario and the answer the questions that follow.
You are the HR Manager for a medium sized organisation.
The Managing
Director has asked you to evaluate whether your organisation’s current pay
structure is market related.
1. Describe how you would go about doing this.
2. If you were to find that your organisation’s compensation structure differed
from competing organisations, what might the reasons for this be?
3. What could the consequences be for your organisation for having a
compensation system which is not in line with your competitors?
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Comment on Activity
Model answers are provided below
Question 1 – Determining Whether an Organisation’s Pay Structure is Market Related
In order to determine whether your organisation’s current pay structure is market related you
would need to conduct a market pay survey in which you would benchmark your
organisation’s compensation practices against those of your competitors (Noe et al, 2012). In
conducting the market pay survey you would need to determine:
•
Who your product-market and labour-market competitors are so that you may include
them in the survey
•
Which jobs are sufficiently representative in terms of level, functional area and product
market to include in the survey (Noe et al, 2012)
Your survey should also investigate the return on investment which your competitors are
receiving for the compensation packages which they are offering to their employees.
Question 2 – Reasons for Different Compensation Structures in Competing Organisations
Your organisation’s compensation structure may differ from your competitor’s in that you
may provide rewards other than compensation. For example, your organisation may use
flexible working hours or intensive training for all employees as a means to reward
employees.
Question 3 - Consequences of Not Having a Compensation System in Line with Competitors
Noe et al (2012) point out that if your organisation’s compensation structure is above that of
your competitors, your organisation may find it difficult to compete because of its high
labour costs. On the other hand, if the market pay survey shows that your organisation is
paying below your competitor’s compensation structure, your organisation may have
difficulty in attracting and retaining suitably qualified and experienced employees.
7.5
Challenges to Compensation Systems
This section examines the compensation challenges of job-based compensation structures as
well as those associated with executive pay.
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7.5.1 Job-Based Compensation
Thus far, this section of the module has focused on compensation systems which are jobbased.
?
THINK POINT
Think about a job-based compensation system which you have experienced.
What were the disadvantages of this approach?
Comment on Think Point
There are a number of disadvantages associated with a job-based compensation approach.
These include:
•
Job-based compensation systems promote bureaucracy
•
The system’s hierarchical nature promotes top-down decision making and emphasis of
status at various levels of the organisation
•
The revision of job descriptions and conducting of job evaluations is costly and time
consuming
•
Job-based compensation systems may fail to reward the required performance
•
Job-based compensation systems place emphasis on status differentials and in so doing
promote promotion-seeking and discourages lateral employee movement (Noe et al,
2012)
In order to address the limitations of job-based compensation systems, Noe et al (2012)
recommend:
•
Delayering and Banding where job levels are reduced and grouped into broad bands.
•
Skills Based / Competency Based Pay where “employees are paid for the skills they are
capable of using, not for the job they are performing at a particular point in time”
(Ledford, cited in Noe et al, 2012).
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7.5.2
Executive Pay
Noe et al (2012) asserts that executives tend to be paid very highly, and that a trust gap is
often created between the employees and the executive, where employees resent the
executive’s high pay.
Grobler et al (2006: 373) identify that executive pay usually involves:
•
a base salary
•
an annual bonus, which usually includes cash and stock payments
•
long term incentives, which are designed to enable executives to accumulate wealth.
•
benefits and perquisites (perks) which could include an executive motor vehicle, a
private dining room, country club membership, personal legal counseling and private
use of the company’s aircraft (Grobler et al, 2006: 273)
7.6
Incentive Compensation Systems
In section 7.5 the challenges of job-based compensation systems were discussed. This
section serves to examine compensation systems which are structured to reward employees
for contributions to the organisation’s success.
7.6.1
Types of Incentive Compensation Systems
Noe et al (2012) identify a number of incentive-based compensation systems. These include
merit pay programmes, individual incentives, profit sharing and ownership, gainsharing and
the balanced scorecard.
INCENTIVE
COMPENSATION SYSTEMS
MERIT
PAY
INDIVIDUAL
INCENTIVES
PROFIT
SHARING
OWNERSHIP
GAIN
SHARING
GROUP
INCENTIVES
BALANCED SCORECARD
Figure 6.2: Types of Incentive-Based Compensation Systems (Noe et al, 2010:548).
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7.6.1.1 Merit Pay Programmes
Merit pay programmes link pay to performance by basing an employee’s annual increase on
performance appraisal ratings (Noe et al, 2012). The employee’s performance is essentially
rated only by his/her direct supervisor.
Merit pay programmes have been criticised by Deming (cited in Noe et al, 2012) who argues
that it is unfair to rate individual performance as “apparent differences between people arise
almost entirely from the system that they work in, not the people themselves”. A further
criticism of this approach is that it discourages teamwork. It is also argued that merit pay
programmes do not actually exist in that merit increases are allocated within the boundaries
of predetermined merit increase budgets.
7.6.1.2 Individual Incentives
Individual incentives, like merit pay programmes, are based on an individual’s performance.
However, in contrast to merit pay programmes, they are not incorporated into an employee’s
base pay and therefore need to be earned and re-earned (Noe et al, 2012).
Individual incentives tend to be rare and therefore have the disadvantage of not providing for
the development of a problem solving, proactive workforce (Noe et al, 2012). Further, as
with merit pay programmes, individual incentives tend to undermine teamwork.
7.6.1.3
Profit Sharing
Profit sharing provides for payments (not incorporated into base salary) which are “based on
a measure of organisation performance (profits)” (Noe et al, 2012).
The advantages of profit sharing include employees in approaching issues from the
perspective of the business owner and labour costs being reduced during difficult periods
(Noe et al, 2012). Disadvantages of profit sharing include the failure of employees to
identify the relationship between the work which they perform and the organisation’s profit.
Also, profit sharing does not necessarily provide for the high motivation of individual
employees (Noe et al, 2012).
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7.6.1.4
Ownership
Ownership may be achieved through the issuing of share options to employees or by
implementing employee stock ownership plans (ESOPs). The advantages and disadvantages
of ownership are similar to that of profit sharing (Noe et al, 2012)
7.6.1.5
Gainsharing
Gainsharing provides “a means of sharing productivity gains with employees” (Noe et al,
2012). This differs from profit sharing in two ways: the programme measures departmental /
group performance and payments are made more frequently than with profit sharing
schemes.
An advantage of gainsharing is that it usually involves rewards such as employee
participation and problem solving.
7.6.1.6
Group Incentives and Team Awards
In contrast to gain sharing plans, group incentives and team awards are applied to the smaller
work group. This approach involves rewarding employees at the level of the team or group.
An advantage of this approach is that competition between individuals is reduced (Noe et al,
2012). However, this competition may be replaced by competition between teams and
groups, which is a disadvantage.
7.6.1.7
Balanced Scorecard
It has been shown that the various incentive based compensation programmes have both
advantages and disadvantages. So as to overcome the disadvantages and capitalise on the
advantages, it is recommended that organisations design a mix of compensation programmes
to meet the needs of the particular enterprise and its employees. The balanced scorecard is
an approach which would provide for this in that it enables companies to “track financial
results while simultaneously monitoring progress in building capabilities and acquiring
intangible assets they would need for future growth” (Kaplan and Norton cited in Noe et al,
2012).
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7.6.2
Ensuring the Effectiveness of Incentive Compensation Systems
In order ensure the effectiveness of incentive compensation systems Noe et al (2012)
emphasise that:
•
Employees should participate in decisions relating to incentive compensation systems
•
Effective communication should take place to ensure that employees understand the
incentive based compensation system, and
•
Organisations should take note of the fact that not only incentive pay plans impact on
productivity and performance, but so too does the manner in which employees are treated
(Noe et al, 2012)
7.7
Summary
This section of the HRM module examined the HRM activity of Compensation. In so doing,
the nature of compensation was investigated and the development of compensation structures
and levels was studied. The types of incentive-based compensation systems and the criteria
for their effective implementation were also examined.
Section 8 of this module guide will focus on Employee Benefits and Services.
SELF CHECK ACTIVITY
Check your understanding of some of the principles and theory addressed in this section by
answering the questions below.
1. Atul is a senior researcher at Mezac Pharmaceuticals. He has recently found out that his
friend Jerry, who works at Mezac’s competitor, New Health Pharmaceuticals, earns 20%
more than he does despite being less qualified and experienced. Atul is now demotivated
– he feels unappreciated at Mezac Pharmaceuticals and has decided to start looking for a
new job where he will earn what he is worth.
The comparison which Atul has made between his earnings and Jerry’s earnings is known
as:
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A. Equity
B. Internal Equity
C. External Equity
D. All of the above
2. Which of the following could be the reason for New Health Pharmaceuticals providing
higher compensation than its competitor, Mezac Pharmaceuticals, for the position of
senior researcher?
A. Mezac Pharmaceuticals offers rewards other than compensation such as intensive
training for high performing employees.
B. New Health Pharmaceuticals does not offer any other rewards, other than salary
C. Both A and B
D. Neither A nor B
3. Ncanyiswa works as a legal secretary within a large law firm. She is a single mom and is
finding it difficult to make ends meet on her current salary, so she decides that she needs
to look for a better paying job. However, after going to five interviews with different law
firms, the highest salary which she has been offered is only 2% higher than her existing
one. Most of the law firms that she has had interviews with have acknowledged her high
level of skills but have indicated that there are so many highly skilled legal secretaries
available for the position that it is not possible to increase the salary package.
Which of the following external environmental factors are negatively impacting on
Ncanyiswa’s ability to find a job with higher pay than her existing job?
A. Labour Market Conditions
B. Government Influences
C. Union Influences
D. Both A and B
4. Thabo is the HR Manager responsible for Compensation at Future Technologies, an IT
company providing a range of IT services to corporate clients. Thabo has recently
implemented an organisational job evaluation throughout the company. The results of
the job evaluation are now being used to determine pay structures for the various
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positions. Thabo is currently perusing the results of the job evaluation system for three
critical technical positions within the organisation.
FUTURE TECHNOLOGIES
RESULTS OF JOB EVALUATION FOR CRITICAL IT POSITIONS
JOB TITLE
COMPENSABLE FACTORS
TOTAL
EXPERIENCE
EDUCATION
COMPLEXITY
Computer Operator
40
30
40
110
Computer Programmer
40
50
65
155
Systems Analyst
65
60
85
210
(from Noe et al, 2008: 493)
Based on the results of the job evaluation, which of the positions should receive the
highest pay?
A. Computer Operator
B. Computer Programmer
C. Systems Analyst
D. All three positions should receive equal pay
5. Craig is a Computer Programmer at Future Technologies. He is very happy as he has
just been issued with 1000 share options as a reward for his continuous high level
performance.
Share options are an example of which incentive compensation systems?
A. Individual Incentive
B. Merit Pay
C. Profit Sharing
D. Ownership
Answers Self Check Activity
1.
C
2.
C
3.
A
4.
C
5.
D
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STUDY GROUP DISCUSSION
For this section, your Study Group is required to analyse a case study entitled “Paying for
Good Employee Relations” taken from your prescribed text, Noe et al (2010: 572-573).
Paying for Good Employee Relations
Organisations understand that reaching financial objectives, or satisfying shareholders,
depends to a considerable degree on how well they manage relationships with other
important stakeholders such as customers and employees. One suggestion has been to link
compensation, in part, to customer satisfaction and employee satisfaction. Is this a good idea
in the case of employee satisfaction? There is some disagreement on this issue. Eastman
Kodak has, since 1995, used employee opinion survey results as one factor in deciding
executive bonuses. Likewise, United Airlines, which is employee owned, is moving to a
system where executive bonuses will depend to some degree on employee-satisfaction
surveys. Although the idea of rewarding managers for good employee relations has some
intuitive appeal, there may be unintended consequences. Indeed, Gordon Bethune, CEO of
Continental Airlines, described such an idea as “absolutely stupid”. Bethune argues, “being
an effective leader and having a company where people enjoy coming to work is not a
popularity contest. When you run popularity contests, you tend to do things that may get you
more points. That may not be good for shareholders and may not be good for the company.”
This is not to say that Bethune and Continental do not see employee relations as an important
part of their competitive advantage. Continental was named the 2001 airline of the year by
Air Transport World and is number 18 on Fortune’s 2001 list of best companies to work for
in America.
And many companies use employee opinion survey results to adjust their
employee relations policies as needed. Rather, the issue is whether an incentive plan that
explicitly rewards employee satisfaction will produce only intended positive consequences or
might also produce unintended, less desirable consequences. Eastman Kodak and United are
two examples of companies that have decided some direct incentive makes sense, even if it is
small relative to other factors (like financial performance,) that determine executive pay.
Other companies, even those that use strong employee relations as an important source of
competitive advantage, have been too concerned about unintended consequences to use
explicit incentives.
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(from Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2010) Human Resource Management:
Gaining a Competitive Advantage 6th Ed. McGraw-Hill. P 572-573).
Preparation
Prior to the Study Group meeting it is important that each individual group member has
completed the following:
•
Studied Section 7 (Compensation) of this Study Guide
•
Read the supporting chapters on Compensation in the prescribed texts
•
Read the case study “Paying for Good Employee Relations”
At the Study Group Meeting
The Study Group’s discussion should focus on the case study “Paying for Good
Employee Relations”. In particular, the following questions should be discussed:
1. Should organisations worry about the attitudes of employees? Provide reasons for
your answer.
2. If an objective of the organisation is to achieve positive employee attitudes, is it
appropriate to link pay incentives to attitudes? Justify your answer.
3. Consider your situation as a manager (or aspiring manager) within your organisation.
Discuss how you would feel if ‘positive employee relations’ was a criterion for the
award of part of your incentive pay?
Comment on Study Group Discussion
Responses will differ across Study Groups. The response to question 3 is dependent on an
individual’s personal feelings and therefore there is no model answer for question 3.
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Model Answers
Question 1: Attitudes of Employees
Organisations should certainly be concerned about the attitudes of employees as these have a
direct impact on the performance of the organisation. Indeed, research has shown that
positive employee attitudes lead to higher productivity. Both employees and managers who
have high levels of job satisfaction “generally like their jobs, feel that they are being fairly
treated, and believe that their jobs have many desirable features or characteristics (such as
interesting work, good pay and job security, autonomy, or nice co-workers)” (Jones and
George, 2003:83). Therefore, positive employee attitudes are generally an indication of a
healthy and productive organisation.
Question 2 – Linking of Pay Incentives to Employee Attitudes
It may well be argued that if one of the organisation’s objectives is to achieve positive
employee attitudes, then it would be appropriate to link a component of a manager’s pay
incentive to this objective. The argument for this is that a workplace which has positive
employee attitudes will most likely be a workplace that is productive and achieving (or even
exceeding) its organisational goals.
A further argument is that in today’s knowledge
economy, organisations compete on human capital. If a manager is failing to create and
sustain positive employee attitudes, he / she is effectively eroding the competitive advantage
(human capital) of the organisation in that this will lead to poor performance by employees
and will impact negatively on the organisation’s ability to retain them.
However, others may argue that it is more appropriate to measure a manager against the
outcome which will accrue from a positive workforce, that of achieving business results and
making a profit. If a workforce is positive, it generally follows that the business is likely to
perform well.
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SAMPLE EXAMINATION QUESTIONS
Instructions:
Read the case study below taken from your prescribed text, Noe et al (2010: 535) and then
answer the questions which follow.
Changing Compensation to Support Changes in Corporate Strategy
By realigning its strategy and compensation and benefits programmes, Corning Inc., once a
traditional economy company, hopes to compete successfully in the new economy. First, the
company divested itself of several business units, including Corning Consumer Products.
These divestitures reduced its annual revenues from $5 billion to $3 billion. Next Corning
pursued a ‘high octane’ growth strategy in optical communications (optical fibre, cable
systems, photo technologies, optical networking devices), environmental technologies,
display technologies, and speciality materials. To support this shift in corporate strategy,
Corning sought to support growth by creating an environment that bolstered innovation, risk
taking, teaming, and speed. One major change was in its compensation system. The salary
structure was streamlined from 11 grades to 5 broad bands for exempt employees and from 7
grades to 3 broad bands for non-exempt employees. In a new economy company, products
have a short life cycle and change in markets is a way of life. This means that the nature of
work also changes rapidly, so the detailed job descriptions and traditional promotion paths
of the past may not fit this fluid environment. By changing its salary structure, Corning hopes
to increase its ability to move quickly in responding to and anticipating customer needs in
rapidly changing markets by encouraging flexibility, teamwork and learning among its
employees. Decentralising more pay decisions to managers contributes to this flexibility, and
giving employees an increasing stake in the success of the company by making more
employees eligible for stock options contributes to the increased focus on teamwork. Finally,
employee compensation is increasingly tied to individual employee learning and performance
as the broad bands allow managers more flexibility to recognise outstanding achievements.
(from Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2010) Human Resource Management:
Gaining a Competitive Advantage 6th Ed. McGraw-Hill. p 535).
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1.
Critically discuss the advantages and disadvantages of Corning’s new pay structure.
(15 marks)
2.
Discuss how the shifting product market conditions impacted on
restructuring and success.
Corning’s
(5 marks)
Guidelines for the Answering of the Examination Questions:
•
The length of your answer should be guided by the mark allocation.
Generally one coherent point / fact equals one mark.
•
The following sections of this Study Guide (and corresponding sections in the
prescribed text) are relevant to the sample examination question:
o
Question 1: Section 7.4 and 7.5
o
Question 2: Section 7.4
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Suggested Answers to Sample Examination Questions
Question 1 – Critically discuss the advantages and disadvantages of Corning’s new pay
structure.
Corning has recently moved from a graded salary system to a broad band system. The
advantages of this particular system are as follows:
•
The broad band compensation system facilitates the achievement of Corning’s new
strategy and enables the organisation to effectively compete in the new economy
•
It provides for greater flexibility in the assignment and fulfillment of job assignments
•
It provides for greater flexibility in assigning merit increases (Noe et al, 2010) and the
recognition of high performing employees
•
It reduces the bureaucratic nature of the compensation system
The disadvantages of Corning adopting a broad banding approach to its pay structure are:
•
There is reduced opportunity for promotion. This may be a particular disadvantage
for employees who comfortably enjoyed working for Corning when it was a
“traditional economy company”.
•
Broadbanding can lead to weaker budgetary control and labour costs could rise (Noe
et al, 2010).
This is a particular potential disadvantage for Corning who has
decentralised more pay decision to managers.
Corning also implemented stock options for eligible employees in an effort to increase
teamwork. Stock options have the advantage of encouraging employees to work together in
the interest of the organisation (Noe et al, 2010). However, while studies have shown that
stock options impact positively on the performance of top and middle level managers, it is
not clear whether they impact positively on the performance of lower level employees.
Indeed Noe et al, (2010) assert that “the Golden Age of stock options may be coming to an
end”. This is partly due to changing accounting standards as well as the fact that the stock of
IT companies (such as Microsoft), who previously used stock options as an incentive, is not
likely to increase as rapidly as it once did (Noe et al, 2010). It is recommended therefore that
Corning reassess the value of including stock options in its compensation strategy.
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Question 2 – Discuss how the shifting product market conditions impacted on Corning’s
restructuring and success.
The shifting product market conditions necessitated that Corning restructure in a manner
which would make it more flexible and innovative. It is clear that, had Corning not
restructured in this manner, it would not have been able to compete in the new economy. A
potential challenge going forward is for Corning to manage its labour costs as these directly
impact the price of Corning’s products, which is one of the most important dimensions on
which organisations compete (Noe et al, 2010). The banding approach to pay structure
potentially and decentralisation of certain aspects of pay decisions to Corning managers
could potentially result in labour costs becoming too high.
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SECTION 8
EMPLOYEE BENEFITS AND SERVICES
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CONTENTS
Learning Outcomes
Reading
8.1 Introduction
8.2 The Nature of Employee Benefits and Services
8.3 Reasons for Growth in Employee Benefits and Services
8.4 Types of Employee Benefits and Services
8.4.1 Leave
8.4.2
Unemployment Insurance
8.4.3
Compensation for Injuries and Diseases
8.4.4
Pension Funds
8.4.5
Insurance
8.4.6
Other Employee Benefits and Services
8.5 Administration of Employee Benefits and Services
8.6 Summary
Self Check Activity
Study Group Discussion Activity
Sample Examination Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the learner should be able to
demonstrate a comprehensive understanding of employee benefits and services. This overall
outcome will be achieved through the learner’s mastery of the following specific outcomes:
1. Discuss the nature of employee benefits and services.
2. Identify and discuss the reasons for the growth in employee benefits and services.
3. Identify and critically discuss the various types of employee benefits and services.
4. Discuss the importance, and the process involved, in effectively administering employee
benefits and services.
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READING
Reading
•
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGrawHill. (pp 556- 596) Chapter 13
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (pp 230-263) Chapter 8
Recommended Reading:
Books
•
Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. and Hatfield, R.D. (2006)
Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp
373 – 387 (Chapter 11).
•
Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. and Pilbeam, E.
(2007). Human Resource Management: Fresh Perspectives. pp 208 – 226
(Chapter 8).
•
Snell, S. and Bohlander, G. (2007) Human Resource Management. Mason:
Thomson. pp 445 – 480 (Chapter 11).
Journals and Legislation
•
Cole, N.D. and Flint, D.H. (2004) “Perceptions of Distributive and
Procedural Justice in Employee Benefits: Flexible versus Traditional Benefit
Plans.” Journal of Managerial Psychology. Vol. 19, No. 1, pp 19 – 40.
•
Lee, S.H., Lee, T.W. and Lum, C.F. (2008) “The Effects of Employee Services
on Organisational Commitment and Intentions to Quit.” Personnel Review.
Vol. 37, No. 2, pp 222 – 237.
•
Marsh, B. and Kleiner, B.H. (2004) “An Overview of Trends in Employee
Benefits Programmes.” Management Research News. Vol. 27, No. 4/5, pp 28.
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READING (continued)
Recommended Reading (continued):
Journals and Legislation (continued)
•
RSA (1997) ‘Basic Conditions of Employment Act (Act No 75 of 1997)’.
Government Gazette No. 18491. Pretoria: Government Printer.
•
RSA (2001) ‘Unemployment Insurance Act (Act No 63 of 2001).’ Government
Gazette. Pretoria: Government Printer.
•
Straub, C. (2007) “A Comparative Analysis of the Use of Work-Life Balance
Practices in Europe: Do Practices Enhance Females’ Career Advancement?”
Women in Management Review. Vol 22, No. 4, pp 289 – 304.
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8.1
Introduction
This section focuses on Employee Benefits and Services. In so doing, the following will be
examined:
•
The nature of employee benefits and services
•
Reasons for growth in employee benefits and services
•
Different types of benefits and services
•
Administration of benefits and services
8.2
The Nature of Employee Benefits and Services
Today, organisations provide employees with a range of benefits and services.
ACTIVITY
Consider your organisation’s approach to employee benefits and services
1. What benefits and services does your organisation provide for its employees?
2. Why does your organisation provide its employees with benefits and services?
3. What factors might influence your organisation’s approach to the provision of
benefits and services?
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Comment on Activity
Nel et al, (2011) defines employee benefits as “items in total package offered to employees
over and above salary, which increase their wealth or well-being at some cost to the
employer.” On the other hand, Snell & Bohlander (2007: 448) define employee benefits as
“an indirect form of compensation intended to improve the quality of work lives and the
personal lives of employees.”
Organisations may provide employee benefits and services to keep the organisation
competitive in attracting and retaining human capital, to improve employee performance, to
fulfil agreements with trade unions, and/or to comply with legislation (Nel et al, 2011). Nel
et al (2011) emphasise that the reward environment is thus the starting point for adding value
to the organisation and it would result in lower labour turnover, lower absenteeism and better
public relations.
Factors which may influence the organisation’s provision of services and benefits include:
•
Government Requirements as stipulated by legislation, for example unemployment
insurance, accident insurance and pensions.
•
Economic and Labour Market Conditions:
Under difficult economic conditions,
organisations looking for the best employees will seek to provide better benefits and
services than their competitors.
•
The Aims of Management may affect the benefits and services offered. For example,
management might strive for employee satisfaction or oppose trade unions.
•
Competition can prompt an organisation to adapt or expand its benefit plans.
•
The Preferences or Attitude of Employees: In order for benefits to increase employee
satisfaction, employees must know what their benefits are and must prefer the benefits in
their organisation to those offered by competitors. In addition, they must know that the
benefits will satisfy their needs better than the benefits offered by competitors (Snell &
Bohlander, 2007; Noe et al, 2012).
8.3
Reasons for the Growth in Employee Benefits and Services
The offering of employee benefits and services effectively emerged during the Great
Depression of 1929 to 1933, as a result of Franklin Roosevelt’s legislative programme to
buffer the devastating effects of the Great Depression (Noe et al, 2012). A further factor
which initiated the growth in employee benefits and services is the tight wage control and
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labour shortage brought about by World War II, which resulted in employers using benefits
to attract and retain suitable employees (Noe et al, 2012).
?
THINK POINT
The passage above identifies two reasons which initiated the growth in employee
benefits and services. What more recent factors have contributed to the expansion
of employee benefits and services?
Comment on Think Point
The following relatively recent factors have contributed to the growth in employee benefits
and services:
•
Taxation: in order to provide employees with some form of tax relief, salaries may be
structured to incorporate tax-free benefits.
•
Labour Market Conditions: organisations often use employee benefits in order to attract
and retain employees.
•
Insurance Costs: in order to address the rising costs of medical treatment, disability
insurance and pension funds, employers attain insurance cost effectively for their
employees as a group.
•
The Influence of Trade Unions:
Trade unions biggest contribution has been the
improvement and increase in the number of benefits initiated by the employers.
•
Changed Employee Needs: The rise in living standards has resulted in employees
focusing on the satisfaction of their higher order needs (Noe et al, 2012).
8.4
Types of Employee Benefits and Services
Employee benefits and services may be classified as voluntary or mandatory. As Figure 8.1
shows, in South Africa, mandatory employee benefits and services include leave,
unemployment insurance and compensation for injuries and diseases. Voluntary employee
benefits and services within South Africa include pension, insurance and employee services
such as childcare programmes and food services.
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EMPLOYEE
BENEFITS & SERVICES
VOLUNTARY
MANDATORY
•
Leave
•
Pension
•
Unemployment
Insurance
•
Insurance
•
•
Compensation for
Injuries & Diseases
Employee
Services
Figure 8.1:
Voluntary and Mandatory Employee Benefits and Services
(Nel et al, 2011: 249-251)
ACTIVITY
Consider your experience within South African organisations. How does the
South African environment (particularly the legal environment) affect an
organisation’s provision of the employee benefits and services identified in Figure
8.1 above?
Note: If you do not work within an organisation in South Africa, complete this
activity from the perspective of your country’s legal environment.
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Comment on Activity
The impact of the South African context on an organisation’s provision of employee benefits
and services will be addressed in the discussion of the various types of benefits below.
8.4.1
Leave
Leave refers to time off from work which may be paid or unpaid (Grobler et al, 2006: 376).
Legislation provides for the following leave benefits within the South African context:
•
Annual leave: In South Africa, the Basic Conditions of Employment Act of 1997 specifies
that employees are entitled to at least 21 days paid annual leave per 12 months of
employment.
•
Sick leave: In South Africa, the Basic Conditions of Employment Act of 1997 specifies
that employees are entitled to six weeks paid sick leave per 36 months of employment.
•
Maternity leave: Expecting female employees are entitled to maternity leave. In South
Africa, the Basic Conditions of Employment Act of 1997 specifies that “an employee is
entitled to at least four consecutive months maternity leave” (section 25[1]).
•
Family responsibility leave: Family responsibility leave provides for the taking of paid
leave:
o When an employee’s child is born or an employee’s child falls ill; or
o On the death of the employee’s spouse or close family member.
8.4.2
Unemployment Insurance
Unemployment insurance essentially provides for the insurance of employees who may lose
their earnings as a result of illness, pregnancy or termination of service (Grobler et al, 2006:
374).
In South Africa, the Unemployment Insurance Fund came into effect as a result of the
Unemployment Insurance Act of 1946, which was later replaced by the Unemployment
Insurance Act of 1966.
More recently, this piece of legislation was replaced with the
Unemployment Insurance Act, No 63 of 2001. This latest piece of legislation requires that
certain employees, who qualify as contributors, contribute 1% of their monthly income to the
Unemployment Insurance Fund (UIF). Employers are also required to contribute 1% of an
employee’s monthly remuneration to the UIF (Grobler et al, 2006: 374).
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8.4.3
Compensation for Injuries and Diseases
In South Africa the Compensation for Occupational Injuries and Diseases Act of 1993 has
replaced the Workmen’s Compensation Act of 1941. This piece of legislation serves to
regulate the compensation received by employees who contract a disease or are injured while
working (Grobler et al, 2006: 374).
8.4.4
Pension Funds
Pension funds are a voluntary benefit provided by employers (Nel et al, 2011). A pension
provides for the funding of an employee’s retirement. Its objective is to ensure that after
retirement employees has a continued source of income in order to maintain approximately
the same standard of living as before (Nel et al, 2011).
There are two types of pension plans:
•
The contributory plan where the employee and employer both contribute to the plan; and
•
The non-contributory plan that is financed entirely by the employer (Grobler et al, 2006:
374).
8.4.5
Insurance
Employers normally provide employees with medical insurance as well as life and disability
insurance.
8.4.5.1 Medical Aid Schemes
Medical aid schemes provide medical coverage for both the employee and his/her
dependants. Employers and employees both contribute to the costs of the medical aid
scheme (Grobler et al, 2006: 377).
8.4.5.2 Disability and Life Insurance
Many employers, in recognising the importance of salary continuation after illness or
disability, provide their employees with disability insurance (Grobler et al, 2006: 377).
Further, a number of employers also offer life insurance for their employees where the
standard policy provides a death benefit of five times an employee’s annual rate of pay
(Grobler et al, 2006: 377).
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8.4.6
Other Employee Benefits and Services
Organisations may also offer the following employee benefits and services:
•
Food Services where tea and lunch facilities are provided, such as cafeterias;
•
Education Expenses where employers provide partial or full reimbursement for an
employee’s study fees (Grobler et al, 2006: 378);
•
Transportation Programmes where employers may, for example, provide the services of
a company bus or offer company cars to certain grades of employees;
•
Housing Subsidy where an employer may subsidise the employee’s repayment of his/her
housing loan;
•
Childcare Programmes where the employer will either subsidise childcare costs or
provide childcare facilities (Grobler et al, 2006: 378).
READING ACTIVITY
Read the following journal article and then answer the question which follows:
•
Lee, S.H., Lee, T.W. & Lum, C.F. (2008) “The Effects of Employee Services
on Organisational Commitment and Intentions to Quit.” Personnel Review.
Vol. 37, No. 2, pp 222 – 237.
Provide a summary of some of the key research findings into employee services
presented by Lee et al (2008).
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Comment on Reading Activity
Lee, Lee and Lum (2008: 223) identify that employee services “comprising childcare
services, health club memberships and financial assistance programs, are innovative
employee benefits provided to employees to help them integrate their work and family
responsibilities.”
Research shows that employees generally want to work for companies who seek to assist
them in balancing their work and family responsibilities, and in so doing eliminate the stress
which ordinarily emerges from trying to address both these areas of responsibility (Lee et al,
2008: 223). Research has generally found that organisations providing effective employee
services have employees who are generally happier and more satisfied than employees in
organisations who do not have such services. For example, “organisations that had on-site
childcare facilities had more satisfied employees and higher employee retention
rates…however organisations that were unable to help their employees shoulder eldercare
obligations had significantly higher employee absenteeism and intentions to quit, lower work
productivity and more employees with health problems because of care giving stress” (Lee et
al, 2008: 223).
Recent research conducted by Lee et al (2008: 235) found that organisations that provide
employee services “help their employees balance their work and family responsibilities,
thereby enhancing employee retention and preventing a premature loss of human capital in
the workforce. Given that the industrial structure of most developed nations has transformed
towards a knowledge-based economy, retaining knowledge workers and high performing
employees are vitally important for organisationl success and global competitiveness” (Lee
et al, 2008:235).
In summary section 8.4 addressed the types of employee benefits and services which
organisations may provide. These include leave, unemployment insurance, compensation for
injuries and diseases, pensions, medical insurance, life and disability insurance and other
employee services such as childcare programmes. The impact of employee services on
organisational commitment and retention were also explored.
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8.5
Benefit Planning
Grobler et al (2006: 379) assert that benefits generally amount to 40% of payroll costs, which
is considerable. It is therefore important that organisations offer benefit packages which
meet the specific needs of employees and which have strategic value.
Trends in benefit planning show that flexible benefit plans are increasingly being offered to
employees. This allows employees to choose those benefits which best meet their needs
(Grobler et al, 2008: 379). There are essentially three types of flexible benefit plans:
•
Core Cafeteria Plan: This plan provides core coverage to all employees in certain areas
(e.g. medical aid scheme) and allows employees to select further benefit options, or
alternatively cash equivalent to the benefit options (Grobler et al, 2008: 379).
•
Buffet Plan: This plan gives all employees the same benefits and coverage, but then
allows employees to reduce coverage in certain areas (e.g. life insurance) so as to earn
benefits in other areas (e.g. childcare).
•
Alternative Dinners Plans: This plan comprises a number of alternative plans structured
to meet the needs of different groups of employees (e.g. the single working mother, the
married employee with no children, etc.) (Grobler et al, 2008: 379).
?
THINK POINT
What do you think would be some of the advantages of flexible benefit plans?
Comment on Think Point
The advantages of flexible benefit plans are that:
•
The diverse needs of a range of employees are met
•
Benefit costs are controlled
•
Improved benefits may be offered (e.g. childcare)
•
Facilitates the attraction and retention of employees is facilitated, and
•
Avoids duplicate coverage, particularly for married employees with dual careers is
avoided (Grobler et al, 2008: 381)
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8.6
Summary
This section addressed the HR issue of Employee Benefits and Services. In so doing, the
nature of employee benefits and services was examined and reasons for the growth in
employee benefits and services were investigated. The types of employee benefits and
services offered by organisations were also studied. An exploration of benefit planning
concluded this section.
Section 9 will focus on Human Resource Management and Employment Relations.
SELF CHECK ACTIVITY
Check your understanding of some of the principles and theory addressed in this section by
answering the questions below.
1. Sumaya, the HR Director for a large aircraft manufacturer has been asked by the
Executive Committee to review and improve the employee benefits and services offered by
the organisation. Lately the organisation has experienced difficulty in employing and
retaining skilled and experienced artisans to build aircraft. The Executive Committee is
hoping that an improvement in the benefits and services offered will help to attract
qualified staff from the organisation’s competitors and also facilitate the retention of
staff.
Based on the information provided in the brief case study above, which of the following
factors are impacting on the organisation’s decisions around employee benefits and
services?
A. Economic and labour market conditions
B. The aims of management
C. Competition
D. All of the above
2. Sumaya has prepared a revised structure of employee benefits and services which she
presents to the Executive Committee at the next meeting. Included in her revised benefits
and services structure are the following: leave, unemployment insurance, compensation
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for injuries and diseases, pension, life and disability insurance, medical aid,
transportation services, childcare and financial counselling.
In the South African context, leave, unemployment insurance and compensation for
injuries and diseases would be classified as………
A. mandatory benefits
B. voluntary benefits
C. employee services
D. None of the above
3. Childcare facilities, financial counselling and transportation services are….….
A. mandatory benefits
B. voluntary benefits
C. employee services
D. None of the above
4. Pension, life and disability insurance and medical aid included in Sumaya’s revised
employee benefits and services plan are……..…
A. mandatory benefits
B. voluntary benefits
C. employee services
D. None of the above
5. Sumaya has just completed her presentation of the revised employee benefits and services
programme to the Executive Committee. Jerry, the CEO, asks Sumaya what the reason is
behind including employee services which the organisation previously did not do. In
response, Sumaya informs Jerry of the research findings about the impact of employee
services on employees.
Which of the following are research findings which Sumaya could use to motivate the
need for employee services?
A. employee services help employees balance work and life responsibilities
B. employee services prevent the premature loss of human capital
C. employee services result in a more satisfied workforce.
D. All of the above
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Answers Self Check Activity
1.
D
2.
A
3.
C
4.
B
5.
D
STUDY GROUP DISCUSSION
For this section, your Study Group is required to compare and contrast the Employee
Benefits and Services from the different organisations in which the Study Group members
work.
Preparation
Prior to the Study Group meeting, each individual group member must prepare the
following with respect to their organisation’s employee benefits and services programme
(you may need to consult your HR Manager in doing this preparation if you are not
familiar with the organisation’s employee benefits and services):
•
Source your organisation’s employee benefits and services policy and procedure.
•
Identify whether your organisation’s employee benefits and services programme is a
fixed or flexible plan.
•
Find out how the benefits and services programme supports the overall organisational
strategy
•
Find out which stakeholders were involved in the generation of the benefits and
services programme.
At the Study Group Meeting
At the Study Group meeting each individual group member must be given the opportunity
to present their organisation’s employee benefits and services programme. The policy
and procedure document, as well as any other supporting documentation (e.g. pamphlets
with employee service details), if available, should be perused by the group.
On completion of each individual presentation, the group should critique each benefits
and services programme.
The extent to which the programme supports the overall
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organisational strategy should also be discussed. Suggestions for improvement of the
benefits and services programme should be made.
Following the Study Group discussions of the various employee benefits and services
programmes, it would be useful for the group to prepare a one to two page summary
document entitled “Guidelines for the Design and Implementation of an Effective
Employee Benefits and Services Programme”.
Record your notes on the Study Group discussion in the space provided below.
This Study Group discussion activity provides the Study Group with an opportunity to reflect
on and compare different experiences of employee benefits and services programmes within
organisations. Group members, in sharing their experiences will learn from each other which
in turn will enable them to better understand and respond to the employee benefits and
services practices within their own organisation.
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SAMPLE EXAMINATION QUESTIONS
Instructions:
Read the case study below taken from your prescribed text, Nel et al (2011: 260) and then
answer the questions which follow.
Dropping a Stitch at Jabula Textiles
Mary Mabuza is the owner and CEO of Jabula Textiles, a textile manufacturer situated near
Cato Ridge. Mary’s father started the business in 1980 and she took over the reins from her
father when he retired in 2004. Revenues and profits increased slowly but surely during her
father’s term of office, but during the latter part of the last decade, Mary has had to face
many financial problems as a result of foreign competition, mounting raw material costs, and
the increasing burden of providing employee benefits.
Mary is very concerned about HIV / Aids, and as a local regional representative, was
sponsored to attend the 17th World Conference on HIV / Aids and Welfare, held in Dar es
Salaam, Tanzania in 2007. The focus of the conference was on the pandemic, as is manifest
in East and Southern Africa. Local newspapers reported that delegates at the conference
agreed that health care costs had grown faster than overall inflation, and faster than any
other segment of the regional economies since 2000. Besides the HIV / Aids crisis, many of
the delegates at the conference cited large catastrophic-illness claims, increased use of
mental health and substance abuse services, increased use of medical services, hightechnology medicine and the demographics of blue collar workers – a higher percentage of
older employees requiring medical treatment for ageing conditions, and an increasing
percentage of younger employees requiring medical treatment for HIV / Aids related
diseases.
After Mary returned from the conference, she realised that she must do something about
managing the benefits programme in her company of 74 employees. There is currently no
structure to the benefits programme and she does not know where to start. She knows she
has to do something before matters get out of hand, as she has already had a few Aids-related
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deaths in her business, and therefore, benefits for spouses or other affected individuals are of
paramount importance. Mary has decided to procure the services of a benefits consultant.
(from Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B. (2011) Human Resource
Management. 7th Edition. Cape Town: Oxford University Press Southern Africa. pp 260.)
Mary Mabuza has hired you as the benefits consultant to Jabula Textiles. You are required to
write a report in which you analyse Jabula Textiles’ situation and provide recommendations
for a structured employee benefits programme.
(25 marks)
Guidelines for the Answering of the Examination Question:
•
The length of your answer should be guided by the mark allocation.
Generally one coherent point / fact equals one mark.
•
Sections 8.4 and 8.5 of this Study Guide (and corresponding sections in the
prescribed text) are relevant to this sample examination question
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Suggested Answer to Sample Examination Question
Report to Jabula Textiles
The Implementation of a Structured Employee Benefit Programme
July 2009
1.
Introduction
Mary Mabuza, CEO of Jabula Textiles, has contracted my employee benefit consulting
services for the purposes of advising as to a structured employee benefit programme which
would be most appropriate for her organisation. This report provides an analysis of the
situation at Jabula Textiles, as well as recommendations for a structured employee benefit
programme.
2.
Analysis of Jabula Textiles Situation and Needs
Jabula Textiles is a medium sized organisation comprising 74 employees. Currently no
structured employee benefits programme is implemented within the company. The CEO has
expressed concern in this regard, particularly as the organisation has already experienced a
few Aids related deaths. In addition to concerns about HIV / Aids, the CEO has also
expressed concern around:
o The possibility of claims associated with large catastrophic illness
o Trends showing an increase in the use of mental health and substance abuse services
o An increase in the use of medical services
o The cost of high technology medicine, and
o The demographics of blue collar workers where a higher percentage of older
employees require medical treatment for ageing conditions while an increasing
percentage of younger employees require medical treatment for HIV / Aids related
diseases
It is also noted that Jabula Textiles regularly faces financial challenges and therefore it is
important that the structured employee benefit programme which is implemented is as cost
effective as possible.
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2.
Recommendations for a Structured Employee Benefit Programme
Research shows that employees require benefit packages which reflect the dynamic labour
market. Over 75% of workers prefer health benefits, while young workers require a savings
plan as a second preference and older workers require a pension (Nel et al, 2011). It is
important therefore that the employee benefit programme which is put in place for the staff
of Jabula Textiles is one which takes into account the current trends identified in section 1 of
this report, as well as the needs of both the younger and older employees.
It is recommended that Jabula Textile’s Employee Benefit Programme be structured as
follows:
o Medical Aid: A medical aid scheme which covers both the employee and his / her
dependents needs to be put in place. It is recommended that Jabula Textiles pay 50%
of the medical aid scheme and that the employee cover the remaining half. Such a
medical aid scheme would go a long way to ensuring that employees are able to cover
medical expenses which result from HIV / Aids related illnesses, other illness as well
as the use of mental health and substance abuse professionals.
o Life and Disability Insurance: Given the impact which HIV / Aids has had thus far
on the Jabula Textiles workforce, it is recommended that life and disability insurance
is offered to all employees. This will ensure the continuation of salary should an
employee become disabled or pass away, thereby providing for his / her dependents
(Grobler et al, 2006: 377). The cost of the life and disability insurance may be
deducted from the employee’s monthly remuneration and may be subsidised by the
organisation if necessary.
o Pension Fund: Although my analysis of Jabula Textiles needs did not overtly show
the need for a pension fund, it would be in the organisation’s interest to provide a
pension or provident fund to the employees so as to enable them to start saving for
their retirement. It is customary, in the administration of pension funds, for the
organisation to deduct the employee’s contribution to the fund and pay it on their
behalf. It is also customary, although not essential, for the organisation to subsidise a
portion of the monthly pension payment (Nel et al, 2011).
o Employee Services: Should finances allow, so as to increase the commitment and
motivation of the workforce, it would be of value if Jabula Textiles could provide one
or more of the following employee services:
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•
Subsidised cafeteria
•
Wellness programme
•
Financial counseling
•
Retirement counselling
•
Child care on site
•
Transportation services (Nel et al, 2011).
Research has found that the provision of such employee services contributes to a
more satisfied workforce (Lee, Lee and Lum, 2008).
In addition to the voluntary benefits recommended above, it is essential that Jabula Textiles
ensures that it is providing the necessary mandatory benefits as well. In South Africa,
mandatory benefits include:
•
Unemployment insurance
•
Compensation for injuries and diseases
•
Leave
Given the financial challenges which Jabula Textiles experiences, it may be prudent for the
organisation to offer a ‘cafeteria package’ of benefits from which employees may select
those which are most appropriate to their specific needs (Nel et al, 2011).
3.
Conclusion
Given the current needs of Jabula Textiles employees, it is imperative that a structured
employee benefits programme be implemented as soon as possible.
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SECTION 9
HUMAN RESOURCE MANAGEMENT
AND EMPLOYMENT RELATIONS
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CONTENTS
Learning Outcomes
Reading
9.1 Introduction
9.2 In search of a definition: from industrial relations to employment relations
9.3 The major theories of employment relations
9.3.1 The pluralist perspective
9.3.2 The unitarist perspective
9.3.3. The radical or “Marxist” approach
9.4 The parties to the employment relationship and their respective roles
9.5 The Labour Relations Environment
9.5.1The Micro-environment
9.5.2 The Macro-environment
9.6 Summary
Self Check Activity
Study Group Discussion Activity
Sample Examination Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on completion, the learner should be able to
demonstrate a basic understanding of employment relations within his / her country’s context.
This overall outcome will be achieved through the learner’s mastery of the following specific
outcomes, in that a learner will be able to:
1. Define the concept of employment relations
2. Identify and discuss the major theories of employment relations.
3. Explain the concept of the tripartite relationship by having identified the parties to the
labour relationship.
4. Identify and display awareness of the various environmental factors that impact on the
labour relationship.
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•
READING
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGrawHill. (pp 598-647) Chapter 14
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (pp 36-93) Chapter 2
Recommended Reading:
Books
•
Bendix, S. (2000) Industrial Relations in the new South Africa.3rd edition
revised). Cape Town: Juta and Co.
•
Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. and Hatfield, R.D. (2006)
Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp
416 – 477 (Chapter 13).
•
Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. and Pilbeam, E.
(2007). Human Resource Management: Fresh Perspectives. pp 265 – 293
(Chapter 10).
•
Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (pp 93-124) Chapter 3
•
Nel, P.S, Swanepoel, B.J., Kirsten, M., Erasmus, B.J. and Tsabadi, M.J. (2005)
South African Employment Relations: Theory and Practice.5th edition.
Pretoria: Van Schaik Publishers.
•
Venter, R. (ed) (2003) Labour Relations in South Africa (revised edition) Cape
Town: Oxford University Press.
Journals
•
Lotte Hansen, L. (2002) “Rethinking the Industrial Relations Tradition from a
Gender Perspective.” Employee Relations. Vol. 24, No. 3, pp 190 - 210
•
Simelane, X. (2008) “Textiles and Employee Relations in Swaziland.”
Employee Relations. Vol. 30, No. 4, pp 452 – 465.
• Wood, G. (2008) “Introduction: Employment Relations in Africa.” Employee
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Vol. 30, No. 4, pp 329 – 332.
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9.1
Introduction
“Labour relations” is an all-encompassing term used to describe the dynamic complexities of
the various relationships between the parties to the employment relationship. It provides a
theoretical and practical framework by means of which the relationship between individual
employees and employers, and also the relationship between the collectives (such as trade
unions, employers’ organisations and the state) and individuals, or between one collective
body and another, are regulated.
Industrial relations is often perceived as being synonymous with stereotypical blue-collar, allmale unionised workers in the mining or manufacturing industry (Lotte Hansen, 2002). The
term labour relations, however, tends to reflect to a greater extent the realities of the
employment relationships in the post-industrialized era.
The growth of the services industries, facilitated to a large extent by the growth in
information technologies and changing global demographics, has prompted the need for an
accurate definition and study of the employment relationship. Although the relationship
between employees and employers does include an element of conflict, it is actually
interdependent. This interdependence between the parties to the employment relationship
ensures mutual reliance for the realisation of their respective aspirations, whether they be
work or non-work related (Nel et al, 2011). Thus the purpose of labour relations can be seen
as the creation and promotion of harmonious working environments through the regulation of
the employment relationship.
9.2
In Search of a Definition: From Industrial Relations to Employment Relations
An early attempt to define the field of industrial relations was made by Dunlop (1958). He
defined an industrial relations system as follows: “It is comprised of certain actors
(managers, workers, and specialised government agencies), certain contexts (technological
characteristics, the market and the distribution of power in the society), an ideology which
binds the industrial relations system together and body of rules created to govern the actors
at the workplace and the work community (Dunlop, 1958:7).”
According to Dunlop (1958), the actors establish rules for the workplace and work
community. These rules are essentially aimed at governing the relations and the interaction
between the actors and therefore include the establishment of justice in the workplace. He
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also emphasised that the environment surrounding the workplace influences the actors and as
such the industrial relations system of any country exists alongside other systems such as the
economic systems and the technological system.
Flanders (1965:4) defined industrial relations as a study of the institutions of job regulation.
Hyman (1975: 12) preferred to focus on the processes of industrial relations describing the
field as the study of the processes of control over work relations which include job regulation.
Early perspectives tended to focus on the conflict regulatory aspects and the institutions
involved in the rule making and work control processes in the employment context.
Gradually other perspectives developed and since the 1980’s the definition and scope of this
field has attracted renewed interest and debate. In the early 1990’s the debate was taken
further when it was renamed employment relations.
The acknowledgement of the centrality of the employment relationship – in its totality –to
industrial relations thus greatly facilitated the broadening of this field both in theory and
practice. This shift has brought about the merging of human resource management and
industrial relations into what has now become known as employment relations. Employment
relations as a field thus covers everything that emanates from or impacts on the employment
relationship.
9.3
The Major Theories of Employment Relations
There are three major approaches to employment relations namely the pluralist approach, the
unitarist approach and the radical or Marxist approach. Each of these will be discussed in
more detail below.
?
THINK POINT
What is your understanding of the terms ‘pluralist’, ‘unitarist’ and ‘Marxist’ ?
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Comment on Think Point
Keep your understanding of the terms ‘pluralist’, ‘unitarist’ and ‘Marxist’ in mind as you
read through the following theories on employment relations.
9.3.1
The Pluralist Perspective
The pluralist perspective views the employing organisation as a coalition of individuals and
groups with diverse objectives, values and interests. It presupposes that organisations are
multifaceted, complex groupings of individuals who align themselves with other members of
the organisation sharing similar views, values and objectives (Venter 2003:7). The different
groups in the organisation are competitive in terms of leadership, authority and loyalty. Trade
unions are accordingly accepted as a legitimate forum for coordinating various interests and
expressing them accordingly. There is a greater scope for conflict because of this interface
between a variety of interest groups and a greater dissemination of power that has now been
accepted as rationale and inevitable (Nel, Swanepoel, Kirsten, Erasmus and Tsabadi, 2005).
Conflict is primarily the result of the tensions that arise between the parties to the
employment relationship as a consequence of the differing roles they play. Management is
responsible for the efficiency, productivity and profitability of the organisation. The concerns
of the individual worker are, however, wider than this and include personal aspects such as
higher pay, better working conditions, job security and more meaningful work. Conflict
results from industrial and organisational factors rather than from individual, personal factors.
The conflict that does arise is manageable through a system of negotiated trade-offs and
settlements. The pluralists argue that in the employment relationship there is a constantly
shifting balance of power that needs to be maintained through compromise and collaboration
(Venter, 2003:7).
The pluralist perspective therefore typically concentrates on how to regulate and
institutionalise conflict in order to contain and control its impact on the parties and their
relationships. The state is viewed as the guardian of public interest and should provide the
machinery to institutionalise the conflict.
9.3.2
The Unitarist Perspective
The unitarist perspective views the organisation as an integrated group of people having a
unified authority structure with common values, interests and objectives. Management is the
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only source of authority in the organisation. Its right to manage is legitimate and any
objections to this are seen as irrational (Nel et al, 2005). Conflict is perceived as being
irrational and is most often of a direct clash between opposing ideologies. Managers
generally attribute conflict to a clash of personalities or a general failure on the part of
employees to understand the decisions taken by management as a whole or to a breakdown in
managerial communication (Venter, 2003:7). Trade unions are viewed as being subversive
providing a direct affront to the power and authority of management who “know what is best
for their employees” and make decisions accordingly.
9.3.3.
The Radical or “Marxist” Approach
The radical approach is also known as the “Marxist” or “class conflict” perspective. Its
proponents concentrate on the nature of the society that the organisation finds itself in. It
assumes that workers are oppressed for the sake of capitalist interests. Labour-management
relations are viewed as a mere extension of the class conflict, between the “haves” and the
“have-nots” which permeates the capitalist society as a whole (Swanepoel et al, 2003: 623)
Organisations are accordingly geared to wealth generation and the labour relationship is
structured to conform to the devolution of power from top to bottom. Marxism by contrast
promotes an order in which productive capacity (including land, capital and labour) and the
fruits thereof are owned by and shared among the people (Venter, 2003).
Industrial conflict can therefore be seen from a Marxist perspective as an expression not only
of organisational conflict but of wider divisions within society as a whole (Nel et al, 2005).
Accordingly trade unions should only be seen as vehicles of fundamental societal change.
One of Marx’s biggest criticisms was that it alienates workers mainly due to the strict
division of labour that seeks to achieve maximum efficiency. A factory system ultimately
alienates workers from their produce, their potential, their efforts and each other. All
employees’ efforts are geared toward the production for the benefit of employer and the
employee. Under a Marxist system there is no division of labour. Everything is produced for
the benefit of the whole rather than the individual and society rather than the market will thus
determine what is produced for whom. (Venter, 2003). Ideally people will work for the sake
of working and not what they stand to gain in return.
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9.4
The Parties to the Employment Relationship and Their Respective Roles
?
THINK POINT
Based on your experience of employment relations within your organisation, who
would you say are the parties to the employment relationship?
Comment on Think Point
The labour relationship is essentially a relationship between employer and employees, as well
as between employer/employee and the state, thus making it a tripartite relationship (Venter,
2003:9):
•
The role of the state is to create, by means of policy and legislation, a framework within
which the other parties can conduct their relationships.
•
The employer refers to the organisation as a legal entity and the employing organisation.
•
The employee traditionally refers to the workers and their representative bodies, namely
trade unions (Nel, et al. 2005:13).
The State
Secondary
employment
relationship
Secondary
employment
relationship
Employers and
employer
organisations
Labour and
Trade
Unions
Primary employment relationship
Figure 9.1: The Tripartite Relationship (Venter, 2003:9)
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It is important to realise that the state plays a less than equal role in the relationship, except
when it is the employer itself. The primary focus of the employment and labour relationship
is therefore the relationship between employer and employee, with the state filling a
secondary or supportive role (Venter, 2003: 9)
The relationship is therefore divided into two categories:
•
The secondary employment relationship –which is the relationship between the state, the
employee and the employer.
•
The primary employment relationship – which is the relationship between the employee
and the employer.
The labour relationship is a dynamic one, as the interactions between parties often occur in a
turbulent environment. The secondary employment relationship is a facilitative relationship
in which the state provides the framework for conducting the primary employment
relationship. The state establishes the rules and regulations governing the interactions
between employee and employer. The degree to which the state intervenes in the primary
employment relationship ranges along a continuum from minimal to maximal intervention.
The degree of state intervention is an extension of the prevailing system of government and
its socio-economic policies.
Bendix (2000:16) points out that in the employment relationship there is continuum between
conflict and co-operation, each governed by its own power relations and processes. The
interaction is characterised by the following (Bendix, 2000: 17-19):
•
Custom and tradition
•
Legislation
•
Mutual agreement
•
Ethical considerations: trust, integrity and fairness
External influences on the employment relationship are:
•
The socio-political system
•
Societal influences
•
The economic dispensation
•
The influence of trade unions
•
Technological developments
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NEGATIVE
POLE
POSITIVE
POLE
Diverging interests,
goals, values and
needs
Common interest in
continuation of the
organisation
Conflict
Co-Operation
No or little
trust
Power Over
(Coercive Power)
Joint
problemsolving
Increasing
trust
Power To
Task
related
decisions
(Expert / Reward
Power)
Power
Sharing
Institutionalisation
of Conflict
COLLECTIVE
Figure 9.2
Participation & CoDecision Making
INDIVIDUAL
INDIVIDUAL
&
COLLECTIVE
The Interaction Continuum (Bendix, 2000:16)
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9.5
The Employment Relations Environment
Every organisation is influenced by the environment in which it operates. A good
organisation is earmarked by its ability to anticipate change and respond accordingly. The
human capital and the labour relationship are in essence prone to influence by a number of
moderating factors from both within and outside the organisation.
Figure 9.3: The LabourRelationsEnvironment, (Venter, 2003:17)
9.5.1
The Micro-environment
According to Venter (2003:17) the micro-environment comprises the following:
•
Culture: An organisation’s culture consists of shared values, norms and beliefs that help
to unite the members of that organisation in a common purpose. A strong culture will
enable a firm to adapt to environmental changes and to co-ordinate and integrate its
internal operations (Venter, 2003: 17).
•
Leadership: Strong leadership is increasing in importance as an ingredient for a
successful organisation. The age-old debate regarding the interchangeability of the terms
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“management” and “leadership” continues unabated. However, while all leaders are
managers, it does not necessarily mean that all managers are leaders. What distinguishes
a leader from a manager is that leaders secure the co-operation of their followers. Thus, a
positive labour relationship is dependent on the ability of an organisation’s leadership to
create a harmonious, productive and sound working environment (Venter, 2003: 18).
•
Communication structures: Effective labour relations obviously depend on positive
communication. Organisations often make the mistake of relying extensively on topdown communication. This contradicts the principles of participation and co-operation
that form the basis of much of the new age labour dispensation. Language increasingly
becomes an issue especially in diverse countries like South Africa, thus organisations
need to be aware of the language requirements of their workforces and to adjust their
communications policies accordingly (Venter, 2003:19).
•
The Nature of the Workforce: Cultural diversity is one component of a workforce that
needs to be considered by an organisation sensitive to its diverse nature. The number of
women employed is also an important issue. Generally speaking, Southern African
organisations are still lax in promoting gender empowerment and many are still male
dominated. Sexual orientation is also another sensitive matter to be considered (Venter,
2003: 20). Finally, sight, hearing, physical, psychological, or other disabilities need to be
considered.
•
Policies and Procedures: Policies and procedures are the elements that provide direction
in and regulate the activities of the organisation and its members. Organisations have a
range of policies and procedures that co-ordinate and facilitate the labour relationship
(Venter, 2003:20).
9.5.2
The Macro-environment
According to Venter (2003: 20) the macro environment comprises:
•
The Economy: The economic environment can be further sub-divided into a number of
factors that typically impact on the employment relationship. These are:
o Government policy
o Inflation and unemployment
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o Globalisation and retaining the competitive edge
o Technology
•
The Socio-Political Environment: The prevailing political dispensation should reflect the
ideology supported by the majority of the constituents. Since these are employers and
employees their political aspirations will often be reflected in the workplace. In the same
vein, worker’s ideals may be reflected in the political arena since they would typically
vote for the party that best accommodates their socio-economic needs (Venter, 2003:20).
•
The Legal Framework: A country’s labour legislative framework comprehensively
regulates all facets of the employment relationship, from basic employment rights and the
conditions of employment at one end to the employment practices at the other (Nel et al,
2005:26). Within the South African context, the following legislation is important:
9.6
•
The Labour Relations Act of 1995
•
The Basic Conditions of Employment Act of 1997
•
The Occupational Health and Safety Act of 1993
•
The Employment Equity Act of 1998
•
The Skills Development Act of 1998
The Changing Face of the Employment Relationship
Venter (2003: 525) identifies that the relationship between the employer and employee will
move away from what can be loosely described as a ‘master-servant’ relationship in which
employees are subservient to the employer. Instead, alliances will be formed between
providers of labour and suppliers of work. Within these alliances the parties will interact on
an equal contractual footing. This will involve the following changes:
•
The role of trade unions will become increasingly redundant as the suppliers of labour
and employers increasingly negotiate on a contractually equal footing.
•
The roles of the lower to middle management tiers in organisations will increasingly
become redundant as employees are given increased autonomy and control.
•
Work itself will be less rigidly governed by rules and regulations.
•
There will be less commitment and loyalty and a higher turnover of contingent and
contract workers (Venter, 2003: 525).
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?
THINK POINT
Consider whether some of the changes to the employment relationship which
Venter (2003) identifies are applicable to your organisation.
Comment on Think Point
Learners’ responses will differ and will be dependent on the context in which they work.
READING ACTIVITY
Read the following journal article:
•
Wood, G. (2008) “Introduction: Employment Relations in Africa.” Employee
Relations. Vol. 30, No. 4, pp 329 – 332.
In his introductory paper to a 2008 edition of the Employee Relations journal
which is dedicated to employment relations in Africa, Wood (2008) summarises
key employment relations dynamics which are taking place throughout Africa.
Summarise these in the space provided below.
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Comment on Reading Activity
Wood (2008: 329) introduces his article by saying that articles dealing with African
employment relations have not been frequently published. This is problematic as “the study
of employment relations in Africa can shed light on a wide range of contemporary issues and
debates: the dynamics of working in insecure and non-standard contracts; strategies for
union outreach and renewal; the consequences of the uneven enforcement of labour
legislation; contemporary advances in institutional theory; and the pressures posed on
working life by the intensification of international competition” (Wood, 2008: 329).
Wood (2008) summarises the key points of five journal articles focusing on employment
relations within Africa. The countries addressed include:
•
South Africa: where it is found that unions have failed to penetrate the informal sector of
the economy. The need for unions to “develop a broader discourse, highlighting social
injustices and the need to secure the rights of women and marginalised communities”
(Wood, 2008: 330) is emphasized. However, within the formal sector, unions have made
considerable progress and have succeeded in deterring managers from repression, and
organisations have been forced to utilise labour more effectively (Wood, 2008: 331).
•
Namibia:
where there has been a fragmentation of collective bargaining and a
reproduction of racial and gender discrimination in the informal sector of the economy
(Wood, 2008:330).
•
Nigeria: where the enforcement of labour legislation is weak, in both the formal and
informal sector. “Government weaknesses mean that unions will have to rely on their own
resources and that of the NGO sector in fighting for better conditions of employment in
the informal sector” (Wood, 2008:331).
•
Algeria: where “state sponsorship of a specific strand of unionism has not only weakened
attempts to independently organise workers, but also the broader position of
employees…independent unions face a stark choice between continuing to autonomously
organise in a very difficult climate, or opt for cooptation and emasculation” (Wood,
2008: 331).
•
Botswana:
where expatriate workers “constitute a labour aristocracy, occupying
positions formally occupied by colonial officials and settlers” (Wood, 2008: 331). As is
the case throughout Africa, many workers in Botswana face insecure livings and do not
have effective union representation.
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•
Swaziland: where foreign owned companies are attracted to Swaziland because of low
labour costs and access to southern African markets. Labour repression is rife and Swazi
workers are confronted with daily indignities (Wood, 2008: 331).
Despite the diversity of the countries studied in the issue of Employee Relations journal
devoted to Africa, there are a number of commonalities which emerge. These include:
•
The sharp divide between work in the formal and informal sectors of the economy
•
The challenges which face unions in trying to organise in contexts where the formal
economy is shrinking
•
The negative effects of liberalisation (Wood, 2008: 332)
9.6 Summary
This section focused on Human Resource Management and Employment Relations. In doing
so the nature of the subject has been examined and it has been established that employment
relations is a “living” field of study that is played out daily in workplaces around the world.
SELF CHECK ACTIVITY
Check your understanding of some of the principles and theory addressed in this section by
answering the questions below.
1. In employment relations, who are the parties to the tripartite relationship?
A. The state and the employer
B. The employer and the employee
C. The state, employer and the employee
D. None of the above
2. The nature of the employer and employee’s relationship is...
A. Primary
B. Secondary
C. Tertiary
D. None of the above
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3. The nature of the relationship between the employer and the state is …
A. Primary
B. Secondary
C. Tertiary
D. None of the above
4. Which of the following perspectives holds that the organisation is a coalition of people
with different beliefs, interests and goals and as not all employees have the same goals,
conflict is likely to arise?
A. Marxist perspective
B. Unitarist perspective
C. Radical perspective
D. Pluralist perspective
5. Which of the following perspectives stresses a common goal in all organisations and that
there is no need for divisions in the organisation as all employees have similar needs and
values - therefore conflict is unnecessary and unnatural?
A. Marxist perspective
B. Unitarist perspective
C. Radical perspective
D. Pluralist perspective
Answers Self Check Activity
1.
C
2.
A
3.
B
4.
D
5.
B
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STUDY GROUP DISCUSSION
For this section, your Study Group is required to review your country’s labour legislation
which impacts on employment relations within your organisation.
Preparation
Prior to the Study Group meeting it is important that each individual group member
prepares as follows. Each member of the Study group must:
•
Source their organisation’s policy which deals with employment relations
•
Source at least one relevant piece of labour legislation. This piece of legislation must
be read and summarised for presentation to your Study Group.
•
To what extent does your organisation’s employment relations policy support the
implementation of the piece of labour legislation which you have reviewed?
At the Study Group Meeting
At the Study Group Meeting, each individual group member is to present his/her
•
Organisation’s employment policy
•
Summary of the piece of labour legislation which was assigned to him / her
•
Explain the extent to which the organisation’s employment relations policy supports
the labour legislation reviewed.
The presentations of each individual should be discussed by the group.
On completion of the presentations and discussions, the Study Group should prepare a
one to two page summary of their key learnings around Employment Relations which
emerged as a result of the individual presentations and discussions.
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This Study Group Discussion activity provides the Study Group with an opportunity to reflect
on their country’s labour legislation and the impact which it has on organisational practices.
Group members, in sharing their experiences will learn from each other which in turn will
develop a better understanding of the application of employment relations within the context
of their country and organisations.
SAMPLE EXAMINATION QUESTION
Instructions:
The Executive Committee of your organisation has requested that you provide an overview of
Employment Relations. Prepare a speech in which you detail the key issues underpinning
this important area of HRM.
(20 marks)
Guidelines for the Answering of the Examination Questions:
•
The length of your answer should be guided by the mark allocation. Generally one
coherent point / fact equals one mark.
•
Section 9 of this Study Guide in its entirety (and corresponding sections in the prescribed
text) is relevant to the sample examination question.
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Suggested Answer to Sample Examination Question
The answer will essentially be a summary of all the issues addressed in this section of the
Study Guide. It is important that the answer be formatted as a report and that it addresses the
following:
•
Definition of Employment Relations
•
Major Theories of Employment Relations
•
Parties to the Employment Relationship
•
Employment Relations Environment
•
The Changing Face of the Employment Relationship
•
Employment Relations in Africa
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SECTION 10
CAREER MANAGEMENT
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CONTENTS
Learning Outcomes
Reading
10.1 Introduction
10.2 The Changing Nature of the Career
10.3 The Importance of Career Management to Employers and Employees
10.4 Career Stages
10.5 Career Planning
10.5.1 Organisational Career Planning
10.5.2 Individual Career Planning
10.6 Career Development
10.7 Summary
Self Check Activity
Study Group Discussion Activity
Sample Examination Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the learner should be able to
demonstrate a comprehensive understanding of career management. This overall outcome
will be achieved through the learner’s mastery of the following specific outcomes:
1. Define the concept of the ‘career’.
2. Critically discuss the changing nature of the career.
3. Identify the importance of career management for employers and employees.
4. Identify, discuss and apply the various career stages.
5. Critically discuss organisational and individual career planning.
6. Critically discuss career development.
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•
READING
Prescribed Textbook
o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human
Resource Management: Gaining a Competitive Advantage 8th Ed. McGrawHill. (pp 394-438) Chapter 9
•
Recommended Textbook
o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.
(2011) Human Resource Management. 8th Edition. Cape Town: Oxford
University Press Southern Africa. (pp 356-404) Chapter 13
Recommended Reading:
Books
•
Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. and Hatfield, R.D. (2006)
Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp
245 – 259 (Chapter 8).
•
Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. & Pilbeam, E.
(2007). Human Resource Management: Fresh Perspectives. pp 171 – 191
(Chapter 7).
•
Snell, S. & Bohlander, G. (2007) Human Resource Management. Mason:
Thomson. pp 189 – 231 (Chapter 5).
Journals
•
Ballout, H.I (2007) “Career success: the effects of human capital, personenvironment fit and organisational support.” Journal of Managerial
Psychology. Vol. 22, No. 8, pp 741 – 765.
•
Chiaburu, D.S., Baker, V.L. & Pitariu, A.H. (2006) “Beyond Being Proactive:
What (Else) Matters for Career Self-Management Behaviours.” Career
Development International. Vol. 11, No. 7, pp 619 – 632.
•
De Vos, A, Dewettinck, K. & Buyens, D. (2008) “To Move or Not to Move?
The Relationship Between Career Management and Preferred Career Moves.”
Employee Relations. Vol. 30, No. 2, pp 156 – 175.
•
Dries, N. & Pepermans, R. (2008) “Real High Potential Careers: An
Empirical Study into the Perspectives of Organisations and High Potentials.”
10.1
Introduction
Personnel Review. Vol. 37, No. 1, pp 85 – 108.
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READING (continued)
Recommended Reading (continued):
Journals (continued):
•
Kelly, A., Brannick, T., Hulpke, J., Levine, J., and To, M. (2003) “Linking
Organisational Training and Development Practices with New Forms of
Career Structure: A Cross-National Exploration.” Journal of European
Industrial training. Vol. 27, No. 2/3/4, pp 160 – 168.
•
Quigley, N.R. & Tymon Jr, W.G. (2006) “Towards a Integrated Model of
Intrinsic Motivation and Career Self-Management.” Career Development
International. Vol. 11, No. 6, pp 522 – 543.
•
Smith-Ruig, T. (2008) “Making sense of careers through the lens of a path
metaphor.” Career Development International. Vol. 13, No. 1, pp 20 – 32.
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10.1
Introduction
This, the final section of the HRM module guide, focuses on Career Management. In so
doing, the following will be examined:
•
The changing nature of the career
•
The importance of career management
•
Career stages
•
Career planning
•
Career development
10.2
The Changing Nature of the Career
A career may be defined as “a sequence of jobs held during a person’s working life”
(Grobler et al, 2007: 246). Grobler et al (2007: 246) identifies, however, that the nature of
the employer-employee relationship has changed significantly over the past couple of years
and as a result the traditional career has also changed.
READING ACTIVITY
Before reading the journal article listed below, answer the following question.
1. In your opinion how does the ‘career of today’ differ from the ‘career of 30
years ago’?
Now read the following journal article and answer the question which follows.
•
Kelly, A., Brannick, T., Hulpke, J., Levine, J., & To, M. (2003) “Linking
Organisational Training and Development Practices with New Forms of
Career Structure: A Cross-National Exploration.” Journal of European
Industrial training. Vol. 27, No. 2/3/4, pp 160 – 168.
2. From your reading of pages 160 – 162 of Kelly et al (2003) how has the career
changed over the years?
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Comment on Reading Activity
Kelly, Brannick, Hulpke, Levine & To (2003: 16) provide a review of the management
literature which focuses on the changing nature of the career. They point out that there are
three dominant viewpoints about the changing nature of the career in the literature:
•
The first viewpoint is that “the demise of the traditional career is inevitable; they see
organisations and individuals abandoning the traditional organisational framework,
within which stable, long-term career planning was feasible” (Kelly et al, 2003: 160).
•
The second viewpoint is that “the career is merely adapting to changing economic
conditions and that no fundamental change is evident” (Kelly et al, 2003: 160).
•
The third viewpoint is that “the changes taking place may be random, rather than
indicative of a new patterned stability, or, indeed, that the orderly form of a career that
has existed during the past 50 years or so has itself been the aberration” (Kelly et al,
2003: 160).
Factors such as globalisation, the pace of change and more intense competition have resulted
in dramatic changes to the structure of organisations.
As a result, the traditional
understanding of careers, which focused on vertical, upward movement coupled with
increasing status, income and authority within a single organisation no longer applies (Kelly
et al, 2003: 160). A number of theorists propose that the order and predictability of the
traditional career has decreased and has been replaced with horizontal and lateral movement.
While in the traditional career, individuals moved upwards within the same function,
nowadays individuals often move across functions. Alternative career paths have replaced
the traditional upward career path and include:
•
Horizontal cross-functional moves
•
Job switches
•
Downward moves
•
Temporary moves
Kelly et al (2003: 161) assert that “those who support the new order of careers have
formulated various models to represent what they see as the new reality…such models focus
on the dissolution of boundaries, the emergence of employee self-management and the
accumulation of marketable skills.” Some of these new career models include:
•
Arthur and Rosseau’s Boundaryless Career
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•
Peiperl and Baruch’s Post Corporate Career
•
Hall’s Protean Career
•
Handy’s Portfolio Career
These new career models identify a new employment contract where
•
individuals take responsibility for managing their own careers
•
there is extensive mobility across organisations
•
boundaries have dissolved
•
job security has changed form, and is dependent on the marketable skills which the
individual possesses (Kelly et al, 2003: 162)
10.3
The Importance of Career Management to Employers and Employees
Career management may be defined as “the process of designing and implementing goals,
plans, and strategies that enable HR professionals and managers to satisfy workforce needs
and allow individuals to achieve their career objectives” (Grobler et al, 2007: 246).
?
THINK POINT
Consider your organisation. What benefits could result from the implementation
of an effective career management programme?
Comment on Think Point
The implementation of an effective career management programme could bring about a
number of benefits for both the employer and the employee. These include:
•
The ability of the organisation to gain competitive advantage within both the local and
global context as a result of the maintenance of the organisation’s intellectual capital
•
The organisation would avoid the negative effects of obsolescence
•
Increased employee job satisfaction and motivation, and
•
Reduction in staff turnover due to satisfied employees (Nel et al, 2011)
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10.4
Career Stages
A career may be viewed in terms of career stages, each of which corresponds to a particular
life stage of an individual (Nel et al, 2011).
?
THINK POINT
Consider your career thus far. Are you able to identify in the region of two to four
‘stages’ in your career?
Comment on Think Point
Nel et al (2008:481) argue that all individuals experience a number of career stages, each of
which serves to address particular individual needs.
The various career stages and the
corresponding needs which these stages address are depicted in Figure 10.1.
NEEDS
Safety, Security,
Physiological
Needs
Safety & Security
Needs
Achievement,
Autonomy &
Self
Actualisation
Needs
Esteem &
Self
Actualisation
Needs
Self
Actualisation
Needs
Maintenance
Retirement
CAREER STAGES
Pre-Work
Establishment
Advancement
Figure 10.1: Career Stages (adapted from Nel et al, 2011: 393)
The career stages depicted in Figure 10.1 include:
•
Pre-Work where the individual is supported by his / her parents and may be preparing
him / herself for a career through studying.
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•
Establishment where the individual enters into an organisation and becomes an
employee.
•
Advancement where the individual starts progressing in his/her career (Nel, 2008: 481).
•
Maintenance where the individual strives to maintain the gains which he/she has made
from his/her past performance.
•
Retirement where the individual completes one career and may move to another (Nel,
2011).
10.5
Career Planning
Career planning should be performed by both the individual and the organisation.
1.
ACTIVITY
Identify the career planning programmes which your organisation has
implemented. Comment on the effectiveness of these programmes.
2.
Identify the career planning initiatives which you as an individual have
taken, and comment on their effectiveness.
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Comment on Activity
Information regarding organisational career planning is addressed in section 10.5.1 below
and information regarding individual career planning is addressed in section 10.5.2.
10.5.1 Organisational Career Planning
Section 3 of this HRM module explored the HRM function of HR planning. It was identified
in this section that organisations need to forecast in order to identify the number and nature
of employees which the organisation will require in both the short and the long term future.
In order to meet the future labour needs of the organisation, management should engage in
career planning (Grobler et al, 2007: 249).
Organisational career planning may be achieved through the development of individual
development plans for employees (Grobler et al, 2007: 249). Such a plan provides details of
an employee’s potential progression (vertical, lateral or diagonal) from one job to another
according the goals of the organisation. The plan also specifies the development activities
which will be conducted to prepare the employee for the identified future positions (Nel et al,
2011).
Such career planning enables the organisation to not only successfully prepare for and
achieve its goals, but it also serves to ensure that individual employee’s career goals are
realistic.
10.5.2
Individual Career Planning
As identified in section 10.2, the changing nature of work requires that the individual
employee take charge of his/her career management. Individual employees therefore, need to
engage in their own career planning.
In order to be career self-managers, employees need to engage in career planning through:
•
Career exploration which involves the collection and analysis of career-related
information (Nel et al, 2011)
•
Seeking developmental feedback so as to identify and address one’s strengths and
weaknesses
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•
Enhancing one’s job mobility preparedness which involves developing competence in
informal networking internal and external to the employee’s organisation, and being
proactive in gathering information on new job opportunities and acting on these
opportunities (Nel et al, 2011; Grobler et al, 2007: 250).
10.6
Career Development
Career development needs to take place in order to ensure that the goals established in career
plans may be achieved. Career development programmes may involve a wide range of
training and development interventions, such as on-the-job training, in-house training
programmes, off-site training programmes and coaching (Nel et al, 2011).
Given the dynamic nature of today’s career, as identified in section 10.2, career development
interventions should also focus on developing the employee’s career self-management
competence.
READING ACTIVITY
Read the following journal article:
•
Chiaburu, D.S., Baker, V.L. and Pitariu, A.H. (2006) “Beyond Being
Proactive: What (Else) Matters for Career Self-Management Behaviours.”
Career Development International. Vol. 11, No. 7, pp 619 – 632.
Discuss Chiaburu et al’s (2006) findings regarding the proactive personality’s
impact on career self-management behaviours.
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Comment on Reading Activity
Career self management may be defined as “the degree to which employees regularly gather
information and plan for career problem solving and decision-making” (Kossek cited in
Chiaburu, Baker and Pitariu, 2006: 619).
Chiaburu et al (2006) conducted a study which focused on the impact of the proactive
personality on career self management behaviours. The proactive personality is defined as
“one who is relatively unconstrained by situational forces and who effects environmental
change” (Crant cited in Chiaburu et al, 2006: 621). Research studies have shown that
individuals with a proactive personality engage in life long learning and that they take
responsibility for career progression, while “individuals who do not exhibit proactive
personality are much more reactive and content with maintaining status quo within a career
context” (Chiaburu et al, 2006: 621).
Chiaburu et al (2006) cites studies conducted by Kossek which found that formal training
programmes implemented by organisations in an attempt to develop career self-management
skills within employees were not effective.
The results of Chiaburu et al’s (2006) study show that the proactive personality is positively
related to career self management behaviours such as job mobility and developmental
feedback seeking. Career resilience, which refers to “a belief in oneself, a willingness to take
risks and a need for achievement” (Chiaburu et al, 2006: 622) is also an important
determinant in the proactive personality’s implementation of career self management
behaviours.
?
THINK POINT
Do you have a proactive personality, as defined by Chiaburu et al (2006)?
How does your personality impact on your career self management behaviours?
Is your behaviour in line with Chiaburu et al’s (2006) findings?
Comment on Think Point
Responses will differ per learner.
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10.7
Summary
This section investigated Career Management. In so doing, the changing nature of the career
was explored and the importance of career management to the employer and employee and
were examined. Various career stages, career planning and career development were also
explored.
SELF CHECK ACTIVITY
Check your understanding of some of the principles and theory addressed in this section by
answering the questions below.
1. Farhana, the HR Director of Cars Inc., a motor vehicle manufacturing organisation, is
preparing a presentation to the Executive Committee on career management within the
organisation. She is currently preparing the slide where she is to list the alternative
career paths which are replacing traditional career paths.
Which of the following characteristics should Farhana include on her slide for alternative
career paths?
A. Horizontal cross-functional moves
B. Upward moves
C. Temporary moves
D. Both A and C
2. Farhana is at the Executive Committee meeting and is about to present her presentation
on career management within the organisation. Aidan, the Financial Director, does not
want to waste time as he has a considerable amount of work to get through back at his
office. Before Farhana can start her presentation, Aidan interrupts her, “Really Farhana,
with all due respect, is career management so important that it needs to take up time in
the Executive Committee meeting. I really think we should leave the presentation and
discussion to our middle managers.”
Farhana responds to Aidan’s objection by identifying the benefits of implementing an
effective career management programme as her motivation for making the presentation to
the Executive Committee.
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Which of the following could Farhana list as a benefit of career management?
A. Gaining competitive advantage as a result of maintaining the organisation’s
intellectual capital
B. Reduction in staff turnover due to satisfied employees
C. Avoidance of the negative effects of obsolescence
D. All of the above
3. After the Executive Committee meeting, Farhana returns to her office in the HR
Department. On her way she walks past Thabo, one of the organisation’s young and
upcoming employees. Thabo was employed as an HR Administrator three years ago and
due to his commitment and high levels of performance he rapidly progressed to the
position of HR Consultant. Last month he was promoted to Senior HR Consultant. Thabo
has also been identified as a successor for the position of HR Director in the
organisation’s successions plan.
“How did the meeting go, Farhana?” asks Thabo.
“It was tough Thabo,” responds Farhana, “But I think I got through to them. At least on
completion of my presentation they seemed to understand why this organisation needs to
take career management more seriously.”
In which career stage is Thabo?
A. Establishment
B. Advancement
C. Maintenance
D. Retirement
4. Farhana sits down at her desk and reflects. The Executive Committee has given her the
go ahead to design a proposed career management programme for the organisation.
Farahana starts working on this right away and starts thinking about the organisational
career planning which could be implemented.
Which of the following are organisational career planning interventions which Farhana
could consider?
A. Individual development plans
B. Training and development interventions
C. Seeking developmental feedback
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D. Both A and B
5. In designing Car Inc.’s career management plan, Farhana’s thoughts turn to Thabo, the
Senior HR Consultant. “Hhhmm,” thinks Farhana, “if we had more employees like
Thabo we certainly wouldn’t even need an organisational career management plan.
People like him so easily engage in career self-management behaviours – it must be that
they have a specific type of personality!”
Which of the following personality types is positively linked to career self-management
behaviours?
A. Introverted Personality
B. Proactive Personality
C. Analytical Personality
D. Extroverted Personality
Answers Self Check Activity
1.
D
2.
D
3.
B
4.
D
5.
B
STUDY GROUP DISCUSSION
For this section, the individual members of the Study Group are required to reflect on and
discuss the progress and experiences which they have had in their careers thus far.
Preparation
Prior to the Study Group meeting it is important that each individual group member
prepares as follows:
•
Study section 10 (Career Management) of this Study Guide
•
Read the supporting chapters on Career Management in the prescribed texts
•
Read the recommended journal articles by Chiaburu et al (2006) and Kelly et al
(2003)
•
Reflect on the following questions regarding your personal career.
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1.
Does your career fall within the “traditional” career model or the “new” career
model? Provide reasons for your answer.
2.
In which career stage are you currently?
Which of the career stages have you found most fulfilling thus far? Provide
reasons for your answer.
3.
What career self-management behaviours do you engage in, if any?
Is your career self-management effective? Justify your answer.
4.
Identify the organisational career planning interventions does your
organisation implements?
What is the purpose of these interventions and do they fulfil their objective?
5.
How do you see the future of your career?
At the Study Group Meeting
At the Study Group Meeting, each individual group member is to present his/her
responses to the questions above, and group members are to discuss their different career
experiences.
On completion of the presentations and discussions, the Study Group should prepare a
one to two page summary of their key learnings around Career Management which
emerged as a result of the individual presentations and discussions.
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This Study Group discussion activity provides the Study Group with an opportunity to reflect
on and compare different career experiences. Group members, in sharing their experiences
will learn from each other, which in turn will enable them to engage in better career selfmanagement as well as improve the career management of their employees.
SAMPLE EXAMINATION QUESTIONS
Instructions:
Read the case study below and then answer the questions which follow.
Career Non-Management at Progress Software
Progress Software, a software development company with a staff complement of 200
employees, has called in Absolute Management Consulting to assist them with their low staff
morale and high staff turnover. Eighty percent of Progress Software’s staff is technical
specialists involved in software development work.
In order to adequately diagnose the reasons for the low staff morale and high staff turnover,
Absolute Management Consulting implements an organisational climate audit. The results of
the audit show that staff are:
•
Generally happy with the leadership and management of the organisation
•
Satisfied with the compensation and incentives which they receive
•
Enjoy opportunities for teamwork which their work often provides
•
Very dissatisfied with the lack of career development opportunities
•
Dissatisfied with the lack of opportunities for growth
•
Dissatisfied with the career management structure in the organisation which only
provides for vertical mobility
You are a management consultant from Absolute Management Consulting. You are required
to prepare a report in which you recommend a new career management approach for Progress
Software.
(20 marks)
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Guidelines for the Answering of the Examination Questions:
•
The length of your answer should be guided by the mark allocation. Generally one
coherent point / fact equals one mark.
•
Section 10 of this Study Guide in its entirety (and corresponding sections in the
prescribed text) is relevant to the sample examination question.
Suggested Answer to Sample Examination Question
The answer will essentially be a summary of all the issues addressed in this section of the
Study Guide. It is important that the answer be formatted as a report and that it addresses the
following:
•
The changing nature of the career and the implications that this has for Progress
Software’s career management
•
The importance of career management to Progress Software and its employees
•
Career stages
•
Career planning – organisational and individual
•
Career development
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SECTION 11
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