Human resource management strategy
In this chapter you will learn how to:
o evaluate the difference between hard HRM and soft HRM
o evaluate the impact on business of flexible employment contracts and flexible working
o analyse employee performance by using a range of measures
o assess ways in which employee performance might be improved
o analyse Management by Objectives(MBO), its implementation and usefulness
o assess the changing role of Information technology (IT) and Artificial Intelligence (AI)
in HRM.
Introduction:
Approaches to human resource management strategy
A strategy: Is defined as long-term plan /decision undertaken by senior managers to meet long-term aims
of the business.
This means that managers must be in a right position to make long-term plans for human resource(HR).
Therefore; developing an HRM strategy is one of the most important roles of an HR director or
manager.
All resources need to be planned for: finance, materials, business accommodation and
employees.
Without a long-term plan for human resources (HR), a business will almost certainly have:
1. the wrong number of employees, many with inappropriate skills
2. unsuitable payment methods
3. inappropriate employment contracts for different types and grades of employee
4. poor employee performance
5. poor application of information technology (IT) to HR issues.
The first two of these major planning issues were analysed in Chapters 10 and 11. This chapter
analyses
the other three issues.
Hard and soft human resource management
Soft HRM: This involves treating your employees as a resource, and not a commodity.
Hard HRM: The management system in which the employees have been seen as a resource that is
required to be controlled in order to achieve the maximum profit margin along with various
competitive advantages. The man aim of hard HRM is to focus on cost controlling and
achievement of business goals.
Some business analysts use the two terms hard HRM and soft HRM to define two approaches to
HRM strategy.
In reality, not many businesses would use completely soft HRM or hard HRM.
However, there are certainly major differences in how business managers view human resources.
The hard approach is to view employees as resources just like any other business resource.
According to this view, people have to be managed in a similar way to equipment and raw materials.
They must be obtained as cheaply as possible, used sparingly and exploited as much as
possible to keep labour costs per unit as low as possible.
There is certainly little concern for a work–life balance. This approach may remind you of the
Theory X view of workers (see Section 12.2) and Taylor’s approach to motivation (see Section
11.3).
Theory X view of workers:
This management style assumes that the typical worker has little ambition, avoids responsibility, and
is individual-goal oriented. In general, Theory X style managers believe their employees are less
intelligent, lazier, and work solely for a sustainable income.
The soft view of human resources is that employees are an asset to the business who
must be cared for and developed.
As a result, employees will contribute to the success of the business in several ways, not just
with their physical effort. This approach may remind you of the Theory Y view of workers (see
Section 12.2) and Herzberg’s views on motivation (see Section 11.3).
Theory Y of workers.
This theory assumes that employees are happy to work, are creative, and enjoy taking on
additional duties. Theory Y managers and supervisors are sometimes called hands-off managers.
Hands-off managers usually give their employees more freedom and trust with the hopes that the
result will be happier workers who will go the extra mile for the company. E.g., a hands-off manager
may ask the staff to help interview a new candidate that has just applied for a job.
• Flextime
The illustration of Core workers and peripheral workers.
Note that;
It may be viewed as unfair, and possibly unethical, but many businesses now adopt a
hard approach to their less important or peripheral workers, compared with a soft
approach to their core workers.
Core workers: are basically those employees that the business does not want to lose.
Again, it is argued that, as the core workers are key to the business’s future success, so
therefore; they should be developed, trained and motivated in ways that will greatly
increase the chances of them having high morale and a desire to stay with the business.
Charles Handy’s ‘Shamrock organisation’
The hard approach might save money on peripheral workers’ costs in the short term, but:
 It could increase recruitment and induction training costs in the long term as temporary workers
have to be frequently recruited.
 Demotivated workers with little job security might be unproductive, reducing company efficiency
and profitability.
 Bad publicity regarding the insecure employment contracts might lead to negative consumer and
pressure-group actions against the company.
 Hard HRM ignores the research findings of Maslow, Mayo and Herzberg, as workers are not
offered job security, esteem or job enrichment.
Employment contracts
An employment contract: Is defined as an agreement between a company(employer) and a
worker(employee).
An employment contract describes;
 the role,
 responsibilities,
 payment,
 and benefits.
It is a legal requirement in most countries for employers to provide workers with an
employment contract. However, it is not a legal requirement that firms should offer jobs
with full-time employment contracts or permanent employment contracts.
Therefore,
One of the most important differences between hard and soft HRM is the type of
employment
contracts that are offered in a way that;
o Hard HRM will mainly use temporary, part-time, zero-hours or gig contracts. Some
managers believe that these contracts also offer some advantages to employees. While;
o soft HRM will prefer most employees to be on permanent, full-time contracts. These
offer security and a greater opportunity to train and develop employees for the benefit of
the business.
As a consequence of the disadvantages to business of full-time and permanent contracts, some
employers have switched to employing most workers on temporary employment contracts.
E.g.;, a bank might employ a cashier on a temporary contract to cover the absence of a worker on
maternity leave.
Further, many of the workers given temporary contracts are only expected to work a proportion of
the full working week. This means they have part-time employment contracts. E.g.;, a shop may
employ some part-time workers to provide additional customer service at busy periods
during each day.
Some key terms
1. Zero-hours contract: no minimum hours of work are offered and workers are only
called in – and paid – when work is available. For example, a warehouse has a problem of
worker absenteeism that is difficult to predict. It recruits a number of people on zero-hours
contracts. If there is no absenteeism from employed workers, there is no work for those on zerohours contracts. (it is an extreme a form of a part-time contract)
2. Part-time employment contract: employment contract that is for less than the normal
full working week of, say, 40 hours, e.g. eight hours per week.
3. Temporary employment contract: employment contract that lasts for a fixed time
period, e.g. six months.
4. Flexi-time contract: employment contract that allows staff to be called in at times most
convenient to employers and employees, e.g. at busy times of day.
Note that;
These three types of contracts are often a key feature of hard HRM. The main advantage of using
them is the ability to adjust labour costs flexibly. It further shows that by only employing workers
and calling them in for work when they are actually required, labour costs become much more
variable.
Some businesses are taking this one step further, by recruiting people to work on a particular
contract, not as employees, but as contractors who are self-employed. Once this contract
is completed there might be no further offers of work. Such offers of work are referred to as gigs and
the growth of this form of contract has given rise to the gig economy.
Gig economy is characterized by short-term, flexible jobs that businesses offer to freelancers and
independent contractors instead of traditional, full-time employees.
The main two broad groups of workers based on types of employment contracts are;
1. Permanent and full-time contracts could be offered to key workers that the
business wants to try to keep on a long-term basis. Employees offered these contracts
are often termed core workers.
2. Part-time, temporary, zero-hours and gig contracts can then be offered to workers who
perform less important tasks or to those who are relatively easy to replace if they leave. These
employees are often termed peripheral workers.
The illustration of Core workers and peripheral workers.
A way of representing this trend towards fewer core employees on permanent and salaried contracts
was devised by the business writer Charles Handy. He first used the term ‘Shamrock organisation’.
Charles Handy defines the ‘shamrock organisation’ as a 'core of essential executives and
workers supported by outside contractors and part-time help'. This structure permits the
buying-in of services as needed, with consequent reductions in overhead costs.
The three core components of Charles Handy on ‘Shamrock organisation’ view
are;
1.
Core managerial and technical employees, who must be offered full-time, permanent contracts
with competitive salaries and benefits
2.
Outsourced functions fulfilled by independent providers or gig workers, who may once have
been employed by the company
3.
Flexible workers on temporary and part-time contracts, who are called on when the situation
demands their labour.
Charles Handy’s ‘Shamrock organisation’
Therefore,
One of the most important differences between hard and soft HRM is the type of
employment
contracts that are offered in a way that;
o Hard HRM will mainly use temporary, part-time, zero-hours or gig contracts. Some
managers believe that these contracts also offer some advantages to employees. While;
o soft HRM will prefer most employees to be on permanent, full-time contracts. These
offer security and a greater opportunity to train and develop employees for the benefit of
the business.
Flexible employment contracts
Flexible employment contract’ Involves a type of working agreement which gives a degree
of flexibility on how long, where, when and at what times employees work.
o Flexible working practices include: Part-time working: work is generally considered part-time
when employers are contracted to work anything less than full-time hours.
o Flexibility is increasingly becoming a feature of employment contracts.
o Flexible employment contracts are not just of importance to employers, but also can
have important benefits to employees.
Take a serious note on this;
The nature of work is changing with increased use of IT, and so this is creating more
opportunities for flexible working. Although unemployment is a major problem in many countries,
businesses often report that they find it hard to attract and retain enough well-qualified and experienced
employees. Therefore, employers are being forced to consider ways in which they can make the jobs
they offer more attractive.
Employers choose to offer different forms of flexibility to employees such as;
 flexitime arrangements
 home working,
 annualized hours contracts,
 job sharing and
 compressed working hours.
• Flextime is an arrangement that allows an employee to alter the starting and/or
end time of her/his workday.
JOB SHARING
Job sharing means that two (or more) workers share the duties of one full-time job, each working
part time, or two or more workers who have unrelated part-time assignments share the same budget
line.
A job share arrangement is a full-time job split between two individuals, each with responsibility for
the success of the total job.
'COMPRESSED HOURS'
'Compressed hours' means working the total normal full-time hours but in fewer days, that
is, by working longer days.
This Compressed Hours Employment Contract does not set in stone the hours and days to be worked,
it is flexible and allows for the parties to agree these between themselves.
ANNUALISED HOURS
 If you have an annualized hours contract you will have a yearly total of hours you need to
work, rather than a weekly figure. This allows you greater flexibility to manage your workload
and balance work and domestic responsibilities. The usual method of calculating annual hours is to
take the total hours in a normal working week of the employer and multiply it by 52, then deduct
the employee's annual leave entitlement (20 days) and the statutory bank holidays (8 days).
How to Calculating annual hours
(Total normal weekly working hours* Number of weeks in a year) minus (employee's annual leave
entitlement + statutory bank holidays)
For example
If a person works five days, and 8 hours a day, but gets 8 holidays a year and 20 employee's annual
leave entitlement , you would subtract 224 hours from the total 2,080 work hours per year to learn
that the employee works 1856 hours per year.
Shift work
Shift work is an employment practice designed to make use of, or provide service across, all 24
hours of the clock each day of the week.
The practice typically sees the day divided into shifts, set periods of time during which different
groups of workers perform their duties.
Working shifts may be a contractual obligation of employees. Although shift work does offer some
flexibility to both employer and employee, the main benefits are to increase output and reduce
unit costs. Many industries rely heavily on shift work. Millions of people work in jobs that require
shift schedules – perhaps up to 20% of the world’s workforce.
Benefits of shift work
 It increases the output of the business.
 It ensures expensive capital equipment is fully used, for example, on a three-shift
system, equipment will be operating 24 hours a day.
 It is more flexible for business. If demand falls, one shift can be eliminated.
 Workers may be able to switch shift, so there is some flexibility.
Limitations of shift work
 Machine maintenance and repair schedules have to be built into the shift system.
 About 20% of night and rotating shift workers are thought to have a sleep disorder known as ‘shift
work disorder’. This can reduce productivity and cause long-term, stress-related health issues.
 Limited responsibility could lead to job dissatisfaction.
 Negative impact on the family unit’s quality time. Shift work often means that you aren’t able to
attend regular family gatherings. You might miss your kid’s sports day or can’t make it to dinners
as a family.
 Your lifestyle may become lonely. When you work shifts, you miss out on all the regular time spent
with family and friends, the more time you miss with those you care about, the lonelier your life
may become.
 It may be hard to make friends at work as shifts may separate you from friends.
 If you work the night shift, you may find yourself at security risk.
Measurement, causes and consequences of employee performance
The consequences of poor workforce performance can be damaging for business prospects.
However, improvements in performance should be recognized and fed back to the employees.
There are several indicators that HRM can use to assess the level of employee performance,
including;
 Labour productivity and
 Absenteeism.
Labor productivity
Labor productivity is a concept used to measure the worker’s efficiency.
Most managers consider that labour productivity is the key test of employee performance. If output
per worker increases over time, then labour productivity is increasing. It also means that, given
constant/ fixed wage rates, labour costs per unit of output are falling. This is, therefore, a major
factor influencing the competitiveness of a business.
To assess employee performance, productivity results are usually compared with data
from other
employees, other businesses in the same industry and over time.
Qn: Why labour productivity might increase over time?
Some of the reasons may be due to;
1. improved employee motivation and higher levels of effort
2. more efficient capital equipment, such as automated robots
3. better employee training
4. increased worker involvement in problem-solving to speed up methods of production
5. improved operations efficiency (e.g. no waiting for new supplies of materials to arrive).
Measuring productivity in service industries is usually more complex than in
manufacturing or primary sector industries.
Here are some examples:
1. Transport industry – kilometers travelled per driver per year.
2. Hotels – number of guest nights per employee per year.
3. IT and banking/finance service – revenue earned on average per employee per year.
It can be difficult to increase labour productivity in service industries. In the case of
luxury hotels, for example, top-quality services for guests depend upon having staff permanently
on call. This means, for example, that prices in the hotel industry have not fallen as they have for
consumer electronics products. One way in which a hotel owner could improve labour productivity
would be to use IT as much as possible in the support services of booking, billing and ordering
supplies.
Absenteeism
Absenteeism : the practice of regularly staying away from work or school without good reason.
Absenteeism in the workplace occurs when an employee chronically stays absent from work without
clear cause. Excessive employee absences can have a negative effect on productivity, company
finances, and team morale. Employee absenteeism in the U.S. has proven to be a significant problem
for most businesses.
Employee absenteeism can cause many problems for the effective operation of a business.
Absenteeism rates can be calculated for the whole business or department, over a period of time.
How to calculate absenteeism.
Example:
Last week a business recorded 225 days of employee absence. It employs 1 000 workers on 5-day a
week
full-time contracts. Total number of workdays therefore = 5 000.
Absenteeism can also be measured by expressing the average daily number of workers absent as a
proportion of the number of workers. Alternatively, absenteeism can be calculated for each individual
employee.
Employee absenteeism is disruptive in all businesses, especially those providing consumer services.
These services cannot be held as inventory for use during periods of absence. Once a consumer has
experienced poor service due to a worker being absent, that consumer may never return. It is expensive
to employ extra people just to cover for absent employees or to ask other workers to work overtime.
Absenteeism rates can be an indicator of motivation. Very well-focused and motivated employees will
avoid missing days off work at all costs. In contrast, it is possible that Herzberg’s ‘hygiene factors’ of
the job might contribute to high absenteeism. For instance, poor working conditions might lead to
illness, or over-supervision could lead to worker stress. Days off work could be a consequence of either
problem.
For absenteeism to be an effective measure of employee performance, it is important for HRM to
investigate the cause of absence. If the absence results from poor health or family problems, then HRM
may need to be supportive and offer appropriate help. However, if it is discovered that absenteeism
results from laziness or the employee having a second job, then disciplinary action may be required.
Other measures of employee performance
There are several other measures of employee performance. Some are not applicable to all
types of
business activity. They include:
 wastage rates (the proportion of materials that are wasted and the proportion of total
output that is
damaged)
 quality levels and reject rates (proportion of output that is of unacceptable quality)
 consumer complaints as a proportion of total customers served
 comparing an individual’s performance against pre-set targets (see the section on
management by objective)
Note
Strategies for improving employee performance
There is no single solution to a problem of poor employee performance. In fact, the most
important first step after calculating the performance measures is to find out why
performance is poor. Managers need to analyse why:
productivity is falling or below that of competitors
workers are taking unexplained absences
customer complaints about poor service are increasing.
There is no point in spending large amounts on modern technology to increase efficiency
if the main reason for low productivity is a poorly motivated team of employees. This
chapter focuses on HRM strategies to improve employee performance. Chapter 23
analyses some operations strategies to improve productivity.
The HRM strategies used by businesses to improve employee performance can be
divided into ‘hard approach’ and ‘soft’ approach.
Hard strategies: Hard strategies focus on;
i.
warnings to employees,
ii. discipline if targets are not met and flexible contracts so that frequent ‘poor performance’ can
easily lead to dismissal.
One benefit of hard strategies is lower cost, in the short term, rather than focusing on Herzberg’s
motivator factors and training and developing employees. However, hard strategies are likely to
lead to low motivation of employees, which could worsen performance.
Soft strategies
HRM strategies that adopt a soft approach stress the need to consider employees as a resource to be
nurtured and developed. The soft HRM strategies that can be used to improve employee performance
include:
i. Regular performance appraisal against agreed pre-set targets with two-way discussion on how to
improve performance.
ii. Additional training to increase efficiency, to stretch and challenge employees.
iii. Quality circles – small groups of workers are encouraged to take responsibility for identifying and
suggesting solutions to work-related problems.
iv. Autonomous work groups where teams of workers are given multi-skill training and the opportunity
to take responsibility for a complete section of work. Employees can take decisions on the best way
for the team to achieve predetermined goals.
v. Financial incentives linked to the profits of the business or an offer of a stake in the ownership of the
company, such as employee share option schemes.
vi. Adopting a system of management by objectives(MBO) (see the next section).
Note that:
Soft strategies to improve employee performance involve high costs of training and regular
appraisal meetings. However, greater levels of motivation from these strategies should reduce;
 Absenteeism,
 Improve punctuality and;
 Increase employees’ determination to reduce waste and improve quality.
Management by objectives(MBO)
Management by objectives (MBO): Is a system designed to motivate and coordinate a
workforce by dividing the company’s overall aim into specific targets for each division, department
and individual.
Implementing MBO
How is management by objective put in action?
The MBO process is best undertaken after discussion and agreement between managers and workers
at each level of the organisation. This form of staff involvement is a key feature of job enrichment.
It can be a very effective way of delegating authority and motivating people. This approach would be
used by managers with a Theory Y approach to workers. If, however, the targets at each level were
merely imposed by senior management (as with a Theory X style), then motivation would be likely to
be low.
Individual targets for performance are established during the annual appraisal process. For
maximum effect, these targets should be agreed with each worker and not without the employee’s
agreement.
For an MBO system to be effective, targets and objectives should be agreed and discussed with
the managers and employees at departmental and individual levels. This form of employee
participation is a key feature of job enrichment and should help provide a motivating force.
Job enrichment is a method for redesigning jobs, a motivation technique that aims at making
work more interesting and challenging for the employees.
The changing role of IT and AI in HRM
Some uses of IT in HRM are very common and have been in use for many years.
They include:
1. Keeping employee records on databases
2. Recording flexible work schedules on planning software, so all workers have access to
information on when they are expected at work
3. Holiday planning on similar software, so workers can enter their preferred annual holiday
dates.
Recent IT applications in HRM
 Recruitment:
Web portals allow employers to post details of vacant positions and the qualifications and experience
required of applicants. These portals make e-recruitment visual, allowing job applicants to post
videos describing their main skills as well as showcasing their potential. Many workers are now
recruited through social networks such as Facebook. When a business posts a job position on its
Facebook page, any follower can apply if they qualify for that position.
 Training and development:
Training programmes can be uploaded on IT, such as essential induction training
programmes. They can be viewed by employees as many times as needed. Illustrations
and demonstrations can be included to aid understanding. Assessment techniques can be
incorporated, allowing employees to check their understanding and progress on the training
course.
Recent IT applications in HRM, continued…..
 Employee performance management:
Computerized performance management software allows regular recording and updating of
employee performance. Managers can see easily how much work is being accomplished by
each employee in a given time period. The software helps in the flow of information about
employee performance across the business. This should be shared with employees and
can help improve their performance.
NOTE:
As with all innovations in business, it is important to consider the business context before
managers
decide to make the changes needed to introduce new technology.
The future of IT and AI in HRM
The IT opportunities appear to be almost limitless. The use of AI(Artificial intelligence),
which learns how to perform tasks that usually need human intelligence, is particularly likely
to transform HRM within the next 20 years.
Here are just a few ways in which IT and AI will impact on HRM in the years to come:
Although AI is not currently extensively used to interview candidates;
 it can read hundreds of job applicants’ details very rapidly.
 It can then evaluate these candidates without human bias or error.
 It can record and analyse thousands of possible replies to standard interview questions. These
replies are then classified according to applicant type. Appropriate follow-up questions can then be
asked, based on previous answers.
The future of IT and AI in HRM, continued..
Many companies are adding chatbots to their HRM systems to provide answers to employees’
questions. Common questions related to pay, holiday entitlements, social benefits and employees’
rights can be answered by computer software. Answering these questions in person can be both
repetitive and time-consuming. Using a chatbot allows HR personnel to focus on responding to
more complex and urgent employee issues.
Virtual reality (VR) is breaking away from its computer gaming image and is being used to
develop realistic and interactive training courses. The idea of building new worlds can be
applied to training situations as well as gaming. For example, a VR simulation of an air emergency
could be used to train airline cabin crew. The benefits of developing VR training programmes
include the costs saved in trainers’ time and the space needed for training
The future of IT and AI in HRM, continued……..
Biometric time clocks use biological markers to identify employees. Popular methods of biometric
time-tracking include fingerprint scanning and facial recognition. They can identify which
employees are present at work, what time they arrive and what time they leave. They prevent
unauthorized people entering business premises, for example stopping employees from allowing
friends or relatives to check in for work and claim wages on their behalf. Biometric technology can
also automatically cut off employee access to computer systems once the employee has checked
out and left the workplace.
Biometric time clocks
Evaluation of increased use of IT in HRM
 The use of IT frees up HRM time for more important strategic issues.
 It can reduce social and personal contact between HRM and employees and make the HR
managers seem remote.
 The increased dependence on IT-based communication methods reduces the opportunity for twoway group discussions unless conferencing software is used.
 There is a risk of creating a sense of being watched and monitored at all times amongst employees.
Note
END