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Hrm strategic approaches

HRM strategic approaches leads to improved organisational

performance

Staffordshire University

Business School

BA(Hons) Business Administration Level 3 – Top Up

Module: Management Of People In Organisations

Essay title: "Critically assess whether HRM strategic

approaches leads to improved organisational

performance".

Date Submitted: Wednesday, 29th April 1997

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The term "human resourcing" is used here to describe a key set of principles through which the strategic possibilities of an organization's workforce and employment structure are evaluated. The methodologies of human resourcing derive from two concerns:

1. The auditing of current human resources in relation to possible future product/service and labour market scenarios.

2. The promotion and maintenance of optimal human resource performance through the management of work patterns and organization structures.

While human resourcing encompasses what has traditionally been termed manpower planning, it also involves another dimension: that of managing motivation and activity in support of enhanced performance.

Manpower planning

The basic idea of manpower planning as developed in the 1960s was to manage the headcount of an organization in such a way as to achieve compatibility with predicted trends in performance over time. The emphasis primarily was on the relationship between numbers employed (in various capacities) and the rate of growth or contraction of the organization. This approach rested on three sequential steps (Bennison 1984:4):

1. An estimation of the organization's future manpower needs in terms of numbers and skill composition.

2. An analysis of labour flows into, within and out of the organization, and the ability of relevant labour markets to supply existing or future demands.

3. The identification of gaps between supply and demand and the development of policies to 'close' these.

In theory, this approach had the advantage of combining sophisticated mathematical modeling with a range of potentially innovative policy options (i.e., step 3 above) in practice, however, this promise frequently seems to have been incompletely realized. From the outset, the mathematical dimension tended to dominate, giving manpower planning the appearance of an esoteric activity accessible only to those with a high level of quantitative knowledge. According to Pearson (1991:18) the prioritization of statistical analysis also encouraged "an uncritical acceptance of existing categories of manpower and career structures, simply because they provided instant fodder for equations and computer databases", encouraging conservatism and myopia when innovation and clear-sightedness were necessary (see also Maloch 1988).

In addition, there was another more serious problem: the inability of this type of planning technique effectively to "connect" with real organizational performance. As Bennison explains:

The framework was logical, the techniques were well founded, and the idea of a manpower planning system seemed unassailable. Yet it failed to make the impact it should have done because it contained within it an immense practical difficulty. The notion that it is possible to estimate future manpower needs, with the precision necessary to match policies of supply, is quite fallacious. Demand is particularly susceptible to changes in the outside world; wars, commodity prices, and foreign exchange rates cause problems in managing economies, which, in turn, affect the growth rates of organizations. These external events are essentially unpredictable and so the ability to estimate the demand for an organization's manpower is suspect.

(Bennison 1984:5)

Such problems with traditional mathematical approaches to manpower planning led to moves away from forecasting and towards the auditing of organizational manpower. This 'practical' approach, following Benison’s cartographic metaphor, is concerned not with planning detailed routes between destinations but with producing a 'map' of the organizational manpower 'configuration' and the general direction in which it is heading, an exercise that can be undertaken with the assistance of techniques such as flow charts, histograms and pie charts, rather than complex mathematical functions.

Although these latter techniques have contributed significantly to contemporary human resourcing, there is another quantitatively orientated approach, human asset accounting, which has also exerted an influence.

Human asset accounting and human resource audits

The popularization of human asset accounting (or human resource accounting, as it is also known) is usually attributed to Likert (1967) although Flamholtz has beet, more influential in recent years. According to the latter:

Human resource accounting may be defined as the measurement and reporting of the cost and value of people as organizational resources. It involves accounting for investment in people and their replacement costs as well economic values of people to an organization.

(Flamholtz and Lacey 1981:57; emphasis added)

This concern reflects a long-standing debate within accountancy about the precise nature of employees as assets: can something that is not owned by the company be regarded as an asset? (Hermanson 1964; for a useful overview see Gray and Maunders 1987: 161-7; also Giles and Robinson 1972). Historically, accounting conventions have treated employees as a (variable) cost of operation, with no value (Dawson 1989:6). Flamholtz's challenge to this 'accounting hegemony' suggested ways of measuring the value of an employee to the employing organization by means of the Stochastic Rewards Valuation Model (an accessible and brief account of which is provided by Dawson 1989). Although this relatively sophisticated tool failed to resolve satisfactorily either the practical problems of measurement or the dispute over accounting concepts, the general approach has attracted qualified support for its intentions. Tyson and Fell (1986:93), for example, suggest that it provides a major benefit by encouraging the perception of employees as assets: "The notion of "investing" in employees encourages a view that one is looking for the profit to be gained from the investment and therefore the focus is on the development of people for a purpose.'

But, as with mathematical manpower planning, there has been a tendency for highly technical accounting principles to give rise to concepts with a lower level of technical specification and more general applicability. In this respect although what is now termed 'human resource auditing' borrows its title and rationale from accountancy, it also makes heavy use of the methodologies of the social and information sciences. An example of this approach is provided by the West Midlands and North-Western Regional Health Authorities' Human Resource Management Audit, which develops measures of human resource outputs and effectiveness derived mostly from diagnostic questionnaires and financial and productivity ratios. The underpinning rationale of this approach, significantly, is analytical rather than prescriptive:

it aims to encourage managers to develop their own ways of measuring performance against targets and objectives developed from the experience and needs of their own particular units. Managers are encouraged to revise, adapt and apply the various diagnostic instruments in ways which are best suited to their own circumstances.

(IRS 1992c:7)

A related but more sophisticated development has been the modeling of cost-based financial manpower decisions on computer spreadsheets. Dawson (1990), for instance, uses a computer simulation model based on principles of stylized stock control (Dawson 1988:33) to provide a form of scenario analysis whereby different inputs and outputs can be compared. A key part of this analysis is that it organizes the numerical and cost dimensions of human resourcing decisions in a way, which emphasizes contingency and probability, rather than prescription and certainty. Importantly, this model also forces managers to engage in the prior processes of clarifying their own understanding of the ways in which employees are used and their value to the organization assessed. For example:

The eight stages of the acquisition process [in Dowson's model] are broken down into 26 separate activities, for which the manager has to provide input data for both time and costs. Although some of these inputs may be given the value zero, it still requires the manager to go through the process of considering each. Moreover, if the manager feels that some time elapses whilst a particular activity takes place, there is a requirement to decide exactly how this is best expressed, by means of the choice of distribution and whether there are seasonal variations... it draws attention to the significance of the 'establishment level' and the convictions which lead to the setting of its particular size. The confrontation and subsequent thinking through of these issues, which are prompted by the use of the model, am potentially of considerable benefit.

(Dawson 1988:36)

This use of computerized systems as a way of challenging managers to confront the basis of their human resource thinking raises a number of issues about the role of information technology (IT) in this area, a role which has increased significantly over recent years. However, whereas Dawson's approach is very much in the tradition of 'action research', aimed not only at modeling specific processes but also at the development of new ways of conceptualizing basic human resourcing assumptions, the widespread adoption of computerized human resource 'systems' has focused more on the collection and processing of large amounts of information in a manner which provides 'pre-packaged' results. Having already noted the potential danger of an over-reliance on data processing encouraging analytical conservatism (Pemon 1991), it does seem that the growing sophistication of IT systems is also supporting a more innovative and creative dimension.

IT and human resourcing

The role of computers in personnel has been the subject of increased interest and scrutiny over the past decade. Over this period, both the quantity and sophistication of applications has increased, the latter especially since the late 1980s.

The 1991 survey of computer use in personnel (IPM/IMS 1991) revealed that some 96 per cent of respondent companies were using computerized personnel information systems (CPIS), including 53 per cent of those with fewer than 1,000 people. These systems were utilized to provide electronic office facilities, recruitment administration, storing performance appraisal data, absence control and training administration. However, the full potential of CPIS is held to lie with the development of networked systems. 'Where, for example, a system can automatically drive the payroll, this may allow the remote input of overtime and absence data, abolishing the need for hard-copy time sheets and associated processes.

Such a system provides a basis for a manpower costing system that can be interrogated by line managers on a 'need to know' basis. Thus, instead of sending large quantities of manpower reports through the post to line managers, they can have remote access to the CPIS where they activate pre-written programs to generate the reports they need (Richards-Carpenter 1992:36).

This type of development has been projected into the future by Woodward and Winchurch (1991), who posit a ‘molecular’ human resourcing system as the next step in CPIS (see Figure 1).

Figure 1 Molecular CPIS structure

(Source: IPM/AMS 1991)

Here, the nucleus of the system is composed of personnel records to which numerous other principal and subsidiary modules (in the form of specific software applications) are linked. Examples of the theoretical uses to which such a system, once operational, could be put are suggested by Woodward and Winchurch (1991:71) thus:

Recruitment

Production of detailed job/person profile

Biodata analysis

Psychometric testing

Using data on current employees for comparison and profile building

Job evaluation

Production of printed interview guides

Total analysis of all results to produce a shortlist

Producing rejection letters automatically

Cost analysis of the program and costs per individual

Budgeting

Succession planning

Appraisal results analysis

Matching of personal details to the job requirements

Training and development needs

'What if, organization charting

Projected costs

Matching of competencies to projected job profile

Team-role analysis.

Salary management

Payroll

Salary modeling

Absence

Pension and benefit calculations

Manpower planning costs.

The implications of this type of system architecture within an HRM framework re potentially significant, it being highly congruent with decentralized and/or flat organization structures, allowing the devolution of human resource information to line managers as well as its escalation to senior executives and strategies. The logic of this type of information configuration places the human resource manager in the role of a facilitator or internal consultant, assisting other managers with the accessing and use of information and (expert) systems relevant to particular operational personnel practices (Richards-Carpenter 1992: 61)

However, although a study by Torrington et al. (1991:73) put forward claims to have founds instances of this emergent role, the authors remained cautions about its rapid spread in the immediate future. Nevertheless, it is significant that many approaches to the use of CPIS give growing recognition to its applications in the socio-cultural dimensions of organization (see Legge 1989 for a comprehensive review) such as equal opportunities, appraisal and assessment, personal development, and planning organization structures. Securicor PLC, for example, has developed a computerized biodata/psychometric assessment package which is used to screen candidates and quickly provide hard copy reports (in less than two hours) which can be used as the basis for personal interviews (Selby 1991:123ff.). Similarly, Spencer (1990:331) gives details of a job analysis and evaluation package which serves as an expert system, not only defining jobs, skills and person specifications, but also extending into organization design and career and succession planning, involving the identification and prioritization of options for moving or replacing the holders of specified jobs.

In these respects, therefore, there may be increasing opportunities for the integration of quantitative and qualitative human resource data, a prospect that appears especially propitious for the current concern to link human resourcing techniques to the management of performance at both individual and organizational levels.

PERFORMANCE MANAGEMENT SYSTEMS

Given the goal-directed nature of organizations, performance in terms of these goals is usually a central concern. To the extent that success in this respect can depend heavily on the effective deployment of human resources, one key aspect of human resourcing is to make the linkage between goals and performance explicit and manageable. A prime example of this type of endeavour is the strategy adopted by the computer company ICL and given voice in their company 'bible', The ICL Way:

ICL is an achievement company. Recognition, rewards, promotion and opportunities for career and job development depend absolutely on results delivered. Performance is the way forward - for every individual and for the company as a whole. It is therefore vitally important that every individual has a clear understanding of his or her work objectives and responsibilities because performance will be measured against these. It is down to managers to make sure that these objectives and responsibilities provide maximum opportunities for the development of individual talent and to operate the company's recognition and reward systems on their achievement.

(Cited in Williams 1991)

The operational basis of this philosophy is a system of performance management involving 'a logical sequence of four steps linked with the cornpany's business strategies'. The four steps in the cycle are defined as follows:

Step One. The determination and setting of individual objectives which support the achievement of the overall business strategies.

Step Two. A formal appraisal centered on what was achieved against these prearranged objectives. This results in the joint determination of a personal/job improvement plan, a career development plan and a training plan, plus the allocation of performance rating by the manager.

Step Three. A separate pay review in which the level of pay increase is based largely on the actual level of achievement made against the prearranged objectives.

Step Four. An organization capability review which, as part of the normal business review process, focuses on the total Organizational capability of each part of the organization to achieve the future business strategies.

(Neale 1991: 12)

What can be seen from this example is the emphasis, which this type of approach to performance places upon the management process as this relates to human resources. In short, it takes a view which Is broader and more encompassing then that which focuses merely upon the ‘results' or 'ends' of a given task.

For this reason, models of performance management systems generally pay con-siderable attention both to the organizational 'climate' which the system presupposes, and to the motivation and development of the individual via the system. Thus, according to Armstrong and Murlis (1991:190), an effective perfor-mance management system (PMS) should include:

? A clear statement of mission and values.

? A procedure for establishing individual performance 'Contracts' (based upon psychological contract principles).

? A clear process for establishing individual improvement progranunes.

? Performance indicators and critical success factors.

? A performance appraisal mechanism.

The result, they suggest, is a system, which works as a continuous cycle. A performance agreement is determined mutually between an individual and his /her manager which provides the reference point for the more formal performance plan In many ways, the agreement can be likened to a psychological contract to which the individual is committed through mutual and open agreement. Once committed in principle, performance plan provides the concrete details of what performance will be sough and what will need to be done (e.g., training/support) to reach this level. Achievement of the planned objectives is the subject of continuous assessment and changes/adaptations made in the light of this. The process is concluded by performance review, which serves both to take stock of what has been achieved and to start a new cycle of the process again.

Initiatives such as PMS assume that the structure of employment within organization is already effectively established and that appropriate performance measures have been identified. Such an assumption, however, needs careful consideration. We have already seen that one function of human resource auditing techniques is to cause managers to question the often taken-for-granted value, which they put upon employees and their jobs. The same questioning needs to take place it, the area of performance management as here, too, conventional measures may hinder as much as help when it comes to evaluating cuffent practice and the nee for change or innovation.

This problem has been highlighted by IDS (1990c), who point to the efforts which arise from the 'obsession' which many business commentators and mana-gers have with economic definitions of 'productivity'. In particular, they suggest that most organizations should be more concerned with questions of efficiency and that, even here, they should be cautious that numerical measures of efficiency are not treated as more real than the activities they represent.

All too often, It seems, productivity measurement has got the focus wrong - from the organizational point of view, what Is Important is the jobs that people do, rather than the balance of payments. This also means that measures of productivity based on worker effort are similarly ill conceived.

It is not, IDS claim, a question of whether workers are working harder, but whether they are working better. As more organizations start to think about issues of quality and high value-added goods and services, the latter concern becomes absolutely crucial; An employee may work incredibly hard, but be involved in a process which is inefficient. In this respect the key to measuring efficiency, and to cutting costs, is a qualitative one: namely, to identify what it is that managers and employees do that is necessary, to look at the effectiveness of organizations and their members from the standpoint of the customer. This is very different from merely cutting costs on a bottom-line basis. Instead it focuses upon the nature of the work that is done, the skills that are needed by employees, and the ways in which those skills are utilized. IDS give the following examples:

A comparative study of the hotel industry in Britain and Germany conducted by the National Institute for Economic and Social Research...revealed that German hotels were able to function with between 50 per cent and 70 per cent of the staff of their British counterparts. The key difference was the level and mix of skills in the German hotels, above all in the key craft functions. German hotels operated with many fewer unskilled workers and a larger number of qualified staff capable of a variety of roles.

A second case is the pioneering work on skill mix in the NHS done at the John Radcliffe Hospital in Oxford, since taken up at a number of other hospitals. The changes involved an increase in the number of other hospitals. The changes involved an increase in the number of registered nurses and a decrease in the number of less trained staff (enrolled nurses and auxiliaries). Routine tasks were delegated and skilled staff devoted more time to patient care.

Costs were held steady while all the measures of quality and effectiveness of care showed an improvement.

(IDS 1990c: 10)

One way in which organizations have attempted to rethink the organization of employment to enhance performance through greater efficiency is through a reassessment of working practice in tems of greater flexibility.

FLEXIBILITY AND WORKING PRACTICES

Flexibility can be achieved at two levels: at the level of work practice (functional flexibility); and at the level of organization structure (numerical flexibility). To this can be added a third category, temporal flexibility, which involves the reorganization of working time (Blyton and Morris 1992).

Functional flexibility

An example of functional flexibility is provided by Storey (1992) in the case of Ford of Britain's 1985 agreement whereby discretionary productivity allowances were made available at plant level with the provision that they become payable only to 'employees who cooperate with local management in ensuring maximum capacity utilization and the efficient use of manpower' (ibid.:92). This involved accepting changed working practices, so as to encourage versatility and flexibility, the acquisition and use of new skills, and the elimination of inefficient demarcation lines. Wickens' (1987:52) account of flexibility at Nissan UK seems also to point in this direction (referring as it does to flexibility between production functions that can involve manual, non-manual and managerial employees), although the reality of this position has been questioned by Garrahan and Stewart (1992).

In practice it seems that most developments in terms of this form of flexibility have involved the relaxation of restrictive demarcation practices (Blyton and Morris 1992:306), rather than thoroughgoing multi-skilling of craft workers. This is confirmed by IDS (1990d), which compares surveys from 1986,1988 and 1990 to conclude that although multi-skilling remains an aim, the real task across a range of industries is now to enhance and build on specific skills' (IDS 1990d:l), this position involving a greater recognition by managements of the importance of respecting craft attitudes and adapting working arrangements to deepen skills.

BIBLIOGRAPHY

1. Bennison, M. (1984) The Manpower Planning Handbook, London: Mc Graw Hill.

2. Blyton , P. and Morris, J. (1992) 'HRM and the limits of flexibility', in Blyton, P. and Turnbull, P.(eds) Reassessing Human Resource Management, London: Sage

3. Dawson, C.(1989) 'The moving frontiers of personnel management: human resource management or human resource accounting', Personnel Review 18(3): 3-12

4. Flamholtz,E. and Lacey, J.(1981) Personnel Management: Human Resource Management in International Firms.Basingstoke: Macmillan

5. Garrahan, P. and Stewart, P.(1992) The Nissan Enigma, London: Cassell

6. Gray, R. and Maunders, K.(1987) Corporate Social Reporting, London: Prentice Hall.

7. Giles, W. and Robinson, D.(1972) Human Asset Accounting, London: Cassell

8. IPM/IMS(1991) Computers in Personnel 1991 Conference Book, Brighton: IMS

9. IRS(1992c) IRS Recruitment and Development Report 28,"Auditing the management of human resources in the NHS', April

10. IDS(1990c) IDS Focus 57 'The politics of production'

11. Likert, R.(1967) The Human Organization, London: Mc Graw Hill

12. Malloch, H.(1988) 'evaluating strategies on a cost-based manpower planning model', personnel Review 17(3): 22-28

13. Richards-Carpenter, C.(1992)'Capitalizing on devolution', personnel management April.

14. Woodward, T. and Winchurch, R.(1991) 'Molecular human resourcing', Computers in Personnel Conference, Brighton: IMS/IPM: 77-84

Word Count: 3834

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