Introduction of Human Resource Planning part 2

Human Resource Planning

Introduction

At the start of the 21st century there are increasing claims that the route to competitive advantage is achieved through people.  A crucial element in this is the degree to which a link exists between HR practices and performance of the business exists, or the so-called ‘bottom line’.  Further, according the Resource-Based View of the firm, an organization can derive competitive advantage from its resources through the development of HRM systems and routines which are unique to that organization

The HR function faces a dilemma in becoming more strategic. A ‘hard’ version of HRM puts stress on a plan for people that should ‘fit’ the plan for the business. A ‘soft’ version emphasizes people as assets who can be developed and through whose commitment and learning an organization might achieve competitive advantage. In the 2000s, there is growing evidence that progressive HR practices can enhance a company’s sustainability and profitability if there is integration with business purpose although there is also evidence of a failure by many senior managers to recognize this.

The genesis of human resource planning: manpower planning

Manpower planning owed its importance to the importance of business strategy and planning in many organizations, where a plan represents one of the outcomes of a process that seeks to find a solution to a defined problem.

Business strategy and plans find their expression in measurable financial, marketing and production targets with an implicit or explicit demand for people. The manpower plan represents a response by the personnel function to ensure that the necessary supply of people is forthcoming to allow the targets to be met (see Figure 6.1).

The manpower plan is expressed to fit the overall business strategy and plan, showing how the demand for people and their skills within an organization can be balanced by supply. The rationalized approach leading to a balance of demand and supply can be found in some of the definitions and explanations of manpower planning over the past 30 years.

Equilibrium and optimization

Manpower planning has been a suitable area of interest for operational research and the application of statistical techniques.  An organization can be envisaged as a series of stocks and flows as part of an overall system of resource allocation.

With the growing use of computers, the techniques and models became more ambitious and probably beyond the comprehension of most managers.

Learning about HR problems

Manpower planning techniques can be used to understand and deal with `real' manpower problems. This is a diagnostic approach to manpower planning. Key manpower measures such as turnover, retention and stability and absenteeism can be calculated either monthly or quarterly and expressed graphically to reveal trends and future paths.

These measures can be used in order to identify problem areas and understand why they are occurring (see Figure 6.2).

Through the 1990’s manpower techniques were incorporated into PC-based computerized personnel information systems (CPISs). 

By revealing complex factors of concern, manpower planning becomes integrated into the whole process of management of the employment relationship, which itself plays a proactive part in affecting organization, strategy, structure and practices.

Human resource planning

In both the diagnostic approach and the rationalised approach, manpower plans are established with reference to a predetermined strategy. HRP seeks to make the links between strategy, structure and people more explicit.

Various studies show that there is benefit in adopting a ‘high road’ HRM strategy of high training, high involvement, high rewards and quality commitment. Further HR practices need to be introduced together in a ‘bundle’ so that they enhance and support each other. By contrast ‘low road’ HRM is characterized by low pay, low job security and work intensification.

Change and difficulties in the 2000s

Many organizations respond to difficulties by cutting costs and making staff redundant. With a pressure to sustain or increase profits, employees are more likely to be treated as a ‘number’ in the quest to reduce costs.

It is also realised that losing staff could have negative consequences:

·         there is the loss of skill, knowledge and wisdom which employees accumulate over years of practice at work.

·         the result of downsizing may be a loss of productivity

·         those employees who remain at work after a period of downsizing may experience the ‘survivor syndrome’-effects of guilt, lower motivation and commitment, mistrust and insecurity where they respond sympathetically towards those made redundant

·         redundancy is stressful for those made unemployed, possibly through the process of being made redundant itself and then through the experience of unemployment.

Human resource accounting (HRA)

Human resource accounting (HRA) is defined as the process of identifying, quantifying, accounting and forecasting the value of human resources in order to facilitate effective HRM

People in organizations differ from other assets - unlike capital items and materials they cannot be owned by an organization.

Value-adding

The value-added by people can increase over time through the knowledge and skills that they develop from the performance of work and specific activities such as training and development.

There have been attempts to account for the value of people in organizations and include this value in the balance-sheet.

People’s knowledge and understanding has a value that is greater than the cost of their employment and forms part of an organization’s intangible assets or intellectual capital.

Towards e-HR

Information and communication technology (ICT) has been developed to support HRP activities via human resource information systems (HRISs). There are three types of ICT application in HRM:

·         Transaction processing/reporting/tracking applications covering operational activities, for example payroll, record-keeping and performance monitoring

·         Expert systems to improve decision-making based on an analysis of decisions concerning such  issues as sources of new recruits, salaries and training needs

·         Decision support systems to improve decision-making through the use of scenario modelling in areas where there are no clear answers, for example teams formation and management development programmes.

In the 2000s, many HR departments are using the Internet and related technologies to support their activities - a process referred to as e-HR.

HRM in Practice 6.1 ‘BT boosts managers’ role in HR’  shows how e-HR is being used in BT

One trend is to outsource many transactional services to outside HR service centres.  It is claimed that the transfer of administrative work will allow HR staff to concentrate more on strategic and high value-added work.

 

Flexibility

Many organizations invoke the idea of flexibility, a term subject to a variety of different meanings with a variety of implications for HRP.

Drawing on the idea of labour market segmentation, a classification of employment based on:

a)      the degree to which workers have flexible skills which are specific to an organization

b)      the degree to which work contains discretionary elements that provide stable earnings helps to explain how and why some organizations will adopt different approaches to the management and planning of the employment relationship for different groups of employees (see Figure 6.3).

The model of a flexible firm identifies four types of flexibility:

a)      functional

b)      numerical

c)      distancing strategies

d)     financial

Within the flexible firm, the workforce can be divided into a 'core' group surrounded by 'peripheral' groups.

Teleworking

An important variation in working patterns has been the growth in teleworking and/or home working. There are five main types of teleworking:

1.      Multi-site: alternation between working on an employer’s premises and working elsewhere, usually at home but also in a tele-cottage or tele-centre

2.      Tele-home working: work based at home, usually for a single employer and involving low-skilled work performed by people who are tied to their homes

3.      Freelance: work for a variety of different clients

4.      Mobile: work carried out using communication technologies such as mobile phones, fax machines, PC connections via the Internet often by professional, commercial, technical and managerial staff who work ‘on the road’

5.      Relocated back-functions (call centres): specialist centres carrying out activities such as data entry, airline bookings, telephone banking, telephone sales and helpline services

Call or contact centres

A significant feature of tele-work and regarded as one of the ‘success stories’ of the UK economy over the last decade employing around 800, 000. The claim is that customers can be serviced at lower cost though the use of telephones and other ICT with the added possibility of learning about customers to enable cross-selling. There is also evidence of job intensification with high absenteeism and turnover of staff. Further cost savings are being achieved through off shoring.

The effect on motivation and commitment

Attempts to create the flexible job by removing demarcations and boundaries between areas of work can often mean a loss of valued features of work such as control over the pace of work. Extending responsibilities within a job, but removing promotion prospects, often as a result of flattened hierarchies, can easily engender feelings of job insecurity.

Diversity management

One of the most important trends in recent years has been the growing interest in the benefits to be achieved by planning for a diverse workforce. This move to diversity can be seen as an extension but also a contrast to the promotion of Equal Opportunities (EO) during the 1970’s and 1980’s.

Figure 6.5 provides a typology of approaches to managing diversity.

HRM in Practice 6.3  - ‘BBC announces new diversity council’  considers how the BBC is highlighting its commitment to diversity.

However, whatever the value of such commitment, there remain concerns about background assumptions and institutional practices that inhibit progress.

Career management

Through the 1990s and into the 2000s, there have been significant changes in the way careers are explained, understood and managed. Key changes in organizational career philosophy are:

a)      an end to the long term view of employer-employee relationship

b)      an end to hierarchical movement as career progression

c)      an end to logical, ordered and sequential careers.

Fewer organizations would now claim to offer careers for life and over the course of a person’s working life, an individual might expect to work for a variety of different organizations in a variety of positions requiring a range of skills and learning new ones as required. This is referred to as the portfolio career.

Career Management Skills

It is suggested that individuals and organizations can benefit from the development of career management skills (see figure 6.4).

ENGAGING IN CRITICAL THINKING

                   REFLECTIVE QUESTION/ESSAY QUESTION

Can human resources be planned to improve organization performance?

  

           HELP

This question is an invitation to you to explore some of the assumptions that underpin HRP and HRM more generally. Steer them away from the mechanistic features of manpower planning techniques and point them towards more recent work that attempts to show how the idea of a ‘high road’ HRM strategy and a ‘bundle’ of HR practices can lead to positive outcomes and an impact on the organization’s bottom line. Cooke (2000) and Guest et al’s. (2000) work as part of the ESRC Future of Work Programme, the ILO’s (2000) High Performance Working Research Project and The DTI’s (2005) survey support such a view. However, there are also challenges and criticisms such as those found in Legge (2001) and Thompson & McHugh (2002). Apart from problems in measuring performance, which include outcomes such as motivation and commitment, there is always the difficulty of proposing linear causality. There is also the effect of history and culture in organizations, which may affect how people respond to the ‘bundle’. There is little evidence concerning the meanings attached to ‘high road’ HRM practices. There is need to understand how the link actually works - what Bowen & Ostroff (2004) refer to as the ‘strength’ of the HRM system.

CHAPTER CASE STUDY: CDX BANK This case is concerned with planning for merger in financial services against a background of considerable HR problems and issues. There are issues relating to roles, structure, grades and so on,  as well as how redundancy is managed. In addition, there is the added concern of staff perceptions of what is happening to their careers. Against all this, some of the best staff were becoming alienated by rumours and seeking employment elsewhere. Students are asked to provide advice on ‘good principles’ during a merger/takeover. This is an opportunity to argue for a strong link of HR practices to organization strategy. Merger/takeover is a strategic move fraught with dangers, often producing a result which is less than the sum of parts. HRP can work to combine the practices of the different organizations but there are bound to be cultural and contextual factors to consider. Crucial here is the idea of planning as a process which involves others and is subject to adjustment. On the question of downsizing, some key issues are covered in the chapter and students can be referred to the work of Thornhill et al. (1997) and Appelbaum & Donna (2000). For Offshoring, try Doh (2005) Can they find ways to prevent morale falling and make the prospect of the new organization attractive enough to prevent staff leaving?  More attention to career management is one response. Given there are considerable concerns, the CDX can provide resources for this. The chapter provides some of the options and students should be encouraged to extend their understanding not only of the debates relating to career management but also the skills required.