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Human Resource Management Theory and Practice, Study notes of Human Resource Management

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CCH AUSTRALIA LIMITED
Date: 24-APR-14 Time: 16:30 Seq: 1
1
Chapter 1
HUMAN RESOURCE MANAGEMENT,
THEORY AND PRACTICE
Key issues
Human resource management deals with the effective and efficient
management of an organisation’s employees.
All human resource management functions must link to each other and to
the organisation’s goals and strategies.
Human resource planning aims to ensure that organisational objectives are
achieved by getting the right quantity, quality and skills mix of employees at
the right time.
Recruitment programs are affected by internal and external factors such as
economic conditions and the nature of the organisation.
Labour demand forecasting is an important part of human resource
planning.
1-100 What is strategic human resource
management?
Recruitment and selection within an organisation is an integral part of that
organisation’s overall human resource management and planning process. As
such, it is related closely to other human resource management processes, for
instance, job design, human resource development, performance appraisal
and management, reward systems, career and succession planning,
promotions and transfers.
Two key concepts underlie modern human resource management (HRM)
practice and are reflected in all activities concerned with the attraction,
maintenance and separation of an organisation’s employees. They are:
(1) employees as human resources, human capital or organisational assets,
and
(2) human resource management as a long-term, integrative and accountable
strategic process.
The first concept highlights the productive contribution of employees, both
actual and potential, while the second focuses on the approach of human
resource management practitioners to optimise this contribution for
organisational benefit. Where are these concepts more crucial than in the
careful and cost-effective attraction and choice of employees during
recruitment and selection?
1-100
Oxford University Press Sample Chapter
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Chapter 1

HUMAN RESOURCE MANAGEMENT,

THEORY AND PRACTICE

Key issues

● Human resource management deals with the effective and efficient

management of an organisation’s employees.

● All human resource management functions must link to each other and to

the organisation’s goals and strategies.

● Human resource planning aims to ensure that organisational objectives are

achieved by getting the right quantity, quality and skills mix of employees at

the right time.

● Recruitment programs are affected by internal and external factors such as

economic conditions and the nature of the organisation.

● Labour demand forecasting is an important part of human resource

planning.

¶ 1-100 What is strategic human resource

management?

Recruitment and selection within an organisation is an integral part of that

organisation’s overall human resource management and planning process. As

such, it is related closely to other human resource management processes, for

instance, job design, human resource development, performance appraisal

and management, reward systems, career and succession planning,

promotions and transfers.

Two key concepts underlie modern human resource management (HRM)

practice and are reflected in all activities concerned with the attraction,

maintenance and separation of an organisation’s employees. They are:

(1) employees as human resources, human capital or organisational assets,

and

(2) human resource management as a long-term, integrative and accountable

strategic process.

The first concept highlights the productive contribution of employees, both

actual and potential, while the second focuses on the approach of human

resource management practitioners to optimise this contribution for

organisational benefit. Where are these concepts more crucial than in the

careful and cost-effective attraction and choice of employees during

recruitment and selection?

2 Effective Recruitment and Selection Practices

Social, economic, political and workplace relations changes, together with

developments in the human resource (HR) profession, have propelled

practitioners towards innovative managerial perspectives, approaches and

strategies. New skills, especially in the information technology/

telecommunications and accounting areas, need to be acquired, applied and

evaluated. Economic fluctuations, legislative developments in areas such as

workplace relations, equal employment opportunity, privacy and workplace

health and safety, environmental and quality of work life issues provide

human resource practitioners with both pressures and opportunities.

Restrictions on recruitment strategies and selection techniques are balanced by

opportunities to grow current employees in innovative and creative

directions.

Human resource management as a profession is concerned with the effective

and efficient management of an organisation’s employees (human resources)

towards the achievement of desirable objectives and goals. It has displaced

earlier models (eg personnel administration, personnel management) because

of its emphasis on the integration of all traditional personnel functions (eg job

design, recruitment and selection, human resource development, rewards

systems, career management, etc) and their management towards

organisational strategic outcomes and objectives.

Human resource management involves a perception that employees are

human resources (or even human capital ), not unlike other organisational

resources such as finance and technology, who need to be managed in similar

(and different) ways in order to achieve productivity and profitability

outcomes. Specific human resource management functions then provide the

means by which employees are acquired (eg human resource planning, job

design, recruitment and selection), developed (eg human resource development,

reward and remuneration systems, performance and career management) and

ultimately terminated (eg dismissal, retirement and redundancy programs)

according to organisational requirements. It thus involves a human resource

management strategy and a human resource management plan, consistent

with overall organisational strategies, which subsequently feed into each of

the related human resource functions.

4 Effective Recruitment and Selection Practices

programs to the demands of their (external) industry, national and regional

contexts (‘‘dynamic environments’’ in Diagram 1.1).

While practical evidence on the role of HR professionals as ‘‘strategic business

partners’’, demonstrating both horizontal and vertical alignment, internal and

external fit, is limited, there are some promising indications of its applications.

Recent studies (Guest, D, 2011, ‘‘HRM and performance: still searching for

some answers’’, HRM journal , 21(1), pp 1–13; Butler, P, McEvoy, G, 2012,

‘‘Strategic human resource management and performance: sharpening line of

sight’’, HRM review , 22, pp 43–56) reveal significant contributions of human

resource management systems to organisational performance, with the latter

authors concluding that ‘‘much of the recent research suggests that HRM

practices can positively affect firm performance, primarily through their

impacts on human and social capital... the HRM objectives are to establish

and promote a clear alignment of capabilities at all levels with the firm’s

strategic goals and to create the culture, norms, motivation and opportunity to

engage in actions that contribute to these goals’’ (p 54).

Diagram 1.2 below shows the HR professional capabilities (competencies)

considered by the Australian Human Resources Institute (AHRI) as essential

components of a business-driven approach to the human resource practitioner

roles.

Diagram 1.2: AHRI model of excellence — Driving your success

Source: HR Competency Model (Ulrich & Brockbank 2007) and AHRI HR Management

Model 2003.

Human resource management is comprised of a number of interrelated

activities that combine to drive business performance. With a base capability

of being business driven , HR professionals require the following additional

Human resource management, theory and practice 5

capabilities: strategic architect, stakeholder manager, workforce designer,

credible activist, expert practitioner, and culture and change agent. Human

resource management knowledge and capability underpin HR practice and

influence the professional behaviour of HR professionals and how they are

perceived. In addition, the overarching goal of people leading business is

underpinned by the following four HR objectives:

● contribute to a profitable and sustainable organisation

● increase workforce competency and engagement

● develop excellence in people management

● create a dynamic and productive work environment.

All of these ‘‘capabilities’’ may be displayed in the specific recruitment and

selection functions of human resource management, but perhaps the most

important ‘‘capabilities’’ for HR practitioners are those of workforce designer,

stakeholder manager, expert practitioner, culture and change agent. Thus, as

workforce designers, practitioners will be engaged in decisions about the

structure, clusters, and tasks involved in particular jobs; as stakeholder

managers, they manage the expectations of managers, work groups and

potential new employees; as expert practitioners, they must demonstrate their

competence in the design of effective recruitment and selection processes; and

as culture and change agents, use these processes to ensure that new

employees fit into their jobs and work teams.

From a human resource management perspective, recruitment and selection

reflect broader staffing strategies, and represent the first stage of the

management of human resources (employees) towards organisational goals.

They can be considered as the most difficult and yet the most crucial of all

human resource management strategies. Acquiring the best applicants can be

a huge bonus to organisations, but hiring less than the best can result in

enormous disruption, reduced productivity, interpersonal difficulties and

interruptions to teamwork, customer service problems, and long-term costs.

As both stakeholder managers and expert practitioners, HR professionals are

usually the key organisational informants, interpreters, and advisers with

respect to the workplace impacts of existing and new federal and state

government legislation, especially in industrial relations,

diversity/discrimination, workplace health and safety, equal employment and

privacy. Perhaps the most important contemporary pieces of legislation

requiring advice from HR professionals in Australia are the Fair Work Act

2009 , established under the Rudd-Gillard Labor federal government, and the

current amendments proposed by the Fair Work Amendment Act 2013 under

the Abbott Liberal government. Together with the new employer

responsibilities associated with the national ‘‘harmonisation’’ of workplace

health and safety legislation, HR professionals will undoubtedly be required

to provide considerable interpretative and practical advice on their workplace

implications. More details on the inclusions and implications of these Acts are

included in Chapter 3, Legislation and legal issues.

Human resource management, theory and practice 7

each of these functions (see Chapter 13, Evaluation of recruitment and selection )

should then feed back into human resource plans in order to further improve

their capacity to deliver the right employees with the right skills and

competitiveness, according to organisational requirements.

Accordingly, recruitment techniques will vary from time to time. In periods of

growth, alternative sources of contract staff or long-term staff may be sought.

During industry decline, internal development activities, retrenchments or

early retirement programs (sometimes called ‘‘negative recruitment’’) may be

emphasised. Selection strategies will also differ, consistent with corporate

developments.

Ideally, human resource planning focuses on both the strategic (or long-term)

and operational (short-term) perspectives. Long-term covers up to five years

and short-term less than one year, depending on the nature of the industry.

Recruitment and selection should therefore focus on both filling current job

vacancies and preparing for future staffing needs.

More recently, some writers have suggested that human resource planning is

a crucial component of ‘‘human capital management’’, which refers to the

process of measuring (and managing) the alignment of human resource

management and organisational goals, from the perspectives of all

stakeholders, including managers, shareholders and investors. It aims to

‘‘understand and support (HRM) activities that create sustainable capability

and external shareholder value’’ (Donaldson, C, 2006, ‘‘Intangibles crucial in

HR’s future’’, Human resources , 107(27), June, p 1), or more specifically, to

ensure that ‘‘organisational capabilities such as talent, speed, collaboration,

accountability, shared mindset, learning and leadership are the deliverables of

HR... which contribute to an organisation’s market value’’ (Kramar, R, 2006,

Cranet Macquarie survey on international strategic human resource management:

report on the Australian findings , Macquarie University, Sydney, p 7).

The complexity of human resource planning techniques will vary with

organisational size and the dynamic nature of the organisation or its industrial

environment, and the perception and status of the human resource function.

Most modern organisations engage in forward planning from time to time, to

enable the determination of overall objectives, future directions and

opportunities for growth and productivity. This is usually referred to as

strategic (corporate) planning.

As a result of such plans, structures, budgets and resources can be reviewed to

take advantage of economic, social, labour market, product or industry

changes. Changes in global, regional or national economies, including the

constant restructuring of the Australian economy, financial crises, fluctuating

currency rates, increasing international competition, cross-generational issues,

different work attitudes and workplace relations developments, together with

modern management theories, have highlighted the importance of strategic

planning to achieve organisational success. All these factors have a significant

impact on the nature of recruitment and selection programs.

8 Effective Recruitment and Selection Practices

Such long-term planning is usually undertaken by a team of senior managers

in close liaison with the Chief Executive Officer and the Board of Directors.

The process commonly involves the following five stages.

STRATEGIC PLANNING PROCESS

(1) Development of a clear mission statement, core vision or prime objective.

(2) Review of likely pressures and opportunities both within and outside the

organisation.

(3) Formulation of alternative scenarios and optional strategies. It should also

indicate the proportions of full-time, part-time, contract, casual and

outsourced positions, with the view to aligning staff requirements to the

dynamic demands of organisations.

(4) Choice of the most effective options.

(5) Preparation of objectives, targets, budgets and operational business plans.

The process is cyclical, incorporating contingency strategies and in-built

monitoring and review processes.

With growing recognition of the value and costs of an organisation’s human

resources, most organisations now actively integrate human resource plans

with corporate plans (see Diagram 1.1). The human resource manager should

be well placed to advise on labour market trends, legislative and statutory

requirements, and the staffing impacts of product or service diversification,

relocation, growth or decline. With the support of an efficient human resource

management information system (HRIS) (see Chapter 11), practitioners can

provide a wealth of data relevant to corporate planning. Fully-costed human

resource plans will indicate the relative viability of scenarios and alternative

strategies.

Human resource management policies and practices can be linked to strategic

management in at least three ways:

(1) They can be used to reinforce existing corporate strategies (eg through

performance management or job and work group redesign to improve

productivity).

(2) They can be used to signal and reinforce changes in corporate strategies

(eg through the shaping of existing or injection of new corporate values,

or the development of new workforce skills).

(3) Human resource data can be used as an input into the strategic planning

process (eg employee survey data can be used to guide priority setting or

program development, or human resource planning and employee

demographic data can be used to assess the viability of plans for

diversification, expansion or contraction).

10 Effective Recruitment and Selection Practices

have been summarised as global competition, new technology and

communication developments, an increasing demand for employee flexibility,

‘‘skills convergence in multi-disciplinary environments’’, global best practice,

changing business standards (notably ethical and corporate social

responsibility issues), and dynamic governmental regulations (Wilson, P,

2010, People@Work , AHRI, Melbourne, p 3). More specific issues include

emerging skills shortages in a variety of industry sectors and occupations, at

both professional and technical levels; an ageing workforce in Australia and

other regional countries (for example, China, Singapore, Japan) contrasted

with youthful labour markets in India and Indonesia; workplace inter-

generational conflict; and ongoing industry sectoral shifts.

With respect to the latter, the resources, manufacturing, aviation, and retail

industry sectors in Australia have all been adversely affected by a

combination of increased global and regional competition, the development of

new technologies, and currency fluctuations. For example, the mining ‘‘boom’’

of the early 2000s, which provided significant levels of employment for

workers in Western Australia and Queensland together with contractual jobs

for employees from other states, is now abating. The closure of the Ford Motor

Company and the imminent demise of General Motors signals the end of

vehicle manufacturing in Australia, whilst the deteriorating financial position

of Qantas is likely to result in significant numbers of unemployed skilled

workers. Global online sales have also provided more traditional retailers with

considerable HRM challenges.

Whether human resource plans form an integral component of corporate

plans will depend on the foresight, status and skills of human resource

professionals.

1-200 Benefits of human resource planning

The principal purpose of human resource planning is to ensure that

organisations have sufficient staff with the required skills, knowledge and

abilities to cost-effectively produce the goods or services required to achieve

organisational objectives.

The human resource planner must therefore forecast staffing requirements

and predict labour supply as well as ensure the effective integration of all

human resource activities. Thus, job analyses must produce position

descriptions that accurately reflect job content, while allowing for

technological change. Job design, job rotation or promotion programs may

reduce or remove the need for expensive recruitment and selection processes.

Organisational restructuring, involving substantial staff redundancies, may

alter these staffing plans and processes. Alternatively, accurate position

descriptions will make those processes more effective when they have to be

used.

For example, in the information technology industry, specific long-term skills

requirements may be difficult to determine due to the dynamic nature of the

industry. Position descriptions and recruitment policies will therefore need to

reflect this uncertainty by providing for both short-term (such as the use of

Human resource management, theory and practice 11

casual or contract employees) vacancy-filling as well as longer-term career

prospects. These days, many of these skills have been contracted out (or

outsourced) as an efficiency and cost-cutting exercise.

Successful induction followed by ongoing human resource development

assists in the motivation and maintenance of valued employees who may

otherwise be poached by attractive offers from competitors. Efficiently-

conducted performance management programs can assist salary

supplementation and career and succession planning procedures. All human

resource functions therefore benefit from a well-prepared, realistic and

carefully-monitored human resource plan linked to the overall corporate

strategy.

Recruitment and selection programs must be linked with other human

resource systems, especially performance appraisal, career management,

rewards schemes and data analysis programs, as well as being integrated into

the overall human resource plan.

In summary, the benefits of human resource planning include:

● the provision of clear linkages between human resource functions and

organisational objectives

● more focused sourcing of workers from both traditional and non-

traditional labour markets

● cost-effective recruitment and selection strategies, and

● systematic and responsive human resource policies and practices in all

areas.

Human resource planning, while of immense benefit to both practitioners and

senior management, also has its drawbacks, including the time required, and

the difficulty in achieving accuracy and the correct focus. Good planning takes

time, and senior management time is expensive. Plans may be subject to a

large number of unpredictable variables (employment levels, demographic

aspects, skill variations, economic factors) demanding multiple contingency

strategies. Finally, practitioners themselves may consider the focus on

employees as resources distasteful. Despite these disadvantages, human

resource plans that are clearly integrated with corporate plans are becoming

essential for modern human resource practice.

1-250 Linking recruitment and selection with the

strategic business plan

As discussed earlier, both the horizontal and vertical alignment of human

resource management goals, strategies, policies and functions with the

strategic business plan are crucial to strategic human resource management.

Nowhere is this more important than with an organisation’s recruitment,

selection and retention functions. The stage of an organisation’s development

(that is, whether it is just starting up, in a growth phase, merging with another

company, or even in decline) will indicate the numbers and types of

employees it requires in both the short and longer terms. Human resource

planning will, for example, provide organisational planners with details of the

Human resource management, theory and practice 13

development, more rapid promotions, the use of technology to replace

employee tasks, and (where there is difficulty obtaining suitable employees)

the feasibility of reviewing plans to consider whether it is possible to operate

without certain employees. The use of temporary, contract and casual staff, or

the outsourcing of servicing functions, may also be an option.

When determining recruitment needs, it may be beneficial to use three

separate categories of recruits:

● those needed to account for labour turnover

● those needed for short-term growth, and

● those needed for long-term growth of the organisation.

Sometimes the responsibility for recruitment may also be separated, for

example, by giving line managers responsibility for the first two categories

and long-range planners responsibility for key groups of employees.

Labour supply and recruitment

Having determined the appropriate numbers and types of employees required

to meet organisational goals, the next step is to assess their likely sources.

There is an increasing number of general and specialist labour pools, both

within the organisation and in its external environment. These are discussed

later in this book, but the choice between internal and external sources reveals

both advantages and disadvantages, and it should clearly reflect the goals of

the organisation as a whole.

Existing employees can be trained, developed, redeployed, transferred or

promoted for future skills needs. New recruits will need to be sought out,

attracted and carefully selected to ensure suitability for future positions.

Internal labour supply can be determined effectively if prior skills audits have

been conducted and maintained on an effective HRIS (see Chapter 11, Human

resource management information systems ). Job analyses (see Chapter 4, Job

analysis and competency profiling ), replacement charts, human resource

development records, career and succession programs are usually integrated

and contain usable data for predicting internal supplies to meet future

demand.

While internal supplies of labour are more predictable, less expensive and

require minimal orientation to the organisation compared with new recruits,

they can also have disadvantages. Existing employees may not possess the

required new skills or relevant experience and/or may have become

entrenched or restricted in work focus. Some organisations have addressed

the issue of employee stagnation by interchange or secondment programs.

These are inexpensive and can prove immensely valuable. In parts of the

Australian public sector, senior staff exchange positions with private sector

managers in order to gain additional work experience and liaison. As

examples, there is currently a shortage of highly skilled technical and

professional employees at one end of the labour market, and an undersupply

of apprentices, age care and childcare workers, at the other.

14 Effective Recruitment and Selection Practices

The alternative future labour source is from outside the organisation. This

source also has advantages and disadvantages. New blood, fresh approaches,

cultural changes and specialist skills are balanced by the costs associated with

recruitment and selection, human resource development, induction and

orientation to the organisation. If corporate directions require attracting

employees from outside the organisation, the human resource planner must

become an environmental scanner of the changing community.

As discussed earlier in this chapter, economic, social, political, technological

and industry variables will all affect future labour supply. Employment levels

will vary according to locality, industry, occupation and educational

emphases. Government policies will affect the numbers, training and

availability of apprentices and graduates. The policies of educational

institutions (TAFE, universities and schools) will determine proportionate

supplies of labour in occupations such as law, medicine and accountancy.

Migration trends and legislation will have an impact on overseas recruitment,

while technological developments will affect numbers and qualities of

employees.

Inflation levels, interest rates, mergers and acquisitions, industry competition

and economic policies may provide constraints on opportunities to the staffing

of new sections or the development of additional services.

Social factors, such as environmental movements, industrial relations

initiatives, quality of work life and workplace health and safety issues will

affect applicant response levels to advertised positions. Demographic

variables, including age, gender, ethnicity, impairment and area of residence,

may have an increasing impact on the types and quality of future applicant

pools. In particular, the needs and expectations of different generations of

employees (for example, Baby Boomers, Generations X and Y, Nexters) will

demand new approaches to their attraction and retention. The latter factor is

becoming a key challenge for recruiters, as research on the expectations of

younger generations of employees has revealed that they often have different

needs and demands from their older colleagues. These include work-life

balance, varied job roles, new technology, supportive managerial styles, and

ongoing learning and development opportunities, and enhancing their

perceptions of ‘‘employer of choice’’ company branding. It is interesting to

note that these characteristics have been found not only in Australia, but also

in the USA, Europe, Singapore, China and India.

Recognition of these issues has led to significant changes in the ways in which

such applicants are being recruited. Newspaper recruitment, for example, has

been largely replaced by posting vacant positions on company websites and

the use of social media such as Facebook, Twitter and LinkedIn. As Scott

McDaid, Head of Recruitment and Learning at ANZ bank explains, the

company ‘‘uses such direct channels to source talent and reduce our

dependence on more traditional sources’’ (Nankervis, A, Compton, R, Baird,

M, Coffey, J, 2011, Human resource management: strategies & processes , 7th edn,

Cengage, Melbourne, p 241). Others caution reliance on social media for

applicant endorsements, suggesting that ‘‘skill endorsements on social media

16 Effective Recruitment and Selection Practices

may also be used to evaluate the effectiveness of recruitment and selection

over time, and can help to identify potential or actual weaknesses in the

current workforce.

Labour turnover analyses

Again, usually based on organisational data from the HRIS, regular analyses

of employee turnover (sometimes called wastage), or the numbers and types

of employees resigning or being terminated from an organisation, can assist

human resource professionals, senior and line managers to assess whether too

many qualified and experienced employees are leaving, with enormous costs

to the organisation and/or a severe loss of talent. Such analyses may also

indicate the reasons for their departure (eg inadequate salaries, lack of training

and development or career opportunities, bad management, ineffective

recruitment or selection procedures) and can suggest how these turnover

difficulties may be remedied.

Sometimes, such analyses may indicate that turnover rates are too low, and

that there is a need to bring new blood into old-style organisational cultures.

In either case, carefully conducted labour turnover analyses can yield essential

information for human resource planning, and can help to focus recruitment

plans on the precise types of skills and experience that the organisation needs,

and the most likely sources and processes to attract them. Such attractors may

include more competitive salaries and conditions, ongoing human resource

development, or promotional opportunities.

Career and succession planning

From the organisation’s point of view, the object of career planning for

individual employees is to retain them working enthusiastically and

productively. For the employees themselves, it provides achievable goals,

gives satisfaction and maintains morale, and is perceived as a reward for their

hard work. As vertical careers become scarcer due to the de-layering of

management in many organisations, and as the market for good employees

becomes more competitive both nationally and internationally, the ability of

employers to retain high-performing employees has become more difficult.

Thus, organisations that can find ways of designing stimulating career paths,

whether through job rotation, different projects, new technology or gradual

promotion, are the most likely to be able to retain their employees against

their competitors and, in turn, are likely also to be ‘‘employers of choice’’ (see

Chapter 5), attractive to prospective new employees.

Succession plans are plans that select employees with the greatest potential to

become future managers and then prepare them for the task through extensive

training, ‘‘acting’’ opportunities and individually designed career strategies.

They thus represent both rewards to retain good employees, and internal

selection techniques for the most senior jobs in organisations.