The Challenges of Human Resource Management

1. The Challenges of Human Resource Management There is an old joke that goes….. The organization of the future will be so technologically advanced that it will be run by just one person and a dog. The person will be there to feed the dog, and the dog will be there to make sure that the person doesn’t touch anything. • In the past, observers feared that machines might one day eliminate the need for people at work. In reality, just the opposite has been occurring. Competitive advantage belongs to companies that know how to attract, select, deploy, and develop talent. Competitive Advantage Through People While people have always been central to organization, today they have taken on an even more central role in building a firm’s competitive advantage. • In knowledge-based industries such as software and information services, success increasingly depends on “people-embodied know-how.” This includes the knowledge, skills, and abilities imbedded in an organization’s members. 1

2. The Challenges of Human Resource Management Competitive Advantage Through People A firm’s success is based on establishing a set of core competencies –integrated knowledge sets within an organization that distinguish it from its competitor and deliver value to customers. Examples: • McDonald’s – management efficiency • Federal Express –package routing, delivery, and employee relations • Canon Corporation –precision mechanics, fine optics, and microelectronics Organizations can achieve competitive advantage through people if they meet the following criteria: • The Resources must be of value – Value is increased when employees find ways to decrease costs, provide something unique to customers, or some combination of the two. Empowerment programs, total quality initiative, and continuous improvement efforts. • The Resource must be rare –people are a source of competitive advantage when their skills, knowledge, and abilities are not equally available to competitors. Microsoft and other firms hire and train the brightest employees in order to gain advantage over competitors. 2

3. The Challenges of Human Resource Management Competitive Advantage Through People • The Resources must be difficult to imitate – when employee capabilities and contributions cannot be copied by others. (teamwork) • The Resources must be organized –when employees talents can be combined and deployed to work on new assignments at a moment’s notice. Nearly 80% of executives said the importance of HRM in their firms has grown substantially over the past ten years, and two-thirds said that HR expenditures are now viewed as a strategic investment rather than simply a cost to be minimized. Competitive Challenges and Human Resources Management • Going Global • Embracing technology • Managing Change • Developing human capital • Responding to the market • Containing Costs 3

4. The Challenges of Human Resource Management Competitive Challenges and Human Resources Management Challenge 1 – Going Global • In order to grow and prosper, many companies are seeking business opportunities in global markets. • Exporting accounts for more than 956 billion a year. US trade deficit is now nearly 400B Impact on Globalization • Globalization –trend toward opening up foreign markets to international trade and investment • Approximately 70% to 85% of the US economy today is affected by international competition. • Nearly 97% of all US exporters are small and medium-sized companies. Efforts to lower international barriers: NAFTA –facilitate commerce between Mexico, Canada, and the U.S. FTAA –Will encompass the entire Western Hemisphere and extend from the tip of Alaska to the bottom of Argentina. 4

5. The Challenges of Human Resource Management Efforts to lower international barriers: EU –European Union focuses on the integration of European markets APEC –Asia Pacific Economic Cooperation has helped establish freer trade among Pacific Rim Countries. Effect on Globalization on HRM Finding competent individuals that understand, geographies, cultures, laws, and business practice. Challenge 2 –Embracing New Technology • The introduction of advanced technology tends to reduce the number of jobs that require little skill and to increase the number of jobs that require considerable skills. • This move is from touch labor to knowledge workers, where employees responsibilities expand to include a richer array of activities such as planning, decision making, and problem solving. 5

6. The Challenges of Human Resource Management Challenge 2 –Embracing New Technology • Today, fully one-third of all courses are devoted to computer skills training (compared with 25% in 1996) Influence of Technology in HRM • Today, many firms are using technology to manage their HRM called Human Resources Information System (HRIS) • HRIS –computerized system that provides current and accurate data for purposes of control and decision making. Three major components • The operational impact –automating routine activities, alleviating the administrative burden, reducing costs, and improving productivity internal to the HR function itself. (payroll processing, maintaining employee records, administering benefits programs) • The Relational impact –it enhances service by providing line managers and employees with remote access to HR databases, supporting their HR related decisions, and increasing their ability to connect with other parts of the corporation. (scanning resumes, tracking application information) 6

7. The Challenges of Human Resource Management Three major components • The transformational impact –expanding the scope and function of the HR depart. (training, on-line performance evaluation, employees self-learning) Challenge 3: Managing Change Due to technology, the globalization of competition and markets, and workforce demographics, CHANGE in today's business world is inevitable. Types of Change Programs that focused on total quality, continuous improvement, downsizing, reengineering, outsourcing, and the like are all examples of the means organizations are using to modify the way they operate in order to be more successful. Two types of change: • Reactive-change that occurs after external forces have already affected performance • Proactive-change initiated to take advantage of targeted opportunities. 7

8. The Challenges of Human Resource Management Managing Change Through HR 84% of executives polled said that they have at least one change initiative going on in their organizations. Unfortunately, successful change or change management rarely occurs naturally or easily. Here is why: • Not establishing a sense or urgency • Not creating a powerful coalition to guide the effort • Lacking leaders who have a vision • Lacking leaders who communicate the vision • Not removing obstacles to the new vision • Not systematically planning for and creating short-term “wins” • Declaring victory too soon • Not anchoring changes in the corporate culture Responsibilities change, job assignments change, work processes change. And this is a continuous change- a part of the job –rather than temporary. 8

9. The Challenges of Human Resource Management Challenge 4: Developing Human Capital The idea that organizations “compete through people” highlights the fact that success increasingly depends on an organization’s ability to manage Human capital. Human capital –the economic value of knowledge, skills, and capabilities. Human Capital and HRM • Human capital is intangible and elusive and cannot be managed the way organizations manage jobs, products, and technologies. • One of the reasons for this is that employees, not the organization, own their human capital. • If valued employees leave a company, they take their human capital with them, and any investment the company has made in training and developing those people is lost. • To build human capital in organizations, managers must continue to develop superior knowledge, skills, and experience within the workforce. 9

10. The Challenges of Human Resource Management Human Capital and HRM • Staffing programs focus on identifying, recruiting, and hiring the best and the brightest talent available. • Training programs complement these staffing practices to provide skill enhancement, particularly in areas that cannot be transferred to another company if an employee should leave. (What is transferable skills?) Challenge 5: Responding to the Market Meeting customers expectations is essential for any organization. • Focusing on internal management issues, managers must also meet customer requirements of quality, innovation, variety, and responsiveness. These standards separate the successful and unsuccessful companies: • Who well does a company understand its customers’ needs? • How fast can it develop and get a new product to market? • How effectively has it responded to special concerns? • Faster, better, cheaper…….. 10

11. The Challenges of Human Resource Management Challenge 5: Responding to the Market Organizations use several approaches to address this very crucial issues: • Total Quality Management (TQ M) • Six Sigma • Reengineering TQM, Six Sigma, Reengineering, and HRM TQM –is a set of principles and practices whose core ideas include understanding customer needs, doing things right the first time, and striving for continuous improvement. Six Sigma –a statistical method of translating a customer’s needs into separate tasks and defining the best way to perform each task in concert with the others. Reengineering –has been described as “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, service and speed. (ISO 9000+) 11

12. The Challenges of Human Resource Management Challenge 6: Containing Costs Investments in reengineering, TQM, human capital, technology, globalization, and the like are all very important for organizational competitiveness. • Yet, at the same time, there are increasing pressures on companies to lower costs and improve productivity to maximize efficiency. Labor costs are one of the largest expenditures of any organization Organizations have tried a number of approaches to lower costs: Downsizing, outsourcing and employee leasing, and productivity enhancement. 1) Downsizing –the planned elimination of jobs. Other ways of downsizing besides direct layoffs: • Early retirements • “Sweetened” voluntary separation program • Sabbaticals • Severance packages 12

13. The Challenges of Human Resource Management Challenge 6: Containing Costs 2) Outsourcing – contracting outside the organization to have work done that formerly was done by internal employees. Some of the most common outsourcing are: • Services of accounting firms • Advertising firms • Law firms • Maintenance such as, security, catering, and payroll Employee Leasing – Process of dismissing employees who are then hired by a leasing company (which handles all HR related activities) and contracting with that company to lease back the employees. Impact on HR: 93% of all HR depts. reported outsourcing some of their work • Increasing morale – especially if you know your work is only temporarily • Increasing productivity level • Managing contracting companies • Legal issues with temporary workers 13

14. The Challenges of Human Resource Management Challenge 6: Containing Costs 3) Productivity Enhancement – Productivity can be defined as the “output gained from a fixed amount of inputs,” organizations can increase productivity either by reducing the imports (the cost approach) or by increasing the amount that employees produce. Two view points: View Point #1 – managers may cut costs only to find that productivity falls at even at ore rapid rate – WHY????????? View Point #2 -Mangers may find that increasing investment in employees (raising labor costs) may lead to even greater returns in enhanced productivity. ? Fact: The US is the world’s most productive nation. However, other can catch-up How to Increase Productivity? • Employee productivity is the result of a combination of employee abilities, motivation, and work environment. Figure 1.3 • When productivity falls off – or more positively, when productivity improves –the changes is usually traceable to enhanced skill, motivation, or a work environment conducive to high performance. 14

15. The Challenges of Human Resource Management Challenge 6: Containing Costs How to Increase Productivity? • Employee productivity is the result of a combination of employee abilities, motivation, and work environment. Figure 1.3 • When productivity falls off – or more positively, when productivity improves –the changes is usually traceable to enhanced skill, motivation, or a work environment conducive to high performance. Demographics and Employee Concerns Demographic Changes – among the most significant challenges to managers are the demographic changes occurring the the US. The Diversity Challenges –figure 1.4 In the year 2010 minorities will make up an even larges share of the US labor force than they do today. • Blacks will increase their share from 10 to 12 percent • Hispanics from 7 to 12 percent • Asian American from 3 to 6 percent These groups are expected to account for about 70 percent of labor force. 15

16. The Challenges of Human Resource Management Demographics and Employee Concerns Age Distribution of Employees • The # of older workers is beginning to rise as baby boomers approach retirement age and is projected to reach 15.2% by 2010. • Companies are finding that large portions of their workforces are nearing retirement. • Managers are concerned that the expertise of these employees is likely to be drained too rapidly from companies. What are companies dealing with this issue: • Attracting older workers to work for them • Innovative ways of training – Old version “You can’t teach an old dog new tricks” New version “You can’t teach an old dog the same way you teach a puppy” Gender Distributions of the Workforce (figure 1.5) • Bureau of Labor suggest that women will continue to join the US labor force and are expected to account for about 48% by 2010. 16

17. The Challenges of Human Resource Management Demographics and Employee Concerns Gender Distributions of the Workforce (figure 1.5) HR Issues with the upcoming Gender • Employers are under constant pressure to ensure equality for women with respect of employment, advancement opportunities, and compensation. • Need to accommodate working mothers and father through parental leaves, part-time employment, flexible work schedules, job sharing, telecommuting, and more sensitive to the growing need for policies and procedure to eliminate sexual harassment in the workplace. Rising Levels of Education (figure 1.5) • The most Secure and fastest-growing sectors of employment over the past few decades have been in areas requiring higher levels of education. • However, this brings yet another challenge and that is that the there is a widening gap between the educated and the noneducated. • Recent study suggests that less than half of all high school seniors are able to handle mathematics problems involving fractions, decimals, percents, elementary geometry, and simple algebra. 17

18. The Challenges of Human Resource Management Demographics and Employee Concerns Cultural Changes The attitudes, beliefs, values, and customs of people in a society are an integral part of their culture. Employee Rights Over the past few decades, federal legislation has radically changed the rules for management of employees by granting them many specific rights. Among these are: • Equal Employment Opportunity (chapter 2) • Union Representation, if desired (chapter 14) • Safe and Healthful Work environment (chapter 12) • Pension plan that is fiscally sound (chapter 11) • Equal Pay for men and women performing the same job (chapter 9) • Employment at will doctrine (chapter 13) 18

19. The Challenges of Human Resource Management Demographics and Employee Concerns Changing Attitudes Towards Work • Employees today are less likely to define their personal success only in terms of financial gains. • This trend has been evolving for some time, but observes have noted that it has peaked since the terrorist attacks of 9/11. • Personal fulfillment and self-expression – as well as a balance between work and family – are key factors in a complex array of job attitudes. Employees are looking for: • Interesting work • Balancing the challenges and rewards of work with those in their personal lives • Ways of living that are less complicated but more meaningful • HRM has become more complex than it was when employees were concerned primarily with economic survival. 19

20. The Challenges of Human Resource Management Responsibilities of the Human Resource Manager • Advise and Counsel • Service • Policy formulation and implementation • Employee advocacy Competencies of the Human Resources Manager (figure 1.9) • Business mastery • HR Mastery • Change Mastery • Personal credibility 20