Schein(1980) defines an organisation as “the planned coordination of the activitiesof a number of people for the achievement of some common, explicit purpose orgoal, through division of labour and function, and through a hierarchy ofauthority and responsibility.1” Humanresource management (HRM) therefore need to create business objectives to workwith commercial and regulatory pressures (Taylor, 2012.)Forces shaping the HR agendaDevelopments in product markets GlobalisationGlobalisationis not a new phenomenon but is something that has reasserted itself since theSecond World War through a process of significant reduction in tariffs andother trade barriers between countries and regions. (Boxall, 2011) The impacton competitive intensity has been huge and very rapid.
(Taylor, 2012) Globalisationentails new markets, new products, new mind-sets, new competencies, and newways of thinking about business. (Ulrich, 1996) Companies are looking to reducetheir costs by outsourcing work and paying less money for labour. For example,looking at national labour costs figures in 2007 (US Department of Labor) hourly compensationcosts in Germany was $50.73 whereas in the Philippines the cost was $1.37 perhour. Indicating that HRM would need to create new business agendas due to theimpact international trade and labour would have on the product market. Forexample, businesses may not want to hire people in the German markets due tothe high labour costs and would prefer to have their factories in thePhilippines instead. The recent 2007 recession had a very big impact onoutsourcing work and businesses looking to grow their labour force abroad asthey could not afford to maintain employment in the U.
K. HRM for example, wouldlook to outsource some of their internal departments such as payroll in a bidto reduce overheads or to introduce HR shared services to achieve efficienciesat a lower cost.Technology Developmentof new technologies has considerable implications for how people work. (Gallagher,2002) The advent of new technology is both a major cause of increasedglobalisation and a driver or increased competitive intensity in its own right.(Taylor, 2012) Increased technology in the workforce can increase productivityfor the business and ‘reduce the work efforts of employees to ones involvingmachine minding and machine-feeding’. (Gallagher, 2002) Therefore HRM could bebusy dealing with reductions in employment and redundancies.
Government actionGovernmentshave had to respond to the impacts of globalisation and technological change.This is shown through a ‘mixture of regulation and deregulation.’ (Taylor,2012) A government-commissioned review by Matthew Taylor (Taylor, 2016) into the modern world of workis designed to ensure that those working in new business models have the rightbalance of flexibility, rights and protections. (Broadbent, 2017)ImpactTherefore,HRM has had to deal with the uncertainty and unpredictability of globalisation,technology and government action. HRM are less able to create and developlong-term strategic plans for organisations due to rapid change. Therefore,this requires more training of HRM and input and communication from all levelsof HRM in order to effectively manage and introduce strategic change. HRM havecreated new models to help with the impact of the above factors to the HRfunction.
HR Business Partnering was created to add more value to anorganisation. As part of Ulrich’s three-legged model, HR business partners workclosely with business leaders and line managers to build capabilities,undertake talent management planning and help implement HR processes andsystems to achieve shared organisational objectives. (CIPD, 2015) Ulrichsuggests that in order to build a competitive future HR practices must berefocused and concentrate on ‘more on the value chain (suppliers and customers)and less on activities within the firm.
(Ulrich,1996)Developments in labour marketsThere aremany examples of changes to our labour markets in the recent years, below is acouple of illustrations:Increased female labour market participationSince the1970s we have seen legal moves to support the position of women in theworkplace such as enhancing maternity rights. (Megatrends, 2013) Since 1971,where women took up 37% of the workforce, in 2013 women now make up 47% ofemployment – the workforce is nearly split equally. The impact on HRM forincreased female participation in the workforce would be shown in recruitmentand changes to interview and CV screening to ensure that more women areentering the workforce.
The impact on HRM is also shown in retention of theirworkforce by given incentives for women to stay within the organisation, forexample equal pay to be ethical throughout the organisation.Increased educational participationThe 2013OECD working paper showed that in 2010, the adult population of the UK had, onaverage, received 13.5 years of schooling – the highest figure for the entireOECD alongside, Canada Switzerland, Australia and Germany (CIPD, 2013) Theshift to the more educated workforce has seen a change in the age of theworking force as well as the target recruitment capabilities HR looks for in anemployee. According to the Skills and Employment Survey, 26% of jobs in 2012required a degree, compared with just 10% in 1986.
(Felstead, 2012) The HRMimpact of this sees a rise in training employees to be highly qualifiedworkforce. Ageing workforceTheretirement age is increasing and people in the UK typically need to work longerbefore they retire. This has a direct impact on HRM through recruitment of ayounger workforce that may be more educated, training the ageing workforce sothey are able to perform as well as graduates and also on the organisationspension scheme.ImpactTheimpact on HRM is introducing improvements to recruitment, learning anddevelopment (L&D), effective managing of employees and retention ofemployees through rewards and incentives. HRM will need to have better datareporting and conduct more surveys in order to effectively source and retaintalent. Withrecent high-profile scandals such as Volkswagen, HRM has an increasedresponsibility to implement and manage ethical conduct throughout theorganisations and hold those who do not follow these procedures accountable.
HRpractices need to support the promotion of ethical business, for example,following the CIPD Code of Practice. HRM need to manage the burden thatincreased competition brings. There is a strong debate on how the increased competitionhas a massive detrimental effect on the employee shown in a rise in mentalhealth issues at work due to the pressure of trying to maintain their jobs. AsWright and Snell (2005) argue ‘to remain competitive, organisations willinstinctively look at reviewing their largest single controllable cost, whichis the cost of the workforce2.
Overall, organisations main focus is reducing cost which the HRM needs tomanage in order to improve employee satisfaction. Tools to analyse businessenvironmentThere arevarious frameworks and approaches used in the analysis of a company’s strategicposition. (Hill, 1997) Many tools existin the strategic management literature that are intended to helpdecision-makers accomplish their goals of fewer surprises, and more steadytransitions through difficult market changes and fluctuations (Chermack, 2007)’SWOT’ is a planning technique which ‘focuses on an organisation’s strengths,weaknesses, opportunities and threats’ (Currie, 2009)The wizardryof SWOT is the matching of specific internal and external factors, whichcreates a strategic matrix.
(Lee, 2000) Internal factors, are those that theorganisation can control, for example, finance. So in reference to SWOT, this would be the organisations strengths andweaknesses. The external factors are those the organisation cannot control,such as government interventions.
In relation to SWOT, these are theopportunities and threats.PESTLE (Political,Economic, Sociological, Technological, Legal, and Environmental) analysis isanother tool used by HRM to analysis a company’s strategic position. PESTLE isan audit of an organisation’s environmental influences, with the purpose ofusing this information to guide strategic decision-making. (CIPD PESTLE, 2015) Unlikethe SWOT, the PESTLE analysis does not consider internal factors. PESTLEanalysis concentrates purely on external factors such as political factors.
Forexample, the impact of BREXIT on organisations since there has been a shift inUK government priorities and policies. HRM now must look at how BREXIT willimpact their organisations. Using the PESTLE analysis, HRM can break down thedifferent impacts BREXIT will have such as the legal effect. Both SWOTand PESTLE tools need to be regularly monitored and updated if need be toensure that they align with modern trends. A criticism of both is that they donot address the urgency of different factors or put any weight on which mightbe more important.
They also are affected by people’s perceptions that areusing the two models. Impact on an organisation’s businessand HR functionDifferent types of organisationsThe private sector Theprivate sector is made up of businesses which are owned by private individualsor families, by other organisations or by large numbers of individual andinstitutional shareholders, including, sometimes, employee shareholders. (Taylor,2012) HRM is always found in private sector companies, typically with a seniordirector who reports into the senior members of the company. HRM in privatesector companies especially in recent years focus on long term plans for thecompany and is often strategic. The public sectorExamplesof public sector companies are central government departments and publiccorporations such as the BBC. Around 20% of the UK’s workforce is employed inpublic sector organisations. (Taylor, 2012) Similar to private sectors, inrecent years public sector HRM have moved into being more strategic.
They havealso had to deal with recent pressures from the recession of 2007-2009 whichhas resulted in pay freezes and redundancy. Trade unions have a strong presencethroughout public sectors and in turn have an effect on the HRM.The Third SectorThose whodo not fit into the public or private sector are referred to as the thirdsector, for example, charities.
They are not subject to company law orgovernmental control. Human Resources (HR) varies in these third sectororganisations and is mainly based on their available resources which can belimited in organisations such as charities. Factors impacting on organisationExternal :EU migration TheCIPD’s podcast (CIPD, 2014) on ‘the impact of EU migrant labour on the UKworkforce’ illustrates that the UK has 1.
75 million people that are employedthat are EU migrants that has doubled in the last 10 years. Therefore, thelabour market in the UK has been changing due to migration. This would affectthe employment statistics in organisations that HRM need to monitor. Moreover,there is a need for government action to train and educate people from the UKto be better skilled for the competitive jobs. For example apprenticeships to reduceyouth unemployment in the U.K. The impact on organisations therefore iscreating or improving existing school leaver programmes.
BREXIT TheResourcing and Talent Planning 2017 survey (CIPD survey, 2017) has revealedthat in light of Brexit, organisations are placing great emphasis on developingexisting staff, increasing communications and opportunities to listen toemployees, and also excersing more caution in recruiting. (CIPD factsheet, 2017)Due to the uncertainty of BREXIT the HRM has had the direct impact of changesin recruiting employees. The Resourcing and Talent Planning 2017 survey showedthat organisations are most likely to strongly agree or agree that competitionfor well-qualified talent has increased over the past year. (CIPD factsheet,2017) Therefore, HRM needs to work on their employer brand and how this isperceived to target employees due to this increased demand and to ensure thatemployee satisfaction is high as bad reviews on websites such as Glassdoor canbe detrimental. HRM must be up to date with current changes and legal effectsof HRM and must be able to apply these changes and laws effectively andcorrectly. Internal:Stakeholders In a widesense, a stakeholder is any group or individual who can affect or is affectedby an organisation. (Freeman, 1984) Organisations rely on stakeholders for monetary support for example infinancial institutions stakeholders are needed to be successful thus peopleneed to continue to borrow money.
Employees are also stakeholders therefore HRM need to have a successfulrecruitment and talent development programme in order to retain staff asrecruitment can be costly if they need to continuously rehire new staff. Organisational culture/structure HRpractitioners (HRP) should use organisational design as one of the instrumentsfor shaping the culture necessary to achieve the business strategy and toimprove the quality of jobs for people (CIPD factsheet, 2015). Handy’s (1999) culturaltypology provides useful insight on organisational culture. This is made up ofpower culture (the web) typically seen in start-up companies where it isdominated by one person or a small group. Role culture (temple) where there areclear hierarchies within the organisation and is has a centralised mentalitywhere decisions are made at the top. Task cultures (lattice) which promotescollaboration and knowledge sharing. Person cultures, where the structure mustsupport individual needs and is similar to divisional or a matrix.
Strategy formulations and implementationsEveryorganisation has different approaches in developing strategy.Rational/classical approach is less competitive and is where the seniormanagement take control using the SWOT analysis to determine best strategymaking techniques considering internal and external environments. In thisapproach, the senior managers take the leader without much input for thoselower down. Mintzberg’s (1978) emergent strategy where the organisationresponds to change over time. Boxall (2011) uses the example, when anorganisation decides to enter internet banking; it is inevitable that theprocess of carrying out that commitment will involve learning, which will shapethe strategy over time. From a HRM perspective therefore, they will need toconcentrate on the learning and development of employees. Symbolic and radicalapproach is where implementation precedes the formulation of strategy. However,the organisation may not be quick enough to respond.
HRM whenforming a strategy will create a mission and objective for the organisation,for example, Uber’s mission statement is ‘transportation as reliable as runningwater, everywhere, for everyone.’ Therefore the consumer knows exactly whatservice Uber is running in a short, snappy sentence. They will conduct a SWOTanalysis to learn about the internal strengths and weaknesses of theorganisation for example, the effectiveness of their learning and development.External analysis will be conducted to ensure that business leaders are up todate on business ethics.
HRM will then create plans for example, refining theirrecruitment and talent planning. Finally, the plan will be reviewed andstructures such as performance management will be looked at .It is veryimportant the organisations have a strategic plan so using the Ansoff matrix,they will know how to penetrate an existing market, develop new products in newmarkets, develop existing products in new markets and diversify themselves andtheir products in new markets.For manyyears managers have made use of contingency thinking and contingency models inorder to help them align HR strategies with business strategies (Taylor, 2012) and to understand and cope with competition.(Porter, 2008) Porter (2008) describes competitive advantage as growing’fundamentally out of value a firm is able to create for its buyers thatexceeds the firm’s cost of creating it.3’Michael Porter (1985)’s model identifies three core alternative strategies thatfirms follow: cost leadership (value for money) an example of this is Primark.Differentiation (innovation) and focus.
Therefore, Porter argues that anorganisation in order to compete effectively can: produce goods and servicesthat are cheaper than those of its competitors, from a HRM perspective thismeans paying at below market rates and having this affecting recruitment andretention. The second, it can produce goods and services that are of higherquality, from a HRM perspective this means higher pay and good training or canproduce goods and services that are more innovative than competitors whichrelates to a heavy focus on recruitment and training. (Taylor, 2012) Latercritics, namely Johnson et all (2010) argue that it is necessary to achieve allthree factors simultaneously albeit this can be difficult.In all ofthe above examples, HRM must manage being an ethical company and abiding by theCode of Conduct. Ensuring that employees well-being is being looked after inboth monetary and mental health situations. Using Sports Direct (Guardian,2015) as a recent example, the HRM failed the employees by not protecting themagainst being paid minimum wage.Business PlanningTraditionally,business performance and success was measured indicators such as revenue,profit margin and stock turnover. However, by the 1980s, many executives wereconvinced that traditional measures of financial performance did not let themmanage effectively and wanted to replace them with operational measures.
(Kaplan 2005). Kaplan and Norton (1992) developed the ‘balanced scorecard’ tohave a more holistic measurement which includes, financial gains, customersatisfaction, internal business processes and development in learning toachieve growth. At the centre of this is the organisation’s vision andstrategy. Within each measurement is the objective, measure, targets andinitiatives to achieve the targets. Improving retention is an objective.
Tomeasure this, is the number of resignations in one year. An initiative that HRMcan implement is flexible working to ensure better mental health for the employee. Other modern indicators can be the generalbrand reputation and awards such as Times Top 100 Employers.Ulrich(19974)identifies four roles for HR supporting the change process. The first is changechampion.
The HRP identifies the need for change, possibly through dataanalysis. For example, data showing 50 employees left the company in one yearshows that there needs to be an initiative to retain staff. Change facilitator,is a HRP who encourages feedback such as surveys and uses this to helpimplement change with line managers. Change designer, those who develop andimplement practices to ensure transformation. For example, initiatives toretain staff such as better mental health awareness.
Finally, change demonstrator,whereby the HRP assists and demonstrates the target change this can often be aHR business partner.Big DataHumancapital (HC) is used in HR to describe people at work and their collectiveknowledge, skills, abilities and capacity to develop and innovate (CIPD HumanCapital, 2017) Measuring HC can bechallenging. The emphasis for measurement is no longer on absolute measures ofHC, but instead context specific information to enable informed decisionmaking. The number of resignations and vacancies in one year can indicate theHR recruitment and retention needs. Data is essential to HR and L becauseit allows conversations and connections which have tended to be in the realm ofthe immeasurable to be captured and leveraged (CIPD report, 2013) However, thedata does not take into account different factors such as economic situations(recession in 2007) or customer trends (increase in online shopping.)Internalexamples of data reporting are staff surveys to help identify and improveemployee satisfaction or external examples can be the news.
There aredifferent levels of data collection: operational data analysis whereby youmonitor data without analysing (retention data) this will help managers havebasic information on headcount, basic insights where some correlations will beexplored which can help contribute to designing the HR model and insightsdriving performance to identify drivers of business performance.There aresome risks with data analytics which Boyd and Crawford (2012) highlight that thebig data is not the whole data and that this can incorrectly influenceoutcomes. There is also a risk of uncertain or unclear data sources being usedthat could result in error. The CIPD (May 2017) recommends to prevent this isimproving empirical evidence by closing the gap between the practice of HCmeasuring and reporting and the high-quality empirical evidence of differenttypes of outcomes for individuals, organisations and business stakeholders. HRPcan look at institutional and cultural barriers within organisations that mayprevent the development of high-quality HC analytics and reporting.