Chapter # 01.docx

Central Challenges Faced by the Human Resource Department in Any Organization Every human resources department faces the challenge of aligning strategy and action to create an organization known as an "employer of choice." An employer of choice is where people most want to work because the company has a combination of leadership that values employees' talent, a positive work environment and competitive compensation and benefits. These are organizations where it's difficult to get a job because hiring standards are high and employees are satisfied, which means low turnover. Even when the ultimate goal isn't as lofty as becoming an employer of choice or being named in "Fortune" magazine's Top 100 employers, HR faces a number of challenges nonetheless. 1. Employee Retention Retaining employees is a challenge all employers face, and retaining good employees is something human resources struggles with in every organization. The best employees usually are the most difficult to retain. Without a strategic plan that ensures employee satisfaction, great compensation and benefits, and work assignments that continually challenge employees' skills and aptitude, high-performing workers will use your organization as a mere stepping stone on their career path. 2. Compensation and Benefits The company's human resources and finance leaders determine how to budget for employee compensation and benefits. The strategic decision human resources makes determines where an organization stands in terms of applicants' and employees' perception. Some employers pay competitive wages and offer standard benefits, others offer high wages and minimal benefits, and still others can afford to offer extremely competitive wages and provide outstanding benefits packages. The challenge HR faces is gaining executive-level support for the value of the organization's human capital. 3. Diversity Management The meaning of workplace diversity has grown far beyond the simplest definitions of race, color, sex, national origin and religion in Title VII of the Civil Rights Act of 1964, one of the first federal laws governing equal opportunity in the workplace. Diversity now includes differences attributed to work style, generation, communication and language. The challenge for human resources is learning how to provide leadership and feedback to all of the organization's employees through understanding what motivates individual employees in a diverse workplace. 4. Talent Management Recruitment and selection, performance management and sustaining a workforce that enables an organization to maintain its competitive edge are components in what HR practitioners refer to as

talent management. Labor conditions, unemployment, training and development are factors that human resources examines whenever vacancies exist or when turnover presents an opportunity to restructure the company's workforce. Challenges within talent management are likely to develop when there are labor shortages or when current employee performance doesn't meet expectations; these are factors that potentially threaten the organization's productivity and profitability. 5. HR Outsourcing The decision whether to outsource human resources functions or develop in-house expertise is a challenge HR practitioners and leaders consistently encounter. With the number of outsourcing firms that provide HR transactional services at lower costs than the salaries of in-house HR specialists, the decision can be one that has a tremendous impact on the workforce and the quality of services to employees. Regardless of whether an organization moves services to an outsourcing firm, it must still maintain in-house expertise to manage the quality of services the firm renders. Why Effective HR Management is Necessary Employees are a company’s best asset. Small businesses that invest in their teams will enjoy faster growth and outpace their competition. Here are just a few more reasons to focus on effective HRM: 

Creates a unique workplace culture

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Emphasizes the rules, expectations, and standards for the workplace

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Helps everyone understand workplace diversity

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Facilitates communication between HR and employees

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Strengthens the importance of training and development

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Eliminates employee uncertainty It’s important to know common HR issues so you can put the right policies and procedures in place now. Understanding the complexities of employee benefits, employment laws, leadership development, and other areas will help you stay ahead of the competition and meet your business goals this year, and in the years to come. Organization of the HR Department The main function of HR department is to oversee department functions and manage employees by planning, implementing, and evaluating human resources policies, principles, and programs. Basically, it involves functional activities including hiring qualified employees,

establishing compensation structure, training staffs, addressing employee relations matters, and maintaining workplace safety. Function Units: 

Recruitment

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Compensation and Benefits

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Employee Relations

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Training and Development

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Workforce Safety An HR organizational chart example:

1. Recruitment: Recruitment is a vital task for HR department because it determines what kind of people will work for the company – whether they have the right knowledge and skills, and whether they are suitable for the position or not. To accomplish this mission, they HR department need to develop and execute quality recruitment strategies to ensure that recruitment meets all affirmative action commitments. 2. Compensation and Benefits: HR manager needs to establish strategic compensation plans, ensuring wages and reward programs are administrated equally throughout the workforce. They need to provide employees with benefit options, including health insurance, retirement planning, life insurance, etc. What’s more, they are responsible for authorizing salary changes, position changing an election. 3. Employee Relations HR department is also responsible for investigating and solving employee complaints, conflicts and concerns. Many possible issues might arise in a company. For example, an employee is not satisfied with his performance assessment result and seeks for revision. If this kind of circumstance happens, the HR department needs to research on this issue, and solve the problem by negotiating with his superior. 4. Training and Development Through effective training, employees could enhance their knowledge, skills and work abilities, so that they can improve their job performance. Human resource department conduct needs analysis to decide what training is necessary to improve performance and productivity. 5. Workforce Safety HR department needs to ensure every staff working in a safe environment. It’s their obligation to research and develop safety policies for the company that is in compliance with state and federal laws and regulation. They need to identify unsafe conditions and make clear notice on potential dangerous matters such as dangerous equipment, chemical drugs, radioactive substances, etc. Models of Human Resource Management 

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The Human Resource Management models contain all human resource activities. When these activities are discharged effectively, they will result in a competent and willing workforce who will help realize organizational goals. There is another variable in HR models - environment. It may be stated that the Human Resource function does not operate in vacuum. It is influenced by several internal and

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external forces like economic, technological, political, legal, organizational and professional conditions. They provide an analytical framework for studying HRM (for example, situational factors, stakeholders, strategic choice levels, competence). They legitimize certain HRM practices; a key issue here being the distinctiveness of HRM practices: "It is not the presence of selection or training but a distinctive approach to selection or training that matters." They provide a characterization of HRM that establishes variables and relationship to be researched. They serve as a heuristic device - something to help us discover and understand the world of explaining the nature and significance of key HR practices.

Following are major HRM Models: 1. 2. 3. 4.

Matching Model of Fombrun, Tichy & Devanna The Harvard Model The Guest Model The Warwick Model

1. Matching Model of Fombrun, Tichy & Devanna: This model held that HR system and the organizational structure should be managed in a way that is congruent with organizational strategy. Main focus was on the four functions of HRM i.e. selection, appraisal, development and rewards and their inter relatedness.

This is the first and very simple model that serves as a heuristic framework for explaining the nature and significance of the key HR activities. But it is incomplete as it focuses only on four functions and ignores all environmental and contingency factors that impact HR functions. 2.

The Harvard Model: The Harvard model claims to be comprehensive in as much as it seeks to comprise six critical components of HRM. The dimensions included in the model are: stakeholders’ interests, situational factors, HRM policy choices, HR outcomes and long term consequences. The Stakeholders interests recognize the importance of 'tradeoffs' between the interests of the owner and those of employees. Tradeoffs also exist among other interest groups. But this is the challenge of HR manager, who needs to balance the interests of all stakeholders. The Situational Factors influence management's choice of HR strategy. The contingent factors included in the model include work force characteristics, management philosophy, labor market, task, technology and laws and social values. HRM Policy Choices emphasize the management's decisions and actions in terms of HRM can be fully appreciated only if it is recognized that they result from an interaction between constraints and choices. This model outlines four HR Policy areas: Employee Influence - delegated levels of authority, responsibility, power etc. HR Flows - recruitment, selection, promotion, appraisal, termination etc. Reward System - Pay system, motivation etc. Work System - design of work and alignment of people

These HRM policy choices lead to 4 Cs of HR Policy Outcomes that have to be achieved: -

Commitment Congruence

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Competence Cost Effectiveness

Beer et al (1984) proposed that long term Consequences both benefits and costs of HR policies should be evaluated at three levels: Individual, Organizational and Societal. These in turn should be analyzed using the 4 Cs. The Feedback Loop is the sixth component of the Harvard Model as was stated above, situational factors influence HRM policy and choices, and are influenced by longterm consequences. Similarly, stakeholders interests influence HRM policy choices, and in turn, are impacted by long-term consequences (see Figure) 3.

The Guest Model: It was developed by David Guest in 1997 and claims to be much superior to other models. This model claims that the HR manager has specific strategies to begin with, which demand certain

practices and when executed, will result in outcomes. These outcomes include behavioral, performance and financial related. (See Above Figure).

The model emphasizes the logical sequence of six components i.e. HR strategy, HR practices, HR outcomes, Behavioral outcomes, Performance outcomes and Financial outcomes. Looking inversely, financial results depend on employee performance, which in turn is the result of action oriented employee behaviors. Behavioral outcome are the result of employee commitment, quality and flexibility, which in turn are impacted by Hr practices. HR practices need to be in turn with HR strategies which are invariably aligned with organizational strategies. 4. The Warwick Model: This model was developed by two researchers, Hendry and Pettigrew of university of Warwick (hence the name Warwick model). Like other models, the Warwick proposition centers around five elements (See Figure): 1. Outer Context (macro environmental forces)

2. 3. 4. 5.

Inner Context (firm specific or micro environmental forces) Business Strategy Content HRM Context HRM Content

This model takes cognizance of business strategy and HR practices (as the Guest Model), the external and internal context (unlike the Guest Model), in which these activities take place, and the process by which such changes take place, including interactions between changes in both context and content. the strength of the model is that it identifies and classifies important environmental influences on HRM. It maps the connection between the external and environmental factors and explores how HRM adapts to changes in the context. Obviously, those organizations achieving an alignment between the external and internal contexts will achieve performance and growth. Proactive Versus Reactive HR Proactive and reactive human resources are both critical to the success of businesses in managing and motivating people. Both are especially important for strategic HR processes. However, strong development of proactive HR programs can often help managers avoid overreliance on reactive HR, including "putting out fires." Proactive HR Basics Proactive or preventative human resources is the strategic development of plans for recruiting, selecting, managing and motivating people. Proactive recruiting means crafting specific plans for

recruiting employees who are the best fit for your organization. Proactive HR management processes include development of effective compensation programs that pay people fairly and competitively. They also include management approaches that are known to motivate employees to deliver optimum performance on a regular basis. Reactive HR Basics Strategic planning to react to human resources crises are important. Businesses need to know what to do when employee troubles arise. However, reactive HR is often regarded as putting out fires and living in HR chaos because managers wait until employee issues come to a head before they try to handle them. By this time, symptoms may have become overwhelming for the business and its employees. Reactive HR also means adding new policies and procedures in response to problems that arise. Similarities The main similarity between proactive and reactive HR is that both are integral in strategic HR, which has become prominent in the early 21st century. Companies need to proactively develop procedures but have an efficient system to deal well when surprise issues occur. Both approaches involve processes of dealing with employees and their concerns. In each type, HR professionals and managers want to keep employees happy so that production is high. Differences Timing is a key difference between proactive and reactive HR. Proactive HR plans are typically implemented before issues come up. Proactive approaches include intentionally hiring certain employees and paying what it takes to motivate employees. Reactive approaches more often involve waiting until employees complain to fix pay or motivation problems. In an April 2011 Foster Thomas article, Kristin Rueber explains that proactive HR also may involve payroll and employee audits that catch issues before they fester. She describes a particular situation in which a company paid a non-active employee for about 12 years because it failed to review payroll files proactively. The difference in a proactive versus reactive human resource management strategy comes down to planning and forethought. As a business owner, a proactive strategy can help you anticipate problems in staffing levels and employee training. A reactive strategy, while less devoted to planning and risk management, is definitely cheaper and may be more cost effective for a small business. Employee Recruitment Strategies A proactive recruitment strategy in human resources management emphasizes anticipation of a business's staffing needs. This can manifest in several ways, including keeping promising job

applications on file to provide a ready pool of prospective workers as well as conducting rolling interview cycles to keep a constant flow of new employees entering your company. Conversely, a reactive human resources strategy only works to meet an identifiable need. That means no interviews or advertising for employment opportunities until your business has an immediate job opening. Your company may still take submitted employee applications but will not review these applications until the need arises. HR Risk Management The planning associated with a proactive human resources management strategy allows your team to anticipate crises in staffing levels and employee training. By anticipating these shortfalls, your HR team can develop strategies to mitigate the damage and keep productivity at a relatively constant level. This keeps your revenue stream flowing evenly. A reactive model of human resources management responds to crises as each occurs. As a result, you could experience a sudden drop in productivity due to fluctuating staff levels or lagging employee training while your company's HR department scrambles to develop workable solutions. Attracting Top Talent Attracting the best employees in your business's industry doesn't happen by accident. A proactive human resources strategy coupled with a competitive benefits package is necessary to make the brightest workers notice your business and apply for jobs. A proactive strategy involves advertising the strengths of your business, its position in the industry and the long-term goals of your company. A reactive human resources management strategy is only going to secure the best workers who happen to apply for open positions with your company -- not the best the entire industry has to offer. The Money Problem A proactive human resource management strategy takes the devotion of an entire department in a company. This may be difficult to pull off in the early years if you are a small-business owner with tight overhead and an unreliable revenue stream. Your company may find a reactive human resources strategy a necessary evil until you can generate enough revenue to fund a full HR department. A reactive HR strategy may sound like no strategy at all, but if you devote your attention to staffing problems as soon as problems occur, your business can mitigate the damage and continue operating. Strategic Human Resource Management Strategic HR management is essential to any organization looking to align their team to their overall strategic plan. It represents a proactive approach by organizations to support and engage

employees while also promoting the achievement of company goals. Extensive planning and research goes into: #1: How a company as a whole can better meet the needs of its staff and, #2: How employees can best utilize their skills to contribute to the success of the organization. Basic strategies and goals will then start to form around how organizations can cultivate a work environment and culture that encourages engagement, team collaboration, and productivity. Following that, HR departments will begin looking into how they can improve recruitment practices, provide more ongoing training for their employees, and establish effective retention strategies. The Purpose of Strategic Human Resource Management Strategic human resource management is so much more than just “putting the right people in the right job.” And, those organizations who believe measuring whole-hearted engagement and productivity can be done once a year with a cookie cutter performance review questionnaire may meet with some challenges. Put very simply, an organization wants to be able to: 1. Attract the best employees 2. Retain their best employees 3. Continue to develop their employees A New Trend: Strategic HR Is Changing The Way We Value and Manage Our Employees There have been new trends emerging in how companies big and small choose to value and manage their team members: 1. Innovation and Engagement: HR departments and C-Level management are now actively seeking out new and innovative ways to engage and connect their employees back to the organization’s goals. 2. Whole-Hearted, Employee-Focused Plans: Strategic HR planning techniques are being adopted to help formulate plans that guide individual employees in successfully meeting their personal and professional goals. Whether you’re a Fortune 500 company or a fast-growing start up, road mapping your organization towards building an employee-focused human resources plan that’s directly connected to the overall strategic plan is just good business sense. Why?, Because the success of your organization is directly related to employee engagement and productivity.

What’s Included In A Strategic HR Plan: 1. Recruiting tactics: How to find and hire the right talent that just so happens to also be a great fit with your organizational culture. 2. On-boarding and ongoing training programs 3. Employee succession planning 4. What to do during times of economic downturns and expansions 5. Employee relations and retention plans By delving into each of the above elements, an organization is able to effectively plan for how they can successfully manage their human resources. Join us next week as we explore the first steps in creating an HR management plan that’s aligned with your organization’s strategic plan.