How to manage HRM? - Chapter 1

The Management of Human Resource Management

Managing people is not as easy as it seems. Buckingham and Coffman link the quality and effectiveness of managers, and the performance orientated behaviour of their subordinates, with the use of the answers to twelve basic questions. If the answers are positive, the employee will value his or her manager more likely. Managers are seen as critical to how a person behaves and performs at work. Much of what we need to know about managing people already exists; we need to know where to look and what to look for.

The fundamentals of managing people might not have changed much over time, but the conditions in which people are employed and managed have definitely changed. Today’s managers have to ensure that goods and services are provided profitably and efficiently, while maximizing the productivity of their workforce. This must be done in environments that are rewarding, provide opportunities for personal growth and development, generate commitment to the organization and encourage employees to use their capabilities and potential to the full and in the interests of the organization.

Today’s challenges are influenced by these (contemporary) changes:

• The rise of self-employment and the independent worker: people are more ‘free’ to work or not and have more choice where and for whom to work.
• Changes in the external regulation of employment: management’s freedom to take rational business decisions where these threaten the legitimate interests of employees (especially in areas of race, gender, age discrimination, employment protection, treatment of pregnant women and trade union membership) is decreasing.
• The emergence of new ideas and ways of managing associated with inward investment and the spread of new knowledge: growing influence of Japanese and German companies changed things: the removal of unnecessary and restrictive differences between managers and employees, the harmonization of terms and conditions of employment, the removal of restrictive labour practices and the emphasis on a new culture of pride and investment.
• The challenge to, and replacement of, physical power and manual skills by the power of knowledge, creativity and intellectual capital: this is creating a different kind of labour force, with different requirements and expectations of work and how it will be managed. Knowledge workers work with knowledge, not only their own but also that generated and used by others in ‘communities of practice’ and professional networks.
• The implications of this for the way people are managed extend to the need to align rewards more sensitively with the motivational characteristics of this kind of employee, the nature of supervision and what managing the knowledge worker actually involves, the intrinsic importance of work and work-life balance issues.
• A diversified labour force: new migration patterns are adding to the demographic mix from which the labour force is drawn and these developments affect the need for different employment and working arrangements.

An implication of these changes is that a ‘one size fits all’ approach to HRM is not working.

Discretionary effort is effort or performance that is additional to that which the employee is contractually required to deliver. It is determined by the employee(s) and is the difference between what employees are minimally required to give and what they are capable of giving. Effective managers are those that generate higher levels of discretionary efforts without having to pay for it.

The psychological contract is the unwritten, often unarticulated and not necessarily shared expectations that exist between employees and managers, which influence the relationship between the two parties and particularly the behaviour of employees.

Successful HR managers are those who are able to achieve those objectives that are critical to the successful operation of the organization through:

• Ensuring that the supply of human resources is consistent with the changing levels of demand;
• Pursuing strategies that result in improvements in the efficient use of labour and increased levels of labour productivity;
• Maintaining sufficient levels of control of employee behaviour;
• Generating employee commitment and engagement;
• Developing employees as human beings and as economic resources.

And ensuring that, as far is possible, these fundamental employee objectives are also met:

• To be treated as a human being first and then as an economic resource;
• To be recognized and valued for what they contribute;
• To be allowed to develop as a person and a resource;
• To be treated and rewarded fairly.

In reality, these objectives are not always compatible and they may be in conflict.

McGregor (1960) presented a dichotomy of the assumptions made about people, divided in ‘Theory X’ and ‘Theory Y’. Theory X assumptions are based on a belief that:

• The average human being has an inherent dislike of work and will avoid it if he can;
• Because of their dislike of work, most people cannot be trusted to do a good job, and therefore need to be controlled and closely supervised;
• People generally prefer to be directed, dislike taking on responsibility, will not change much beyond what they already are and desire a high level of security.

Under theory X, managers need to develop working environments and organizational controls that reflect the unreliable and problematic nature of their employees.

Theory Y assumptions are based on a belief that:

• People enjoy work as a natural and necessary part of the human experience;
• Tight control and use of punishments are not the only, or most effective ways to make people work;
• Employees are capable of self-motivation and self-direction, and can, mostly, show a high level of commitment to management and the organization for which they work;
• The average person is capable of learning and changing, and will be prepared to take and exercise responsibility for his or her and others’ actions.

O’Reilly and Pfeffer (2000) argue that, because of Theory X assumptions, many organizations are failing to unlock the hidden value and potential that their employees offer. This hidden value is not scarce or unique, but organizations are not able to access/use it. Besides, Theory X is also a self-fulfilling hypothesis: employees treated as if they are ‘Theory X people’ will act like they are.

Mayo (2001) described in his research a set of beliefs that transformed our understanding about work and what people expect from it:

• Work is a social activity involving people working together in groups and teams;
• The need for security, sense of belonging and recognition is more important for morale and performance than the physical working environment;
• An employee is a person whose attitudes and effectiveness are conditioned by social expectations that exist both within and outside the place of work;
• When employees complain, the complaint may have some basis in fact, but can also be seen as a symptom that reflects changes in their status or sense of self-worth.

In the work of Ouchi (1981), Theory Z can be found. He argues that workers:

• Are capable of demonstrating a strong sense of loyalty;
• Will respond positively to working in teams because they are social animals;
• If trusted to work in a demanding, but not coercive environment, can and will reflect the interests of the organization as well as their own.

Ouchi describes management practices that flow from his Theory Z and emphasizes personal responsibility and accountability, collaborative working, devolved decision-making and harmonized working conditions.

These theories are sets of assumptions that managers hold about their employees, and not real theories. If people are more like X, Y or Z depends on experience at work and managers’ behaviour, and not individual characteristics.

Frost (2003) describes that ‘toxicity’ or emotional pain is a normal by-product of organizational life and that the generation of emotional pain is an inevitable part of ‘doing business’. He says that emotional pain itself is not toxic: what determines whether its long-term effects are positive or negative is how the pain is handled. Harvey (1996) suggests that the reason why so many people conform to or do not challenge what others prescribe is due to their need to remain connected. However, he also believes that people fear the unknown less than they do the known. West (2010) made the following points:

• Relationships are one of the most potent sources of human misery (e.g. dead of a spouse);
• Troubled relationships are the most common presenting problem in psychotherapy;
• Chronic conflict and hostility damage the immune system.

These points have implications for the physical and psychological health of people at work.

Stress is a situation where demands on a person exceed that person’s resources or ability to cope. People may suffer from stress because of too little pressure as well as too much. There is a clear link between stress and ill health according to the Stress Management Society (2010). Stress can be dysfunctional and damaging.

An organization has responsibilities to its employees as people, because it will have a beneficial effect on the well being of the organization.

From an economic and business view, people are seen more as productive economic resources, which represent an input to the productive process with a value and a cost. Seen as a commodity, people have no rights as such, but as human beings in employment they enjoy varying degrees of protection. But even this protection is not enough if the demand for goods/services falls: people are removed or displaced from one location to another outsourcing of production of goods and services decreases the amount of people who are employed in (Western) Europe. If people are seen as resources, some people are more important than others because they have different values/contributions to the organization. This provides a rationale for the application of differentiated employment policies. This perspective is called human resource accounting and personnel economics and mostly used in the USA.

According to Mayo (2001), employees have to be seen as intangible assets because:

• They cannot be transacted – i.e. bought and sold at will;
• Their contribution is individual and variable;
• They cannot be valued according to traditional financial principles.

The inability/reluctance of many organizations to value their ‘human assets’ can have important consequences. Managers are unable to develop HR practices that reflect differences in employee performance and contribution, with the implication that the ‘one size fits all’ mindset will continue to be adopted. Secondly, returns on investments in training and development will be difficult to calculate because of managerial inability to measure any changes in employee value. This view has been described as the ‘expense model’ of human resource accounting. It confirms the importance to organizations of finding ways of allocating financial value to employees’ asset value. The paradox is that employees are both people, with human requirements and sensitivities, and economic resources, with differentiated and changing asset values.

What is Management?

Management can be understood as being about clarifying objects, planning and organizing and directing and controlling. According to Clegg et al. (2005), this functional and rational approach to management of Taylor/Fayol/Ford identifies key management activities and responsibilities, and explicitly excludes employees from any meaningful part of what management does. Scientific management (Taylor) involves the application of precise procedures and approaches to the management and control of work and workers: it describes a ‘one best way’ approach to improve labour productivity. Fordism is associated with mass production techniques, extreme forms of division of labour and assembly line techniques, reflecting a Taylorist (Scientific Management) approach to the control of work.

These traditional views may be insufficient to deliver all of the required outcomes now change and increasing complexity of organizations becomes the norm, so new management activities may emerge (e.g. the need to communicate/consult/motivate). Because the workforce becomes better educated and technically equipped to manage, there is less need for people in formally designated management positions: self-management, self-direction and self-control become more important. In the context of rapidly changing environments, the effectiveness of traditional approaches is questioned: managers should not accept one, but several different types of rationality.

Dialectic: the tension that arises between conflicting ideas, interacting forces, or competing interests. The term can also be used to explain the process of reconciling opposing opinions or facts by means of argument and discussion.

Management in the twenty-first century is changing: there will be more self-management, outsourcing will create opportunities, higher skilled jobs will increase employee discretion, managers will develop new ways in which to supervise and delegate work, people will want greater responsibility and more mundane jobs will be transformed to make employment feel more like self-employment (Moynagh and Worsley, Tomorrow Project, 2001). Changes in the nature of work makes traditional ideas of what management involves increasingly inappropriate and reduces the number of managers. Social and technological changes have resulted in much more complex and varied working patterns.

Managing people is, according to Heller (2003), not the primary aim of managers management comes down to three simple words: revenues, costs and quality. Understanding and addressing the needs of people as human beings is critical to their status as productive economic resources and their ability to contribute to these business goals.

O’Reilly and Pfeffer (2003) emphasize the importance of a philosophy of management and assumptions managers make about people. A philosophy is an enduring framework of beliefs, values, and ways of doing things that can exist at the individual and organizational levels. A shared philosophy is a powerful way of creating a common purpose and set of expectations as to how people behave. Collin (2001) describes these philosophies as a framework for action, within which consistency, rigour and a belief that their way is right for them sustains an environment within which the right kinds of people can prosper, grow and outperform competitors. Watson Jr (2003) argued that great organizations owed their success not only to the power of their beliefs, but also to the appeal these beliefs had to their employees. According to him, it is important to get the people that organizations employ to understand and support the values and beliefs espoused by their managers. Buckingham and Elliot (1993) argued that simply processing basic competencies is not a sufficient condition for generating managerial success. Underpinning personal characteristics and how people work is what they describe as a conceptual mindset, which is a perspective on their role and its purpose that is significantly different from their less highly rated colleagues. This mindset is a philosophy of management that is strongly rooted in clear perceptions about, and a real commitment to, the value of good employees and of their contribution to the company.

Why is it important to be strategic on HRM? - Chapter 3

What are HR strategies?

The main paradox in HRM is the importance of human resources to organizational success vs. the problems that are caused by human resources in organizations. Another paradox described is that valuable and talented people are not being fully utilized at work. A third paradox could be: why is so much of HR’s resources, intellectual and financial, spent on activities that produce relatively little added value? These paradoxes present a strategic perspective on HR.

Why is it so important to be strategic? Bassi and McMurrer (2004) provide an answer to this: the relentless force of globalization has left only one sustainable path to profitability for firms operating in high-wage, developed nations: to compete based on superior human capital capabilities and strategies. People not only need to be connected to their job but to each other and their organization, because an organization’s success and performance is the product of its people competence. However, performance improvements that are strategically important are by no means inevitable and to increase performance, an environment and conditions that lead to changing mind sets and higher levels of employee engagement have to be created.

Integration: a preferred relationship between different parts of an organization and ‘the whole’ and between different functional strategies and the corporate strategy.

Strategic: a particular mindset and approach defined by a more integrated and holistic view of the world of business and management. Being strategic means having an impact on the things that are most important to an organization – the corporate goals and objectives (Sullivan, 2005).

Strategy: a way of doing things that is intended to produce required outcomes and results.

According to Hammonds and Gratton (1999), the majority of HR professionals struggle to offer a vision of the future and how the organization works and needs to change. There is also a real difficulty in trying to successfully align HR strategy to business strategy because business strategy can change quickly and it is unrealistic to constantly adapt aspects of HR such as its recruitment, compensation and employment policies to maintain this notional alignment.

Being strategic is associated with the following features:

• Having an impact on the organization as a whole, through influencing things as its financial performance and/or its economic strength, the characteristics of its working environment, which creates conditions for high performance working and the organization’s competitive advantage over others by developing unique talents and competences.
• Creating organization wide capabilities within the workforce as a whole.
• Possessing a vision of how the HR function needs to operate and being able to convince other stakeholders of what that vision means in practice.
• Acquiring, nurturing and retaining talented people.
• Consistently working to develop specific HR strategies that reflect the strategic needs of the organization (difficult!).
• Provide leadership and influence all levels within the HR function and organization.
• Possession of a strategic mind set: looking forward and see and think strategically.

Being strategic is not a ‘tick-box’ exercise. However, being strategic does involve HR in delivering against two key requirements:

1. Building human resource capabilities that can help to meet short- and long-term organizational requirements;
2. Ensuring that these capabilities are used and applied to generate strategically valuable outcomes.

HR is not solely responsible for these strategic contributions though.

What is Operational effectiveness?

Operational effectiveness means performing similar activities better than rivals perform them. It is not limited to efficiency and refers to any number of practices that allow a company to better utilise its inputs. In contrast, strategic positioning means performing different activities from rivals’ or performing similar activities in different ways (Porter, 1996). According to Porter, there is a real danger of failing to distinguish between these two. If all organizations adopt similar operational practices, no strategic competitive advantage will be gained by any unless such practices result in higher levels of profitability or other improvements in strategic performance.

Porter’s view is different from the ‘best practice’ approach to SHRM, which suggests there is a set of universally effective HR practices that are associated with organizational performance. However, according to Purcell (1999), what is most notable about the best practice model is there is no discussion on company strategy at all: adopting a set of best practices would attract super human resources, talent and competencies and these human resources will influence the strategy. In this approach, policy precedes strategy. The value of this approach is questioned: mutually compatible ‘bundles’ of HR policies that promote high levels of employee motivation and commitment, the reason given for this best approach, are unclear and undefined. Strategic value and competitive advantage comes from either significantly reducing the costs of delivering HR services and/or reallocating professional resources to other and more value adding activities. ‘New HR’ states that HR can act strategically by questioning rather than accepting the case for certain practices and policies.

Not all HR activities and contributions are at or should be at the strategic level. However, not engaging at all at the strategic level has real consequences and damages HR’s standing in the organization. Hammonds (2005) is rather critical about the current position of HR and states that HR managers are ‘far less involved in strategy than it thinks it is’. Two points of HR’s role in strategy can be made now:

1. Strategic impact does not come from the range of HR activities which tend to dominate the contents of HR textbooks, but rather from HR focusing on shaping the behaviour of all the company’s employees through the development and internalization of a set of corporate values that influence the way employees think about their work and what being a part of the eaga business involves.
2. There is a clear link between strategic impact and organization culture; it seems that it is through HR’s ability to shape culture, through influencing how people think, perceive, and act, that the contribution that they make to the organization’s business, commercial, or service provision objectives are maximized.

Johnson and Scholes (2008) define strategy as the direction and scope of an organisation over the long term, which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations. However, Mintzberg (1987) states that the field of strategic management cannot afford to rely on a single definition of strategy. Recognition of multiple definitions can help practioners and researchers by manoeuvring through this field. He gives five different interpretations of strategy:

1. Strategy as a plan: strategy represents a way forward; a set of actions and a use of resources that direct the organization (or the HR function) to do certain things in intended ways, which are rational and consistent over time. Unfortunately, plans do not always work and guarantees nothing other than having a plan of action.
2. Strategy as pattern: if there is a pattern of behaviour (intended or not), there is more consistency in what organizations do (and their strategy).
3. Strategy about what: whether plan or pattern, strategies need to be about something. The content, focus and purpose of HR strategies will be heavily influenced by the organization’s unique history, position in its environment and internal competences. Strategy as content and focus is also about successful implementation. Being strategic can mean performing similar activities in different ways and this can involve developing more effective ways of implementing chosen policies. The most frequently found strategies in HR are about managing talent, managing performance, managing costs, managing rewards and managing trade unions.
4. Strategy as position: how does an organization differentiate itself in relation to competitors? For example, how does the organization market what it has to offer to potential and existing employees (employer branding)? The organization will have to take a deliberate positioning.
5. Strategy as perspective: strategy is in this perspective the same as what personality is to the individual. This way of understanding strategy is associated with a collective and shared set of understandings and ways of being that transcend changes in the external environment and generate a sense of deeply-rooted commitment to patters of behaviour.

Hamel and Prahalad have written an article in 1993 about conventional thinking on strategy, that emphasizes:

• Fit or the relationship between the organization and its environment; in the case of HR this is the fit between HR strategy and corporate strategy and the fit or integration between different HR strategies;
• The allocation of resources in ways that generate the best returns from investments made;
• A long-term rather than a short-term perspective.

Without rejecting the importance of these elements, they offer an alternative view of strategy in which ‘the concept of stretch supplements the idea of fit’ and that ‘leveraging resources is as important as allocating them’. They say there are two basic approaches to achieve greater resource productivity:

1. Downsizing and head count reduction: ‘becoming lean and mean’;
2. Resource leveraging that seeks to get the most out of the available resources: to get more from what you have.

According to them, a resource leveraging strategy is more energizing than downsizing, which will have a demoralizing effect on employees and the potential of reducing productivity. HR management can leverage its resources in 4 basic ways:

1. Concentrating Resources: convergence and focus: this is what defines the organization is about and known for. Without focused attention of a few key-operating goals at any one time, improvement efforts are likely to be so diluted that the company ends up as a perpetual laggard in every critical performance area. Convergence prevents the diversion of resources and focus prevents their dilution at any given time.
2. Accumulating Resources: extracting and borrowing: maximizing your organization’s resource base, operational effectiveness and generate competitive advantage through the way it learns from experience. Learning from experience is a key source of leverage, but is also paradoxically a source of threat because learning form and using experience involves the potential for challenging the status quo.
3. Complementing Resources: blending and balancing: how organizations are structured (hierarchy) and how this affects the way they function (creating internal divisions or barriers to people working together). Blending is about the integration of organizational units and resources. This has implications for flexibility level of HR.
4. Conserving Resources: recycling, co-opting and shielding: it is about the productivity of resources. It is also about the ability of an organization to move its resources to wherever they can make a more valuable contribution. These opportunities can be recycled, but this depends on the state of the organization’s internal culture processes. Best example of recycling and co-opting can be found in the idea of Communities of Practice.

Hamel and Prahalad’s concept of leveraging value and strategic contribution from stretching organizational resources can easily be related to developments in HR. However, the crucial question is whether HR professionals are aware of the potential such developments represent and whether they are able to realize this potential.

How effective are HR strategies?

You can ask the question if HR strategies are really different and if they are a source of competitive advantage. Boudreau and Ramstad (2007) argue that most HR strategies are similar in focus and content and it would be difficult to identify which strategy belongs to which organization. Effectively implemented strategies should confer competitive advantage and generate high impact outcomes, but also need to focus on aspects of behaviour, structure and culture that if changed in the required way would make a significant difference to key dimensions of organizational performance. Boudreau and Ramstad name these strategically important areas ‘pivot points’. HR strategy needs to reflect and focus on those key pivot points in the employment and management of people that have the potential to permanently change behaviour in ways that confer significant and sustainable improvements in performance. Strategy reflects how people frame the problem(s) they are faced with and their ability to visualize a future desired state that they want the organization to be in. What makes HR strategies different between organizations is their ability to identify the key things that need to be changed, rather than simply improved.

Farnham (2002) argues that organizations need to identify the HR strategies which ‘fit’ their enterprises in terms of product markets, labour markets, size, structures, strategies and other factors. He offers three kinds of ‘best-fit’ models:

1. One that links HR to an organization’s life or business cycle: fundamental objectives of managing people remain constant, but their relative importance changes to reflect life cycle or business cycle requirements.
2. One that links HR’s contribution to the different strategies and structural configurations of organizations: understanding how cultural and structural forms and preferences generate the context within which HR needs to operate in and make its contributions.
3. The third best-fit model links HR strategies to business strategies: this involves HR actively engaging with current and potentially different business strategies and working to support them (for example, strategies that stress creativity and innovation and HR selection criteria to find these people).

The concept of strategic integration or fit can take three different forms:

1. Horizontal integration: different activities and contributes associated with HR work need to be mutually supportive and designed in a holistic way, rather than exist as unconnected and isolated interventions. Strategic impact comes from the synergistic effects of the different activities.
2. Vertical integration: HR is outward looking and connected to the wider organization, sensitive to its values and beliefs, its corporate strategy and contextual challenges.

3. Functional integration: the way HR and production functions work in conjunction rather than in isolation.

The most influential contribution to the development of a strategic dimension to HR is the idea that the organization represents a flexible mix of different kinds of resources: a resource based view. People can do more and less depending on a wide range of factors and influences. According to Kamoche (1996), people need to be seen as the ‘source of resourcefulness’ and a central focus of HR is to grow as well as use the resource in ways that result in or contribute to competitive advantage. To be sure to gain a higher level than your competitors, Analoui (2007) states that to make a distinctive contribution to competency development, an organization’s resources must be unique and distinctive. Porter argues that strategic advantage comes from organizations doing things differently from their competitors or doing different things better. The challenge for HR professionals is to find ways to improve efficiency and productivity that drive competitive advantage and which are unique to their own organization.

How to recruit and select? - Chapter 4

What is recruitment ?

Hiring/employing: the overall process of taking on new staff from outside the organization.

Recruitment and selection must be effective, because the capabilities and commitment of employees ensure the success of an organization. Human capital is a valuable asset for organizations. Maintaining and strengthening the human capital base is one of the main strategic challenges of HR professionals and recruitment and selection is key to achieve this goal. However, the recruitment and selection procedure is not risk free.

Selection: the process, culminating in the decision to fill a vacancy from internal or external applicants, used by the organization to choose the most suitable candidate from a pool of applicants.

The recruitment and selection process is so important, because:

• Each employment decision can add to, or subtract from, the overall quality of the workforce;
• The ability of managers to continuously generate greater levels of added value from each employee is heavily influenced by what each new recruit brings into the organization and what each is capable of becoming;
• As a result of the increase in employment protection rights, it has become more difficult to correct mistakes in employment decisions once a person has been offered and has accepted a contract;
• Employees who fail to meet the performance and behavioural expectations of managers can have a detrimental impact on the performance of others;
• The process of correcting a hiring mistake can be difficult, prolonged and costly to all those involved;
• Employing new and better-qualified members of staff to replace those that are unwilling or unable to adapt to new requirements is often the only effective long-term strategy for improving the operational performance of functions and departments.

Approaching the recruitment and selection process as an economic rationality is not the only perspective you can adopt: you could also use a more strategic and demographic perspective. Next to this, the impact of economic downturn cannot be underestimated.

An HR professional will most likely encounter the next situations:

• Replacement recruitment: recruitment to replace any kind of employee;
• Recruiting for a new position/job: the processes and implications are different to those of recruiting a replacement, because it is a new/revised position;
• Recruiting for a new build: the whole organizational unit is new and this creates differences in scale, complexity and timescales;
• Recruitment needs that reflect long-term distortions in the supply and demand for labour: often sector-specific or geographical in nature, for example developing new/overseas labour markets. This may feature an ethical, demographical and political dimension;
• Recruitment that is used as an instrument of social engineering: desired or enforced change in the composition of the labour force and its political and social acceptability.

The core of what recruiting and selecting involves is the ability to differentiate between applications, in terms of their suitability and ‘fit’ with a person specification and the culture of the organization. Cook (1988) offers an insight into the economic and financial dimension of employment decisions: what means the value of good employees exactly? He states that ‘the best is twice as good as the worst’ and the best adds at least double the economic value to the organization of a poor recruit. This has two important implications:

1. Decisions about employing new staff can have either long-term financial costs or benefits for the organization. The value of the contribution of the person hired, compared with the one who was rejected, can be either positive or negative. This is known as opportunity cost: cost associated with not choosing to pursue one course of action in favour of another. This is a difficult calculation, but nevertheless important in considering when deciding which course of action to take.
2. It becomes even more important to understand both the ‘real’ costs of recruitment and selections, and the longer-term financial consequences that follow from the selection decisions.

According to Cook, failing to discriminate between the ‘productive potential’ of different potential employees can be detrimental, should the ‘productive capacity’ of employees differ greatly. Productive capacity: what employees can currently do and their current value to the organization.

Productive potential: employees’ future value and contribution based on future learning and development. He believes that the direct costs of recruitment and selection, the time of those involved and the value of production lost while positions remain unfilled must all be included in an overall cost-benefit calculation. However, according to Lazear (1998), the best and most productive employees are also likely to be the most expensive in terms of their recruitment and employment costs. Therefore, an HR professional could question if it is better to employ just the best (but expensive) people or employ the cheapest people, irrespective of the quality.

What is Cost Per Hire?

Fitz-Enz (2002) argues that ‘the hiring decision is often made too lightly; hiring is expensive and one cannot ignore the importance of the selection process’. He offers the following formula for the calculation of ‘cost per hire’ (CPH):

Cost per hire (CPH) = (AC + AF + RB + TC + RE + RC + NC + 10%) / H

• AC = advertising costs; RE = relocation costs;
• AF = agency fees; RC = recruiter costs;
• RB = referral bonus; NC = the costs of processing unsolicited CVs;
• TC = travel costs; H = the number of hires.

An alternative costing model, more appropriate to the UK:

Cost per hire (CPH) = DA + GO + RE + C of S + RC + EAF + TC + CLP + 10% / Numbers involved

• DA = direct administration costs: time plus rate of pay; EAF = external agency fees;
• GO = a proportion of general overheads; TC = training costs;
• RE = recruitment expenses; CLP = costs of lost production.
• C of S = costs of selection: time of staff involved, selection materials;
• RC = relocation costs;

Labour markets can be virtual or physical, and they are important because they represent the source of an organization’s supply of labour. The markets can be local, regional, national or international in size. External recruitment: the process of identifying and attracting potential employees to an organization to fill current or future vacancies. Internal recruitment: the process of identifying current employees who may be suitable for newly created vacancies or for replacing staff who leave. These can be attractive in terms of cost and time, but stagnation is a big danger: the detrimental effect on creativity, change and originality that is associated with relying largely/entirely on the existing workforce to fill job vacancies.

Recruitment and selection processes must be fair: processes need to be as objective as possible and only information relevant to the situation should be required. Decisions should be based solely on the merits of applicants and their suitability for the position in question and no form of discrimination.

Recruitment requirements are often described in two important documents: a job description gives details of the purpose or the job, and of the tasks and responsibilities or areas of accountability that are assigned to the jobholder, whereas the person specification details the skills, knowledge and attitudes that should ideally be possessed by the jobholder. A job description can be useful when jobs are relatively routine, if the work people do and the contributions they make are clearly defined and uncomplicated and if organizational change is not a major factor. Otherwise, the usefulness can be doubted.

Criteria used in person specifications should actually reflect the requirements for the job. Once a person specification has been agreed upon, this becomes the basis of the assessment process. Assessment: the tools and techniques used by an organization to identify and measure, either qualitatively or quantitatively, the skills, knowledge and potential of applicants.

When recruiting and selecting, often an approach is used to select the ‘best fit’ or the ‘right fit’ for the person to the job. Best practice: this term implies that in carrying out HR activities there is ‘one best way’ of doing things, irrespective of the context or circumstances.

Best fit: what should be done and how it should be done based on the unique circumstances that characterize every organization. It links action to specific requirements rather than following an established approach. However, it could be that the person doesn’t fit into the organization. Therefore, an alternative approach is to look at fitting the ‘job’ to the person to maximize the potential performance: the person-organization fit. Another method that could be used is using competency profiles/frameworks: statements of what people need to be able to do in order to perform their job to the required standard. They can give a more observable and tangible basis for selection decisions than knowledge or experience alone.

It is hard to recruit and attract high-potential and top-performing candidates, because they are less likely to be unemployed, well recognized, valued and nurtured by their current employees, not looking for another job, get more offers when looking for another job, given a counteroffer to stay with their current employer or hard to convince that it is worth their while to move to a new job in an unknown organization.

There are many channels that can be used to make potential candidates aware of current and future vacancies, and these vary in degrees of formality and expense.

Employer of preferred choice is a status that certain employers seek to attain in relation to prospective applicants. It means that, through its successful marketing of the organization, the development of challenging and supportive working environments, and the opportunity to enjoy good reward packages, applicants are attracted to the prospect of being employed by the organization. As a consequence, there is a natural flow of high-calibre people towards these organizations, which has the effect of reducing the time and costs of recruitment.

Employer branding is how an organization promotes what it has to offer to current and potential employees. It is a set of attributes and qualities - often intangible - that makes an organization distinctive, promises a particular kind of employment experience, and appeals to those people who will thrive and perform to their best in its culture (CIPD, 2007). The most widely used method for attracting applicants is recruitment advertisement; the biggest change in recent years has been the move to online recruitment.

How to handle selection?

A curriculum vitae (CV) or résumé is a document prepared by the candidate as part of his or her application, giving personal details, education and employment history, and other relevant information. It might be argued that an application form ensures that only objective and relevant information is gathered, and that it is fairer to consider similar information from all candidates. Social networking sites like LinkedIn, Facebook and Twitter are used more and more to gather information of potential employees and are an opportunity to employers to attract potential applicants. Before applications begin to arrive, the organization should consider how these are going to be handled: how to shortlist applications, and how is the process of final assessment and selection stages? Organizations may have other obligations for checks, such as criminal record checks, checking eligibility to work in the UK, checking references and health screening.

After shortlisting the applicants, techniques and tools are designed to discriminate between them using legal, relevant and predictive criteria. The requirement to assess and distinguish is both challenging and difficult, and the people involved need to apply a range of skills to the task. O’Leary et al. (2002) notifies that a more holistic approach – looking to the ‘whole person’ and the full range of competencies that each person offers – is used.

He says that the most important property of the assessment instruments used to measure or assess applicants against set criteria is their ability to predict future job performance, or job-related learning. They must have a high predictive validity. Findings suggest that those instruments with a high predictive validity relative to others should be used, but this is an assumption that ignores the influence of contextual factors.

The most widely used method of selecting candidates is interviewing. They serve a number of purposes from an employer’s point of view: it provides an opportunity to learn more about a candidate, it assesses the knowledge skills and experience described in an application in more detail, they provide a chance to provide insight into the role and the organization and to sell the benefits of the organization to candidates. From a candidates’ point of view, applicants will use the interview as an opportunity to discover more about the role and the organization and make a decision about whether to accept the role if an offer is made. Both legislation and culture in different countries will influence the selection process.

Applicant reactions to selection procedures are related to whether the procedures are perceived by the applicants as fair and just (Chambers, 2002). If applicants (either internal or external) perceive their experiences as unfair, unprofessional or uncaring, they will not continue with an application. Distributive justice: perceived fairness of the outcome itself; procedural justice: perceived fairness of the procedures used to reach the outcome and interactional justice: interpersonal treatment of applicants as procedures are enacted and the manner in which information is conveyed and managed. Managers and HR professionals need to recognize that applicants are human beings, who will become emotionally engaged in, and affected by, the way they are treated and what they are required to do.

How to manage employee relations? - Chapter 5

The relationship between an employer and its employees is one of the key factors that determine if an organization is effective. If a workforce is motivated and committed, the expectation is that this workforce will understand that its long-term interests are better served by working with management, rather than by challenging them in the pursuit of its own short-term interests. ‘Employment relations’ has its origins in the 1960s. The contract between an employer and employee provides a set of rights, responsibilities and obligations that structure the behaviour of both parties, and represents the basis of what constitutes the normative system of regulation and control within the workplace. Trade unions have played an important role in establishing these contracts.

What are rules?

Dunlop (1958) developed a theory of industrial relations that saw industrial relations as a subsystem of society, on a par with the economic and political subsystems, which overlapped and influenced each other. He provides conceptual and explanatory tools that can be used by interpreting the way in which the ‘system’ functions:

• Actors: representatives of management, employees and their representatives and specialist government agencies that have an industrial relations functions;
• The context or environment within which the actors operate and which determines the material conditions of work and employment;
• The ideology or belief systems that each ‘actor’ possesses and is influenced by, and which help to determine the way in which particular groups relate to other ‘actors’ within the system;
• The system outputs, in terms of rules, that give the system a degree of stability and maintain order, although these should be seen as provisional and conditional rather than as permanent.

There is a degree of indeterminacy in all employment contracts, so the actors must establish rules to ensure that there is the necessary level of normative order, and therefore stability, within the national or local system.

Rules in employment relations fall into two main categories: procedural rules and substantive rules. Procedural rules are those that establish how the actors in the system will respond and behave in given situations.

Next to this, rules are agreed that determine how other kinds of rules will be determined. These rule-making processes are at the heart of any employment relations system and can be expressed in terms of:

• Unilateral regulation: managers, unions or employees alone create rules that regulate a particular part of the employment relationship.
• Joint regulation or collective bargaining: the process of negotiation between trade union representatives and employers, or employer representatives, to establish by agreement the terms and conditions of employment of a group of employees.
• Legal and judicial processes: procedural rules that originate outside of the employing organization or national institutes of the employment relations system.

Substantive rules are rules that are generated by rule-making processes, such as joint determination and unilateral decision-making. In a constantly changing environment, new conditions and situations arise that need to be regulated and, through the processes for creating new rules or amending old ones, the body of substantive rules is constantly being amended.

Managerial authority is central to understanding the sources of tension within employment relations and the ongoing struggle between managers and trade unions. ‘Prerogative’ means the right to make decisions and to establish rules that are essential in allowing the production system to operate efficiently and effectively. Managers try to guard their prerogative, while trade unions try to increase their power by eroding it.

How do rules in work environments originate and develop?

The idea that people at work operate within two organizational environments has long been recognized (Handy, 1993). The environment represented by the formal organization consists of the formally approved, by management, procedural and substantive rules. These rules are legitimized, through being known and approved by management, and regulate how people are supposed to behave at work. The informal organization represents an informal world with the place of work and the day-to-day interaction between managers and employees. Within employee groups, its own social and work-related norms (rules) can be established. Such rules may lack the legitimacy of formally derived rules, but can nevertheless exert a powerful influence on the behaviour of the managers and employees affected by them.

The essential elements of an industrial relations system and how, as these change over time, the system produces new institutions, different patterns of rule making and new ways of preventing and resolving conflict. This is a dynamic system and is often influenced by forces that are outside the control of the main participants and interests groups. The figure also represents a model that can be applied both to national ‘systems’ and to those that exist within each organization.

Which three perspectieves on employment relations are frequently used?

There are three perspectives on employment relations that are most frequently referred to:

1. Unitary perspective: organizations and societies work together towards a common objective, with accepted hierarchical control and with all members having common values;
2. Pluralism: there are many different groups with different roles and ideologies, which lead to differences in priorities and therefore conflict between groups which must be managed;
3. Radical/Marxist perspective: class wealth and power creates a hierarchy in which workers at the bottom of the hierarchy are dependent upon those at the top for employment and exploitation results in wealth being disproportionate to efforts. The trade unions therefore represent both political and employment interest and conflicts occurs in the pursuit of both economic and political change.

What is the role of Trade Unions?

A trade union is an organization that is independent of an employer and funded by member contributions, the function of which is to represent worker interests in relations between workers and employers. Trade unions, in the absence of legal prohibition, thrive in situations in which:

• Employees have limited, or no, protection from state or other judicial authorities;
• Management show little concern for the interests or well being of their employees;
• Individual workers are relatively powerless to challenge management and are unable to restrict their power;
• Workers’ experience of employment leaves them with a strong sense of grievance towards management, based on a feeling that they are being exploited and treated unfairly.

Member commitment to a trade union can be strong/weak, depending on the need of them.

Dunlop (2002) argues that trade unions are fundamentally concerned with:

• Industrial jurisprudence: unions are involved in grievance and arbitration procedures, rules governing promotion, transfers, discipline and dismissals etc. The ‘human rights aspect of the workplace’ is discussed in this jurisprudence.
• The economic regulation of employment: what and how people are paid, the benefits they enjoy, their hours of work and the terms of the wage-work bargain. This aspect of trade union activity is more a reflection of the resource status of employees, the economic value they generate through using their physical and intellectual capital and what they can expect in return from managers as rewards for their wealth-creating contributions.

Trade unions have had to adjust to a rapid change in the employee relations over the last 30 years. Historically, unions were formed to provide a collective voice to asset and defend employee rights; today trade unions have been forced to find an alternative role because successive governments have introduced legislation to regulate employees’ treatment, terms and conditions of employment, benefits and individual rights. A collective agreement is a written statement, defining the arrangements agreed between a union and employer, and the terms that will apply. Such agreements are only legally enforceable if this is expressly stated or if the collective agreement is referred to in individual written terms and conditions of employment.

Reasons why employees join trade unions:

An employer can recognize unions at a number of levels. There can be a recognition agreement with a particular union. Employers can also recognize a union as the party with which they will consult about information and issues affecting the organization. Some employers also recognize one or more unions for the purposes of presenting the interests of members in collective bargaining arrangements. Bargaining is different from consulting, and trade unions will always try to bargain instead of only consulting. ‘Bargaining’ implies that any important decision has yet to be made and is subject to trade union influence/pressure/ sanctions. ‘Consultation’ implies that management retains the final right to make the decision, but wishes to keep representatives informed of its intentions and is prepared to listen to what they have to say.

When a union is recognized for bargaining purposes, it has certain rights. The information that should be disclosed is stated in the Trade Union Relations (Consolidation) Act 1992. Negotiating committees may consist of a number of union representatives and two or more unions may form a joint negotiating committee. Negotiation may take place at different levels. Employers can be members of employers’ associations and may draw upon the advice and expertise of experienced management negotiators. There can also be a second tier of negotiation. Collective bargaining has four dimensions over which each party has an interest in influencing:

1. Scope: the range of issues that are subject to joint regulation;
2. Form: whether the bargaining is formal or informal;
3. Level: whether the bargaining is at company or national level;
4. Unit: the bargaining unit, which identifies the group of employees covered by the resulting collective agreement. The unit can change, depending on what is being negotiated.

Industrial action can have a damaging effect on an employer and its customers. It’s the ultimate expression of force that a group of workers can inflict upon managers and can lead to a loss of earnings, conflict between employers reflecting differences in the level of support for industrial action and the possibility that prolonged action will result in job losses. In organizing industrial action, a union is encouraging its members to break their contractual obligation to attend work and cause the organization to break its contractual obligation to customers, clients and suppliers. Such actions are unlawful if unions were not granted some immunities.

In order to secure immunity from being sued for damages (known as tort), there are a number of conditions that the union must meet:

• The action must be taken ‘in contemplation or furtherance of a trade dispute’;
• The union must conduct a secret postal ballot under strict conditions, involving every member who may be involved in the action;
• There are specific requirements about notifying the employer of the ballot, providing the employer with copies of the ballot paper and with the numbers and categories of employee to be balloted;
• The ballot paper should state if the union is calling for either strike action or action short of a strike;
• Specific conditions must be met with regard to calling action and notifying the employer of action to be taken.

Types of industrial action:

• Strike action: temporary withdrawal of labour. Strikes are often accompanied by a number of employees ‘picketing’: standing at the entrance to ‘encourage’ other employees, customers and suppliers not to enter the premises or to cross the picket line.
• Action short of a strike: still consist a breach of contract, like a ‘go-slow’, under which employees refuse to carry out a specific task, and ‘blacking’, under which trade union members refuse to work with another employee. Other types that do no necessarily consist of a breach of contract include a ‘work to rule’, under which employees do the bare minimum to meet their contractual obligations or an ‘overtime ban’, under which employees withdraw from voluntary overtime.
• Unofficial industrial action: if action is taken by members or a union representative and does not follow the strict conditions for balloting for industrial action, then the union must repudiate or disown it within 24 hours to maintain its immunity. Writing to all of these participants deems the action to be unofficial and warns them that there is no protection from unfair dismissal, if all of the participants in the action are dismissed.

Strategies for improving poor industrial relations:

• Be clear on the rules and the distinction between normal working duties and union duties;
• Train, coach and support the union representatives and line managers;
• Communicate directly with employees, as well as with union representatives, to prevent messages being distorted;
• Listen to employee concerns and rectify these wherever possible before the union representatives get involved;
• Apply the same consistent rules to union representatives as to all employees;
• Invite union representatives and managers to participate in joint training;
• Enlist help and support, and encourage senior dialogue with full-time union staff;
• Offer additional observer and participant places at consultation and negotiation meetings to other managers and representatives of non-union members to remove the mystery of such meetings;
• Take responsibility for the negotiations: managerial representatives should be given the authority to act, not be only a messenger;
• Brief managers and staff promptly, and publish minutes and notes following all collective meetings;
• Be consistent and clear;
• Ensure that all first-line managers are well trained to make appropriate decisions to avoid the need for an overruling decision to be made;
• Establish clear scope and objectives, along with joint commitment to outcomes of meetings, before commencing consultation or negotiation.

What is legally arranged with regards to effective employee relations?

Maintaining effective employee relations in a non-unionized environment is just as important as in a unionized environment. The Information and Consultation of Employees Regulations 2004 introduced a requirement for businesses to inform and consult with their employees. The Regulations give employees the right to be:

• Informed about the business’ economic situation;
• Informed and consulted about employment prospects;
• Informed and consulted about decisions likely to lead to substantial changes in work organization or contractual relations, including redundancies and transfers.

Psychological contract: the obligations that an employer and employee, or group of employees, perceive to exist between each other as part of the employment relationship, comprising both expectations of each other and promises made to each other. The psychological contract is more important as a determinant of behaviour than is the formal contract, because of the way it connects to employees’ everyday experiences of work and of being managed. The psychological contract affects what an employee is willing to do, based upon the belief that over the long term the individual and group will be treated fairly by their manager(s) and be rewarded for their performance and contribution, but not necessarily on a day-to-day basis. Ensuring that high expectations are clearly understood and accepted by all employees, and are rewarded with promises about involvement, development and recognition is the key to utilizing the psychological contract effectively to the organization’s advantage. What does cause problems in organizational change is management’s failure to engage in meaningful communication and consultation, and to listen to what employees are saying.

What is the importance of diversity and equality in employment? - Chapter 7

The focus on fairness in employment and the need to avoid certain types of discriminatory practice is growing, because employers are now required to cope with an increasingly complex and demanding craft of legislation. Fair and fairness are characteristics or outcomes of the way in which people are treated, but can also be used to describe characteristics of a person’s behaviour or of a procedure. Fairness is a decision-making process that is based solely on merit if applied to employees. However, it does not necessarily mean equal treatment.

There are several types of unlawful discrimination. Equal opportunity: the process of ensuring that employment practices in an organization are fair and unbiased, and do not breach any of the legislative provisions that are in place to protect workers from unlawful discrimination. This became rapidly widely accepted. Afterwards, an evolution from ‘equal opportunities’ to ‘diversity’ took place. Diversity is a multifaceted approach to the management of employees, reflecting the changing social and demographic characteristics of the workforce. The approach reflects the belief that maximizing the potential and contribution of all organizational stakeholders is inextricably linked to recognizing and valuing difference, and to treating people with respect.

What are the merits of diversity in HRM?

There are both legal and moral arguments in favour of diversity as an approach, and there are three broad factors, which form the business case for diversity:

1. People issues: by adopting a best practice approach to diversity, employees will be more highly motivated and committed and it will be easier to retain staff, thus reducing the need for recruitment.
2. Market competitiveness benefits: a more diverse workforce can help an organization to be more accessible to a wider potential pool of customers and can help improve service levels to a wider range of users through increased awareness.
3. Corporate reputation benefits: being more representative of the communities and customers that the organization serves may enhance corporate branding.

According to the CBI (2008), “a firm’s success and competitiveness depends on its ability to embrace diversity and draw on the skills, understanding and experience of all its people. The potential rewards of diversity are significant: an organization that recruits its staff from the widest possible pool will unleash talent and develop better understanding of its customers. It will also enable it to spot market opportunities”. Diversity approaches are seen increasingly as important for potential employers and other stakeholders. To summarize, an equal opportunities approach is essentially about compliance and making sure that minimum standards and good practice are in place. A diversity approach places a greater emphasis on the economic benefits of an all-encompassing approach that looks not only to minimize the risks to the organization of claims of unlawful discrimination, but seeks to maximize the economic benefits of having a diverse workforce from many different backgrounds in order to provide a better service either to the customers or to the community that the organization serves. Diversity is the more strategic of the two concepts.

1. Stereotype: a fixed idea or popular misconception about an individual or group of people, and a conventional, formulaic and oversimplified opinion or image that one person has of another, which has the effect of conditioning that person’s perceptions of, and attitudes towards, the other. You don’t recognize differences between people anymore.
2. Prejudice: a preconceived view of some, despite knowing little or nothing about that person. Someone reacting to superficial characteristics, such as gender, race or colour, triggers prejudices. They are formed through conscious and unconscious socialization processes, as well as through general experiences that predispose the person towards a positive or negative view of another.

What are the possible drawbacks of diversity?

The process of appraising employees is an area of HR in which the potential for error, bias and prejudice is high. Coens and Jenkins (2002) talk about the tendency to categorize: the process of psychologically locating a person into a particular group that is associated with either positive or negative value judgements. This is then associated with the instinctive allocation of behavioural patterns that reflect these value judgements to individuals and groups. The point is not that basic human traits and tendencies can, or should, be suspended when we enter the workplace, but rather that we all need to be aware of them and to make a conscious effort not to allow prejudice and bias to affect rational and objective decision-making (Rick et al., 2000).

Context, resources and awareness are important differentiators indicating which model organizations are likely to identify with or be capable of adopting. The three approaches are:

1. Partial or non-compliance: more apparent in smaller, more stable firms which perhaps do not feel that they have sufficient time and resources to be able to adopt all of the measures that would be regarded as ‘best practice’. Can also be in organizations in which the pressures for survival and financial stability are such that matters of equal opportunities and diversity have less impact and importance than they might in larger organizations. Familial connections may have an important influence in companies adopting this approach as well. Unfair and unlawful discriminatory treatment might be difficult to prove if the reason for a candidate failing to get a job or to be promoted is presented as a more acceptable justification, such as lack of experience and potential.
2. Compliant/reactive: a full set of equal opportunities and diversity policies are likely to have been developed, with a particular emphasis on assessment, recruitment and training. Issues are generally dealt with promptly and effectively using established procedures, but there is likely still to be some cultural resistance to embracing fully the idea of a balanced and diverse workforce. The reactive approach also reflects a degree of uncertainty about how far a commitment to equal opportunities and diversity should extend. Most of the time it will not be in the interests of the organization to go beyond the minimum requirement. The HR department may have all the correct policies in place but, behind the scenes, there may continue to be unchallenged biases in recruitment, training and promotional decision-making.
3. Proactive: reflects a broad array of policies and procedures that go beyond the minimum required to be compliant with legislation and recommended good practice. It is the extent to which diversity is embraced at all levels of the organization and particularly by those in senior positions that distinguishes a proactive organization from one that is reactive. Diversity goes beyond treating everyone in the same way, recognizing instead that different groups of people have different needs and expectations of work and employment. There is a culture of tolerance that embraces the value of difference.

The first elements in the legal framework for equal opportunities legislation were introduced in the 1970s. There are several types of discrimination.

Direct discrimination occurs if an individual treats a person, or group of people, less favourably than he/she treats another person or group.

It is also unlawful to discriminate by ‘association’: a person’s association with another person with a protected characteristic or by ‘perception’, where a person is perceived to have a protected characteristic even where this is not the case.

Indirect discrimination occurs if a requirement or condition, while applied equally, cannot be justified and results in less favourable treatment of a person from one group compared to others not of that group. Discrimination can be justified if there is a genuine occupational qualification, for example an actor that has to play a black person in a film: it is legitimized to only hire a black person.

What is disability discrimination?

A disability is a physical or mental impairment that has a substantial and long-term adverse affect on a person’s ability to carry out normal day-to-day activities. Table 7.3 (p. 186) shows the questions that are now asked by a tribunal in making a decision about whether or not a claimant is disabled.

If a person is disabled, an employer is expected to consider making reasonable adjustments to accommodate the person’s particular needs. Many organizations employ specialist medical and advisory services to help to assess the extent of a person’s disability and what adjustments are reasonable. The types of adjustment that an employer should consider in accommodating a disabled person include:

• Improving access to the premises or changing its physical features;
• Reallocating duties;
• Altering hours of work;
• Assigning a different place of work;
• Acquiring or modifying equipment;
• Providing auxiliary aids;
• Modifying instructions manuals or procedures;
• Providing a reader or interpreter.

Like disability discrimination, age discrimination legislation varies slightly from other discrimination legislation. Firstly, age is a continuum and the boundaries that distinguish one group from another can only be arbitrarily set. To prevent service benefits from automatically being classed as age discriminatory, there are special provisions.

Any benefit earned by having service of up to five years is exempt, but the legislation cannot be used to challenge this. Employers also have to demonstrate an objective justification should enforced retirement be in place for any group of employees at any age.

Sex-based discrimination

Legislation about equal pay is an extension of sex discrimination legislation relating to the pay and benefits awarded to men and women in employment. These payment and benefits must be the same for men and women in the same position. If an employee elects to take a complaint of discrimination to a tribunal, the employer has to provide a written objective defence against the claim, which means that the burden of proof is upon the employer: he must demonstrate that discrimination did not take place. It is therefore important to make sure that decision-making, in all aspects of employment, is fully recorded.

How to ensure the equality of opportunities within organizations?

There is no single correct solution to ensuring equality of opportunity within an organization. Adopting a contingency perspective, the approach taken will need to be tailored to suit the needs of the particular organization, having regard for its size, resources and ability to implement whatever policy positions are agreed. HR always needs to be aware of the showing how it adds value and contributes to organizational objectives. The actions and decisions of managers and employees are key to ensuring the development of a fair, diverse and merit-based culture within which all employees can thrive and contribute to their potential. There are many activities that organizations can engage in to promote equality of opportunity.

Work-life balance is about recognizing the importance to employees of non-work, as well as work, commitments. It provides employees with a degree of choice in terms of how they allocate their time and energy between work- and non-work commitments.

The impact of having a poor work-life balance can be far reaching. Long hours and the stress of balancing work and home life can impact upon both work performance and relationships at home.

There is a great deal of legislation that has been introduced in support of work-life balance. Many employers will have policies that clarify how the rights of employees are implemented in their organization. Despite the attractiveness of such policies, it is important to recognize that there is a cost associated with them.

Harassment is any unwelcome attention or behaviour from another that a person finds offensive or unacceptable and which results in the person feeling offended, uncomfortable or threatened, and leads to a loss of dignity or self-worth. Table 7.4 (p. 194) comprises a list of behaviours that might constitute harassment. It can be the case that a person accused of harassment is unaware of the impact of their behaviour upon another person. There is an increasing risk from harassment via electronic media. The effects of harassment can be far-reaching. It can affect the attendance and motivation of employees and, in extreme cases, result in mental health problems, such as depression and anxiety. The costs to an organization can be very high.

Bullying is the abuse of power, or of physical or mental strength, by someone in a position of authority towards a person (or group of people), resulting in harmful stress and undermined self-confidence.

How to develop an international HRM strategy? - Chapter 8

International HRM (IHRM) is a field of growing importance in the human resources arena. To be a truly global organization, it is not sufficient simply to operate in a number of countries. The global organization has the capability of operating and managing at a level at which service to its customers is not restricted by local geographies. The human resource is an integral component of the competitive organizational capability that global companies need to maintain their international presence (Hira and Hira, 2005).

How to develop and international HRM strategy?

Globalization and international business have impacted on the use of HR and the role of the HR professional. As far as IHRM is concerned, academics have tended to adopt one of two approaches:

1. It is seen as essentially HRM ‘writ large’, and associated with a domestic and national agenda transferred and relocated into an international arena. A definition that fits this approach is given by Scullion (1995): IHRM is the HRM strategies, policies and practices which firms pursue in response to the internationalization of business.
2. It is viewed in a more strategic sense, and highlights the importance of leveraging maximum contributions from an organization’s global human resources in the pursuit of competitive advantage.

The internationalization of business has had the effect of adding new responsibilities to the HR practitioner, and created new levels of complexity and challenge. Harris et al. (2001) suggest that a domestically based company developing an international dimension will need to think carefully about:

• The kind of HR strategy that will facilitate the transition and operation as an international organization;
• The implications of such a transition for the kind of managers the organization requires and the competences they will need to be effective in a different context;
• Whether it will be appropriate to develop a standardized set of employment policies and practices, or to allow flexibility and variability to reflect local and regional differences;
• Strategies for resourcing, rewarding and managing the performance of employees;
• Employee recognition and representational issues.

What are the challenges of an international HR management?

If companies become ‘international’, there are important differences to do with managing change, creating consistency and uniformity of practice and challenging entrenched perceptions about gender, culture and contribution.

According to Edwards and Rees (2006), the most important aspects of globalization are:

• Global production: transnational corporations produce, distribute and sell goods and services around the world;
• Global organizations: the ability to resource and manage global production systems impacts directly on HR and management, both of which have to come to terms with social and cultural differences.

A global organization is an organization that employs a workforce in different countries throughout the world, with a view to maximizing performance by sourcing or providing goods and/or services in a globally based market, and in which decisions are driven by markets rather than by geography. Multinational companies (MNCs) are companies that have a national base, but which operate and trade multinationally.

Globalization is also associated with the rapid development of a global economy. This means that national economic and social identities and differences are becoming less distinctive, and arguably more irrelevant, as market forces and free trade move national economies and economic organizations towards a more convergent and universalistic state. The four different challenges and responsibilities facing the international HR manager at the strategic level are:

1. International transactions and administration: e.g., pay and conditions, legal issues, recruitment and selection, induction, database maintenance and managing expatriation and repatriation;
2. Building capability and resource development: e.g., fast-tracking and developing managers, career and succession planning, developing knowledge management systems and IT-driven learning;
3. Business-driven activities: e.g., reorganization, efficiency drivers, supporting overseas start-ups (new factories) and outsourcing (overseas call centres);
4. Developing and implementing strategy: e.g., strategic HR planning, performance and reward management, managing closures, acquisitions and mergers and culture building.

How to include culture in international HR management?

Culture exists within professions, religions, organizations and geographical regions. Culture is the shared beliefs, values and understandings that define and distinguish one group from another: the ‘collective programming of mind’ (Hofstede and Hofstede, 2004). A national culture is a complex system of norms, social values and behaviours, expectations and legal frameworks that gives an identity to a particular country. Cultural sensitivity and the ability to manage in situations of cultural differences and conflicts, becomes an important requirement for the manager with international HR responsibilities.

National cultures are important because they help people to understand:

• What they are and how they fit into society;
• How they relate to each other;
• What social conventions are important and why;
• How they perceive work and what it means in the broader context of their lives;
• The importance of time and the significance of space in relation to personal and professional relationships.

Successfully working across cultural boundaries is often associated with the person moving into, and feeling comfortable within a different cultural environment. This involves being prepared to learn new social and business conventions, and to adjust psychologically to different values and cultural norms. Hofstede (2004) describes the key cultural differences by the following five variables:

1. Power distance: the degree to which members of a society or organization accept and expect that power is distributed unequally. Also the degree of inequality that exists within social institutions.
2. Individualism: the degree to which people identify themselves as individuals or as members of a social group (or ‘collectivity’).
3. Masculinity/femininity: the distribution of roles and relationships between genders. Men are characterized as more assertive and competitive, while women are regarded as caring and modest.
4. Uncertainty avoidance: the extent to which a society exhibits a tolerance for uncertainty and ambiguity. Uncertainty-avoiding cultures try to minimize the possibility of the ‘unknown’ by developing strict laws and rules, and by adhering to philosophical and religious teaching that produce a greater number of social ‘absolutes’.
5. Long-term versus short-term orientation: the ‘time horizon’ of a society or organization, or the importance that it attaches to the future as compared to the past and present.

Ethnocentric: the practice, often unconscious, of judging other cultures from the perspective of one’s own. It’s also the tendency to see one’s own culture as inherently superior to that of other countries. Polycentric on the other hand describes a position and perspective that recognizes the existence of many different national cultures, which are in principle equally valid and justifiable be reference to national identities and difference. No one culture is seen as inherently better than another.

Culture shock is the anxiety and feelings of surprise, disorientation and confusion felt when people have to operate within a different culture or social environment. It is also linked to the shock of discomfort of being separated from family, friends and the other things that matter in a person’s life. The experience of moving to a different cultural environment can be expressed in four stages. Not everyone passes through all of the phases:

1. The ‘honeymoon’ phase: everything new seems to be different and better and those affected may experience a temporary sense of pleasure.
2. The ‘distress’ phase: new things are seen in a different light and begin to be compared unfavourably with those at home. Small irritations become exaggerated, and feelings of loss and loneliness can develop.
3. The ‘autonomy and independence’ phase: after a period of time, people become more confident in and familiar with their ‘new’ environment. They have, either consciously or subconsciously, engaged in a social learning process, which changes their perceptions of their new environment from being different to being normal. This phase implies a degree of social integration.
4. The ‘reverse culture shock’ phase: most well-known example is that of soldiers coming home after time spent in a war zone: coming to terms with the very different conditions and relationships in a peacetime environment can produce very serious and lasting psychological effects.

Asia represents one of the most fast-moving and creative business environments in the world today, and it has some of the worlds most dynamic and creative HR leaders (Connor, 2010).

It is implementing a ‘new’ model of HR, with four elements that indicate the degree to which practice in emerging and growth orientated countries not only reflects economic conditions and imperatives, but also national and regional cultures:

1. Insightful thinking: according to Porter, strategic HR needs to explore opportunities to be different and being different requires the ability to question, challenge and have insight. One of the examples of being insightful relates to a rejection of the distinction between corporate strategy and HR strategy.
2. Community: building a particular type of social organization or organizational culture is seen as one of the key priorities for the new Asian model of HR, and one of the key influences on this is the importance of the family and family type relationships with business organizations.
3. Purpose: the sense of identification and pride that many aspiring professionals seems to have and to want. National pride and a self-belief in the ‘rightness’ of what organizations do and the contributions they make are key drivers that help to explain the zeal and commitment of employees to their organizations and what they stand for. HR has an important role in facilitating the fusion of different levels of engagement and involvement.
4. Performance: HR leaders are increasingly trying to create a stronger commitment to achieving high performance and managing this effectively without undermining the strength and importance of traditional values.

How develop a succesful international recruitment strategy?

Integral to the successful management of recruitment, selection and development of international managers is the ability to identify the key skills and competences that those working overseas need to possess. An expatriate worker is an employee deployed overseas, usually sourced from his or her country of origin. According to Sparrow (2006), the majority of expatriate skills are learnt through experience – they learn how to manage across cultures in most instances without education in cross-cultural skills. This suggests that the key HR decision is taken at the assessment and selection stage. The following characteristics are associated with being a successful expatriate manager:

• Professional and technical competence, and experience on the job: general maturity, knowledge of the company and experience from performing the job in the ‘home’ organization.
• Personality traits and relational abilities: important communication skills, both language ability and personal maturity, tolerance, respect for the host country and adaptability.
• Perceptual dimensions and life strategies: the ability to learn form experiences and the avoidance of being judgemental and evaluative in relation to different social values and social conventions: avoiding an ethnocentric stance.
• Self-maintenance factors: relate to the ability to function independently, to cope with stress and pressure and to exhibit confidence in carrying out specific tasks.
• Leadership and motivational factors: the development of relationships, the use of initiative and the ability to take appropriate action, and a general interest in working overseas.

Based on his work, Sparrow offers a competency framework, which rests on the three fundamental attributes that those working overseas need to have: emotional stability, confidence and relationship building and openness to different experiences.

How to develop an efficient HR planning? - Chapter 9

What is the definition of HR Planning?

Human Resource Planning, originally known as ‘manpower planning’, is concerned with planning and controlling the quantity and quality of labour available to an organization. It connects to the implementation and effectiveness of an organization’s recruitment strategies, its labour reduction strategies, the continual search for improvements in productivity and the consequences that follow from this in relation to changes in the demand for labour. The challenge of HRP is to reconcile changes in the supply and demand for labour and to produce a labour force that can be flexed in terms of numbers and quality in response to changes in demand.

Planning: can be understood as a set of techniques, an approach and a mindset, all of which relate to achieving specified objectives. It should be understood as a process, rather than a time-constrained event. A plan is only as good and as useful as the assumptions about the future internal and external environment on which it is based are accurate. HR plans must be flexible: they must be adapted constantly to reflect changes in the environment if they are to retain their potential utility.

HRP, if based on poor data, limited forecasting models and an inability to see the wider HR and business picture, can result in inaccurate and misleading estimates of supply and demand numbers, resulting in either a costly surplus of shortage of employees. The HR planner and the whole approach to planning now need to reflect the importance of distinguishing between the numbers of people in employment from what they actually do and are capable of doing at work. HRP is now much more about finding ways to achieve a better internal integration of HR activities in order to be clearer about what the workforce requirements will be in the future, in terms of skill and competency requirements, and how these needs can be met.

It can be discussed if ‘manpower planning’ is the same as HRP. According to Bramham (1994), there is a big difference between HRP and manpower planning in terms of process and purpose.

He argues that HRP is concerned with motivating people and involves processes in which costs, numbers, control and systems interact, whereas manpower planning is more concerned with the numerical requirements of forecasting. If the concepts are seen as different, HRP can be defined as involving the strategic alignment of an organization’s human capital with its business direction, and employing the use of methodical processes in analysing the current workforce, determining future workforce needs, identifying the gap between the present and the future and implementing solutions so the organization can accomplish its mission, goals and objectives. Manpower planning is part of the wider HRP function, but having a more operational focus and purpose that involves identifying the numbers of people required at appropriate skill levels across a given shift or production pattern in order to meet production or work requirements.

What are WTE's and how to manage them?

Whole-time equivalents (WTEs) is a quantitative measurement of the number of staff available to or in the establishment that allows for staff on different employment contracts to be reflected in the ‘head count’. Employees who work fulltime get a weighting of 1, a part-time worker who works half the time is weighted 0.5.

From a senior management perspective, the perceived effectiveness and value of HR’s contribution to the planning and management of HR is about the effectiveness in meeting the organization’s labour requirements, within existing budgetary constraints. They must also provide ‘solutions’ that fit the strategic and operational requirements of the organization.

Metrics: relates to what and how something is measured. HR metrics focus on key aspects of the labour force, its behaviours, and its costs and contributions. Historically, measurement in HR was very much associated with HRP and involved the production of estimates or ‘precise’ measures covering changes in the existing supply of labour and changes in the demand for labour. The use of measures is now increasingly associated with important features of the HR function, as part of the process of evaluating its efficiency and effectiveness. However, there is no single ‘correct’ strategy for managing surpluses or shortages for all organizations.

How to manage employee absence?

Absence through sickness or other reasons represents a significant cost to most organizations. It impacts the organization’s ability to meet its objectives and puts pressure on those who have to cover the extra workload. The costs of unacceptably high levels of absence are normally expressed financially, and are based on calculating the value of lost production and sick payments. It also include the costs of additional staffing levels and overtime working, the cost of replacement labour, costs associated with delayed production and disruptions to planning schedules, costs associated with loss of quality or service levels and costs resulting from low morale and dissatisfaction.

The absence rate is usually calculated as follows:

• Absence rate = Number of days absence within team / Number of working days available x 100

The formula used for calculating the lost time rate for the whole organization is:

• Lost time rate = Total absence in days o.a. given period / Total time in days available o.a. given period x 100

One of the limitations of the lost time rate calculation is that it cannot distinguish the pattern of absence. The frequency rate is therefore often preferred:

• Frequency rate = Nr. of spells of absence o.a. given period / Nr. of workers employed o.a. given period x 100

The Bradford absence index is a technique that calculates the impact on business of an individual’s absence pattern, based on the frequency and number of days lost. It is useful because it gives weighting to the frequency of absences. It’s calculated by using the formula:

• Bradford Absence Index = S x S x H

S = the number of recorded absences, H = the total number of hours absent. The formula can be applied to each individual and to the organization as a whole.

The problem with these methods of calculating absence is that it cannot show the actual costs of any given level or individual pattern of absence. Not all employees have the same value in terms of their contribution to the organization and the costs of absence will vary in relation to the value of work that is lost.

Turnover describes who leave an organization and are replaced, while wastage only relates to the number of those who leave. When skilled and experienced employees decide to leave, it usually represents a significant loss and a cost to the organization. High turnover rates create particular pressures for the HR department, but also for line managers who face disruption to production and service standards. Turnover is typically measured over a 12-month period to smooth out seasonal differences.

Stability is a useful measure to accompany turnover and can give a better reflection of the retention of employees than can turnover. It can be calculated as follows:

Stability = Nr. of staff with over one year’s service o.a. given period / Nr. of staff employed at the period end x 100

This information is particularly useful to establish the kind of problem from which the organization is suffering.

Vitality is a method of measuring the balance of internal promotion versus external recruitment or loss of employees. It can be a useful measure of career development and employee satisfaction in an organization. Recruitment vitality is measured as follows:

• Recruitment vitality = Nr. of roles filled by internal promotion – Nr. of roles filled externally /Nr. of positions filled x 100

High negative scores indicate a preference for external recruitment, where high positive scores indicate that most posts are being filled internally. Turnover vitality can also be calculated:

• Turnover vitality = Nr. of roles vacated due to internal promotion – Nr. of roles vacuated dueto departure / Nr. of roles being vacant x 10
• High negative scores indicate that employees are leaving to advance their careers, while high positive scores indicate that employees rarely leave and benefit from internal promotion.

How to measure employee absence?

The increasing use of metrics to monitor organizational performance is not restricted to HR. Mooney (2001) argues that the extensive use of measurement in HR is very important. He claims that HR has been reluctant to measuring its contribution and effectiveness and argues that this is directly linked to the lack of status and respect from which many in HR suffer. It’s less important what HR ‘does’ than what it achieves, the outcomes (Ulrich, 1996). Fitz-Enz (2000) accepts that there are difficulties associated with measuring the economic effectiveness of people, but also claims that it can be and is being done. Mooney argues that it is the management and effective reduction of absence and turnover that has the potential for reducing the financial costs of employment, whereas Fitz-Enz argues for the measurement of rates alone. Mayo (2001) is another influential writer who believes in the importance of quantification in HR: he is committed to the principle that everything can be quantified, and in ways that facilitate management and change. He measures the asset value of employees, rather than absence or turnover levels. Each person’s human asset worth (HAW) is:

Human Asset Worth (HAW) = EC x IAM / 100

HAW = human asset worth, EC = employment costs, IAM = individual asset multiplier. Mayo’s model is based on knowing what it costs to employ a person.

Bucknall and Wei (2006) set out the reasons for using measures in HR:

• To determine how well HR is operating and contribution;
• To determine how efficient and effective the HR function is overall;
• To help establish the organizational climate and how well it is performing;
• To improve the productivity of all staff;
• To maximize the return on human capital.

They also set out certain important principles/guidelines that indicate how best to create maximum value for an organization’s human resources. They suggest that managers:

• Recognize that workforce planning and management should be seen as a form of asset management based on business needs and performance drivers.
• Segment employees and focus of groups that have the greatest potential impact for adding value or reducing costs.
• Consider and focus on three critical dimensions of the workforce: capabilities, behaviours and attitudes.
• Determine which workforce characteristics contribute most to the creation of value and at what cost.
• Establish priorities and drive through changes in how things are done.

Although there is a lot of enthusiasm for measurement, there are also concerns associated with the increasing use of measurement and its extension to different areas of the HR function. The collection of data that allows measurements to be made of the chosen parameter or variable must be complete, unflawed and reliable to see meaningful trends instead of ‘snapshots’. Mooney (2001) suggests that managers need to consider the following criteria in deciding on their strategy on measurement:

• The relevance of the chosen measure to the overall business performance;
• The amount of control that the HR function has over a particular measure;
• The ease and reliability of data collection;
• Data quality: the reliability and integrity of data and the way in which it is analysed and interpreted.

Pfeffer and Sutton (2000) claim that measures and the measurement process, especially badly designed or unnecessarily complex measures, are amongst the biggest barriers to turning knowledge into action.

They point out that measures affect what people do, as well as what they notice and ignore, arguing that as a consequence everyone knows that what gets measured gets done, and that what is not measured gets ignored. They make the following suggestions:

• Effective measurement systems that drive behaviour need to be simple enough to focus attention on key elements and fair enough that employees believe in, and support them;
• Measurements need to guide and direct behaviour, but not be so powerful and coercive that they become substitutes for judgement and wisdom;
• Managers should avoid the overuse of ‘end-of-process’ measures, which can provide insights into how well or badly something has gone but it is often too late to correct a problem.

Another point they make is that external benchmarking runs the risk of establishing a disconnect between the underlying rational and drivers of success from the more obvious measures of their success.

How to facilitate employee development and education? - Chapter 10

Humans are designed to learn. But some people seem to learn more than others, learn more quickly and attain higher levels of performance. Most people will enjoy learning throughout their lives after a positive learning experience, but there are also people who are damaged by negative experiences of learning. Learning is a fundamental and natural human process involving growth and change. Learning is about behavioural modification. It cannot be seen, but is inferred from differences in what we know, believe and can do. Learning is the way in which we can improve and be different from that which we were. It needs to be understood as both a process and an outcome. Learning is linked to the acquisition of new or increased competencies and capabilities that are used in the production of goods or services. There is a presumption that all employees will not only work, but also continue to learn. Therefore they need motivation: the drives and needs within each person that direct and influence their behaviours. Unless employees want to learn, they will try to avoid it.

How to manage employee training?

Training is seen as a way by which people can learn what they need to know and do. Training is planned, structured and often-formalized learning experiences that seek to develop specific skills and knowledge needed for effective job performance. Historically, employees have learnt many of the competencies they need to perform effectively by being trained. Training supports both employee and managerial interests. It adds to the value of human capital: the knowledge, skills, abilities and capacity to develop and innovate that is possessed by people in an organization. Training is important because of the way in which it has the potential for facilitating organizational change, functional flexibility, attitudinal change and statutory compliance. However, training can be ineffective as well as effective: much depends on whether training is the ‘right’ lever to pull and who is pulling it (Boydell and Leary, 1996). Training is also expensive. Nevertheless, training is an essential part of surviving change and maintaining the currency of what an organization knows and what they can do. Table 10.1 (p. 255) summarizes the potential power that training possesses.

There are criticisms of training. Davis and Davis (1998) state the one explanation for training’s credibility problem is that ‘learning got left out’ or learning has been neglected. They offer two reasons for this worrying neglect:

• Training has become routinized and trainers have failed to reflect on the reasons for its successes and failures.
• Trainers themselves often lack sufficient understanding of learning theories and, while they may be knowledgeable about the technique, subject matter or procedure, many are not professional trainers.

Organisations have recognised that the traditional ad hoc approach to training is incompatible with the need to adapt quickly to changing business circumstances and therefore, there is a trend away from training to learning. Sloman (2004) states that limitations of training are the emphasis on content, instruction and the passive involvement of trainees, leading to prescribed behavioural change. Motivated participants, self-direction and work-based processes and locations generate learning. In addition to uncertainties over whether learning is/can be generated through training, there is another problem of line managers failing to understand their responsibilities with regard to the use of training. Rothwell (1996) states the main problems of training as follows:

• Its lack of focus;
• Its lack of management support;
• It is not conducted and managed systematically;
• It is not linked to other organizational initiatives;
• It can be used unrealistically to try to achieve attitudinal change, which is rarely, if at all, achievable through conventional training interventions.

The training cycle: the probability of any positive and lasting outcomes being created is likely to be low or non-existent. The specific weaknesses and problems associated with this model:

• The lack of direct involvement and ownership of trainees;
• The assumption that other people – line managers and trainers – know what employees need to learn and that reliable processes exist to identify learning requirements;
• The practice of subjecting employees, who may have quite different interests, skills, knowledge and motivation, to the same training programs;
• The belief that taking employees ‘off the job’ and out of their working environment facilitates learning;
• The belief that the transfer and application of any new learning that might occur is not problematical;
• The failure to recognize that employees learn as much, if not more, from informal processes and interactions than they do from planned and formalized interventions;
• The idea that training can be wholly managed and controlled by others and still be effective.

Nowadays, more effective approaches for learning are developed and implemented. What emerges from many of these new thinking and practices in training is the importance of the following (Hope, 2006):

• Employees who want to participate actively in their own learning;
• Close working relationships between trainers and line managers that result in agreement on training plans, skill and competency needs, and line support for learners;
• Accurate diagnosis of training and development needs;
• Opportunities for the reinforcement of learning through practice;
• Designing bespoke training solutions rather than offering ‘courses for all’;
• A connection between the delivery of training, its evaluation and the planning and design of future training interventions, i.e. a cycle of learning and application;
• A strong relationship between the required learning outcomes and the learning methods employed.

How to evaluate and measure employee training?

Different perceptions of the value of training:

1. Training as a cost: there are direct and indirect costs involved in training employees. Seen as a cost, training is likely to be limited in scope and intensity.
2. Training as an investment: training represents a key instrument in developing capacity and capability to support organizational objectives. As Kearns (2005) states: ‘we should think of it as an important lever through which we can gain competitive advantage’.

The need to evaluate and measure the effectiveness in training is intrinsically linked to the justification for carrying out training activity. Kirkpatrick (1998) developed four levels of training evaluation:

1. Reactions – what the trainees thought and felt about the training;
2. Learning – the increased knowledge and skills;
3. Behaviour – and the change in behaviour and improved performance on the job;
4. Results – the impact upon the organization of the training.

Easterby-Smith (1994) highlights four reasons why training should be evaluated:

1. Proving – to prove something has happened as a result of training and development activity;
2. Controlling – to demonstrate that the standards of delivery have been monitored;
3. Improving – to demonstrate that the review of current programmes and activities will ensure that they become better in future;
4. Learning – to demonstrate that evaluation is an integral part of the whole learning and development process itself.

However, it is difficult to accurately measure return on investment (ROI) of training; nonetheless, this area remains a key focus for HR and training specialists as well as line managers to justify this continued expense.

What is the definition of learning?

Many authors recognize that the workplace, rather than the training room, should be the primary context in which learning is located. Workplace learning or work-based learning is associated with the following contemporary beliefs:

• The workplace, in terms of its physical and social environments, is a site for learning and offers a range of learning opportunities;
• Many of these opportunities are informal and opportunistic rather than formal and planned;
• The workplace needs to be understood as a learning, as well as a working, environment;
• Working and learning are inextricably linked.

The context in which learning takes place is considered as very important.

Development: changes in the whole person and what they can do. It reflects the belief that all people have the potential to be more and do more, and that this potential needs to be developed as well as utilized. People can develop to a limited degree through training, but development implies the employment of a much wider range of learning experiences and methods, such as coaching and mentoring, not all of which are necessarily connected to the working environment. Coaching is becoming a more commonly used tool to support employee development at work.

It is a process in which a ‘coach’ supports an individual to develop his or her skills through a series of structured conversations by exploring the nature of challenges faced at work and helping the individual to identify the best approaches to those challenges to achieve the desired outcomes. Mentoring has some similarities, but tends to involve the development of a relationship between a much more senior person in and a more junior person, often as part of a development programme, involving the experienced person using his or her greater knowledge and expertise to accelerate the junior colleague’s development. Human resource development: this term came into usage in the late 1980s and early 1990s, and is used by many writers, but fewer practitioners, in preference to training. Its relationship to training is similar to that between HRM and Personnel Management, in that it represents a more holistic and strategic approach to learning than does training (Walton, 1999).

E-learning

E-learning can be understood as learning that is delivered, enabled or mediated using electronic technology for the explicit purpose of training in organizations. The introduction of this was also not without controversy. Sloman (2001) argues that there is a danger of becoming seduced by the functionality of the technology rather than concentrating on its use.

Different forms of e-learning:

• Web-based training: no significant interaction with (or support from) training professionals, peers or managers;
• Interactive online learning: emphasis is on the delivery of courses and support material online, for example using Blackboard.
• Informal e-learning: technology to support informal learning in the workplace.
• Standalone e-learning materials: CD ROM-based learning, no support provision or interaction.

What is the difference between training and learning?

The actual way/process in which learning takes place has several important characteristics:

• You cannot see it happening – it is essentially a cognitive process;
• You can only see that learning has taken place through changes in the way people think, behave and work;
• People may well have learnt something new or already possess a valued competency, but may choose not to use and display it;
• ‘Real’ learning relates to knowledge, skills and attitudes that are embedded within the individual. Some learning is temporary and superficial, which can be easily lost;
• No one can learn for you, learning lies within the domain of the individual;
• Employees need to feel positive about the outcomes of the learning process before they make a commitment to learn.

Although the beginning of the chapter tried to separate training and learning, training is a way of generating learning, based on the use of certain techniques and methods. The problems with training are twofold. Firstly, it is often badly designed and delivered, or based on a faulty diagnosis of training needs; secondly, it is considered as an inappropriate way of meeting certain learning requirements for which other, more individualized, learning methods are likely to produce the required results. We need to reformulate and reframe training, so that it can overcome many of its limitations and deliver valued contributions to the development of employees.

What does the process of learning look like?

Kolb’s (1984) learning cycle offers important insights into the different ways in which people can learn, and into the choices and preferences that exist in our own learning. Kolb defined how people learn from their experiences by going through these steps:

1. Concrete experience: the learner carries out an action that has observable consequences, e.g. a child touching a hot stove.
2. Reflective observation: the learner reflects upon their action and the outcome of that action, e.g. the child realizes that the stove burned his hand and that this hurts.
3. Abstract conceptualization: the learner develops a theory that can be applied to similar scenarios, e.g. the child theorizes and draws the conclusion that touching a hot surface will hurt.
4. Active experimentation: the learner tests the theory out to see if the correct conclusion has been drawn, e.g. the child may put his hand near the stove to see if it feels hot.

This cycle can lead to further experience, e.g. the child might learn about other hot items.

Which learning styles are there?

There are a range of different theories on learning styles. Honey and Mumford (2006) proposed a model of 4 learning styles, which they refer to as activists, reflectors, theorists and pragmatists. Jackson (2005) made a ‘hybrid model’ of learning. Sensation Seeking is described as the basis of learning. Those with a high drive to explore can have dysfunctional learning experiences unless these are regulated by factors such as goal orientation, conscientiousness, deep learning and emotional intelligence.

The conscious competence model shows how learning progresses from one stage to another. A competence is the combination of skills, knowledge and experience that results in a person’s ability to carry out specific tasks and procedures to a required standard. A specific competency can also be understood as an underlying characteristic of a person, that is a trait, belief, ability or attitude that distinguishes one person from another and explains differences in job performance (Rothwell, 2004). The stages of the conscious competence model:

1. Unconscious incompetence: the learner is unaware of his/her lack of competence;
2. Conscious incompetence: become aware of the shortfall;
3. Conscious competence: skills are acquired but are not familiar yet;
4. Unconscious competence: no longer conscious of each of the individual actions that make up the new skill.

In stage 4, knowledge and know-how have become embedded within the individual. It has become tacit knowledge: knowledge of, or about things, which has been gained from various sources and which is internalized by an individual, through the process of ‘doing’ and practice. Training often failures because the trainer assumes that the trainee is aware of and understands the importance of meeting/a skill or competency deficiency/the benefits from learning, while most of the trainees are still in phase 1 and will not be able to address achieving conscious competence until they’ve become consciously and fully aware of their own incompetence.

Accelerated learning is a set of principles, values and practices that represent an alternative to conventional approaches to learning, particularly the use of course-based training, which have the potential of generating enjoyable and productive learning experiences. Emphasis is laid on instruction and passive listening. In table 10.2 (p. 274), a comparison of traditional and accelerated learning is made. Meier (2000) argues that any approach to learning is underpinned by a set of assumptions about what people need in order to optimize their learning. The assumptions of accelerated learning are:

• A positive learning environment: people learn best when their social, physical and emotional environments are positive, supportive and stimulating;
• Total learner involvement: active involvement and responsibility are key to effective and sustained learning;
• Collaboration among learners;
• Variety that appeals to all learning preferences and styles: learning becomes accelerated and more effective when the full range of people’s senses and energies are engaged and used in learning (see figure 10.4 for the energy triangle, p. 275);
• Contextual learning: the best learning comes from doing the work itself in a continual process of ‘real world’ immersion, feedback, reflection, evaluation and re-immersion.

Based on these characteristics and assumptions, Meier offers a universalistic model of learning. He describes four phases/components that must be present in order to learn:

1. Preparation: the arousal of interest;
2. Presentation: the initial encounter and involvement with new areas of knowledge or skill;
3. Practice: the integration and embedding of the new knowledge or skill;
4. Performance: applying the knowledge or skill to the job.

Enjoyment and learning outcomes are positively correlated to the amount and variety of energy consumed in the learning experience. The energy triangle in figure 10.4 describes the three types of energy that need to be utilized in learning and what they involve.

How to manage employee performance? - Chapter 11

What is the definition of performance management?

Performance management is a broad term that has come to stand for the set of practices through which work is defined and reviewed, capabilities are developed and rewards are distributed (Morhman and Morhman, 1995). It is also a strategic and integrated approach to delivering sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of team and individual contributions (Armstrong and Baron, 1998). However, simply having a performance management system does not guarantee higher levels of performance. According to Mabey et al. (1998), performance management refers to a set of techniques and procedures that serve to:

• Provide information on the contribution of human resources to the strategic objectives of the organization;
• Form a framework of techniques to secure the maximum output for any given level of inputs;
• Provide a means of inspecting how well individual performance-enhancing processes actually deliver performance in relation to targets and objectives.

They define performance management as ‘a framework in which performance by individuals can be directed, monitored, motivated and refined’.

The basic requirements of managing performance are:

• Everyone should know what to, and what not to do: performance management is an ongoing process that need to be connected not only to each other, but also to very aspect of the organization’s activities.
• Everyone contributes: employees as well as managers need to actively engage and contribute to the effective management of performance.
• Everyone develops the necessary skills: every employee should be encouraged to grow by acquiring new skills and competences that will enhance their effectiveness;
• Managers must have the necessary skills: managers need a range of technical and process skills to be able to influence employee performance;
• Managers’ measure and monitor: managers need to measure performance on an ongoing basis, to ensure that it remains on track and that employees continuously develop their skills.

The key activities and areas of responsibility associated with an integrated and holistic performance management system are discribed in the paragraph. The first step in this cycle is for the organization to define its long-term strategy and strategic intentions. The objectives of the organization define the goals and targets over a shorter period and will need to be regularly assessed to establish their alignment with the strategy. In order to be able to measure success at regular intervals, key measures or metrics need to be established. The organizational objectives can then be translated into departmental and team goals, and then into individuals goals and objectives. The individual objectives are often agreed and finalized during an appraisal interview. The next step in the process is to develop skills and abilities of the individuals and teams. The performance of them is then measured, and the results can be pooled to establish a regular measure of the organization’s performance.

How to analyze and measure performance?

Performance can be interpreted as expressing the relationship between a person’s capabilities and what the person actually achieves, usually related to a person’s job. Managers are faced with four fundamental questions when making sense of performance:

1. What are the key determinants of organizational performance?
2. How well are my staff currently performing in their jobs?
3. How can their performance be improved?
4. What are the causes of underperformance?

Performance is explained by the following concepts:

• Productivity: this concept links the inputs to a production process to its outputs, expressed in quantitative or financial terms. In engineering and manufacturing contexts, this has traditionally been the preferred concept that managers use and measure.
• Effectiveness: the relationship between targets or objectives set and what is actually achieved.
• Effort: often linked to the intensity of work (how hard an employee works), but not necessarily linked to outcomes.
• The effort bargain: the imprecise relationship between what employees ‘do’ at work and the rewards they receive.
• Discretionary effort: the belief that employees only give a part of what they are capable of and that moving to higher levels of performance, effort or contribution is at their discretion, rather than subject to management control.
• Contribution: seen as what employees can do in addition to doing their jobs. Particularly important if jobs actually limit what people are allowed to do.

Performance is about achievement, but also about capability: what are people capable of achieving? Two important consequences follow from this definition:

1. Not all employees are capable of the same levels of performance. While effort is important, it is not the same as inherent or acquired talent or capability.
2. Simply achieving set objectives is not necessarily an indication of high performance if the targets or objectives set are too low and do not realistically stretch an individual or reflect his or her capability.

Maximum performance is achieved when employees use their capabilities to the fullest, drawing on all of their physical, intellectual or emotional energies, and when they are set targets and objectives that stretch the individual (or team) to the highest sustainable level of performance.

What is the role of motivation?

Motivation is sometimes linked to performance. The implicit assumption is that the more managers know about the dynamics of motivation, the more they can acquire insights into what employees value from their work which in turn allows them to develop mechanisms and provide opportunities that allow employees to achieve their needs and at the same time increase their performance. There is a difference between extrinsic motivation and intrinsic motivation, where the first term describes how factors and decisions ‘outside’ the individual represent the main context for understanding and influencing behaviour, while the second focuses on forces and processes where the individual interact with the external environment and specific external influences such as reward systems, performance standards and managerial expectations. Amabile and Kramer (2007) claim that every worker’s performance is affected by the constant interplay of perceptions, emotions and motivations triggered by workday events, including managerial action – yet, inner work life remains mostly invisible to management. Behaviour is fundamentally determined by what goes on within people.

The work of Amabile and Kramer has implications for the way managers can use the insights generated by their research to develop a more strategic approach to ‘managing motivation’. Adopting a strategic approach involves:

• Framing the problem and challenge in the ‘right’ way – that is basing the assumptions made about human behaviour and motivation on verifiable propositions and a tested body of knowledge;
• Developing practices that impact on the majority (if not all) of an employee group;
• Ensuring that subsequent affective and behavioural changes have a significant and positive impact on performance.

How to deal with performance problems?

Managers are faced with a wide range of situations that create very different kinds of performance problems:

• People absent from work: if people are not at work, they cannot perform and their added-value contributions become zero, while their costs of employing largely remain the same. The higher the level of absence and the longer the time for which people are away from work, the bigger the performance loss becomes.
• People at work who don’t perform: if people don’t want to perform at any level other than that with which they are comfortable, then there can be a serious underutilization of labour that affects the performance of the organization itself.
• Legitimizing low standards: if there are no negative consequences for being a low performer, why should he want to improve? And what message does this send to high performers?
• Raising performance expectations and standards: to improve performance, two broad approaches are used. Some organizations give an emphasis to improving performance through the development of employees (a soft approach), while others prefer one based on measurement (a hard approach). Most successful companies adopt a balanced and rounded approach.
• Removing the barriers to higher performance: in some organizations, there are influences that originate in the culture, working environment or management behaviour that act to suppress employees’ natural desire to ‘give more’.
• The challenge is to clear the blockages that are preventing people from improving their performance.

Performance appraisal is a process for reviewing the past performance of an employee, and agreeing future objectives and development activities. It can be seen as ‘the process of evaluating and judging the way in which someone is functioning’ (Coens and Jenkins, 2000). The process usually includes a preparation stage, completed by both the employee and the manager. The appraisal then typically takes place at a meeting between the employee and his/her manager, and discussions take place covering each of the elements of the employee’s job that the manager and employee wish to consider. A final record is then made of what was discussed and agreed at the meeting.

Many appraisals require the manager to rate the performance of each employee in order to compare performance among colleagues. Different rating scales:

• Manager-allocated rating scales: manager gives a rating using a scale. This system is easy to implement and relatively simple, but also highly subjective and will force the manager to make a judgement based upon his/her overall perception of the employee, rather than on hard indicators of actual performance;
• Objective-based rating scales: assess an employee’s performance against the objectives set and allocate a rating based upon the extent to which these objectives are met. Subjectivity is tried to avoid with this method; however, objectives must have been set in such a way that the required target level of performance was clearly defined. This rating will be more closely reflect the employee’s actual performance. Ratings as these are often linked to the pay award given to an employee.
• Points-based rating scales: allocate points to different aspects of the job that employees perform. To be effective, these rating systems require comprehensive, reliable and consistent information on performance against each job element or objective. These systems often lack the necessarily credibility to be accepted and legitimized.

How to set employee objectives?

A key factor in the success of any organization is its ability to ensure that everyone clearly understands what they are required to do to contribute to its success. SMART is an acronym used to describe key characteristics of appraisal objectives:

S: specific, one end result is clearly described;

M: measurable outcome, the outcome can be measured;

A: agreed, manager and report agree the outcome;

R: realistic, i.e. ‘what is the maximum we can realistically achieve including target and stretch?’

T: timely, i.e. ‘by when will it be achieved?’

Objectives can become out-dated as circumstances change, and management must respond quickly to new situations and demands.

A direct objective: an individual or team is responsible for a section of the financial budget of the organization. Many objectives that can be quantified and expressed in these ways, represent a stronger motivational influence on employee behaviour because progress towards the agreed objectives can be monitored and displayed.

Indirect objectives:

• Key performance indicators (KPIs): KPIs are a measurement for the achievement of supportive or secondary objectives: objectives that contribute to meet central objectives. Example: ‘attract an average of 5000 visitors per month to Mayfield Hall Museum throughout the summer season in 2012’. The KPI is visitor number, and this directly correlates to revenue generated from ticket sales.
• Project measures: targets expressed in terms of delivery of a project that will contribute towards the organization achieving its strategic objectives, if objectives cannot easily be expressed in terms of numbers that are directly or indirectly related to the organization’s main aims and objectives.

Setting objectives presumes that required actions or outputs can be predicted, but sometimes this is not the case. Many jobs consist of complex patterns of decision-making and long-term strategic planning, and the flexibility and creativity needed to deliver success in these roles can be stifled by rigid objectives. Some jobs lend themselves more readily to objective setting than do others.

How to give proper feedback and reviews to employees?

Employees and managers generally benefit from honest, objective feedback about how things are going. It’s a constant exchange of information, often generated through ‘performance conversation’, helps every to stay on track and the organization to stay competitive. Effective feedback helps an employee to understand how others perceive their behaviour and performance. This gives employees the opportunity to learn about themselves and to decide whether they need to change in some way or another.

360-degree feedback involves seeking contributions about what a person achieves and how he/she operates not only from the line manager, but also from others who are in contact with the person and are in a position to offer such feedback. A questionnaire is sent to colleagues, subordinates and possibly external contracts. The completed questionnaires are returned anonymously to an independent third party. To be effective, feedback to the employee of the results should ideally be undertaken by a trained facilitator, who can help the employee to understand his/her own strengths and weaknesses, and can use the information to produce a development plan.

A development plan is an important tool to help an individual plan how he/she can best maximize his/her skills and knowledge. Typically, development plans will list all structured activity that is designed to address specific development needs.

If there are problems with the performance of employees, managers can also use these mechanisms:

• An informal performance review: a meeting between a manager and an employee to highlight areas of concern with the employee’s current performance, to discuss and set targets for improvement and to arrange support and training to achieve these targets.
• A formal performance review: meeting between a manager, often an HR practitioner/other manager and an employee who should be informed of the right to be accompanied by a representative. Concerns about performance can be discussed, targets set for improvement and consequences of failure to improve can be highlighted.

Both types of review are based on the principles that employees need to be given the opportunity to improve their performance before further action is taken.

How to manage employee rewards? - Chapter 12

Rewards are a basic element of the employment relationship, and have a critical influence on the satisfaction and commitment of employees. If you manage rewards in the wrong way, there will be damaging consequences for the organization. The way in which rewards are managed will also, either directly or indirectly, impact on other aspects of HR. Reward management is not simply about the basic issues of paying people fairly in relation to market rates, the job they do and how well they perform in the job, but extends to the impact of reward decisions on recruitment, retention, training, flexibility and performance, in addition to their effect on morale and commitment.

What is the definition of a reward?

Fairness: there are issues relating to pay and rewards generally that generate subjective feelings of what is, and what is not, ‘fair’. This often involves employees looking to other employees, and comparing what they do and what they get paid.

Reward specialists play an important role in HR, and this is partly due to the scale and range of reward matters. The cost of the pay and of the total reward packages represent a significant proportion of the total budget of organizations and these costs need to be managed effectively to ensure that they remain within acceptable limits.

Rewards can be both material and symbolic in form, and are outcomes of the employment and psychological contracts. There is no consensus on how organizations should be rewarding their employees. Instrumental conditioning is immediately giving a reward for desired behaviour. Rewards have the potential to give pleasure and satisfy a fundamental need if they are given, but withholding or withdrawing them has the potential to hurt. Kohn (1993a) argues that rewards and punishment are not really opposites, but different sides of the same coin. A reward presents an extrinsic source of motivation that does not alter a person’s emotional or cognitive commitment, which are the keys to understanding and influencing behaviour. Pay is the regular and contractually agreed monetary rewards, usually linked to position or job and paid as a wage or salary. To strengthen employees’ commitment, paying them more is unlikely to achieve this.

A reward must have the following characteristics:

• It must have a value in itself or because of what it represents: its value is linked to the fulfilment of a basic human need or one that is socially acquired.
• It must be relevant and important to the individual.
• It must be associated with, or serve, a purpose. A reward is something that can be used to achieve an outcome that is desired by one party or the other.
• A reward needs to have a behavioural effect on the person receiving the reward, although the actual effect may not be that which was intended.
• There must be conscious recognition on the part of the receiver and giver that an act of rewarding has taken place.

There are different reward categories:

• Monetary rewards: basic pay, bonuses, commission payments, overtime and condition payments;
• Benefits associated with working for the organization: pensions, health care, subsidized meals/loans/etc., membership of health and fitness clubs, company cars or petrol allowances and flexible working arrangements;
• Psychological rewards: the source of these is embedded in the work that people do and the environment in which they work. Examples: recognition, praise, being valued, being part of a social community, achievement, recognizing that work is important and has an intrinsic value, fun and enjoyment;
• Personal rewards: promotion, advancement and development, acquisition of new competencies and increased employability.

There are in fact two levels of employee performance. One can be described as the ‘normal’ level, which correspondents to employees providing effort and output levels reflecting what they consider to be fair and appropriate in relation to the contractually based reward package. Over and above this exists what is thought of as the ‘incentivized’ level of effort and performance, which can only be accessed through additional monetary payments, in the form of incentives. A bonus is an additional, but variable, payment associated with individual, group or organizational performance. An incentive is the prospect or promise of a reward that is conditional upon an agreed outcome being achieved. A benefit is a normally contractually agreed ‘addition’ to the wage or salary, provided by an employer as part of the overall employment package. Reward systems are all of the practices, procedures and methods of rewarding employees either in use by, or potentially available to, management.

Which can be the disadvantages of the use of rewards ?

On of the most consistent critics of the use of incentives and incentive-based payment systems is Kohn (1993a, 1993b, 1995). His research indicates that rewards typically undermine the very processes they are intended to enhance. The failure of any given incentive programme is due less to a glitch in that program than to the inadequacy of the psychological assumptions that ground all such plans. Kohn suggests that incentives do not alter the attitudes that underlie behaviour. He states that the following factors determine why rewards, in the form of incentives, fail:

• Pay is not a motivator: paying people more will not encourage them to do better or more work over the long term;
• Rewards punish: this is about feeling controlled and manipulated by managers, if the rewards that employees expect or hope to receive are withheld or withdrawn;
• Rewards rupture relationships: the pursuit of personal rewards has the effect of reducing cooperation and fracturing relationships: rewards individualize work;
• Rewards ignore reasons: the use of incentives is often an easier way of trying to address problems of behaviour and performance than exploring and understanding the underlying causes of the problems;
• Rewards discourage risk taking: behaviour that is not seen to be relevant to trying to achieve the incentive is downgraded, even though it still might be important to the organization;
• Rewards undermine interest: extrinsic controls and influences are thought to undermine employee commitment and interest in their work, because they reduce interest in anything else.

The counterarguments against this reasoning is:

• Rewards should not be confused with incentives and people should be rewarded for a job well done. Companies should not stop paying for performance, but should avoid using incentives.
• Integrating the use of incentives and gain sharing, as part of wider strategy of work reorganization and participative working, can achieve very significant results.
• Incentive schemes have a limited time during which they can be effective and, within this timeframe, they can be important elements of a wider reward package.
• Many rewards are not perceived as bribes, but as equitable outcomes that reflect the contributions that people have made.
• While the negative aspects of using of piece rates and merit pay to reinforce task-orientated behaviour are understood, appropriate rewards for improved performance make sense intuitively and practically, and they are neither wrong nor intrinsically demotivating.

Many of the failures associated with financial incentives are caused by:

1. The failure to accurately diagnose the underlying causes of performance problems;
2. Weaknesses in the design of financial incentive schemes;
3. Organizational factors and conditions that are not consistent with or accommodative to what are relatively simplistic and one-dimensional interventions.

Which statuses can rewards have?

There are different forms or statuses of rewards. These are:

Rewards as rights: rewards become rights largely through the process of managers offering employment, and through the prospective employee agreeing to accept the terms and conditions embodied in the contract of employment. The rewards/forms of compensation are a set of rights associated with being employed by a particular organization, which continue to be provided for as long as the contract remains in place. Reciprocation relates to the effect that certain kinds of rewards generate. This can take the form of an obligation or predisposition to give something back to the person or organization responsible for the original reward. It also suggests that rewards are never simply one person giving to another, but represent a more complex, and often unspoken, exchange that has positive outcomes for both parties.

Rewards that are conditional or contingent: many rewards made available to employees are linked to, and dependent on, certain conditions being met. Many of the reward schemes that are based on the ‘conditionally principle’ are associated with some measure of job performance and are frequently linked to performance-related pay. These rewards are not ‘freestanding’; they are related to some measure how we actually behave or perform at work, and are experienced only if predetermined conditions and criteria are met. According to Armstrong (2002), an incentive is a particular kind of reward that can be understood to be the promise of a specified reward that only becomes realizable after the achievement of previously set and known targets. Expectation focuses attention on the behavioural impact of different ‘reward experiences’ and on whether the amount or form of any given reward creates a positive or negative response. Expectations not met will result in disappointment and behaviours that reflect this emotional state.

Expectation is closely tied into the psychological contract and is arguably the most important factor that explains a weakening or breakdown in this unwritten and unacknowledged relationship. It is also linked to beliefs about what is fair.

Rewards that are discretionary: rewards that are neither based on contractual rights nor on meeting specified conditions, but which result from managers and employees deciding to reward others in ways that only make sense in the context of their own particular circumstances and working environment. For example, staff can be given a week’s fully paid holiday. There is no promise of repeating the reward and, even if the company achieves similar results in the future, the owner may decide to spend the money otherwise. Discretionary rewards are often not planned and therefore, employees have no expectation of receiving them.

How to determine an employees pay level?

A great deal of effort goes into determining the level at which to pay employees. There are some different typical hourly payment systems:

Flat rate: an employee is given a fixed amount for a fixed period of time. This might be an hourly rate, an annual amount or a set amount for any period between those two. The ‘market rate’ helps organizations to fix hourly rates and many salary levels. Differences in skills and competencies also help to explain differences in basic pay levels. Figure 12.1 (p. 324) shows the relationship between the level of skill and the band into which market rates fall. The model in figure 12.2 (p. 324) shows a typical distribution of rates of pay across different organizations for jobs of a similar value.

Piece rates: an employee is paid for each item of work completed. While it can be argued that this system does enhance productivity, there are many factors that have led to its demise. Piece rate systems encourage workers to try to stick to the jobs that they can do best and naturally tend to make employees reluctant to do work that does not attract the higher rates. Staff can therefore be reluctant to participate in off-the-job training or meetings to help improve productivity, because of the loss of wages that this involves.

Group/team bonus: measuring the performance of a group of people and awarding a payment to the group for increased output. The group either receives an equal portion of the bonus or pro rata payments that reflect different contributions. Different factors can affect the success of these schemes.

Rates for skills, shift premium and overtime premium: an employer should consider the time by which the work needs to be carried out and the possibility that additional hours might be required to complete the job or work in progress, for which ‘premium’ payments may need to be paid. If employees are required to work at unusual times of the day, then ‘shift’ pay may be included as a pay item. There may also be extra payments above the normal rate of pay for extra hours worked either at the end or beginning of a working day, or on days that are not normally worked, i.e. overtime.

Performance-related pay (PRP) uses financial incentives to link an individual’s pay to his/her performance. It usually refers to the system used to calculate the pay rise awarded to an individual, which is linked to a measure of his/her performance over a given time period. It is often linked to performance objectives set for the individual as part of an annual appraisal process. The pay award reflects the extent to which the measures are met. A key requirement in the employment of PRP is the ability to measure accurately and consistently what performance is defined as.

Incremental pay schemes: length of service drives pay increases, in addition to annual increases linked to cost-of-living adjustments. Incremental awards are generally limited to salaried employees, particularly those who work in the public sector (in the private sector not popular because increases in pay have nothing to do with performance/contribution).

The four main priority areas for reward practices in 2010 were:

1. Ensuring reward strategies and practices were aligned with the business;
2. Ensuring that market rates are competitive;
3. Ensure high levels of fairness in relation to internal reward levels and relationships;
4. Achieving and maintain cost minimization.

According to Brown (2008), very few organizations seem to have any concrete evidence to evaluate or justify their reward practices. This can be problematic, recognizing that between 65% and 70% of total costs of organizations in the USA are costs of compensation. Brown argues that the whole point of being strategic about reward management is to set out how reward can best support the organization’s success, establish the criteria to assess success, and to make changes and improvements to close the gaps.

Introduction to Human Resource Management - Banfield - BulletPoints

Chapter 1: The Management of Human Resource Management

• Today’s managers have to ensure that goods and services are provided profitably and efficiently, while maximizing the productivity of their workforce. This must be done in environments that are rewarding, provide opportunities for personal growth and development, generate commitment to the organization and encourage employees to use their capabilities and potential to the full and in the interests of the organization.

• Today’s challenges are influenced by these changes: the rise of self-employment and the independent worker; changes in the external regulation of employment; the emergence of new ideas and ways of managing associated with inward investment and the spread of new knowledge; the challenge to, and replacement of, physical power and manual skills by the power of knowledge, creativity and intellectual capital; a diversified labour force.

• Knowledge workers work with knowledge, not only their own but also that generated and used by others in ‘communities of practice’ and professional networks.

• Discretionary effort is effort or performance that is additional to that which the employee is contractually required to deliver.

• The psychological contract is the unwritten, often unarticulated and not necessarily shared expectations that exist between employees and managers, which influence the relationship between the two parties and particularly the behaviour of employees.

• McGregor (1960) presented a dichotomy of the assumptions made about people, divided in ‘Theory X’ and ‘Theory Y’. In the work of Ouchi (1981), Theory Z can be found.

• O’Reilly and Pfeffer (2000) argue that, because of Theory X assumptions, many organizations are failing to unlock the hidden value and potential that their employees offer.

• Frost (2003) describes that ‘toxicity’ or emotional pain is a normal by-product of organizational life and that the generation of emotional pain is an inevitable part of ‘doing business’.

• Stress is a situation where demands on a person exceed that person’s resources or ability to cope.

• According to Mayo (2001), employees have to be seen as intangible assets because they cannot be transacted – i.e. bought and sold at will; their contribution is individual and variable and they cannot be valued according to traditional financial principles.

• Management can be understood as being about clarifying objects, planning and organizing and directing and controlling. Scientific management (Taylor) involves the application of precise procedures and approaches to the management and control of work and workers: it describes a ‘one best way’ approach to improve labour productivity. Fordism is associated with mass production techniques, extreme forms of division of labour and assembly line techniques.

• Dialectic: the tension that arises between conflicting ideas, interacting forces, or competing interests.

• Managing people is, according to Heller (2003), not the primary aim of managers - management comes down to three simple words: revenues, costs and quality.

• A philosophy is an enduring framework of beliefs, values, and ways of doing things that can exist at the individual and organizational levels.

• Underpinning personal characteristics and how people work is what they describe as a conceptual mindset, which is a perspective on their role and its purpose that is significantly different from their less highly rated colleagues.

Chapter 3: A Strategic Perspective on Human Resource Management

• Integration: a preferred relationship between different parts of an organization and ‘the whole’ and between different functional strategies and the corporate strategy.

• Strategic: a particular mindset and approach defined by a more integrated and holistic view of the world of business and management.

• Strategy: a way of doing things that is intended to produce required outcomes and results.

• Being strategic does involve HR in delivering against two key requirements:

  1. Building human resource capabilities that can help to meet short- and long-term organizational requirements;

  2. Ensuring that these capabilities are used and applied to generate strategically valuable outcomes.

• Operational effectiveness means performing similar activities better than rivals perform them. In contrast, strategic positioning means performing different activities from rivals’ or performing similar activities in different ways.

• According to Purcell (1999), what is most notable about the best practice model is there is no discussion on company strategy at all: adopting a set of best practices would attract super human resources, talent and competencies and these human resources will influence the strategy. In this approach, policy precedes strategy.

• ‘New HR’ states that HR can act strategically by questioning rather than accepting the case for certain practices and policies.

• Two points of HR’s role in strategy can be made:

  1. Strategic impact comes from HR focusing on shaping the behaviour of all the company’s employees through the development and internalization of a set of corporate values that influence the way employees think about their work and what being a part of the eaga business involves.

  2. There is a clear link between strategic impact and organization culture.

• Johnson and Scholes (2008) define strategy as the direction and scope of an organisation over the long term, which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations. However, Mintzberg (1987) states that the field of strategic management cannot afford to rely on a single definition of strategy.

  He gives five different interpretations of strategy: strategy as a plan, pattern, about what, position and as perspective.

• Hamel and Prahalad (1993) say there are two basic approaches to achieve greater resource productivity: downsizing and head count reduction and resource leveraging that seeks to get the most out of the available resources. HR management can leverage its resources in 4 basic ways: concentrating resources: convergence and focus; accumulating resources: extracting and borrowing; complementing resources: blending and balancing and conserving resources: recycling, co-opting and shielding.

• The concept of strategic integration or fit can take three different forms: horizontal integration, vertical integration and functional integration.

• The most influential contribution to the development of a strategic dimension to HR is the idea that the organization represents a flexible mix of different kinds of resources: a resource based view.

Chapter 4: Recruitment and Selection

• Hiring/employing: the overall process of taking on new staff from outside the organization. Human capital is a valuable asset for organizations.

• Selection: the process, culminating in the decision to fill a vacancy from internal or external applicants, used by the organization to choose the most suitable candidate from a pool of applicants.

• An HR professional will most likely encounter the next situations: replacement recruitment, recruiting for a new position/job, recruiting for a new build, recruitment needs that reflect long-term distortions in the supply and demand for labour and recruitment that is used as an instrument of social engineering.

• Productive capacity: what employees can currently do and their current value to the organization. Productive potential: employees’ future value and contribution based on future learning and development.

• Cost per hire (CPH) can be calculated using the formula: Cost per hire (CPH) = (AC + AF + RB + TC + RE + RC + NC + 10%) / H.

• An alternative formule to calculate cost per hire, more appropriate for the UK, is: Cost per hire (CPH) = DA + GO + RE + C of S + RC + EAF + TC + CLP + 10% / Numbers involved

• Labour markets can be virtual or physical, and they are important because they represent the source of an organization’s supply of labour. External recruitment: the process of identifying and attracting potential employees to an organization to fill current or future vacancies. Internal recruitment: the process of identifying current employees who may be suitable for newly created vacancies or for replacing staff who leave. These can be attractive in terms of cost and time, but stagnation is a big danger.

• Recruitment requirements are often described in two important documents: a job description gives details of the purpose or the job, and of the tasks and responsibilities or areas of accountability that are assigned to the jobholder, whereas the person specification details the skills, knowledge and attitudes that should ideally be possessed by the jobholder.

• Assessment: the tools and techniques used by an organization to identify and measure, either qualitatively or quantitatively, the skills, knowledge and potential of applicants.

• Best practice: this term implies that in carrying out HR activities there is ‘one best way’ of doing things, irrespective of the context or circumstances. Best fit: what should be done and how it should be done based on the unique circumstances that characterize every organization. However, it could be that the person doesn’t fit into the organization. Therefore, an alternative approach is to look at fitting the ‘job’ to the person to maximize the potential performance: the person-organization fit. Another method that could be used is using competency profiles/frameworks: statements of what people need to be able to do in order to perform their job to the required standard.

• Employer of preferred choice is a status that certain employers seek to attain in relation to prospective applicants. Employer branding is how an organization promotes what it has to offer to current and potential employees.

• Ways to get information about potential candidates: a CV or résumé, application form, social networking sites, checks and interviews.

• Distributive justice: perceived fairness of the outcome itself; procedural justice: perceived fairness of the procedures used to reach the outcome and interactional justice: interpersonal treatment of applicants as procedures are enacted and the manner in which information is conveyed and managed.

Chapter 5: Managing Employee Relations

• Dunlop (1958) developed a theory of industrial relations that saw industrial relations as a subsystem of society, on a par with the economic and political subsystems, which overlapped and influenced each other.

• Procedural rules are those that establish how the actors in the system will respond and behave in given situations. These rule-making processes are at the heart of any employment relations system and can be expressed in terms of unilateral regulation, joint regulation or collective bargaining and legal and judicial processes. Substantive rules are rules that are generated by rule-making processes.

• The idea that people at work operate within two organizational environments has long been recognized (Handy, 1993). The environment represented by the formal organization consists of the formally approved, by management, procedural and substantive rules. These rules are legitimized, through being known and approved by management, and regulate how people are supposed to behave at work. The informal organization represents an informal world with the place of work and the day-to-day interaction between managers and employees.

• There are three perspectives on employment relations that are most frequently referred to: unitary perspective, pluralism and radical/Marxist perspective.

• A trade union is an organization that is independent of an employer and funded by member contributions, the function of which is to represent worker interests in relations between workers and employers. Dunlop (2002) argues that trade unions are fundamentally concerned with industrial jurisprudence and the economic regulation of employment.

• A collective agreement is a written statement, defining the arrangements agreed between a union and employer, and the terms that will apply.

• An employer can recognize unions at a number of levels. There can be a recognition agreement with a particular union. Employers can also recognize a union as the party with which they will consult about information and issues affecting the organization. Some employers also recognize one or more unions for the purposes of presenting the interests of members in collective bargaining arrangements.

• Collective bargaining has four dimensions over which each party has an interest in influencing: scope, form, level and unit.

• Industrial action can have a damaging effect on an employer and its customers. It’s the ultimate expression of force that a group of workers can inflict upon managers and can lead to a loss of earnings, conflict between employers reflecting differences in the level of support for industrial action and the possibility that prolonged action will result in job losses. Such actions are unlawful if unions were not granted some immunity.

• Types of industrial action: strike action, action short of a strike and unofficial industrial action.

• Psychological contract: the obligations that an employer and employee, or group of employees, perceive to exist between each other as part of the employment relationship, comprising both expectations of each other and promises made to each other.

Chapter 7: Equality and Diversity in Employment

• Fair and fairness are characteristics or outcomes of the way in which people are treated, but can also be used to describe characteristics of a person’s behaviour or of a procedure. Fairness is a decision-making process that is based solely on merit if applied to employees. However, it does not necessarily mean equal treatment.

• There are several types of unlawful discrimination. Equal opportunity: the process of ensuring that employment practices in an organization are fair and unbiased, and do not breach any of the legislative provisions that are in place to protect workers from unlawful discrimination. Diversity is a multifaceted approach to the management of employees, reflecting the changing social and demographic characteristics of the workforce.

• There are both legal and moral arguments in favour of diversity as an approach, and there are three broad factors, which form the business case for diversity: people issues, market competitiveness benefits and corporate reputation benefits.

• Stereotype: a fixed idea or popular misconception about an individual or group of people, and a conventional, formulaic and oversimplified opinion or image that one person has of another, which has the effect of conditioning that person’s perceptions of, and attitudes towards, the other. Prejudice: a preconceived view of some, despite knowing little or nothing about that person.

• There are three different approaches that organizations can take of fair employment: partial or non-compliance, compliant/reactive and proactive.

• Direct discrimination occurs if an individual treats a person, or group of people, less favourably than he/she treats another person or group. Indirect discrimination occurs if a requirement or condition, while applied equally, cannot be justified and results in less favourable treatment of a person from one group compared to others not of that group. Discrimination can be justified if there is a genuine occupational qualification.

• A disability is a physical or mental impairment that has a substantial and long-term adverse affect on a person’s ability to carry out normal day-to-day activities.

• Next to legislation about disability, there is also age discrimination legislation and legislation about equal pay.

• Work-life balance is about recognizing the importance to employees of non-work, as well as work, commitments.

• Harassment is any unwelcome attention or behaviour from another that a person finds offensive or unacceptable and which results in the person feeling offended, uncomfortable or threatened, and leads to a loss of dignity or self-worth.

• Bullying is the abuse of power, or of physical or mental strength, by someone in a position of authority towards a person (or group of people), resulting in harmful stress and undermined self-confidence.

Chapter 8: International Human Resource Management

• If companies become ‘international’, there are important differences to do with managing change, creating consistency and uniformity of practice and challenging entrenched perceptions about gender, culture and contribution.

• According to Edwards and Rees (2006), the most important aspects of globalization are global production and global organizations. A global organization is an organization that employs a workforce in different countries throughout the world, with a view to maximizing performance by sourcing or providing goods and/or services in a globally based market, and in which decisions are driven by markets rather than by geography. Multinational companies (MNCs) are companies that have a national base, but which operate and trade multinationally.

• There are four different challenges and responsibilities facing the international HR manager at the strategic level. These are: international transactions and administration; building capability and resource development; business-driven activities and developing and implementing strategy.

• Culture exists within professions, religions, organizations and geographical regions. Culture is the shared beliefs, values and understandings that define and distinguish one group from another: the ‘collective programming of mind’. A national culture is a complex system of norms, social values and behaviours, expectations and legal frameworks that gives an identity to a particular country.

• Hofstede (2004) describes the key cultural differences by the following five variables: power distance, individualism, masculinity/femininity, uncertainty avoidance and long-term vs. short-term orientation.

• Ethnocentric: the practice, often unconscious, of judging other cultures from the perspective of one’s own. Polycentric on the other hand describes a position and perspective that recognizes the existence of many different national cultures, which are in principle equally valid and justifiable be reference to national identities and difference.

• Culture shock is the anxiety and feelings of surprise, disorientation and confusion felt when people have to operate within a different culture or social environment. It is also linked to the shock of discomfort of being separated from family, friends and the other things that matter in a person’s life. The experience of moving to a different cultural environment can be expressed in four stages: the ‘honeymoon’ phase, the ‘distress’ phase, the ‘autonomy and independence’ phase and the ‘reverse culture shock’ phase.

• Four elements that indicate the degree to which practice in emerging and growth orientated countries not only reflect economic conditions and imperatives, but also national and regional cultures: insightful thinking, community, purpose and performance.

• An expatriate worker is an employee deployed overseas, usually sourced from his or her country of origin. The following characteristics are associated with being a successful expatriate manager: professional and technical competence, and experience on the job; personality traits and relational abilities; perceptual dimensions and life strategies; self-maintenance factors and leadership and motivational factors. Based on his work, Sparrow offers a competency framework, which rests on the three fundamental attributes that those working overseas need to have: emotional stability, confidence and relationship building and openness to different experiences.

Chapter 9: HR Planning and Measurement

• Human Resource Planning, originally known as ‘manpower planning’, is concerned with planning and controlling the quantity and quality of labour available to an organization.

• Planning: can be understood as a set of techniques, an approach and a mindset, all of which relate to achieving specified objectives.

• HRP can be defined as involving the strategic alignment of an organization’s human capital with its business direction, and employing the use of methodical processes in analysing the current workforce, determining future workforce needs, identifying the gap between the present and the future and implementing solutions so the organization can accomplish its mission, goals and objectives. Manpower planning is part of the wider HRP function.

• Whole-time equivalents (WTEs) is a quantitative measurement of the number of staff available to or in the establishment that allows for staff on different employment contracts to be reflected in the ‘head count’.

• Metrics: relates to what and how something is measured. HR metrics focus on key aspects of the labour force, its behaviours, and its costs and contributions.

• Absence through sickness or other reasons represents a significant cost to most organizations. It impacts the organization’s ability to meet its objectives and puts pressure on those who have to cover the extra workload. The absence rate is usually calculated as follows: Absence rate = Number of days absence within team / Number of working days available x 100

• The formula used for calculating the lost time rate for the whole organization is: Lost time rate = Total absence in days o.a. given period / Total time in days available o.a. given period x 100. This formula cannot distinguish the pattern of absence and therefore, the frequency rate is preferred: Frequency rate = Nr. of spells of absence o.a. given period / Nr. of workers employed o.a. given period x 100.

• The Bradford absence index is a technique that calculates the impact on business of an individual’s absence pattern, based on the frequency and number of days lost: Bradford Absence Index = S x S x H

• Stability is a useful measure regarding turnover: Stability = Nr. of staff with over one year’s service o.a. given period / Nr. of staff employed at the period end x 100

• Recruitment vitality: Recruitment vitality = Nr. of roles filled by internal promotion – Nr. of roles filled externally /Nr. of positions filled x 100

• Turnover vitality can also be calculated: Turnover vitality = Nr. of roles vacated due to internal promotion – Nr. of roles vacuated dueto departure / Nr. of roles being vacant x 10

• Each person’s human asset worth (HAW) is: Human Asset Worth (HAW) = EC x IAM / 100

• External benchmarking runs the risk of establishing a disconnect between the underlying rational and drivers of success from the more obvious measures of their success (Pfeffer and Sutton, 2000).

Chapter 10: Learning and Development

• Learning is a fundamental and natural human process involving growth and change. Learning is about behavioural modification. There is a presumption that all employees will not only work, but also continue to learn. Therefore they need motivation: the drives and needs within each person that direct and influence their behaviours.

• Training is seen as a way by which people can learn what they need to know and do. Training is planned, structured and often-formalized learning experiences that seek to develop specific skills and knowledge needed for effective job performance. It adds to the value of human capital: the knowledge, skills, abilities and capacity to develop and innovate that is possessed by people in an organization.

• Different perceptions of the value of training: training as a cost and training as an investment.

• The need to evaluate and measure the effectiveness in training is intrinsically linked to the justification for carrying out training activity. Kirkpatrick (1998) developed four levels of training evaluation: reactions, learning, behaviour and results.

• Easterby-Smith (1994) highlights four reasons why training should be evaluated: proving, controlling, improving and learning.

• Many authors recognize that the workplace, rather than the training room, should be the primary context in which learning is located: workplace learning/work-based learning.

• Development: changes in the whole person and what they can do. It reflects the belief that all people have the potential to be more and do more, and that this potential needs to be developed as well as utilized.

• Coaching is a process in which a ‘coach’ supports an individual to develop his or her skills through a series of structured conversations by exploring the nature of challenges faced at work and helping the individual to identify the best approaches to those challenges to achieve the desired outcomes. Mentoring tends to involve the development of a relationship between a much more senior person in and a more junior person, involving the experienced person using his or her greater knowledge and expertise to accelerate the junior colleague’s development.

• E-learning can be understood as learning that is delivered, enabled or mediated using electronic technology for the explicit purpose of training in organizations. Different forms of e-learning: web-based training; interactive online learning; informal e-learning and standalone e-learning materials.

• Kolb (1984) defined how people learn from their experiences by going through these steps in his learning cycle: concrete experience; reflective observation; abstract conceptualization and active experimentation.

• The conscious competence model: A competence is the combination of skills, knowledge and experience that results in a person’s ability to carry out specific tasks and procedures to a required standard. The stages of the conscious competence model: unconscious incompetence, conscious incompetence, conscious competence and unconscious competence. In stage 4, knowledge and know-how became embedded within the individual: tacit knowledge.

• Accelerated learning is a set of principles, values and practices, which have the potential of generating enjoyable and productive learning experiences. Based on these characteristics and assumptions, Meier offers a universalistic model of learning. He describes four phases/components that must be present in order to learn: preparation, presentation, practice and performance.

Chapter 11: Managing Performance

• Performance management is the set of practices through which work is defined and reviewed, capabilities are developed and rewards are distributed. The basic requirements of managing performance are: everyone should know what to, and what not to do; everyone contributes; everyone develops the necessary skills; managers must have the necessary skills and managers measure and monitor.

• Performance can be interpreted as expressing the relationship between a person’s capabilities and what the person actually achieves, usually related to a person’s job. Performance is explained by the following concepts: productivity, effectiveness, effort, the effort bargain, discretionary effort and contribution.

• Extrinsic motivation: factors and decisions ‘outside’ the individual represent the main context for understanding and influencing behaviour; intrinsic motivation: forces and processes where the individual interact with the external environment and specific external influences such as reward systems, performance standards and managerial expectations.

• Nohria et al. (2008) theorize that motivation is based on and driven by four basic things. These are related to motivational and performance strategies:

• Managers are faced with a wide range of situations that create very different kinds of performance problems: people absent from work, people at work who don’t perform, legitimizing low standards, raising performance expectations and standards and removing the barriers to higher performance.

• Performance appraisal is a process for reviewing the past performance of an employee, and agreeing future objectives and development activities.

• Many appraisals require the manager to rate the performance of each employee in order to compare performance among colleagues. Different rating scales: manager-allocated rating scales, objective-based rating scales and points-based rating scales.

• SMART is an acronym used to describe key characteristics of appraisal objectives: Specific, Measurable outcome, Agreed, Realistic and Timely.

• A direct objective: an individual or team is responsible for a section of the financial budget of the organization. Indirect objectives: key performance indicators (KPIs) and project measures.

• Employees and managers generally benefit from honest, objective feedback about how things are going. It’s a constant exchange of information. 360-degree feedback involves seeking contributions about what a person achieves and how he/she operates not only from the line manager, but also from others who are in contact with the person and are in a position to offer such feedback. A development plan is an important tool to help an individual plan how he/she can best maximize his/her skills and knowledge.

• If there are problems with the performance of employees, managers can also use these mechanisms: an informal performance review and a formal performance review.

Chapter 12: Managing Rewards

• Rewards can be both material and symbolic in form, and are outcomes of the employment and psychological contracts. There is no consensus on how organizations should be rewarding their employees. Instrumental conditioning is immediately giving a reward for desired behaviour. A reward presents an extrinsic source of motivation that does not alter a person’s emotional or cognitive commitment, which are the keys to understanding and influencing behaviour. Pay is the regular and contractually agreed monetary rewards, usually linked to position or job and paid as a wage or salary.

• There are different reward categories: monetary rewards, benefits associated with working for the organization, psychological rewards and personal rewards.

• A bonus is an additional, but variable, payment associated with individual, group or organizational performance. An incentive is the prospect or promise of a reward that is conditional upon an agreed outcome being achieved. A benefit is a normally contractually agreed ‘addition’ to the wage or salary, provided by an employer as part of the overall employment package. Reward systems are all of the practices, procedures and methods of rewarding employees either in use by, or potentially available to, management.

• Kohn states that the following factors determine why rewards, in the form of incentives, fail: pay is not a motivator, rewards punish, rewards rupture relationships, rewards ignore reasons, rewards discourage risk taking and rewards undermine interest. There are counterarguments against this reasoning.

• There are different forms or statuses of rewards. These are:

  • Rewards as rights: rewards become rights largely through the process of managers offering employment, and through the prospective employee agreeing to accept the terms and conditions embodied in the contract of employment. Reciprocation relates to the effect that certain kinds of rewards generate.

  • Rewards that are conditional or contingent: many rewards made available to employees are linked to, and dependent on, certain conditions being met. Expectation focuses attention on the behavioural impact of different ‘reward experiences’ and on whether the amount or form of any given reward creates a positive or negative response.

  • Rewards that are discretionary: rewards that are neither based on contractual rights nor on meeting specified conditions, but which result from managers and employees deciding to reward others in ways that only make sense in the context of their own particular circumstances and working environment.

• A great deal of effort goes into determining the level at which to pay employees. There are some different typical hourly payment systems: flat rate, piece rates, group/team bonus and rates for skills, shift premium and overtime premium.

• Performance-related pay (PRP) uses financial incentives to link an individual’s pay to his/her performance.

• Incremental pay schemes: length of service drives pay increases, in addition to annual increases linked to cost-of-living adjustments.