Human Resource Management drivers
Created | Updated Oct 2, 2003
Introduction
This essay discusses why many organisations have changed from an established Personnel Management (PM) approach to a Human Resource Management (HRM) approach in relation to managing employees. The essay will attempt to identify the drivers for change. References will be made to organisations, which have implemented such changes and will be cross-referenced with the theory of change of the management of people. The essay will begin by examining the differences between the PM and HRM approaches.
Human Resource Management and Personnel Management
According to the Institute of Personnel Management, “personnel management is that part of management concerned with people at work and with their relationships within an enterprise.” (Måns Mårtensson, 2002). Story (1993) used a “mapping” or “matrix” technique in order to explain the different meanings of HRM. He divided these into four categories; hard and soft, strong and weak. Story argued that a “Strong and Hard” meaning of HRM is: “Strategic interventions designed to secure full utilization of labour” (Story, 1993). There is a clear difference in the two definitions above. PM is concerned mainly with the management of people in the organisation, whereas HRM takes a more “strategic” approach to managing employees in order to gain full potential from their workforce. This is essentially the difference between the two terms for Employee Management (EM) . HRM attempts to include the objectives and aims of a business when planning ahead. However a departmental change of name does not necessarily mean a change of role. Many companies have changed the name of their personnel department to human resource department. There is much debate on what the change of name means for an organisation, and each organisation often has its own interpretation.
In order to understand why a more strategic approach is necessary, we have to look at the changing economic and market conditions in which businesses have to compete.
Competition from foreign businesses
During the last twenty years businesses have been forced to become increasingly competitive, due to global competition. For example, whereas in 1975 only three of the world’s leading banks were Japanese, in 1987 the number reached seven. When Toyota located a manufacturing facility in Derby it was the hundredth Japanese manufacturing company to do so in the UK, suggesting that UK businesses had to become more competitive to maintain their market position (Story, J 1993).
Furthermore, the formation of the EU created a “free market” in Europe. The free market was designed to promote competition by lifting trade restrictions. In order for companies to offer a comparatively good service and product, they had to become more efficient and employ cost cutting strategies. Part of the cost cutting initiative to improve efficiency was to identify areas within EM that could be organised more effectively.
Technological advances
The introduction and the continuing advancement of new technology means that employees need to be constantly re-organised. For employees to be most effective, EM departments need to organise their workforce in order to utilize the equipment and employees to their full potential. In accordance with that idea, assembly lines in Ford had to be completely re-organised and labour distributed appropriately to ensure the plant and equipment becomes a valuable resource. IBM is an organisation that has married both technology and employees to work together in an efficient manner. They have given their sales staff (who spend much of their time away from the office) mobile phones and laptops. This gives a means of staying in touch with colleagues without having to waste time travelling to and from the office. In addition to this IBM has introduced “hot desks” where employees share a desk so saving costs on space and facilities.
An EM department is responsible for the training and the development of employees to use new or existing equipment. Budgeting for this is a huge consideration for an EM department. Technology creates other EM issues. Often when technology is introduced, some employees’ jobs become obsolete; as a result redundancies have to be made which the EM department initiates. The EM department must decide which employees should be made redundant, and which employees should be trained and retrained. This requires careful strategic decision-making.
The change from a collective management to an individual management approach
Business’s approach to people management has caused a shift from a “collective” management style towards a more “individualistic” approach. The Third Workplace Industrial Relations Survey database (WIRS3) shows that the proportion of employees in businesses employing 25 or more individuals whose terms and conditions are officially negotiated by collective bargaining, fell from 71% in 1980 to just 54% a decade later (Millward, N, Stevens, M, Smart, D, and Hawes, W, 1992)
Many businesses have discovered that an individual management approach matches the needs of the job closer than a collective management approach, therefore reducing inefficiencies. Job specifications are written to clarify roles and prevent overlapping of responsibilities and highlight shortages prior to the recruitment process. Setting targets in performance appraisals on an individual basis is much more productive than setting targets on a whole organisational or departmental basis.
The more individual approach to management has coincided with the weakening of trade unions. As performance targets, pay and contractual conditions are being set on an individual basis, there is less of a common or shared area of discontent between employees. An individualistic approach to management helps motivate staff as it makes an employee feel he/she makes a greater contribution to the company. In Jaguar, foremen were trained to be managers and empowered to make decisions on issues such as budget, training and development. This led to a change where employees look to their managers to rectify problems before going to a trade union. This ensures workers have an opportunity to influence the operation of the company. Tyson stated that an empowering business culture should facilitate and encourage creativity. Management of diversity has to be recognised as a business objective that will lead to the company having a competitive advantage. (Tyson, 1995)
Women seeking employment
Over the past twenty years more women have been seeking part time employment. Part time staff help a company adapt faster to changes within the marketplace. Angela Coyle has written that a business strategy for reducing the cost of staff, is to employ a lot of people for a short time, as opposed to employing a few people for longer periods of time. This means they can avoid paying National Insurances contributions and do not have to provide employees with tea and lunch breaks, therefore making a considerable saving (Coyle A, 1986). Argos Ltd uses this method to keep their operating costs down. Jobs such as “customer advisors” only require a little training so Argos use this strategy. Part time employees are often in a better position to cope with sudden increases in workload. This is due to being more flexible with their working hours. Another business, which has seen the benefits of employing part time women employees, is Barclays Bank. They introduced a system where employees that returned to work after maternity leave were offered part time employment in their previous position for two years providing they work a minimum of 14 hours per week (Thomson, 1993).
Commitment
Another driver for change from PM to HRM within many business sectors, especially retail, is the vast changes in the way companies wish their employees to view the business. Businesses believe that many of their employees now have to be loyal and devoted to the company. A sense of commitment is thought to improve productivity in a workforce and provides them with a common goal. This means that employees are empowered to help the company using their own initiative as opposed to following orders from a manager. Thomson said in order to capitalize on commitment from workers, the rewards given should realise individual’s self-actualisation needs. Maslow stated that to achieve self-actualisation and motivation in a workforce, basic needs have to be met first. He placed them in the following order: survival, security, social, esteem and self-actualisation. This is how businesses should create a committed and motivated workforce. For businesses to help employees achieve self-actualisation they should give them room to develop their skills. A report of the Chemical Industries Association in 1991 observed that operators increasingly take on a wider range of skills and responsibilities than that for which they have been trained. This shows a committed workforce (Thomson, 1993).
Adaptability
Highly competitive markets mean companies have to become highly adaptable so that they can maintain and improve their position. For a company to be highly adaptable it must have a highly adaptable workforce. Employees must accept change in their workplace. They must embrace change and not be afraid of the impact of change. Part of the process of change is the training and development of employees. Employees need training when areas of the business are altered. Labour management departments should anticipate the training needs of their employees and help a business through any changes. This may include restructuring the company or even making redundancies in some areas while recruiting in others. Redundancies are difficult to make, however without a strategic view to making them, many businesses would not survive.
Conclusion
In conclusion, the change from PM to HRM was not instantaneous. Many businesses took years to change and still some have kept their traditional departmental name of Personnel Management. However the change of name does not necessarily mean that they changed their attitudes. In the past, companies used to compete on product and price, now they compete on people as well. The main drivers for change from PM to HRM are more committed workforces, women seeking part time employment, adaptability or flexibility of workforce, technological advances and the increased competition due to foreign businesses entering UK markets.
Increased competition is the trigger for the other drivers for the change in labour management. Increased competition forces businesses to compete on a global level, and they need to take a strategic view of the management of a business to survive. This includes taking a strategic view of management and of the labour force within an organisation. This is where the HRM model is used. The increased levels of competition mean that businesses need an adaptable and committed workforce. This as already discussed will give a huge strategic advantage.
When adopting a HRM approach, businesses must establish how they can reduce costs to stay competitive. A method that is used is to recruit women who are often keen to find part time, often lower paid work. This reduces costs and gives a competitive advantage.
Technological advances have an immense affect on businesses. Staying ahead and constantly updating employees on how to use the latest technology is a vital element of EM. If a business can achieve this it gives them a competitive edge.
A company that has followed the trend of changing its department from PM to HRM is making a statement that its employees are a valuable part of the business and should be treated as any other resource in the firm. The HRM model recognises its employees as strategic area of the business, which needs to be considered when making management decisions however in the past under the PM model businesses often neglected to consider the human factor.
Human Resource management has already become the new term in the majority of businesses and organisations for Employee management departments. Even if companies keep the term Personnel Management, it is likely that the management of their labour force will be more strategically managed. Businesses will be forced to adapt and to take an HRM approach, as it is the most efficient way of managing a labour force, and therefore improving its market position. HRM will continue to evolve and develop in its own right. As new methods of increasing efficiency and cutting costs are introduced, HRM departments will adopt them. In future businesses will need to continue to value and consider all of their resources but most particularly their employees.
Biography
Web site
Måns Mårtensson (2002) Institute of Personnel Management, 2002 Available from: http://www.eurofound.eu.int/emire/IRELAND/PERSONNELMANAGEMENT-IR.html [accessed: 20th November 2002]
Books
Coyle, A, (1986) Dirty Business, West Midlands, West Midlands Low Pay Unit.
Millward, N, Stevens, M, Smart, D, and Hawes, W, (1992), Workplace Industrial Relations in Transition, Aldershot, Dartmouth Publishing.
Story, J (1993), Developments in the Management of Human Resources, Oxford, Blackwell Publisher.
Thomson, R (1993) Managing People, Butterworth-Heinemann Ltd, Oxford.
Tyson, S (1995) Strategic Prospects for HRM, Institute of Personnel and Development, London.
This essay discusses why many organisations have changed from an established Personnel Management (PM) approach to a Human Resource Management (HRM) approach in relation to managing employees. The essay will attempt to identify the drivers for change. References will be made to organisations, which have implemented such changes and will be cross-referenced with the theory of change of the management of people. The essay will begin by examining the differences between the PM and HRM approaches.
Human Resource Management and Personnel Management
According to the Institute of Personnel Management, “personnel management is that part of management concerned with people at work and with their relationships within an enterprise.” (Måns Mårtensson, 2002). Story (1993) used a “mapping” or “matrix” technique in order to explain the different meanings of HRM. He divided these into four categories; hard and soft, strong and weak. Story argued that a “Strong and Hard” meaning of HRM is: “Strategic interventions designed to secure full utilization of labour” (Story, 1993). There is a clear difference in the two definitions above. PM is concerned mainly with the management of people in the organisation, whereas HRM takes a more “strategic” approach to managing employees in order to gain full potential from their workforce. This is essentially the difference between the two terms for Employee Management (EM) . HRM attempts to include the objectives and aims of a business when planning ahead. However a departmental change of name does not necessarily mean a change of role. Many companies have changed the name of their personnel department to human resource department. There is much debate on what the change of name means for an organisation, and each organisation often has its own interpretation.
In order to understand why a more strategic approach is necessary, we have to look at the changing economic and market conditions in which businesses have to compete.
Competition from foreign businesses
During the last twenty years businesses have been forced to become increasingly competitive, due to global competition. For example, whereas in 1975 only three of the world’s leading banks were Japanese, in 1987 the number reached seven. When Toyota located a manufacturing facility in Derby it was the hundredth Japanese manufacturing company to do so in the UK, suggesting that UK businesses had to become more competitive to maintain their market position (Story, J 1993).
Furthermore, the formation of the EU created a “free market” in Europe. The free market was designed to promote competition by lifting trade restrictions. In order for companies to offer a comparatively good service and product, they had to become more efficient and employ cost cutting strategies. Part of the cost cutting initiative to improve efficiency was to identify areas within EM that could be organised more effectively.
Technological advances
The introduction and the continuing advancement of new technology means that employees need to be constantly re-organised. For employees to be most effective, EM departments need to organise their workforce in order to utilize the equipment and employees to their full potential. In accordance with that idea, assembly lines in Ford had to be completely re-organised and labour distributed appropriately to ensure the plant and equipment becomes a valuable resource. IBM is an organisation that has married both technology and employees to work together in an efficient manner. They have given their sales staff (who spend much of their time away from the office) mobile phones and laptops. This gives a means of staying in touch with colleagues without having to waste time travelling to and from the office. In addition to this IBM has introduced “hot desks” where employees share a desk so saving costs on space and facilities.
An EM department is responsible for the training and the development of employees to use new or existing equipment. Budgeting for this is a huge consideration for an EM department. Technology creates other EM issues. Often when technology is introduced, some employees’ jobs become obsolete; as a result redundancies have to be made which the EM department initiates. The EM department must decide which employees should be made redundant, and which employees should be trained and retrained. This requires careful strategic decision-making.
The change from a collective management to an individual management approach
Business’s approach to people management has caused a shift from a “collective” management style towards a more “individualistic” approach. The Third Workplace Industrial Relations Survey database (WIRS3) shows that the proportion of employees in businesses employing 25 or more individuals whose terms and conditions are officially negotiated by collective bargaining, fell from 71% in 1980 to just 54% a decade later (Millward, N, Stevens, M, Smart, D, and Hawes, W, 1992)
Many businesses have discovered that an individual management approach matches the needs of the job closer than a collective management approach, therefore reducing inefficiencies. Job specifications are written to clarify roles and prevent overlapping of responsibilities and highlight shortages prior to the recruitment process. Setting targets in performance appraisals on an individual basis is much more productive than setting targets on a whole organisational or departmental basis.
The more individual approach to management has coincided with the weakening of trade unions. As performance targets, pay and contractual conditions are being set on an individual basis, there is less of a common or shared area of discontent between employees. An individualistic approach to management helps motivate staff as it makes an employee feel he/she makes a greater contribution to the company. In Jaguar, foremen were trained to be managers and empowered to make decisions on issues such as budget, training and development. This led to a change where employees look to their managers to rectify problems before going to a trade union. This ensures workers have an opportunity to influence the operation of the company. Tyson stated that an empowering business culture should facilitate and encourage creativity. Management of diversity has to be recognised as a business objective that will lead to the company having a competitive advantage. (Tyson, 1995)
Women seeking employment
Over the past twenty years more women have been seeking part time employment. Part time staff help a company adapt faster to changes within the marketplace. Angela Coyle has written that a business strategy for reducing the cost of staff, is to employ a lot of people for a short time, as opposed to employing a few people for longer periods of time. This means they can avoid paying National Insurances contributions and do not have to provide employees with tea and lunch breaks, therefore making a considerable saving (Coyle A, 1986). Argos Ltd uses this method to keep their operating costs down. Jobs such as “customer advisors” only require a little training so Argos use this strategy. Part time employees are often in a better position to cope with sudden increases in workload. This is due to being more flexible with their working hours. Another business, which has seen the benefits of employing part time women employees, is Barclays Bank. They introduced a system where employees that returned to work after maternity leave were offered part time employment in their previous position for two years providing they work a minimum of 14 hours per week (Thomson, 1993).
Commitment
Another driver for change from PM to HRM within many business sectors, especially retail, is the vast changes in the way companies wish their employees to view the business. Businesses believe that many of their employees now have to be loyal and devoted to the company. A sense of commitment is thought to improve productivity in a workforce and provides them with a common goal. This means that employees are empowered to help the company using their own initiative as opposed to following orders from a manager. Thomson said in order to capitalize on commitment from workers, the rewards given should realise individual’s self-actualisation needs. Maslow stated that to achieve self-actualisation and motivation in a workforce, basic needs have to be met first. He placed them in the following order: survival, security, social, esteem and self-actualisation. This is how businesses should create a committed and motivated workforce. For businesses to help employees achieve self-actualisation they should give them room to develop their skills. A report of the Chemical Industries Association in 1991 observed that operators increasingly take on a wider range of skills and responsibilities than that for which they have been trained. This shows a committed workforce (Thomson, 1993).
Adaptability
Highly competitive markets mean companies have to become highly adaptable so that they can maintain and improve their position. For a company to be highly adaptable it must have a highly adaptable workforce. Employees must accept change in their workplace. They must embrace change and not be afraid of the impact of change. Part of the process of change is the training and development of employees. Employees need training when areas of the business are altered. Labour management departments should anticipate the training needs of their employees and help a business through any changes. This may include restructuring the company or even making redundancies in some areas while recruiting in others. Redundancies are difficult to make, however without a strategic view to making them, many businesses would not survive.
Conclusion
In conclusion, the change from PM to HRM was not instantaneous. Many businesses took years to change and still some have kept their traditional departmental name of Personnel Management. However the change of name does not necessarily mean that they changed their attitudes. In the past, companies used to compete on product and price, now they compete on people as well. The main drivers for change from PM to HRM are more committed workforces, women seeking part time employment, adaptability or flexibility of workforce, technological advances and the increased competition due to foreign businesses entering UK markets.
Increased competition is the trigger for the other drivers for the change in labour management. Increased competition forces businesses to compete on a global level, and they need to take a strategic view of the management of a business to survive. This includes taking a strategic view of management and of the labour force within an organisation. This is where the HRM model is used. The increased levels of competition mean that businesses need an adaptable and committed workforce. This as already discussed will give a huge strategic advantage.
When adopting a HRM approach, businesses must establish how they can reduce costs to stay competitive. A method that is used is to recruit women who are often keen to find part time, often lower paid work. This reduces costs and gives a competitive advantage.
Technological advances have an immense affect on businesses. Staying ahead and constantly updating employees on how to use the latest technology is a vital element of EM. If a business can achieve this it gives them a competitive edge.
A company that has followed the trend of changing its department from PM to HRM is making a statement that its employees are a valuable part of the business and should be treated as any other resource in the firm. The HRM model recognises its employees as strategic area of the business, which needs to be considered when making management decisions however in the past under the PM model businesses often neglected to consider the human factor.
Human Resource management has already become the new term in the majority of businesses and organisations for Employee management departments. Even if companies keep the term Personnel Management, it is likely that the management of their labour force will be more strategically managed. Businesses will be forced to adapt and to take an HRM approach, as it is the most efficient way of managing a labour force, and therefore improving its market position. HRM will continue to evolve and develop in its own right. As new methods of increasing efficiency and cutting costs are introduced, HRM departments will adopt them. In future businesses will need to continue to value and consider all of their resources but most particularly their employees.
Biography
Web site
Måns Mårtensson (2002) Institute of Personnel Management, 2002 Available from: http://www.eurofound.eu.int/emire/IRELAND/PERSONNELMANAGEMENT-IR.html [accessed: 20th November 2002]
Books
Coyle, A, (1986) Dirty Business, West Midlands, West Midlands Low Pay Unit.
Millward, N, Stevens, M, Smart, D, and Hawes, W, (1992), Workplace Industrial Relations in Transition, Aldershot, Dartmouth Publishing.
Story, J (1993), Developments in the Management of Human Resources, Oxford, Blackwell Publisher.
Thomson, R (1993) Managing People, Butterworth-Heinemann Ltd, Oxford.
Tyson, S (1995) Strategic Prospects for HRM, Institute of Personnel and Development, London.
