HRM in Organisations - Coursework Example

HRM in Organisations Topic: Critically evaluate the effectiveness of the Ulrich module of HR and business partnering in helping to deliver value to organization Table of contents Introduction 1 Four-role model of HR 1 Three-legged stool model 5 Factors impacting four-role model 7 Factors impacting three-legged stool model 9 Practical implications of four-role model 10 Practical implications of three-legged stool model 12 Conclusions and recommendations 17 References Introduction The main challenges faced by contemporary organizations are globalization, profitability through growth, technology, intellectual capital and continuous change. Considering the critical challenges faced by contemporary organizations, Dave Ulrich has emphasized the role of human resources management as critical to organizational sustenance and progress. Ulrich’s foundation to HR model was based on his statement, “HR should be defined not by what it does but by what it delivers – the results that enrich the organization’s value to customers, investors, and employees” (1998; p.29). To underpin this proposition, Ulrich has proposed the four-role model of HRM that clearly defines the roles of human resource professionals in creating value for the organization. The present work is an attempt to understand both models from a critical perspective through respective advantages and disadvantages. These models have been studied based on few examples derived from organizations that have successfully adopted them; demerits have also been explored based on some unsuccessful attempts. Four-role model of HR: Identification of various roles that HR professionals performed has led Ulrich to organize these multiple roles in a more systematic and understandable fashion that resulted in the four-role model. In the four-role model, Ulrich has emphasized the business-partnership roles that HR professionals play in terms of focus on long-term/strategic to short-term/operational functions, and activities ranging from managing processes through HR tools and systems to managing people. Based on these two dimensions, focus and activities, Ulrich has identified four key roles for HR professionals that include, management of strategic human resources, management of firm infrastructure, management of employee contribution, and management of transformation and change (Ulrich, 1997; p.25). Ulrich (1997) has referred to each of these functions with specific metaphors that are identical with respective role or function, namely, strategic partner, administrative expert, employee champion, and change agent. As strategic partners, HR professionals are involved in framing HR strategies in line with organizational goals and objectives; specific operational objectives are also considered while framing the strategies. For instance, Ulrich (1997) cites the example of Marriott Hotel’s initiative while starting their operations in Hong Kong. This strategic initiative included introduction of five-day working schedule for its staff, which was unlike most other competitors in that sector. This initiative was meant to attract the best talent in the industry, as well as a step to retain them. Ulrich stated, “The five-day workweek became a cornerstone of Marriott’s strategy for achieving high-quality service, enabling the company to advertise, solicit, and secure the talented employees who would provide that service in Hong Kong market” (1997; p.26). It has been proven in many organizations that appropriate HR strategies are very effective in achieving organizational objectives. Critiques, which include Ulrich also, have argued that the HR roles in this model literally mean HR functions, and not limited to specific roles. However, many organizations that adopted the Ulrich model had misinterpreted the model and its adoption. Adoption of this model had lead to division of HR functions based on roles, which was not the original intention or idea embedded in this model. Moreover, HR functions and structures cannot be fixed, and need to be changed based on time and situation. The four-role model provided little opportunity for this. The CIPD research reported that about 30% of specific sample respondents had indicated that the Ulrich’s model was adopted completely, whereas another 30% indicated only partial adoption of the model (Goodge, 2010). Ulrich’s model advocated the adoption of HR shared services and role adoption, with key emphasis on business relationships. All these resultant aspects of Ulrich’s model were restructured into a different model by organisations by modifying the HR roles according to situation and competition, which resulted in a HR model that Ulrich later described as the three-legged model. Three-legged stool model: The three-legged stool, as an extension to Ulrich’s four-role model, comprises of three critical organizational elements, which include a Shared Services Centre (SSC), Centre of Excellence (CoE) and strategic business partners. Through this model, each of these elements was meant to cover critical parts of the organizational function. Like, the SSC focused on economies of scale and process efficiency through smaller teams, like finance, IT, HR, that provided strategic direction and governance to the larger organization. Second is the business partners that manage business centred value added HR activities through business partnering with leaders of specific business units. The third element is the CoE that worked towards providing professional policy support to business partners in specific functions such as resourcing, employee relations, reward and training (Borough & Rickard, 2009, p.21; Holbeche, 2009; p.67). Evidences indicate a wide adoption of the three-legged model in various organizations across the world (Borough & Rickard, 2009; p.xii). Some well-known organizations like IBM, Shell, Standard Chartered Bank, Lloyds TSB, Royal Bank of Scotland have successfully set up HR SSC at overseas locations (CIPD, 2009). The function of each SSC varies and includes a variety of forms of HR administrative functions. Based on these, the SSCs adopt different business models of functioning. Usually, SSCs are set up along with CoE and Business partners. In other words, centres of excellence and business partnering are integral schemes of SSCs to enhance organizational effectiveness and HR functions. Companies that have adopted the 3-legged stool model successfully is the National Health Services (NHS) of UK among various others (Broughton et al, 2007; p.2). Though Ulrich’s 3-legged stool concept has produced effective and sustainable results for long time, it has been criticized by many in terms of other HR effects this model caused mainly through loss of jobs (Han, Kuchinke & Boulay, 2010; p.62) and its inability as a best fit (Hird, Marsh & Sparrow, 2009; p.10). HR model proposed by Ulrich mainly focused on improving organizational effectiveness and profitability by linking all critical elements, but did not consider how these models may be best implementable. In lieu of tough competition and an urge to continually improve effectiveness in order to sustain competitiveness, organizations have been adopting various approaches that eventually resulted in cross-national transactions. Many organizations set up their SSCs and CoEs in other countries in order to improve profitability and efficiency (Reilly & Williams, 2006; p.22). Critiques point to this aspect as the causative factor for loss of jobs and also reduction in value of business partnering. Very often SSCs are operated on models that evaluate business based on billing per seat and not on performance at business levels. Performance is measured at lower levels, which is not in line with business strategy, and hence causes incongruence. Factors impacting 4-role model Ulrich’s (1997) four-role model describes HR roles most prominently than any other model, and hence is considered as the most widely cited and comprehensive model in HR literature. On a broader aspect, this model considers HR professionals as administrators and also as consultants (Bhatnagar & Sharma, 2005; p.1713). Many researches have successfully established a relation between these HR roles and organizational performance/efficiency through the four roles mentioned by Ulrich. However, practical implications of these HR roles on operations have produced varying outcomes. The concept of Strategic Human Resource Management has been introduced to address many of limitations of the conventional HRM practices, and works on the philosophy of integration of HR strategy with business strategy. For this, Karen Legge (1989) explains that integration of human resource policies with strategic business planning can help in bringing about appropriate organizational change (cited in Armstrong, & Baron, 2002; p.12). On the other hand, Legge also argued that ‘evidence shows that the integration of strategy and HRM is at best a lengthy, complex and iterative process and, at worst, that there is little evidence to suggest that widespread integration is achieved” (1995, p.124). In the role of strategic partner, HR professionals’ successful contribution depends upon their participation in framing strategies and in decision making processes. Strategic partnership impacts relationship between HR professionals and line managers. Success of strategic partnership also depends upon measurability of the outcomes of partnership, which can be based on organizational performance metrics such as training effectiveness, turnover numbers, governance and adherence to audit and compliance, operational performance, customer satisfaction etc (Ulrich, 1997; p.111). Organizations use such metrics to assess the effectiveness of strategies framed to achieve business objectives. In the management of firm infrastructure or administrative functions, HR shapes the practices, technology, and policies. These are impacted by the nature of the organisation, governmental rules and regulations, and types of customers and suppliers. Here, HR professionals are involved in designing, facilitating, coaching, and drafting organizational policies, norms, culture, as well as systems. In the role of administrative functions, Ulrich believes that HR professionals are involved in designing and delivering efficient HR processes for staffing, training, appraising, rewarding, promoting, and managing the flow of employees throughout the organization (Long, 2008; p.90). Towards employee contribution, HR professionals are involved in developing employees through training, coaching, and mentoring; motivating through appropriate rewards and recognition policies and practices; encouraging innovation and creativity; enhance commitment through practices such as delegation and providing different roles and responsibilities. Leadership plays a critical role in helping HR professionals take up employee champion roles. The factors that impact management of transformation and change include HR professionals’ knowledge and expertise; involvement in strategic business decisions; interpersonal relationships; and support from management (Long, 2008; p.90). They should be able to take up consultant’s and facilitator’s role and help operations in executing the change as desired. The four critical roles described by Ulrich are indicative of the extent of HR involvement in various organizational functions. On similar lines, Legge (1995) pointed that integration of HR policies with strategic business planning can help in bringing about appropriate organizational change (Armstrong & Baron, 2002: 12). However, Legge (2005: 124) later argued stating, ‘evidence shows that the integration of strategy and HRM is at best a lengthy, complex and iterative process and, at worst, that there is little evidence to suggest that widespread integration is achieved.’ The HR department formulates policies and practices in the best interest of the employees, but it fails to consider various factors affecting these situations like environmental trends, market behaviour, employee expectations etc. Moreover, involvement of HR personnel in strategic operational decisions is minimal and vice versa; extent of involvement varies across countries (Brewster & Larsen, 2000; p.58). Therefore, strategic integration of decisions from HR and operations perspective may not be effective; in other words, operations may not be able to fully embrace the HR policies and HR department may not be able to do complete justice to their personnel by framing policies and practices that are only partially beneficial and/or applicable. Factors impacting 3-legged model: From value proposition perspective, the CIPD report by Hird et al. (2009; p.14) reveals that the most critical factor is efficiency of implementation of each of the three segments of the model. In implementation of the business partner segment, main hindrances include getting all HR business partners think and act in accordance with organizational objectives; setting expectations and goals; aligning corporate and local business strategies with organizational objectives; roles and skill management; and relationship management with other two segments. At the Centres of Excellence, the main factors include setting role and goal clarity; skill and expertise with right business acumen; resource allocation; achievement and maintenance of desired quality of service; dependence on other segments for delivering results; opportunity for innovation; and effective channels of communication. Success of SSCs depend upon provider performance metrics such as reliability, skill levels, insight into business culture, and communication effectiveness; secondly, expectations of company from its leadership in terms of people management, communication and service delivery. Proactive behaviour of managers significantly impacts service and quality at SSC. Success of SSC also depends upon quality of service, employees, and performance; these aspects are greatly dependent upon leadership, remuneration, technology, and systems. Further, standardization of HR processes and aligning them to employee and customer needs becomes necessary to achieve expected effectiveness of HR systems. Scalability and return on investment need to be optimum to achieve desired operational efficiency. Practical implications of the four-role model: Ulrich (1997; p.31) has quoted the examples of Hewlett-Packard and Clorox as successful organizations that adopted the four-role model and have benefited from the model. At HP, the four HR teams had well-defined individual roles and functions, all aligned to a common vision of satisfying ‘customer needs’. One HR team had the responsibility of facilitating, measuring and improving quality of management and teamwork; the second team was a part of business strategy and involved in HR management and facilitated change; the third team promoted individual and organizational learning and developmental activities; the fourth team managed people within HR department (Ulrich, 1997; p.31). This model proved very successful for HP and helped in winning the Personnel Journal Optimas Award for General Excellence (Ulrich, 1997; p.32). In relation to HP’s strategy, Ulrich (1997; p.35) stated, ‘By focusing on all four roles, HP practice legitimizes all HR professionals, not just those working on the upper-cell strategic activities. The accountabilities assigned for each role focus attention on the responsibility of the line managers to become actively engaged in people-related work’. At Hewlett-Packard, success of this model is attributable to its appropriate interpretation and systematic congruent practices adopted. Another application of this model is that of General Motor’s 3T strategy- Talent, Technology and Transformation. Leonard (2002) explains that this model was introduced by the global HR leader at GM. Through three elements, GM aligned its strategies to HR. The ‘technology’ phase covered all HR activities through an online system thereby giving much time to the HR professionals to concentrate on other strategic aspects of business. The ‘talent’ phase included training and development of executives. The ‘transformation’ phase covered administrative aspects such as standardization of training at different locations; building strong networks; and execution of change in different locations of GM. This was successful as it was well planned and executed through clear roles and specific goals were assigned to the HR professionals. This model improved communication between different units of GM; improved efficiency and profitability; and improved its position in the market It is important to note that both the companies that reported success with this model were from the United States, and critiques feel this model was based on Ulrich’s experience and not on methodical review considering different locations. Caldwell (2003) reported that many organizations have not been able to distinguish between strategic partner and change agent roles as both seem to be overlapping (Talasmaki, 2009; p.18). Yet, this model has become the platform for many other models that were eventually proposed by various other researchers. Practical implications of 3-legged stool model: The best quotable example of the 3-legged stool model is that of Flextronics, which is known for its ‘Discover, Design, Deliver’ HR organizational model that was formed after this organization faced a number of crises because of various external factors such as competition, changing customer needs, and changing markets. According to this model, the discover element constitutes HR business partners who would serve as strategists embedded in the senior leadership teams responsible for each of the global segments/business units. The design element includes multiple centres of excellence in areas such as compensation, learning and development, and HR excellence. The deliver element comprises of sizeable regional HR operations organizations supporting the three business regions of Asia, Europe and the Americas (Humphries and Wilson, 2009; Ch.9). Other successful adoptions of this model, as cited by Ulrich et al, (2009) include that of Pfizer, Takeda, and Intel. Most of the companies that adopted this model have also opted for outsourcing part of their shared services and/or centres of excellence. For example, Pfizer outsources a number of its functions to India in the accounting and finance management section (AP Monthly, 2009; p.1). Many other companies in the banking sector have also adopted this approach through an in-house SSC. Low quality service and other fraudulent practices have been the major issues in such models. Another successful adoption of the 3-legged stool model can be seen in Nestle, which operates at global level and is divided into 3 zones. Nestle operates in 84 different countries, with different products and services. However, at macro level, some of its functions are built on common 3-box model. For example, the Nestle HR organization follows 3-box model, and each function within this model is further based on 3-box model. Some of Neslte’s shared services operate globally within a structure called Nestle Business Services. Centres of Expertise/excellence at Nestle are organized locally and are coordinated globally. Operational HR units are also managed locally according to the need and local culture, but are coordinated and controlled based on global structures. In this manner, the HR functions are divided based on specific design principles and the model is implemented in a flexible manner according to market size, complexity and structure through a lean and efficient HR organization (Hird et al., 2009; p.23). Nestle enjoyed the merits of this model because of four main factors that include interpretation, coordination and control, flexibility and leadership, and market capitalization. Firstly, the model has been appropriately interpreted and a plan congruent with these principles has been made. Secondly, global coordination and local control with flexibility has provided the right base for organization to carry out its functions without undesirable challenges. Here, attitudes, values, behaviours and efficacies of individuals belonging to different cultures and nations are considered. This is very much essential for HRM in international and global contexts (Wilton, 2010; p.122). Thirdly, much emphasis has been laid on people management and capturing the customer market. Local HR strategies are aligned to operational HR managers and are inline with relevant corporate strategy and market HR. Global or corporate HR policies are very flexible and can be adjusted to suit the size, complexity and geographic location of concerned units and sites. At global level, Neslte Business Services organisation operates independent of any other business in the market and strives to sustain its competitiveness through its own products and services (Hird et al, 2009; p.24). Besides profitability and efficiency, the 3-legged stool model helps in promoting discipline. It helps in consolidation and simplification of processes besides harnessing the evolving technology. After segregating the work into different functions carried out by different units, business partners will have sufficient flexibility to think strategically in terms of business enhancement. Moreover, tailored approaches adopted at shared services are being copied at centres of excellence. This model has been adopted by organizations of all sizes, large, medium and small (Hird et al., 2009). The 3-legged stool model of HRM provides a scalable model that would be applicable in times of massive growth or change; incorporation of ‘discover’ as a strategic element would help in aligning the functions and practices to business requirement. Many advantages of the 3-legged model have been quoted for each segment of the model. SSCs are set up to reduce administrative and service costs to much lesser levels. Shared services operating model clearly establishes a relationship between cost and service, thereby indicating a clear direction for organizations to assess their improvement on a periodic basis. SSCs deliver better service and quality through optimum utilization of resources and technology. A few examples of successful SSCs include Deloitte, NHS, General Electric through GE Capital International Services etc. Centres of Excellence have reported benefits in terms of pooling specialists from different areas that can be used for various purposes within an organization. Learning and expertise can be spread to others. More consistent outcomes and policy implementation can be achieved (Boroughs, Hunter & Palmer, 2008; p.18). Forming business partnering relationship fosters stronger relationships between line and HR functions along with a better understanding of the business and people issues. The business partners can add value as consultants, coaches, mentors, and problem solvers. Organizations like the Barclays Bank and Prudential have framed business-partner models successfully. The Immigration Office, UK, has adopted business partner model in which HR experts work as process consultants in order to help in strategic alignment of business with HRM (Kenton & Yernall, 2005; p.46). Though organizations have enhanced their efficiency and profitability, operating through shared services has lowered quality substantially. Besides this, the profitability seems to have reached a plateau from where further improvement cannot be expected. This is because certain key functions such as compliance and audit cannot be left without HR professionals. Technology cannot be substituted. There are companies, like Nissan, that have created in-house SSCs. This is to save operating costs and to meet customer demands on time. Operating from shared services requires huge operating investments and time (Grossman, 2010). As pointed by Hird et al. (2009; p.10), Ulrich’s model has, more often, been misinterpreted by distancing HR from line functions and hence unable to derive expected value proposition from this model. A report by the CIPD indicates variable implementation of the 3-part model in various organizations. The sample responses indicated only 18% conformed to the original idea of this model, and the rest deviated. On the issue of distancing HR from line functions, huge discussion and debate has occurred, as evident from the management and leadership literature. Many management specialists have acknowledged the importance of line managers in HRM. In this regard, Armstrong states, ‘“front-line managers are crucial to the success of HR policies and practices” (2006: p.93). Roles and functions of front line managers include achieving the required performance levels; coaching and developing team members to achieve their targets; reviewing performance and provide feedback; conducting performance appraisals; and other management functions such as planning, organizing, and allocating work to front line staff on a periodic basis. In short, line managers manage most of the activities related to HR. But, notion of line managers’ functions is limited to achieving operational objectives through human resources. Therefore, strategic integration of decisions from HR and operations perspective may not be effective; in other words, operations may not be able to fully embrace the HR policies and HR department may not be able to do complete justice to their personnel by framing policies and practices that are only partially beneficial and/or applicable. Business partner strategy at National Asylum Support Service did not succeed because of inappropriate alignment of HR strategies with business objectives (Kenton & Yernall, 2005; p.46). If HR experts are aligned to business processes, it is difficult for the HR experts to distance themselves from transactional HR activities; in addition, unclear roles and responsibilities could lead to further chaos in achieving desired outcomes. Conclusions and Recommendations Much can be learnt from various successful global giants that adopted Ulrich’s HR models. The four-role model is helpful in demystifying the confusing or often overlapping roles of HR professionals. Based on this model, roles can be demarcated and credibility can be established. These role bifurcation and focus on function will also aid in managing culture, change, and in gaining better understanding of the business. However, misinterpreting the roles or functions can lead to failure of HR processes and functions. The 3-legged stool model is a more comprehensive version of the four-role model. Besides eliminating the ambiguities of HR roles, the 3-legged model has provided a firm base to organizations to operate at local, national and global levels. This model directly aligns HR functions with company strategy and fosters greater involvement from different functions. But, this model has its own demerits that correspond to specific elements of the model. The demerits reported for each of these elements needs to be addressed individually. Most common issues reported by various CoEs include quality of service, knowledge sharing, and communication channels. Challenges in SSCs include huge investments, resistance to change, skills and expertise, technology and communication issues. Business partners face challenges with respect to liaison with line functions; alignment of operational targets with business strategies; and extent of involvement in strategic decision making. Organizations operating on this model would require strong central control and clear roles and responsibilities. However, HR policies and practices should be framed considering the local and national cultures in order to make the policies more effective and people efficient. HR business partners should be aware of these differences while framing policies and liaising with managers and staff across borders. Liaison between line leadership team and HR professionals also has significant impact on fostering effective business partnering. In conclusion, it may be suggested that Ulrich’s models can be adopted as a skeletal or base model of HR management, and need to be modified to fit organizations’ business strategy by considering their units’ locations, numbers of employees, and types of customers. References Armstrong, M and Baron, A. 2002. Strategic HRM: the key to improved business performance. CIPD Publishing: London. (pp:1-25) Armstrong, M. 2006. 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