Management of Organisations, Human Resource Management - Essay Example

Introduction Management of organisations is not an easy task. It requires great skill to balance between human resource policies and meeting shareholder’s demands. National business systems and associated strategies for human resource management are always likely to be affected by the diffusion of managing for shareholder value and the private equity business model. This paper is dealing with the various ways through which they are affected. (Dale, 2001) Shareholder value The shareholder value in some cases is used to refer to a company’s ventures in relation to capitalisation of its market. In most cases maximisation of shareholder value refers to the overall venture by business organisations to make its stock price increase with the main aim of increasing the wealth of its shareholders. When maximizing of the shareholder value is talked of, it means that shareholders are made to reap maximum profits. This is in most cases carried out by the management. In this case it means that all the decisions that are made by management put the interests of the shareholders first. Effects Analysis reveals that this venture has got various effects to the management policies and national business systems. The ways through which these two are affected by diffusing of managing shareholder value and private equity business model include both in positive and negative way. Every organisation normally has policies to which the human resource department has to adhere to. Among the factors those human resources managers have to consider in their work include ethical, environmental and employment issues. Effect on ethical policies When management in an organisation are just concerned with private equity business model and managing shareholder value they are likely to overlook the other management policies mentioned above. Business ethics refers to rules and principles that have to be followed by business organisation. These are always enacted at the national level and in most cases organisations are obliged to adhere to them. They also include the ethical rules that govern the way people in an organisation have to behave towards one another. These rules also enable organisations to amicably solve the problems therein. This includes problems in the way organisation is operating in relation to other businesses. Business ethics is against any unfair deal carried out towards employees and humanity at large. (Dowling, 2006) This also includes any unfairness in balancing of power in management. Now in the case where human resource department is overly concerned about diffusion of private equity business model and maximizing shareholder values, they may ineffectively handle this code of ethics in business. First of all, code of ethics of production in any organisation requires that products made do not harm the consumer. In case the management in an organisation is more concerned about diffusion of managing for shareholder value, it may opt to downgrade these ethical requirements. This is through using poor quality materials in production but selling at high price to make maximum profits which will benefit shareholders. This will mean that consumers will not get value for their money. It also means that consumers may be at risk of being adversely affected by low quality products. The downgrading or failing to follow to the latter these ethical policies could even lead to the loss of death. For instance if an organisation in the quest of managing for private equity business model and shareholder value decides to fail to use quality materials in making tires, they may end up resulting in accidents and even human life. So through this, human resource policy on ethics will be negatively affected. Discrimination Human resource policies also ensure that there is no discrimination at work. When organisations just work towards private equity business model and increasing shareholder value, then this policy is likely not to be effectively handled. Since shareholders mean a lot to the organisation it implies that employees that may be related to shareholders will be treated with favour and those that are not in any way linked to them are discriminated against. (Erickson, 2003) Choice of management Research shows that shareholders in many organisations play a great role towards choosing the management therein. There are times when shareholders require the management to work towards maximizing their shareholder value and the private equity business model. This means that management will not highly incorporate human resource policies in the management with the fear of being sacked or fail to be recommended by the shareholders. In this case the management will fail to effectively handle policies and strategies for human resource management due to the fear of losing employment. The other policies that human resource managers have to adhere to are in line with environment conservation. Policies concerned with environment This include making sure that the organisation does not pollute the environment. When human resource managers are just concerned about the private equity business model and managing for shareholder value, they may overlook their ventures that could lead to the deterioration of the environment. This includes polluting the air, land and water bodies and the ecosystem at large. (Garth, 1998) Corporate social responsibility policies Other human resource policies that are important in any organisation are those in line with the corporate social responsibility. This includes putting in high regard the society’s interests. It also includes helping the community through paying fees for poor students, educating the society and also improving the technology therein. This would mean that the organisation never attempts to carry out these ventures in relation to corporate social responsibility. This gives organisations a very poor public image even though shareholders could be benefiting. When the company’s public image is affected, in the long run people shy away from its services and products leading to failure of growth. Organisational goals Another way through which national business systems and associated strategies and policies are likely to be affected by diffusion of managing for shareholder value and the private equity business model is as follows; managers are likely to emphasize short term goals of stock prices rather than the long term goals. It is the responsibility of the management in any organisation not just to look at the short term goals but also on the long term ones. When the management fails to do this in relation to the policies therein, the future of the organisation is adversely affected. (Hilltop, 1994) Global welfare policies Part and parcel of management’s responsibilities is in relation to fulfilling the company’s policies. Some of these policies are in relation to increasing the organisation’s global welfare. When the management in organisations is overly concerned with maximizing its shareholder value, there are some chances that the organisations may have its welfares in global sector lowered. This can be a great threat to the future of the organisation. For instance, managers can just be concerned with ensuring shareholders returns are high and fail to plan and even implement any investment ventures for the organisation. Compromise There are occasions when financing in private equity by management may exceed the capital available. Research shows that these ventures normally bring up too much competition. This is in regard to every opportunity of investment. This makes shareholders or investors for that matter to put pressure on the management to bring in more returns for shares that were previously invested. This pressure can sometimes make managers to compromise on the company’s policies. Premiums Many business organisations that work towards maximizing the shareholder value are known to work in various ways; one of the things put first by management in such organisations include monitoring for buyers. This is whether the buyers are willing to pay a ‘good’ premium. This is in relation to the cash flow that is estimated for the company’s assets. They include assets that are detachable, real estate, and brands. Analysis shows that such business organisations only want to engage in activities that only work towards the improvement of the shareholder value. This is due to the organisations enjoying a comparative advantage in the market. In such cases management fails to look at other strategies of improving the business organisation. (Hoyer, 2001) Employee rewards Diffusion and managing shareholder value and the private equity business model can also affect national business systems and associated strategies and policies for human resource management in a positive way. This is whereby when the management work towards maximizing the share value the shareholders in return rewards the employees. This in most cases acts as a motivation to employees. When the employees are motivated they tend to produce more and hence enhancing the overall profitability of the company. This can be described as killing two birds with one stone. In most cases when the shareholders in a company realize that they are getting more returns from their shares they can also decide to reward employees. This is through allowing them to get shares through Employee Shares Option Plan (ESOP). This is strategy through which employees are allowed to own part of the company through buying of the organisation’s shares. The shares are usually offered at a discount price in comparison to the stock exchange price. The employees normally receive dividends from the shares allotted besides their monthly remuneration. Through this way employees do their best for the organisation. In this scenario, managing for the shareholder value and the private equity business model works towards improving the human resource policies in the organisation. This is in relation of ethical policies on how management has to treat employees in the organisation. (Kotler, 1996) Employee salary increments According to research carried out in the year 2007 in both the United States of America and United Kingdom; organisations that work towards maximizing its shareholder’s value and also its private equity model also reward its employees through salary increments and other incentives. All these work hand in hand with the national business systems and associated strategies and policies for human resource management. Each and every organisation normally has management policies that are related to cash distribution. Communication Communication is a very important tool in any set up. This is also part and parcel of human resource policies in many organisations. It is even more important in the business world. For a business organisation to be successful, the manager has to use very effective communication strategies. This is in relation to every person in the organisation. The business environment calls for a high level of effectiveness in the communication. When communication is rightly used in an organisation it can motivate the employees. Organisations that are overly concerned about private equity business model and managing shareholder value normally end up failing to carry out adequate and proper communications. This is within the organisation and between the organisation and other stakeholders in the macro environment. Human resource practices and policies in most cases affect the outcome of the organisation. They affect the culture that is adopted by the employees and define the direction to which the organisation takes. The value of a business is not just measured in terms of its financial position in the stock market. It is rather also measured through its contribution to the society at large. Organisational value The worthiness of organisations is also measured through levels of satisfaction among employees. When employees are satisfied, and their wellbeing taken care of, they become more productive. They also become more fulfilled and they portray an image and reputation of the company to the general public. (Mark, 2001) When shareholders are concerned with these issues about employees even as they aim at increasing their shareholder value, they end up benefiting. This means that managing for maximizing shareholder value works hand in hand with management policies and strategies. Investment Investment is part of organisation goals and policies. For a company to expand it needs to plough back part of its profits. When all the efforts are carried out by the management in organisations to maximise shareholders value and private equity model, this will be overlooked. This means that most of the profits will be allocated to the shareholders. This means the dividends are emphasized and not the investment. Investment is very important in any organisation. This is due to the fact that it projects the future income generation to the organisation. Without looking at this policy, the organisation will have no future. Conclusion In conclusion, private equity model and managing shareholders value has got both positive and negative implications on human resource policies and strategies. Organisations which are highly concerned with increasing shareholders value end up overlooking many human resource policies and strategies. Each and every organization has got policies that it has to adhere to. One of the major issues in these policies is dealing with employees. Policies include those that deal with employee ethics and also those that are concerned with the environment. (Ulrich, 1996) Sometimes when the management is concerned with diffusion of managing shareholders value and private equity model, affects management policies positively. For instance when shareholders make maximum profits, they may decide to reward the employees. This is through salary increments and Employee Shares Option Plan and other incentives. This enhances the human resource management policies in the organisation. Employees become more motivated and profitability is increased. All in all there has to be a balance between human resource management policies and shareholders value maximisation. Read More