Human Resources Department: Should It Be Blown Up - Term Paper Example

Human Resources Department – should it be blown up? Globalization, internationalization, global strategies, labor market changes and the competitivework environment has posed great challenges. The role of the HR managers has undergone a change due to the increase in the organizational demands on them. They are expected to identify the internal customers’ consequential changing expectations which require a more strategic approach to human resource management. The HRM strategies need to be more aligned with the business which would also enhance overall organizational performance. These have brought about changes in implementing the HR functions, which include devolving responsibilities to the line managers, outsourcing certain functions and the use of internet and technology. Under the circumstances it is considered that the human resource department as such is not required. To what extent are the line managers equipped to handle all the HR functions? What are the pitfalls of outsourcing HR functions? Do the employees really spend 80% of their time on routine administrative tasks? This paper will discuss how feasible it is to do away with the Human Resources Department and rely on line managers and outsourcing of HR functions. Recent studies reveal that management of human resources is now considered an activity to be carried out by all managers (Thornhill & Saunders, 1998). Today human resource is considered not merely as another resource but human capital, which has to be valued and nurtured. Since they are considered human capital and make a difference to the organization, they have to be managed strategically. This brings out the importance why line managers should be aware of the link between the management of the human resources and the strategic direction of the organization as outlined by the top managers. Simultaneously, Jones and Finlayson (1999) contend that delegating selected business functions to external providers allows organizations to concentrate on their core business activities, utilizing external expertise and reducing costs. Their change role is expected to bring about innovation, quality enhancement and cost-reduction. These two views imply that the HR department is redundant and should be done away with. According to Thornhill and Saunders middle managers are the ones who interact most frequently with the employees. They are thus expected to have the ability to inspire, encourage, motive, enable and facilitate change by allowing the employees to become committed to the organization. This role of middle managers and their ability to strategically manage the human resources has been challenged. Bond and McCracken (2006) agree that the personnel specialist is more concerned with formulating strategies and it is the line managers who have more opportunities to translate the HRM policies into practice at the operational level as has been observed in the local pay in the NHS. At the same time research has revealed that that not all managers are competent enough to make the right decisions and it may not be fair to all staff. Line managers do use mix and match strategy for formal and informal policies. The line managers are often not trained and hence lack discretion and maturity. Renwick (2003) states that it was important for line managers to talk and have close relations with the people under them. The line manager felt their responsibilities increased with this added role and besides, they did not feel they had the competency to handle the HR functions. Line managers are constantly in contact with the employees and for most of the employees, their immediate superiors represent the management of the company (Brewster & Larsen 1992). If these managers have the responsibility and authority to control and reward the employees directly under them, it could enhance productivity and effectively work out better for the organization. The personnel specialists have practically negligible interactions with the employers and it is felt that line managers are appropriate to handle the issues relating to staff under them. They are suitable to motivate and bring out the best from the staff. Along with this, there is an increasing need for the HR to understand how businesses operate. Huselid, Becker & Beatty (2005) contend while the HR professionals are responsible for hiring the staff in the first place but performance problem can only be identified by the line managers. IBM for instance caters to on-demand business and to service the clients it needs Adaptive Workforce (ADWF). IBM has adopted this strategy to integrate strategy/policy, process, organization, and technology to ensure that the resource supply and demand information is available throughout the business to match critical skills to client needs, on demand. In firms like IBM, the strategic value of a job cannot be left to an outside method of job evaluation. The line managers and the senior executive team have to be fully involved in assessment but this does not eliminate the role of HR professionals or the department. The NHS Trusts too have empowered the supervisors who are entrusted with the responsibility of discipline, dismissal, recruitment, issuing contracts and absence. The purpose is two-fold- it allows the personnel to develop a future strategy and it empowers the supervisors to have control over the subordinates (Cunningham & Hyman, 1995). The line managers’ influence on manpower planning is not very strong but in areas of discipline and dismissal they are effective. Hence, once again the efficacy of line managers is limited and the manpower planning has to be done by the department. Gennard and Kelly (1997) interviewed 28 personnel directors and 8 MDs and found that there has been a shift in the relationship between the personnel department and the line managers but this has not brought about a reduction in the influence of the personnel management at either the strategic level or the operational level. According to them the personnel department’s role has been enhanced and the change in the relationship is decided by the top management. Despite line managers taking an active role in HR functions, the importance and need for the HR has not declined. The solution is provided by Whittaker and Marchington (2003) who contend that line managers have to work in conjunction with HR practitioners. While HR personnel took the lead in framing policies, they either have the sole responsibility or took it in conjunction with the line managers. Line managers have a significant role in resourcing and employee relations, rewards and recognitions. If the line managers spend time on people management, they may do so at the cost of corporate goals and objectives. When FoodCo tried to downsize the HR department, they faced problems. HR has to be valued as a function but it has to be integrated with the strategy of the company. The line managers need the HR support, training and advice. Research further proves that in UK the responsibilities of HR are divided between the personnel specialists and the line managers. The operational aspects can be handled by the line managers but the HR policies and practices are best left to the personnel specialists. Even to handle the operational aspects, the line managers need to be trained otherwise they may negatively influence the team under them. In nutshell, the HR managers and the line managers, both have to equally share the responsibilities because technology is here to stay and downsizing is the order of the day due to increased competition and cost effective measures. All that is required is for the line managers to be trained before they take up such responsibilities. Outsourcing of HR functions has consistently been increasing as is confirmed by the Workplace Employee Relations survey that revealed that more than 90 per cent of all workplaces subcontracted one or more services (Walsh & Deery, 2006) and this requires that HRM professionals look more closely at employees’ perspectives on outsourcing, says Richbell (2001). Organizations segregate non-core activities from core ones and thus activities that are not central and revenue producing are outsourced (Cardy, Gove, & DeMatteo, 2000) but Conklin (2005) contends that this core/non-core dichotomy is not sufficient. At the same time, distinctive or idiosyncratic practices requiring tacit knowledge may suffer if outsourced. Sako and Tierney (2005) state that Business Transformation Outsourcing (BTO) is an emerging segment, which focuses on improving the effectiveness of an entire corporate function like the HR. The rationale is to outsource administrative tasks leaving the personnel to focus on strategy formulation using their competencies (Sako & Tierney) and to experience greater flexibility in allocating resources, and greater cost efficiencies (Jones & Finlayson) but Khatri and Budhwar (2002) cite many scholars who argue that human resource can be a source of sustainable competitive advantage for an organization. This implies that all functions related to human resources should be dealt in-house. Organizational culture is a major deterrent to outsourcing HR activities. The entire market is fragmented because the vendors lack the expertise to serve a function like HR. without a secure data protection system in place, sensitive employee information can be misused or misinterpreted. In the field of training and development, learning should be seen as a collective accomplishment and hence outsourcing relationships can create partnerships between contractors and clients that may facilitate learning and cross fertilization between the two firms (Carroll, Cooke, Hassard, & Marchington, 2001). Nevertheless, outsourcing training does not ensure continuity of skills supply which can damage competitiveness. Perkins (2003) cites O’Keeffe who contends that the global economy has brought the realization that the only lasting competitive advantage is the organizations ability to effectively exploit intellectual capital. Thus if companies consider their employees merely as commodities and fail to invest in their training and development, they cannot be said to be practicing human resource management. Training has to involve the environment, the people and the structure of the organization. The most effective method is when managers train their own people, which also reinforces that they understand the principles of TQM (Spenley, 1992, cited by Vermeulen & Crous). Outsourcing training would leave a gap as they do not interact with culture of the organization. HR managers find difficulty in expressing and describing in detail what they require from the vendor (Galanaki & Papalexandris, 2004) which can be attributed to lack of experience. Very often the HRM vendors too lack experience and learn on-the-job from the clients. Before outsourcing HR functions, priority should be given to organizational culture along with strategic issues for sustained success (Ferreira de Sousa, 2003). The HR department should be involved in the outsourcing process and they should also be sensitive to employees’ needs, skills and rights during transfers as according to Rubery, Carroll, Cooke, Grugulis, and Earnshaw (2004) within fragmented and decentralized organizations the effective management of human resources has been increasingly seen as dependent upon a strong organizational culture. In outsourcing, organizations can reap the benefit of the providers’ investments, innovations and capabilities, provide better service to their customers and choose to outsource functions that are usually subject to seasonal demand but due consideration has to be given to the impact on the employees (HRM, 2006). Even if only transactional activities are outsourced and not the strategic ones, there can be resistance from within a firm’s HR department, lack of employee preparation, quality of HR services from vendors may be unsatisfactory, and firms may encounter lack of competencies to manage HR outsourcing. There could also be compliance violations, loss of internal technical skills and expertise, and loss of positive reputation (cited by Kosnik, Wong-Mongji, & Hoover, 2006). In order not to deal with the unpleasantness of redundancies, negative publicity and the legality of employee rights, through outsourcing deals organisations transfer the staff to service providers, who takeover over the entire workforce as a condition of contract (JMD, 2000). Research suggests that less than half of the downsized companies achieve a reduction in overall expenditures and less than one quarter show increased productivity. After outsourcing if the management fails to address the issue of staff reduction and corporate structure, it would negate the value of the entire exercise (Embleton & Wright, 1998). UK has an ageing society like Japan and this poses a number of challenges for the HRM. There is a shift in the values of the younger workers towards work and life. People are looking for flexible working arrangements and greater freedom. Diversity management approach would have to be adapted to focus on individual values and provide a wide range of working conditions (Macdonald & Hanaoka, 2000). Thus, before outsourcing HR functions, priority should be given to organizational culture along with strategic issues for sustained success (Ferreira de Sousa, 2003). The HR department should be involved in the outsourcing process and they should also be sensitive to employees’ needs, skills and rights during transfers as according to Rubery, Carroll, Cooke, Grugulis, and Earnshaw (2004) within fragmented and decentralized organizations the effective management of human resources has been increasingly seen as dependent upon a strong organizational culture. Technology enables HR to supply their services to the internal customers with a capability and degree of interaction not previously possible (Alleyne, Kakabadse & Kakabadse, 2007). Close relationship can be developed and technology allows for greater satisfaction and effectiveness. Despite facilities available, the HR has not applied the intranet and exploited its benefits for the overall satisfaction of its customers. Research suggests that the expectations and the internal customer satisfaction were high and their relationships with HR had improved. The managers found the HR supportive with the increased use of intranet for HR functions. Devolution of HR activities along with downsizing and restructuring has changed the expectations from HR. there is a scope for improvement in this area as managers have not been trained to utilize the services of HR through intranet but what it finally implies is that intranet cannot eliminate the department. Intranet supports in providing better service to the internal customers and developing better relationships within the organization. All it requires is the department to be more proactive in its use of intranet to deliver services. Study of the literature suggests that there is no single solution that can be applicable to all companies. Those with global operations are most likely to reap the maximum benefits. While it is evident that outsourcing HR has tangible benefits like cost savings, access to skills and expertise, moving HR up the value chain and increasing effectiveness of HR delivery, organizations have to take precautions before deciding. Processes must be clearly understood including the outcome. Today sophisticated software is available which can effectively reduce costs even with in-house operations. The responsibility of HRM should be with a mix of internal and external agents. Number of failures in HR outsourcing does not give the impression of a way forward. Perhaps only the mundane activities could at best be outsourced in the future with areas like training, motivation, recruitment and selection being kept in-house. Outsourcing does not even ensure the cost benefit. Outsourcing activities like training and development would not give the feel of the corporate culture to the employees. Even to outsource activities, the HR personnel are required. HR personnel today have a strategic role in attainment of the corporate goals and objectives. Line managers are effective in employee relations, rewards, recognition and motivation. Hence, the routine administrative tasks that the HR department performs could be outsourced without compromising on the corporate objectives. The line managers should be responsible for the subordinates directly under them. Even to make use of intranet, the department is essential. The human resource department is critical to any organization and cannot be blown up. Reference: Alleyne, C., Kakabadse, A., & Kakabadse, N., (2007), Using the HR intranet An exploratory analysis of its impact on managerial satisfaction with the HR function, Personnel Review Vol. 36 No. 2, 2007 pp. 295-310 Brewster, C. Dr. & Larsen, H H (1992), Human Resource Management in Europe, Cranfield Institute of Management Library Cardy, R. 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