The field of Human Resource Management - Essay Example

Human resources essay May, 2009 Executive Summary. This report attempt to address evaluates and provides recommendations to some of the pertinent Human Resource Management problems (HRM) identified in case 12 the absentee bus crews. The case is analysed and discussed inline with the work of leading researchers and theories in the area. After analyzing the case inline with management control, culture, and agency theory the report made some useful assumptions. Paul Iles model was selected based on the evidence in the Brokers that support the ‘Best Fit’ Approach. This model covers all aspects that directly or indirectly affect the Business Strategy, Human Resource strategy, and the corporate strategy. The model was chosen because it covers the SWOT analysis, a focus on the training on teams for fostering a more participatory organizational culture, Training programs for the HR group Promotion & recruitment within the company, Performance related pay (PRP) & Annual bonus which is related to company performance, Individual Development and feedback, and finally Performance Appraisals. These points were the recommendations made to address the HRM problems identified in the case. The recommendation was adapted from the work of existing scholars such as Kotter, and Gilbreath. 1.0Introduction The field of human resource (HR) management is one of the many interesting area of research that has witnessed a paradigm shift within the last few decades (Huselid, A. M., 1995Doty &Delery 1996). Within this area of research, an increasing body of literature contains the argument that, high performance work practices, including comprehensive employee’s recruitment, selection procedures, incentives compensation and performance management systems, and extensive employee’s involvement and training can improve the knowledge, skills and abilities of firms (Huselid, A. M., (1995), Doty &Delery (1996). Today, with the increasing researchers desires to demonstrate the importance of an effective human resource policy on organisation performance research has shifted from a micro level that previously dominated research interest to a more general, strategic macro level (Huselid, A. M., 1995, Doty &Delery 1996). The term human resource management is not new. It has been widely used by scholars and managers to refer to the set of policies designed to maximize organizational integration, employee commitment, flexibility and quality of work (Huselid, A. M., 1995, Doty &Delery 1996) Jackson & Shuler (2002) referred to it as an umbrella term that encompasses (a).specific human resources practices such as recruitment, selection and appraisal and (b). formal human resource policies which directs and partially constrain the development of specific practices and in all, it comprise a system that attracts develops, motivates and retains those employees who ensure the effective functioning and survival of the organisation and its members (Jackson & Schuler 2002). Cobb Gnyawali & Offstein (2006:315) argued that while effective human resource management and policies have, indeed, been linked to strategic outcomes, human resource management theory has yet to link human assets and HR practices directly to the building blocks of strategy and competitive behavior. Accordingly, their model of strategic human resources links both micro and macro literature streams. 1.1 Structure of Work This paper is aimed at analyzing the case study of the absentee bus crews. The Coal Valley Company where absence seems to be a more acute problem. Absence and lateness are the regular cause of disrupted bus services and are rated as the chief concern of local management. This paper is therefore going to analyse the case thoroughly by looking at the main issues discussed in the case study in section 2 below; evaluating the management control system as described in the case study in section 3 below; analyzing the case using agency and contingency theories in section 4; comparing and contrasting agency and contingency theory perspectives as well as looking at how the interpretation of the case differ from each theoretical perspective in section 5. Other important human resource management theory as the Paul 11 best feed model will be presented. The report therefore attempt to address evaluates and provides recommendations to some of the pertinent Human Resource Management problems (HRM) identified in the case. 2.0 The Problem The problem in the case centers on the company’s culture of high level of absenteeism and low level of employee satisfaction. Challenging these problems require the challenge of the taken of granted. Andrews (1997: p. 52) defines corporate strategy as “the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organisation it is or intends to be and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities”. Corporate strategy in effect maps out the businesses in which an organisation intends to compete in a way that focuses resources to convert distinctive capabilities into competitive advantage. (Andrews, 1997). 2.1Cultural Change The main idea in this area I will start to implement will include improving the speed of operations in the organization. Classifying the workers and other major players into three categories A, B, C with A being excellent and C poor. Here, I will select only A-players and that B and C players were to be phased out from the company while A players will be provided with stock options. (Busco et al., 2006). New recruits were to be put under this same condition. In addition back up staff were to be recruited through an employment agency, and the possibility of extra hours for rampant absence were to be scraped off. 2.2 Management Control System AT Coal Valley Bus Company According to Langfield-Smit (1998: p. 208; Otley, 1999) citing Anthony (1965) as “the process by which managers ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organization’s objectives.” Management control systems encompass the largely accounting-based controls of planning, monitoring of activities, measuring performance and integrating mechanisms. (Langfield-Smit, 1998: p. 208). The above definition clearly differentiated the management control system from strategic and operational control. (Langfield-Smit, 1998: p. 208; Otley, 1999: p. 364). Operational control was neglected from the management control system owing to the fact that different organizations employ different practices at the level of operations. (Otley, 1999: p. 364). Management control systems also influence behaviour as they provide a means for gaining cooperation among collectives of individuals or organizational units who may share only partially. (Langfield-Smit, 1998: p. 208). Through the use of management control systems, managers can obtain information necessary to perform their jobs as well as assistance in developing and maintaining viable patterns of behaviour. (Otley, 1999: p. 364). In order to understand the role played by this information in managerial decision making, it is necessary to first of all obtain an understanding of how managers make use of the information provided to them. Unfortunately the situation of our company Coal Valley Bus Company proof the contrary as things were left to go their own way. Long absences with salary pave the way for the series of absences employees were recording. The concept of the management control system was developed by Anthony (1965) with the objective of broadening the scope of information being considered beyond just accounting information. The management accounting system is an essential part of the management control system. (Blocher et al., 2005). At Coal Valley Company, the poor employee monitoring and control system, the long absences with sick pay is a principal source of trust for change. In addition, personal and systems trusts and change management needs to be implemented with an outside consultant. For example, the case study stipulates that practices need to be trusted if they are to become objects of the proposed changes, and they need to be invested with institutionally certified and enforced standards of expertise. Management accounting along with other organizational practices such as human resource management has the ability to promote or serve as an impediment to learning and unlearning (learning and unlearning is used here because it considers the fact that when new things are being learned some old practices are discarded (Busco et al. 2006: p. 12)). 2.3Analysis Based on Agency Theory and Contingency Theory 2.3.1Agency Theory According to the theory of agency, proposed by Jensen and Meckling (1976) the relationship between shareholders and managers can be regarded from the perspective of the principal agent relationship in which the shareholders (principals) delegate work to the managers (agents). This relationship is governed by the employment contract. (Eisenhardt, 1989: p. 57) The contract stipulates that the manager (the agent) provides returns to the shareholders in the form in return for compensation such as salaries, stock options and other compensation schemes. In an organization work structure, the manager is the principal while the other workers are the agent. Since ownership is separated from control in the modern form of corporation, the agency relationship poses two important problems. (Eisenhardt, 1989: p. 57) Firstly, the interests of the shareholder may be in conflict with those of the managers. While the managers of the Coal Valley Bus Company may expect employees to satisfy their interests, employees in this situation such as bus drivers and conductors too may be interested in satisfying their selfish interests rather than what is best for the organization as a whole and the shareholders in particular. Secondly, the shareholders and managers may find it difficult to observe the actions of the manager owing to the fact that both parties may have different attitudes towards risk. (Eisenhardt, 1989: p. 57) While the shareholder may be interested in seeing the manager invest in high risk high NPV projects, the manager may be risk-adverse and therefore discard such projects. Consequently, the principal agent relationship results into agency costs which are often incurred by the shareholders. Agency costs represent the shortfall in returns provided by managers to shareholders and the returns that could have been generated if the shareholders were managing the corporation themselves. (Jensen and Meckling, 1976). In the case of Coal Valley bus Company, agency costs existed between the original management of the company and the other workers. To better align the interest of the managers, or principals in this situation with those of the other workers requires a number of re-structuring plans. The scraping off of absences with salaries, the introduction of a Management control system which further aligned managers’ interests to those of top management and thus those of shareholders. One obvious way of aligning this interest is through the use of target based compensation plans such as share option schemes. Recognizing that it was an A class of companies they were interested at company, management should make it clear to all the managers and workers their choice will be A class of employees emphasizing that it was not in need of managers and workers who perform at the B and C level. Such managers and workers would be phased out of the company while A managers would be provided share option schemes. Share option schemes imply that such managers and workers would subsequently own shares in the company if they meet the performance targets set by the top management. 2.3.2 Contingency Theory “Contingency theory is guided by the general orientation hypothesis that organizations whose internal features best match the demands of their environments will achieve the best adaptation”. Consequently, organizations must adapt their structure to contingencies such as environment, organizational size and business strategy if the organization must perform well. (Drazin and Van de Ven, 1985; Gerdin and Greve, 2007: p. 2). This core idea of contingency theory was formulated by Galbriath (1973: p. 2) cited in Gerdin and Greve (2007: p. 2) as follows: 1. That there is no best way to organize; 2. Any way of organising is not equally effective. Consequently, effectiveness in organizational structures depends on the context or environment leading to the conclusion that no universally acceptable way of organizing is present. (Gerdin and Greve, 2007: p. 2). In some contexts certain organizational forms or structures will perform better than others although the others may perform better in another context. (Gerdin and Greve, 2007: p. 2). Organizations usually face a multiple number of uncertainties or contingencies from their environment and the question that has been posed by many researchers is whether organizational structures and processes should be matched to the environment, size or technology of the organization. (Drazin and Van de Ven, 1985: p. 520). It is difficult to match organizational structures to all contingencies given that multiple and conflicting contingencies may create internal inconsistencies in the structural patterns of organizations which indicate that a pattern analysis is required for the interactions of multiple contingencies and structural patterns on organizational performance. (Drazin and Van de Ven, 1985: p. 520). In the case of Coal Valley Bus Company, the environment never really posed a lot of threats. The major external factors on the company were the fact that it had to cope with the changing environment, migration of the labour force, and strong demands from the labour union. It was obvious that an implementation of a change management program requires the challenge of the taken for granted a bulk or old employees were to lose their jobs if this particular strategy was adopted. Following the action of the Labour Union, GE had to respond to this threat by turning down the plan. New procedures and training programs were to be adopted to train the old and existing personnel and as at a result, the number of workers. These employees were expected to sign a new contract at the end of their training. 4.0Human Resource Issues Raised in the Case Coal Valley Bus Company is a regional player in the transportation industry with a very high degree of absenteeism and low level of employee’s commitment. As one of the market leaders in the transportation business in the area, the company has a low reputation among customers and has established a low level of credibility and goodwill in the transport business, because of frequent absenteeism being recorded by staff resulting in late bus services. The staff who aught to be highly competent in their respective profession and departments have taken advantage of the poor organizational culture and poor control system. The company has a high level of absenteeism and low level of workers satisfaction as compared to the industry standard. Also, as identified in the case certain issues pertaining to the human resource department to this organisation remains a puzzle. These problems include:- Poor communication and lack of information flow between the various departments, Lack of job satisfaction, headhunting of key staff members by competitors, weak organisational structure, weak reward strategy and organisational culture and the absence of training and career development for staff. The company has neglected the soft sides of its business, that of the organisational culture. Today, culture is a core competence of an organisation. Culture being the taking for granted assumptions is absent in Coal Valley Bus Company as routines, procedures, staff training and opportunities for individuals to take care of individual needs are absent. This has created a high level of distrust and lack of commitments amongst workers. The entire business requires direct interaction with the customers, and it is through a strong culture that cost can be reduced. The absence of career advancement track for workers, performance reward systems, supportive work environment, and defined duties for workers has pushed the organisation into a situation of not being up to date with the market demands, as key personnel are being head hunted by competitors or taking advantage of the weak control system and taking absences at will. Having said this, in the next section, I will provide useful recommendation following the best fit model of Paul Iles as attached in the appendix. 5.0 Recommendations and the way forward According to Sveiby (1997) a key to retaining personnel in knowledge based-organisation is ensuring that employees had the opportunities to work on interesting projects with interesting careers challenges clearly defined. From the problems identified above, Coal Valley Bus Company tends to be very goal oriented and one can deduce that the management believes that conducive workplaces are an argument against competitiveness. According to Sveiby (1997), organisations under such a situation should create and incorporate healthier psychological work environments. This was the same position echoed by Gilbreath (2008) when the researcher postulates that, healthy psychological environments contribute to career conduciveness. According to Gilbreath (2008), creating strong HRM policies requires creating a strong psychological environment in which employees can thrive. Such an environment requires conducting stress audit, monitoring the work of the environment, matching people and work environment and using teams of employees and researchers to study the work environment. Coal Valley Bus Company should eliminate unnecessary stressors (e.g., poor job design, ineffective supervisor behaviour, poor communication, mismatches between employee’s skills and job demands). The Human Resource department of the company can also facilitate this through greater involvement, employees autonomy, physical comfort, organisational security and recognition. To be critically useful to management, Ellis et al(2007) argue that an overall HRM framework should capture and integrate various functions and also clarify how various aspect of HRM add value to an organisation. Gilbreath supported this argument when the researcher calls for organisation facing communication and job satisfaction problems to institutes good fit between employees and their work environment. Under good fit theory, demand ability fit, suppliers value fit, self concept jobs fit and person group fit should be primary for workers integration and commitments. One factor that affects the implementation of HRM practices that has received significant attention is culture. Culture can be defined at different levels that range from the group to the organization to the national level (Erez&Earley, 1994). Culture comprises values and norms that guide individuals’ behavior. Many view organizational practices and theories as culturally bound (Adler, 1997; Hofstede, 1980) which would mean that the values of a country should be compatible with a management practice for it to result in employee motivation Kotter (1995), in his article “Why transformation efforts fail”, argues that, the bad outcome of most change efforts is caused by the management’s failure to take the company through a series of important change steps. According to the author, these failures are caused by generally under performing management rather the researcher postulates that, there is little experience out there when it comes to organisational change processes and as he states; “Even capable people often make at least one big error” (Kotter 1995). It is important to recall here that, one big problem identify with “The Coal Valley Bus Company” was resistance to change. According to Kotter, successful organisation implementing change process needs to follow and adopt his eight-step model for transforming organisation. This model includes establishing a sense of urgency, forming a powerful guiding coalition, creating a vision, communicating the vision etc. Kotter (1995) in his eight-step change model argues that, establishing a sense of urgency requires rallying the rest of the company around this decision. Kotter recommends as a tool to reach this gaol could be a fabricated crisis. That is, by over exaggerating an existing problem, the whole process of communicating the urgency for change can be made easier. According to Kotter (1995) forming a powerful guiding coalition requires a strong group of people who can drive change, and without the group, the change process will never accumulate the momentum needed to evolve the organisation to where it is heading to, the vision. This vision must be succinctly communicated, planned for short term wins, and people empower to implement this change through removal of obstacles. In the situation of “The Coal Valley Bus Company” a void has been created through resistance to change. Management of the company should, through removal of large obstacles of change will result into adequate change success. For failure in creating short-term wins will result in lowering motivation among previously committed employees. Thus, the management should make compelling evidence visible for the employees to go on the long match. Kotter (1995) went further and stipulates that:, Most people won’t go on the long match except they see compelling evidence or that the journey is producing expected result” (Kotter 1995:6). Another important recommendation worth mentioning here is commitment within team members of the Coal Valley Bus Company. Commitment within a relationship can be interpreted as the desire to continue and maintain a valued relationship. Therefore, the issue of headhunting of key personnel by competitors could be overcome through trust established within the team. Through definition of career track, greater opportunities for higher roles, job satisfaction, trust and commitment will be enhanced. If this recommendation is properly implemented by the company, a number of benefits could be achieved which include developing a set of shared values, reducing costs when the relationship finishes and increasing profitability as a greater number of end users customers are retain. The Coal Valley Bus Company should see employment relationship as a contractual one with the concept of good faith, and fair dealings in employment contracts and the applications of estopel to work relationship (Gilbreath 2008). Gilbreath (2008) further recommends that, through career development initiatives (e.g., providing career relevant training, implementing monitoring programs, assisting with succession planning), positive effects could be created on employees. The researcher further cautions that, a supportive work environment is primary for this to take effect. Conducive in this genre means contributive and work settings in which employees and their careers can thrive. Gilbreath (2008) went further and listed a number of characteristics organisation must follow to be work conducive (see appendix). While a bottom up planning process should be in place. Since, individuals working at departmental level best know, market demands, customer’s expectation, and market changes. A bottom up planning system should be adopted. By making divisional personnel responsible for their divisions. The head office can easily control and monitor the activities. The head office takes care of coordination, control and supervision. That is the company should have a set of geographical sub region depending on route capacity and contribution. All, the invoicing, vouchering, budget allocation, mission expenses, salaries and wages, sick leave and permission would be handled at the level of the head office, in terms of approval, and preparing the necessary accounting documents. The relationship between the division and the head office will be more of coaching and reporting. To properly formulate its corporate strategy, an organisation must assess its organisational strengths and weaknesses, as well as its environmental threats and opportunities, which will enable it choose among alternative courses of action. (Hofer and Schendel, 1984) cited in Schneider, (1998). This indicates that an organisation must perform a SWOT (strengths, weaknesses, opportunities and threats) analysis prior to formulating corporate strategy. A number of factors have been identified as having an effect on corporate strategy formulation: for example, Kets de Vries and Miller (1984) suggest that managerial personality and experience is an important determinant of the strategy formulation process; Janis (1972) considers group dynamics as an important factor affecting the formulation of corporate strategy while Frederickson (1984); Lyles and Mitroff (1985) suggest that organisational structure plays an important role in strategy formulation. 3.0Conclusion This study was initiated to develop suitable recommendations for pertinent Human Resource Management issues identified in the case, “The Coal Valley Bus Company” in the first part of the course. From inspiration drawn from Paul Ilsles best fit model, and using the work of some researchers a number of recommendations were drawn calling on the management, to create conducive environment, more workers participation, career succession planning, career relevant training, greater opportunities for higher roles, job satisfaction, trust and commitment will be enhanced. If this recommendation is properly implemented, a number of benefits could be achieved which include developing a set of shared values, reducing costs when the relationship finishes and increasing profitability as a greater number of end users customers are retain. References Andrews K. (1997). Resources and Strategy: A Reader, edited by Nicolai J. Foss. Oxford University Press, ISBN 0198781792, 9780198781790 Busco C., Riccaboni A. Scapens R. W. (2006). Trust for accounting and accounting for trust. Management Accounting Research, vol. 17, pp. 11–41. 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Vol.21, No. 4, 711-737 Appendix Characteristic of a Psychological work environment as outlined by Gilbreath (2008). • Conflict, ambiguity, and uncertainty are minimal; • Job control is commensurate with job demands and employee self-efficacy; • Social support is available and provided when and as needed; • There are good fits between employees and their work environment; • Expectations between employers and employees are congruent and met; • The work environment allows employees to develop and move toward their ego ideal; • The organization balances and enhances its subsystems without losing sight of its ultimate purposes; • There is positive morale and job satisfaction; • Work provides reasonable amounts of challenge, variety, learning, recognition, and meaning; • The workplace is safe, is not unpleasant, and has good communication and feedback, respect, flexibility, equity, and consistency; • Supervision is competent, considerate, supportive, and not overly close; • Employees receive decent pay and benefits; • Work is no demeaning and interesting; References Read More