The Role of the Personnel Department in an Organisation - Essay Example

STRATEGIC MANAGEMENT OF HUMAN RESOURCES PERSONNEL DEPARTMENTS: DELIVERING STRATEGIC VALUE Introduction Personnel departments of organizations were for long regarded as managers of staff, pay roll accountants, hiring and firing agencies. However over the past few decades there has been greater understanding of the contribution of personnel departments to strategic value in an organization. This change in perception has come about due to a variety of factors such as the need to meet expectations of customers, global competition, information technology advancements and cost cutting imperatives. (Brockbank, Yeung, 1994) Partly these measures were introduced in the wake of crisis faced by organizations in their profitability and smooth functioning leading to a review and restructuring of personnel departments. On the other hand many enlightened businesses undertook the same to provide an enhanced experience to their employees which in turn greatly added their contribution to the organisation. The next level of change in the role and functions of personnel departments occurred with automation. Thus computerisation of functions such as pay roll and record keeping relieved personnel managers to focus on larger issues enhancing their contribution to strategic value addition to the organization as a whole. Personnel departments are also becoming more aware of the roles and responsibilities of line managers so that there is greater integration between the two for attaining strategic value. The delivery of greater quality of services by personnel departments is thus providing impetus to development in other functions of management. Personnel departments thus increasingly came to be seen not as boundary managers but value builders Role and Functions - Personnel Departments The traditional role of the personnel department has been seen as recruitment, defining job roles, training, structuring of pay and allowances, measuring performance and finally relieve those who are not performing satisfactorily. In many organisations these were also dealing with labour relations. However over the years, this role has been enlarged within the scope of general functions stated above to include induction of the best talent, providing effective training as per needs of the organization, designing and measuring job roles and performance, compensation management to include not just remuneration but also employee stock options based on performance and as a form of incentive and providing feedback to the management on the state of human resources in the organisation. During this stage, the term, human resources manager was being increasingly used in the management lexicon to represent the functions carried out by personnel managers. (Bersin, 2006) Induction of information technology into management and personnel functions had a lasting impact on its role and functions. Information technology systems automated routine and repetitive tasks which were so far engaging personnel managers such as pay rolls, performance reporting and incentive management. (Bersin, 2006). Systems such as recruitment and application tracking, total compensation packages build around cost to company, e learning and organizational development resulted in freeing the human resources manager to focus his attention on achieving key organizational goals by becoming a business partner in strategy implementation. Thus gradually personnel departments provided critical inputs for organizational growth. The emergence of the information and knowledge economy has also provided a critical role to personnel departments in what is being called as talent management. (Bersin, 2006). This implies personnel strategies which can identify best talent critical to organizational growth, retain and motivate it. The various strategies used for this purpose include management of competencies, measurement of performance, aligning these with the compensation package; assess overall contribution to the organization and so on. The overall aim is to limit job hopping, a trend particularly prevalent in new age employees. Principles of talent management entail that the personnel department, not just focus on the, "stars" but also on overall development of essential competencies. These could be acquired in-house by training internal talent or through external hiring based on the skill sets required. Personnel department are also required to design training and leadership development programs for enhancing the skills of potential leaders in the organization. (Bersin, 2006) Thus personnel departments began using e enabled processes to enhance effectiveness of their organizations in diverse fields such as training through innovative programmes of e learning. (Siengthai. Bechter, 2005, p 21). The personnel department is also required to model a succession line for the organization which can reinforce organizational standing in the industry and achieve long term goals in a sustained manner. These functions have to be carried out with consistency and credibility. (Bersin, 2006). The critical role played by personnel departments on strategic culture in an organisation is not fully appreciated. Through their ability to respond to overall organisational objectives and goals, personnel departments can contribute greatly to strategic culture in organizations. (Gratton. Hailey, 1999, p 118). However to do so there is a need for a thorough understanding of how the internal and external factors impact on the ability to deliver results and how interventions in human resources affect the managers, supervisors and workers at each level. Having carried out an analysis of these factors the relationship between the personnel department and the overall organisational structure is established. The manner in which the personnel department can influence the organisational inputs on a day to day basis can also be evolved thereby leading to specific areas of emphasis which can contribute value. A sum total of evaluation of all these factors will lead to evolving an organizational culture which in turn will contribute to strategic worth. Increasing Strategic Value In Organisations To provide strategic value to their organizations, personnel departments have to first convert themselves into strategic assets. Strategic assets are those areas which provide unique services to the business giving it an advantage over competition. (Amit. Shoemaker 1993. p 36). In terms of role and functions, the personnel department will have to provide enhanced personnel, pay, role definition, job enhancement and talent management perspectives to the organization. (Becker, et al, 2001). The overall aim would be to integrate the personnel department in the functioning of the company and be viewed as a business partner. Such integration cannot be restricted to the administrative level as is implied in traditional personnel management functioning wherein the department provides support for management of records rather than strategic inputs for augmentation of human resources thereby contributing to strategic goals. The human resources department should integrate itself with the senior management of the firm and facilitate day to day functioning as well as long term survivability. (Strategic HR, Nd) Personnel managers handle the most sensitive resource in an organization which is a transient rather than a fixed or a static asset. Thus implying that to create value it has to be nurtured to its optimum potential. The personnel department has to ensure that the functions of hiring, role denoting, training, supporting and compensating people in the organization is integrated to provide sustained worth. Personnel departments will have to increasingly reengineer and reinvent to become strategic partners of business leaders. (Ulrich, 1993, p 83) This requires aligning efforts of the department towards achieving common goals and contributing to the overall strategy. (Ulrich, 1993, p 54). For building the right organization, a key ingredient is restructuring personnel departments. An example of the global engineering construction firm Engcon will be illustrative. The company was undergoing a major downturn in business. A review of the performance indicated that there was a need to add value in the personnel department. A restructuring of the personnel department was undertaken and the HR profile of the organization considerably upgraded to achieve higher levels of competencies which in turn greatly contributed to enhancement of organizational performance. Thus it would be seen that by reorganising the personnel department considerable value was added to the organization leading to greater efficiencies. (Ulrich, 1993, p 54). This strategic value has to be built through a structured plan for enhancing capabilities over a period of time rather than attempting to evolve quick solutions by merely turning over staff. The department personnel should be able to adapt to the evolving organization, the changes that are forthcoming and remain competitive by focusing on the internal as well as the external environment. A critical support for developing strategic skill sets in a personnel department to contribute to strategy is denoted by the value, rareness, imitability and organization (VRIO) framework. (Barney, Wright. 1998, p 31). This frame work attempts to link the role of the personnel department and human resources manager to enable an organization to develop a strategic advantage over its competitors. VRIO indicates the quantum of value, the differentiation as well as compatibility and organizational strength that the personnel department can provide to an organisation which can directly impact on the results achieved and indicates the value building mechanisms inherent in such a relationship. A similar trend is to foster the HR executive as a partner at the strategic level providing much needed value at the apex of organizational functioning. (Barney, Wright. 1998, p 42) By incorporating HR department personnel in strategy formulation and implementation an innate understanding of the overall aims, goals and structure of the organization are developed, thereby enhancing their contribution. A key indicator of the significance of the personnel department in an organization would be the status enjoyed by the head of the department. Where the head has been placed on the board, the integration would be complete. However in many cases the personnel department manager will not be seen at the higher decision making level in an organization. Contribution has to be through reporting levels of the department. Creation of strategic value in this case would be by providing integrated inputs through the processes of human resources audit, which would enable the top hierarchy to assess the impact and potential of its personnel on goal achievement. (Strategic HR, Nd). Conclusion The role of the personnel department has considerably transformed from that of hiring, firing and pay roll accounting to maintaining and sustaining competitiveness of the firm. The significance of this transformation has been indicated in many varied settings. A study on how the businesses in South East Asia recovered after the crash in 1997 has clearly indicated that human resource optimization formed a very important part of the overall process of revival. (Siengthai. Bechter, 2005, p 18). These practices were reviewed not just in indigenous Thai owned businesses but also Western and Japanese controlled firms thereby leading to overall contribution of personnel management to growth of economy of the country. (Siengthai. Bechter, 2005, p 18). This effectively demonstrates the impact of personnel departments in adding strategic value to businesses. REWARDS STRATEGY AND CHANGE PROGRAMMES Introduction Management of enterprises is affected by a number of factors in a global environment. The limited job skills available tailor made to the job role and availability of large number of opportunities is placing unprecedented pressure on employee hiring and retention. A well integrated compensation strategy which is aligned to the goals of the company is thus an important facet of personnel management strategies today. Rewards strategy is the total package of benefits that the company plans to provide to its employees including the manner of communicating the same, the delivery as well as an assessment of the results achieved. Salary administration is a key component of the rewards strategy and hence needs due attention. (Armstrong, Murlis, 1991, p 4). However rewards management is a much larger concept than salaries. The aim is to ensure total rewards to employees with a view to obtain their full fledged commitment. (Armstrong, Murlis, 1991, p 10). The use of managerial rewards as a strategy for directing efforts of individuals towards the aims and objectives of an organization has been well accepted. (Kerr, 1985, p 155). Rewards strategy can be effectively utilized to enhance motivation particularly in the case of companies which are undertaking change management. The process of change is extremely risky and requires deft management of the internal environment. A rewards package can sustain the management strategy for change thereby subtly attaining the commitment of the employees in the process. Some organisations have in built rewards mechanisms for change of non strategic nature, such as move from one site to another involving change of place or job content. However rewards can also be utilized as a strategic change management tool effectively Reward Strategy Employee rewards indicate the manner in which people are compensated in an organization based on the value that they provide in their jobs. (Employee Reward, Nd). This is a two way process. Fixing value of a job and compensation of the person occupying it is the first and the better known part. Aligning reward strategy to successful accomplishment of management objectives is the second part which needs greater recognition. A rewards strategy implies total pecuniary and non pecuniary benefits that are contained in the rewards programme of the management which conveys to the employee the value that the company places in work produced. (Total Rewards, 2005). Thus rewards have to be integrated in the policies adopted by the company, its strategies, structures and processes for achieving organisational objectives. This strategy has to ensure that the system is flexible, provides adequate compensation for efforts the employee has put in to support the company, adjust to industry norms as well as the internal environment of the company. A rewards strategy should ensure that benefits offered are seen by the employee as a motivation to continue to excel for the company in the manner desired. To be effective, a rewards scheme has to be holistic, should be integrating, align with the strategy of the business, should be long term, be flexible and also provide a sense of distinctiveness to the employee receiving it. An important component of the rewards strategy is the manner in which it is communicated to the employee. (Total Rewards, 2005) This should be effective in providing visibility to the company's incentive programs. Very frequently it is seen that firms tend to camouflage their benefits in such a way that a majority of the employees are not aware of the same. Some are also not able to fully utilize them due to complicated procedural requirements mostly imposed by restrictions by financial departments as well as stipulations laid down by ethics committees. The reward strategy should reduce these hurdles to the bare minimum while emphasising the need for ethical drawl of benefits. Another important facet of a viable rewards strategy is to ensure that the package is designed to achieve the overall aim of the program. The reward strategy should aim at enhancing the commitment of the participant towards achievement of the goals of the company by non exploitative participation of the employees. There is a need for such a policy being totally flexible and ensure that diversity is fully maintained as per laid down norms of the industry and the government. Credibility and sustainability are thus key components of the program. Within the overall reward system there would be different levels which can be established. These could be purely in terms of pay and allowances or could be non pecuniary to include perks, privileges or simply role definition and job designations. An overall rewards strategy needs to be a total package considering all these facets rather than basing purely on pay differential. Such a holistic policy will ensure that there is sufficient peer value generated in the forms of a bouquet of incentives for sustained performance by individuals in an organization. This may also have added spin offs for the in terms of financial savings. However such a policy has to carefully evolved based on industry standards, the overall labour environment, job and skills matching. (Reward Strategy, Nd). Linking Organizational Change Programmes A rewards strategy can be effectively employed to support and even lead organizational change programmes. Linkage established between change achieved and rewards would foster flexible culture in an organization with greater motivation aligning employees with the goals of the company. During the critical stage of transformation this also establishes an effective link between reward strategies, the overall environment and the organization. (Balkin. Gomez-Mejia.1987, p 170) Through such a perfect alignment, it would be possible to implement pay strategies to support change programmes desired by the management. Thus an effective linkage can be established between the processes of rewards and the strategic transformations desired in the organization. (Balkin. Gomez-Mejia.1987, p 180) A practical usage of such a strategy which has linked rewards with change management has been provided by Geller (1984). In a study on the use of safety belts in an industrial complex, it was observed that where a reward strategy was used, the organizational aim of enhancing protection of personnel through greater use of safety belts succeeded without extensive use of resources. Thus exemplifying that the rewards strategy need not be solely based on deployment of large financial outlays and should be focused on achievement of results. The firm implemented a rewards programme which was based on random selection of personnel who used safety belts while crossing one of the two exit gates to the company. The results demonstrated that for the very limited resources utilized such as tickets to a basketball game or meals for a couple, there was considerable improvement in the frequency in use of safety belts. (Geller, 1984, p 464). While in the initial stages this strategy was employed continuously on a daily basis, to sustain implementation, it was continued sporadically, thereby providing considerable benefits to the company by increasing safety. From industry to the global level, the lessons of employment of a rewards strategy for smooth implementation of change remain constant. Mergers and acquisitions are increasingly carried out across countries, overcoming barriers of regions and nationalities. Considerable friction experienced during mergers and acquisitions in the global business environment can be overcome by an effective employee reward policy. Thus expatriate allowance, tax advantages, home and host concepts can be fruitfully employed to advantage to facilitate absorption and adjustment of merged entities. (Reward Strategy, Nd) Thus broader organisational goals can be successfully concluded through adoption of a special rewards package for employee motivation. The alignment of efforts by an individual to achieve organizational goals through a managerial reward system has also been recognized by a study by Kerr (1985, p 155). The reward system however has to be appropriately designed to ensure subtle linkage between the award and the goals to be achieved. Designing the system has to be done with care and needs considerable thought on the part of the management to ensure that it will lead to desired results. An ideal arrangement should also provide measurable results to at each stage while finally ensuring that change is absorbed within the system. A sustained follow up would be essential for the same. This could be in the form of interventions made from time to time at regular intervals. Flexibility is another component of rewards strategy which can be effectively employed to bring about change in a system. With inbuilt flexibility, managers will be able to adopt innovative pay packages, can institute on the spot financial rewards, provide leave incentive and ensure that the changing needs of the staff are met from time to time. In the United Kingdom, many government bodies have been adopting such policies to get the most of their employees and particularly to motivate them to continue with the organization. (Reward Strategy, Nd). Having implemented a rewards strategy to achieve the desired change, it is essential that there should be adequate means and measures to quantify results achieved through its implementation. While it may be easier to estimate results achieved in a simple case such as use of safety belts as indicated in the study above, it is more difficult to do so where assessment is of strategic transformation where results are not easily quantifiable. Conclusion Employee reward policy is an integrated function. This is not purely linked to the financial state of the company, though it may be dictated by the same as the organization will be able to afford only those rewards which it can sustain. A rewards strategy has to be an integrated as well as a reinforcing portion of the overall policy of the organization. The significance of this as an incentive for change is well accepted. Subtle yet substantive reward interventions will enable achieving desired transformations in an organization at all levels, personal, industry or global. Thus a rewards strategy is now seen as a part of change implementation by many organisations and acts as a natural process of survival and elimination. Reference 1. Amit R., & Shoemaker, P. (1993). Strategic assets and organisational rent. Strategic Management Journal, 14(1), 33-46. 2. Armstrong, Michael. Murlis, Helen. (1991). Reward Management: A Handbook of Remuneration Strategy & Practice. New York: Kogan Page. 3. Balkin, David B. Gomez-Mejia, Luis R. (1987). Toward a Contingency Theory of Compensation Strategy. Strategic Management Journal, Vol. 8, No. 2 (Mar. - Apr., 1987), pp. 169-182 4. Barney, Jay B. Wright, Patrick M. (1998). On becoming a strategic partner: The role of human resources in gaining competitive advantage. Human Resource Management Volume 37, Issue 1, Pages 31 - 46. 5. Becker, B. E., Huselid, M. A., & Ulrich, D. (2001). The HR scorecard: Linking people, strategy, and performance. Boston, MA: Harvard Business School Press. 6. Bersin, Josh. (2006). Talent Management. What is it Why Now Retrieved on 4 January 207 from www.bersin.com/tips_techniques/06_apr_talentmgt.asp - 43k. 7. Brockbank, Wayne. Yeung, Arthur. (1994). Lower Cost, Higher Value: Human Resource Function in Transformation. Wayne Human Resource Planning, Vol. 17, 1994 8. Employee Reward. (Nd). Retrieved on 4 January 207 from http://www.cipd.co.uk/mandq/standards/prac/sgpd/emprwd.htm 9. Geller, ES. (1984). Delayed reward strategy for large-scale motivation of safety belt use: A test of long-term impact. Accident Analysis & Prevention [ACCID. ANAL. PREV.]. Vol. 16, no. 5-6, pp. 457-464. 1984. 10. Kerr, Jeffrey L. (1985). Diversification Strategies and Managerial Rewards: An Empirical Study. The Academy of Management Journal, Vol. 28, No. 1 (Mar., 1985), pp. 155-179. 11. Lynda Gratton, Lynda. Veronica Hope Hailey, Veronica. Et Al. (1999). Strategic Human Resource Management: Corporate Rhetoric and Human Reality. New York: Oxford University Press. 12. Siengthai, S. & Bechter, C. (2005). Human Resource Management in Thailand: A Strategic Transition for Firm Competitiveness, Research and Practice in Human Resource Management, 13(1), 18-29. 13. Reward Strategy. (Nd). Retrieved on 4 January 207 from http://www.kent.gov.uk/jobs-and-careers/rewards-and-benefits/reward-strategy/ 14. Strategic HR. (Nd (No Date)). Retrieved on 4 January 207 from http://www.hrinz.org.nz/system/knowledge_base/Area.aspRD=1&competency=15&area=34. 15. Total Rewards. (2005). Total Rewards tool kit in development. Retrieved on 4 January 207 from http://www.civil-service.net/rewardsplus/fe_news/publicnews_details.aspnewsid=42 16. Ulrich, David. (1997). Human Resource Champions: the next agenda for adding value and delivering results. Harvard: Harvard Business School Press. Bibliography Books 1. Armstrong, Michael. Murlis, Helen. (1991). Reward Management: A Handbook of Remuneration Strategy & Practice. New York: Kogan Page. 2. Becker, B. E., Huselid, M. A., & Ulrich, D. (2001). The HR scorecard: Linking people, strategy, and performance. Boston, MA: Harvard Business School Press. 3. Lynda Gratton, Lynda. Veronica Hope Hailey, Veronica. Et Al. (1999). Strategic Human Resource Management: Corporate Rhetoric and Human Reality. New York: Oxford University Press. 4. Ulrich, David. (1997). Human Resource Champions: the next agenda for adding value and delivering results. Harvard: Harvard Business School Press. Journal Articles 5. Amit R., & Shoemaker, P. (1993). Strategic assets and organisational rent. Strategic Management Journal, 14(1), 33-46. 6. Balkin, David B. Gomez-Mejia, Luis R. (1987). Toward a Contingency Theory of Compensation Strategy. Strategic Management Journal, Vol. 8, No. 2 (Mar. - Apr., 1987), pp. 169-182 7. Barney, Jay B. Wright, Patrick M. (1998). On becoming a strategic partner: The role of human resources in gaining competitive advantage. Human Resource Management Volume 37, Issue 1, Pages 31 - 46. 8. Brockbank, Wayne. Yeung, Arthur. (1994). Lower Cost, Higher Value: Human Resource Function in Transformation. Wayne Human Resource Planning, Vol. 17, 1994 9. Geller, ES. (1984). Delayed reward strategy for large-scale motivation of safety belt use: A test of long-term impact. Accident Analysis & Prevention [ACCID. ANAL. PREV.]. Vol. 16, no. 5-6, pp. 457-464. 1984. 10. Kerr, Jeffrey L. (1985). Diversification Strategies and Managerial Rewards: An Empirical Study. The Academy of Management Journal, Vol. 28, No. 1 (Mar., 1985), pp. 155-179. 11. Siengthai, S. & Bechter, C. (2005). Human Resource Management in Thailand: A Strategic Transition for Firm Competitiveness, Research and Practice in Human Resource Management, 13(1), 18-29. Web Sites 12. http://www.hrinz.org.nz 13. http://www.civil-service.net 14. http://www.cipd.co.uk 15. http://www.kent.gov.uk 16. www.bersin.com Read More