Human Resource Management in an Organization - Essay Example

Introduction Human resource management ensures that all the human resources in an organization is organized planned for, developed etc. All that concerns the human resource in any organization is the responsibility of human resource management. It is the responsibility of the HRM department of any organization to hire competent employees to play a specific role in an organization. However, it sometimes happens that the services required by an organization cannot be easily got from individual employees who get employed or if these services can be got from the employees, the services are not quality enough or efficient to offer the services required by the organization. As such, the organization most of the time decides to outsource these services from other organizations which can offer the service(s) required more efficiently. Other organizations outsource so seriously that they end up co-opting the organization as part of itself thereby creating what is generally termed as the virtual network structure. This paper seeks to highlight the concept of co-opting, outsourcing and virtual network structure. It also explains why virtual network structure is a good structural alternative for some firms and by using one organization as an example, the benefits and limitations of the virtual network structure are evaluated. Outsourcing Outsourcing refers to the transfer of some organizational functions to an external service provider. This kind of arrangement is contractual and it happens between the organization and the supplier of the services that the organization requires. Mostly, the supplier of services through the contract is able to use the means of production it already owns. These means of production may be in form of assets, equipment and personnel among others. For the entire period of the contract, the organization is able to procure the required services from the contracted service provider. It is important to note that outsourcing can be done for a number of services. These services include but are not limited to human resource, estate management, accounting, information technology and auditing among others. Other outsourced services also include customer care or service telemarketing, designing and/or manufacturing and market research among others. The decision to outsource is preceded by a number of cost considerations among other considerations. Usually, the organization has to decide whether to outsource a given service or organizational function or conduct it in-house. It is important to note that the decision to outsource is a strategic level decision and as such requires the approval of the board of directors. The process of outsourcing usually begins after the decision is made after which the organization analyzes the in-house as compared to the buying of the services in terms of cost, efficiency, effectiveness, performance, quality etc in a bid to justify the decision of outsourcing (Chopra & Meindl, 2007: pp123-127). The complexity of the outsourcing process calls for the use of outsourcing consultants or intermediaries who not only help with the scoping but also with the legal terms and conditions, pricing and evaluating the vendors offering the required service(s). Outsourcing has been around for some time now and is as old as specialization itself but in the recent years most companies have embraced outsourcing so as to handle most narrow functions e.g. data entry billing and payroll among other organizational functions. Outsourcing of these functions is done because the contracted organizations can perform the functions more efficiently than when the functions could have been done in-house. Outsourcing of these functions is more often than not more cost effective than the opposite of it because the contracted companies have all the facilities, assets, specially trained human resource and special tools for the functions they have been contracted to carry out. Most of the times outsourcing is sought, it ends up being a success albeit this is not always the case. The success is heavily dependent on the support from the executive of the client organization, communication to the affected personnel who were initially doing the outsourced function and the ability of the client organization to competently manage the service providers. The outsourcing professionals manage the outsourcing venture and as such are in charge of the work both in the client and the service provider's side and these calls for skills such as negotiation, project management and above all communication. They are also supposed to understand the terms and conditions of the outsourcing contract and they should also be flexible to changes in the needs as far as the outsourcing venture is concerned. Outsourcing is often faced with a number of challenges but the most formidable challenge is seen when the most acute of functions are outsourced from a foreign country i.e. the client and service providers are in different countries in what is termed as offshore outsourcing. In offshore outsourcing, language, culture and time differences pose a formidable challenge to the outsourcing venture. As mentioned earlier, most companies outsource to an extent that they create a virtual network structure. This network structure describes a multiple of service providers all contracted by a single client and as such, those service providers whose role depend on another service providers (for instance the accounting and financial functions' service providers may depend on the billing and payroll functions and they will rely on the data from these providers to enable them plan. Similarly, the payroll will also need to work together and closely with the HRM service providers to be able to achieve the function of preparing the payroll easily before handing it over accounting function's service providers). Therefore, the virtual network structure defines the interrelationships between the virtual organizations all of which serve the same client organization. The network structure is similar to organizational structure and as such it may be a centralized or decentralized structure. It may as well be a bureaucracy. However, most of the time it is a horizontal structure as compared to vertical hierarchical structure. Whatever the network structure, it enable the consolidation of efforts to achieve a common goal i.e. overseeing the success of the client organization. Virtual organizations often use email to correspond and synchronize their effort towards a common objective. Virtual organizations are already ubiquitous. Organizational Design Organizational design involves not only the enactment of roles and processes but also the creation of official communicative and reporting relationships. There are two main phases in the entire organizational design process. These are: strategic grouping and operational design. Strategic grouping creates the organization's overall structure i.e. all the sub-units and how they relate to each other. Operational design on the other hand defines all the processes and roles in an organization in a detailed manner. The process of organizational design is practice oriented and mostly seeks the expertise of consultants (Melcher, 1976: pp123-125). There is a clear distinction between organizational theory and organizational design. The former is more descriptive and focuses on the understanding of the functioning of the organization. The latter is more of a normative discipline which produces a framework besides the tools that are required to make the organization effective (Ferrell, 1979: pp58-61). Virtual Network Structure As mentioned earlier, outsourcing has become common in many organizations in the modern times. Most organizations outsource extensively until they end up forming a virtual network structure. A virtual network structure is an extension of the collaboration and coordination beyond the boundaries of the known traditional organization. It embraces the concept of outsourcing. In fact, when out sourcing is mentioned the concept of virtual network structure is implied. It is however not automatic that an organization that carries out outsourcing will maintain a virtual network structure. It is only those organizations that outsource extensively. Extensive outsourcing in this sense refers to the scenario where the organizations farms out or contracts other companies to carry out most of its functions. This is often popular because these companies can perform these functions more efficiently. When most of the organization's functions are farmed out, then it becomes necessary that the various companies carrying out these functions are coordinated from one headquarter organization. Thus, with virtual network structure (also called Modular structure) a client organization subcontracts most or sometimes all of its functions to service providing companies and the client organization remain with the responsibility of coordinating and controlling these various outsourced organizational functions. Virtual network structure is being embraced by a number of organizations because of its advantages that will be highlighted later in this paper. Most organizations today are going the virtual network structure way and some of the examples are enumerated below: All of Sainsbury's (Sainsbury is a British food Retailer) IT functions are outsourced from Accenture company. Mostly, companies from India Malaysia and even Scotland handle call centres and offer technical support for most computer and phone companies in the US. To add more to this illustration, General motors extensively sub contracts most of its functions to other companies. These functions include design of cars, body building, interior decor, furnishing etc. These companies then have to be coordinated such that when one completes its functions, the other takes over in a series manner. Bombardier airplane makers as well do the same thing as Genera motors automobile makers (Daft, 2007: p117). Finally, Fiat Auto is notorious in outsourcing most of its functions from outside companies. These companies handle functions such as engineering, manufacture of parts, design, logistics, maintenance etc. It is imperative to note the fact hat the process of outsourcing or virtual network structure reflects a great shift in the organizational design (Daft, 2007: p117) The question that is mostly asked about virtual network structure is how it works. First it is important to start from the fact that most of organizational functions such as manufacturing, accounting, marketing, distribution, payroll management, design etc are outsourced from companies which may or may not be in the same country as the client organization. These outsourced organizations are then connected electronically to a central centre controlled and coordinated by the client organization. The electronic connections mostly is through networked computers that us the internet to share and transfer information. With these connections the organization made up of several outsourced companies offering various functions pass on as a single efficient company under the name of the client organization or company. As far as structure is concerned, the virtual network structure helps an organization to break away from the traditional vertical structure therefore assuming a horizontal structure whereby all the outsourced companies are coordinated collaborated by the client organization or in other words the outsourcing company. As such the outsourced companies can be contracted or dropped fro the system depending on the market needs as at the moment (Gibson et al, 2003). Is efficiency possible with virtual network structure There is no an efficient organization's structural approach as the virtual network structure. This is because, the outsourcing organization simply concentrates on the services which it can perform perfectly, efficiently and cost effectively and all the others are outsourced to other companies which are the best as far as the service in question is concerned.. The outsourced organizations not only use their assets and manpower but also use their ideas and expertise to accomplish the functions they have been contracted to perform. This approach of virtual network structure has been highly embraced by most organizations but worthy noting is the fact that virtual network structure is advantageous especially for a company that is starting up. For other organizations that are already established, virtual network structure, enables the organizations to do more with less in that those companies with distinctive competence in specific areas are contracted to do this at a cheaper cost a compared to if the function was to be carried out in-house. Virtual Network Structure in Practice In the foregoing section, it was mentioned that the virtual network structure is useful to a company is starting up. A starting up company, instead of spending too much time building a company from scratch, it can concentrate on the major underlying concept or technology and outsource most of the other remaining functions. TiVo is a digital recorder manufacturer a couple of years ago. When it started, it did not waste much resources and time developing from scratch but it simply identified partners and outsourced competent companies for its functions. TiVo developed a technology that would allow users to record video clips up to and more than 80 hours. This was in contrast to similar technologies that required that one has a storage media to store the video. At its inception, TiVo simply outsourced most of the functions enabling it to become a formidable market player within a very short. This would not have been achieved if outsourcing was not embraced. The management of TiVo reckoned that to take on a totally new market by storm, speed is essential and this is why outsourcing was embraced extensively (Daft, 2007: pp118-119). TiVo outsourced most functions such as advertisement, distribution, development of manuals and customer training material and manufacturing functions. TiVo made manufacturing functions' partnerships with already established and renowned companies such as Sony and Royal Philips among others. Through the use of virtual network structure, TiVo was able to concentrate on technological innovations while sit outsourced all the other organizational functions. This approach is solely credited for the success of TiVo because after a very short time after inception, TiVo had become a brand to reckon with and its technological innovations were borrowed and included in other new products produced by companies such as Sony and many others. Indeed from the TiVo's example, it is evident that virtual network structure is highly beneficial but it is better if the entire strength and weaknesses analysis is done to give a wider perspective of the viability of virtual network structure, All the organizations that have used outsourcing have been able to post formidable results in their efficiency and profitability besides holding and maintaining formidable competitive edge in the market (Daft, 2007: pp118-119). Strengths and Weaknesses of Virtual Network Structure Strengths To start with, any organization no matter how small is able to go global. Through sub contracting an organization is able to count on the resources that the outsourced companies have to produce products which can as well be distributed worldwide through outsourcing. Secondly, a company is able to gain market dominance and competitive edge in market without necessarily investing heavily in factories, equipment and distribution means among other pre-investments (Ostroff, 1999: pp30-37). Furthermore, outsourced companies can enter and get out of the virtual network anytime and this makes an organization to be flexible and ready to respond to the rapidly changing market needs. Finally, virtual network structure minimizes administrative costs; the sub-contracted companies are able to manage themselves. All the client organization does is to coordinate and control these companies thus ensuring that they not only continue contributing efficiency to the mother company but also are able to reach targets within deadlines. Weaknesses First, Organizational managers lack an active hand-on control of most activities as well as the human resource. Secondly, this kind of network structure is time consuming as far as management of interrelationships between the contracted organizations so as to limit conflicts is concerned. Thirdly, in this structure, failure of any one of the outsourced organizations means failure of the mother organization. The outsourced organizations may fail to deliver; run bankrupt hence going out of business and this will have far reaching negative impacts on the client organization that out sourced the failing company. Moreover, organizational culture is difficult to achieve because an organization is defined by various subcontracted organizations whose main concern is to deliver as per the contract specification (Sengupta & Bhattacharya, 2006: pp25-27). Similarly, employee loyalty is elusive because employees are constantly in fear of a possibility of replacement by contracted services and this makes it difficult to foster a loyalty to the organization they work for. Finally, communication system breakdown or IT hiccups such as data loss or system clash ha s afar reaching negative impact on the profitability of the organization. Conclusion In conclusion, virtual network structure is quite beneficial to organizations because it is able to enhance highest possible success levels without the necessity of making huge investments. The structure fostered by virtual network structure replaces the vertical and hierarchical structure (often problematic and delays major decisions) with a horizontal structure which is often quite efficient posting massive returns on investments. As much as virtual network structure continues to be embraced, outsourcing will be extensively applied and massive market success will be posted. Outsourcing basically presents a level corporate playing field which makes even the smallest or newest of organizations to post formidable market results. The example of TiVo demonstrates how outsourcing is able to raise an organization from nowhere (scratch) to a formidable position in the corporate scale giving it a bargaining power with market giants such as Sony and the rest. Outsourcing, hence virtual network structure is the way to go for any organization that requires rapid and massive returns on investments. References Chopra S & Meindl P, (2007): Supply Chain Management: Strategy, Planning, and Operation. New Jersey. Pearson Education, Incorporated, pp123-127 Ferrell M.Z, (1979): Dimensions of Organizations: Environment, Context, Structure, Process, and Performance, Santa Monica: Goodyear Publishing Company, pp58-61 Gibson et al, (2003): Organizations: Behavior, Structure and Processes, Boston: McGraw Hill, pp77-82 Melcher A J, (1976): Structure and Process of Organizations: A Systems Approach, New Jersey: Prentice-Hall, pp123-125 Sengupta N & Bhattacharya M S, (2006): Managing Change In Organizations, PHI Learning Pvt. Ltd, pp25-27 Ostroff F, (1999): The horizontal Organization, New York: Oxford University Press, pp30-37 Daft R, (2007): Organization Theory and Design, New York: Thomson South-Western Publishers, pp117-120 Read More