BACHELOR OF BUSINESS ADMINISTRATION Human Resource Management II

BACHELOR OF BUSINESS ADMINISTRATION Human Resource Management II Contact details: Regenesys Business School Tel: +27 (11) 669-5000 Fax: +27 (11) 669-5001 Email: info@regenesys.co.za www.regenesys.co.za

Version 5.6_f Date of Publication: May 2014 Publisher: Regenesys Management Place of Publication: Sandton Document Change History Date Version Initials Description of Change 6 August 2013 5.3 FVS Page continuation amendment 7 August 2013 5.4 FVS Figure/Grapic alternations 3 February 2014 5.5_f FVS Updating of template and referencing, Formatting 22 May 2014 5.6_f SK Update of articles to Emerald Final Formatting This study guide highlights key focus areas for you as a student. Because the field of study in question is so vast, it is critical that you consult additional literature. Copyright Regenesys, 2014 All rights reserved. No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording or otherwise) without written permission of the publisher. Any person who does any unauthorised act in relation to this publication may be liable for criminal prosecution and civil claims for damages.

CONTENTS 1. WELCOME TO REGENESYS... 1 2. INTRODUCTION... 2 2.1 TEACHING AND LEARNING METHODOLOGY... 2 2.2 ALIGNING ORGANISATIONAL, TEAM AND INDIVIDUAL OBJECTIVES... 3 3. ICONS USED IN THIS STUDY GUIDE... 4 4. STUDY MATERIAL FOR THE MODULE... 5 5. RECOMMENDED RESOURCES... 5 5.1 RECOMMENDED ARTICLES... 5 5.2 RECOMMENDED BOOKS... 6 5.3 MULTIMEDIA... 6 5.4 ADDITIONAL SOURCES TO CONSULT... 7 6. LEARNING OUTCOMES... 8 7. CONTENT SCOPE AND LEARNING GUIDANCE... 8 7.1 HUMAN RESOURCE MANAGEMENT IN CONTEXT... 9 7.1.1 HUMAN RESOURCE MANAGEMENT: AN OVERVIEW... 9 7.2 HUMAN RESOURCE PLANNING STRATEGIES... 16 7.2.1 WORKFORCE PLANNING... 16 7.2.2 FORECASTING HR SUPPLY... 17 7.2.3 SUCCESSION PLANNING... 21 7.2.5 ANALYSE HR DEMAND... 25 7.3 PERFORMANCE MANAGEMENT... 30 7.3.1 INTRODUCTION... 30 7.3.2 PERFORMANCE MANAGEMENT PROCESS... 30 7.3.3 PERFORMANCE MANAGEMENT SYSTEMS... 32 7.3.4 PERFORMANCE MANAGEMENT SYSTEM ELEMENTS... 33 7.4 COMPENSATION MANAGEMENT... 38 7.4.1 INTRODUCTION... 38 7.4.2 COMPENSATION MANAGEMENT... 38 7.4.3 REMUNERATION... 41 7.4.4 REWARDS... 43 7.4.5 DEVELOP A REMUNERATION AND REWARD PLAN... 44 7.5 EFFECTIVE WORKPLACE RELATIONSHIPS... 46 7.5.1 UNDERSTANDING WORKPLACE RELATIONSHIPS... 46 7.5.2 IMPORTANCE OF WORKPLACE RELATIONSHIPS... 47 7.5.3 ROLE OF HUMAN RESOURCES IN DEVELOPING SOCIAL CAPITAL... 47 7.5.4 CHARACTERISTICS AND TYPES OF RELATIONSHIPS... 48 7.5.5 DEVELOPING WORKPLACE RELATIONSHIPS THROUGH A MENTOR... 48 7.5.6 ROLE OF SPIRITUALITY IN WORKPLACE RELATIONSHIPS... 50 8. REFERENCES... 52

List of Tables TABLE 1: BENEFIT OF PERFORMANCE APPRAISALS... 14 TABLE 2: TYPES OF STAFF COMPETENCIES... 17 TABLE 3: ANALYSE HR DEMAND... 25 TABLE 4: MONITOR AND EVALUATE A WORKFORCE PLAN... 27 TABLE 5: OBJECTIVES OF COMPENSATION MANAGEMENT... 40 TABLE 6: TANGIBLE OR INTANGIBLE REWARDS... 43 TABLE 7: REWARD PROGRAMMES... 45 TABLE 8: FRAMEWORK OF MENTEE COMPETENCIES... 49 List of Figures FIGURE 1: HUMAN RESOURCE CYCLE... 10 FIGURE 2: HUMAN RESOURCE PLANNING MODEL... 11 FIGURE 3: RECRUITMENT AND SELECTION CYCLE... 12 FIGURE 4: WORKFORCE GAP ANALYSIS PROCESS... 18 FIGURE 5: SUCCESSION PLANNING STEPS... 22 FIGURE 6: DEVELOPING AN ACTION PLAN... 26 FIGURE 7: MONITORING AND EVALUATION STEPS... 28 FIGURE 8: PERFORMANCE MANAGEMENT PROCESS... 31 FIGURE 9: ELEMENTS OF A PERFORMANCE MANAGEMENT SYSTEM... 32 FIGURE 10: FEEDBACK PROCESS... 34 FIGURE 11: PERFORMANCE REVIEW MEETING... 35 FIGURE 12: COMPONENTS OF A COMPENSATION PACKAGE... 40 FIGURE 13: DEVELOP A REMUNERATION AND REWARD PLAN... 44 FIGURE 14: INTERRELATIONSHIPS OF WORKPLACE RELATIONSHIPS... 47

1. WELCOME TO REGENESYS Have a vision. Think big. Dream, persevere and your vision will become a reality. Awaken your potential knowing that everything you need is within you. Dr. Marko Saravanja At Regenesys, we assist individuals and organisations to achieve their personal and organisational goals, by enhancing their management and leadership potential. We approach education and development holistically, considering every interaction not only from an intellectual perspective but also in terms of emotion and spirituality. Our learning programmes are designed to transform and inspire your mind, heart and soul, and thus allow you to develop the positive values, attitudes and behaviours, which are required for success. Having educated over 95 000 students based in highly reputable local and international corporations across over 100 countries since Regenesys' inception in 1998, we are now one of the fastest-growing and leading institutions of management and leadership development in the world. Regenesys ISO 9001:2008 accreditation bears testimony to our quality management systems meeting international standards. Regenesys is accredited with the Council on Higher Education. Our work is rooted in the realities of a rapidly changing world and we provide our clients with the knowledge, skills and values required for success in the 21st century. At Regenesys, you will be treated with respect, care and professionalism. You will be taught by business experts, entrepreneurs and academics who are inspired by their passion for human development. You will be at a place where business and government leaders meet, network, share their experiences and knowledge, learn from each other, and develop business relationships. You will have access to a campus, in the heart of Sandton, with the tranquillity of a Zen garden, gym and meditation room. We encourage you to embark on a journey of personal development with Regenesys. We will help you to awaken your potential and to realise that everything you need to succeed is within you. We will be with you every step of the way. We will work hard with you and, at the end celebrate your success with you. Areas of Expertise Regenesys Business School 1

2. INTRODUCTION Welcome to the second year of Human Resource Management (HRM). In your first year, we introduced you to the different functions of a human resource manager and discussed these functions in detail. This year, we will focus on the Human Resource Management (HRM) cycle. Each of these aspects will be discussed in a separate section of the study guide. In your first year, we described human resource management from the perspective of the human resource manager. This year, we will discuss human resource management from the perspective of the employee. All of this is in preparation for your third year, in which we will discuss human resource management from the perspective of the organisation. 2.1 TEACHING AND LEARNING METHODOLOGY Regenesys uses an interactive teaching and learning methodology that encourages self-reflection and promotes independent and critical thinking. Key to the approach utilised is an understanding of adult learning principles, which recognise the maturity and experience of participants, and the way that adult students need to learn. At the core of this is the integration of new knowledge and skills into existing knowledge structures, as well as the importance of seeing the relevance of all learning via immediate application in the workplace. Practical exercises are used to create a simulated management experience to ensure that the conceptual knowledge and practical skills acquired can be directly applied within the work environment of the participants. The activities may include scenarios, case studies, self-reflection, problem solving and planning tasks. Training manuals are developed to cover all essential aspects of the training comprehensively, in a user-friendly and interactive format. Our facilitators have extensive experience in management education, training and development. Please read through this Study Guide carefully, as it will influence your understanding of the subject matter and the successful planning and completion of your studies. Regenesys Business School 2

2.2 ALIGNING ORGANISATIONAL, TEAM AND INDIVIDUAL OBJECTIVES This course will draw on a model developed by Regenesys Management, which demonstrates how the external environment, the levels of an organisation, the team and the components of an individual are interrelated in a dynamic and systemic way. The success of an individual depends on his/her self-awareness, knowledge and ability to manage successfully these interdependent forces, stakeholders and processes. The degree of synergy and alignment between the goals and objectives of the organisation, the team and the individual determines the success or failure of an organisation. It is, therefore, imperative that each organisation ensures that team and individual goals and objectives are aligned with the organisation s strategies (vision, mission, goals and objectives, etc.); structure (organogram, decision-making structure, etc.); systems (HR, finance, communication, administration, information, etc.); culture (values, level of openness, democracy, caring, etc.). Hence, an effective work environment should be characterised by the alignment of organisational systems, strategies, structures and culture, and by people who operate synergistically. Regenesys Integrated Management Model Regenesys Business School 3

3. ICONS USED IN THIS STUDY GUIDE Icons are included in the Study Guide to enhance its usability. Certain icons are used to indicate different important aspects in the Study Guide to help you to use it more effectively as a reference guide in future. The icons in this Study Guide should be interpreted as follows: Definition The definitions provide an academic perspective on given terminology. They are used to give students a frame of reference from which to define a term using their own words. Examples The example icon is used to indicate an extra/additional text that illustrates the content under discussion. These include templates, simple calculation, problem solution, etc. Video clip or presentation This icon indicates a URL link to a video clip or presentation on the subject matter for discussion. It is recommended that students follow the link and listen/read the required sources. Interesting source to consult The source icon is used to indicate text sources, from the Internet or resource centre, which add to the content of the topic being discussed In a nutshell This icon indicates a summary of the content of a section in the workbook and to emphasise an important issue. Calculations This icon indicates mathematical or linguistic formulae and calculations. Self-reflection Students complete the action of selfreflection in their own time. It requires students to think further about an issue raised in class or in the learning materials. In certain instances, students may be required to add their views to their assignments. Tasks The task icon indicates work activities that contact students must complete during class time. These tasks will be discussed in class and reflected upon by students and facilitators. E-learning students can use these tasks simply to reinforce their knowledge. Note This icon indicates important information of which to take note. Regenesys Business School 4

4. STUDY MATERIAL FOR THE MODULE You have received material that includes the following: Study guide Recommended reading Assignment These resources provide you with a starting point from which to study the contents of this module. In addition to these, other resources to assist you in completing this module will be provided online via the link to this module. Guidance on how to access the material is provided in the Academic Handbook, which you received when you registered for this qualification. 5. RECOMMENDED RESOURCES A number of recommended resources have been identified to assist you in successfully completing this module. 5.1 RECOMMENDED ARTICLES Balaban, N., Belic, K. and Gudelj, M. 2011, 'Business process performance management: theoretical and methodological approach and implementation', Management Information Systems, (6) 4, 3-9, http://www.ef.uns.ac.rs/mis/archive-pdf/2011%20-%20no4/mis2011_4_1.pdf (Accessed 5 January 2013). Busgurus.ca. n.d., 'Workforce Planning Model: Workforce Plan Template', Canada: Motor Carrier Passenger Council of Canada, http://www.busgurus.ca/media/pdf/workforce-planning-template-en.pdf (Accessed 26 December 2012). Foot, M. and Hook, C. 2011, Introducing Human Resource Management, 5 th edition, Cape Town: Pearson Education, http://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/0273740989.pdf (Accessed 24 December 2012). Lengnick-Hall, M.L. and Lengnick-Hall, C.A. 2003, 'HR s role in building relationship networks', Academy of Management Executive, (17) 4, 53-63. Monis, H. and Sreedhara, T.N. 2011, 'Employee perceptions of reward and recognition policy', A comparative study of Indian and foreign MNC BPO firms, JM International Journal of Management Research, (1) 2, 122-130. Regenesys Business School 5

Smith, D. 2010, 'Improving Succession Plans: Harnessing the Power of Learning and Development', Veritaslg.com, http://veritaslg.com/assets/files/articles/sucession%20planning/succession%20planning%20astd.pdf. Accessed 26 December 2012). Additional articles that may prompt discussions and further assist you in completing this course will be saved on Regenesys Online under the relevant course. Please visit the site regularly to access these additional sources. 5.2 RECOMMENDED BOOKS The following book is highly recommended for this module: Dessler, G. 2010, Human Resource Management: Global and Southern African Perspectives, Cape Town: Pearson Education. 5.3 MULTIMEDIA Excentive International 2011, 4: Employee Performance and Compensation Management (HR), [Video clip] YouTube. Viewed 26 December 2012, http://www.youtube.com/watch?v=jtclgglk4pk (Accessed 26 December 2012). Overstrand Municipality 2008, Rewards and Incentives Policy, [Document] Oerswtrand.gov.za, http://www.overstrand.gov.za/index2.php?option=com_docman&task=doc_view&gid=446&itemid=161 (Accessed 21 May 2014). RCI Recruitment Solutions Inc. 2008, 8 Steps, Step 1 Workforce Planning, [Video clip] You Tube, http://www.youtube.com/watch?v=yeiufm-qp70 (Accessed 26 December 2012). Regenesys Business School 6

5.4 ADDITIONAL SOURCES TO CONSULT As a higher education student, you are responsible for sourcing additional information that will assist you in completing this module successfully. Below is a list of sources that you can consult to obtain additional information on the topics to be discussed in this module: Emerald NetMBA: MindTools: Brunel Open Learning Archive: ProvenModels: 12manage.com: Alliance Online: The Free Management Library: The Charity Village: TEDx This is an online database containing journal articles that are relevant to your modules. Please refer to the attached Emerald manual to assist you to download required articles. Information on how to access Emerald is provided in your Academic Handbook. You will receive access to the database once you register as a student. This is one of several web sites that provide a selection of MBA constructs and discussion. It is one of the better of these addresses. http://www.netmba.com/ MindTools.com is a very useful source of ideas, constructs, management models, etc with even more useful commentary and description. http://www.mindtools.com/ A Brunel University support-site that provides an easily accessible library of ideas, concepts, constructs techniques, tools, models, etc. http://www.brunel.ac.uk/ ProvenModels' Digital Model Book presents digitalised management models categorised in a clear, consistent and standardised information structure to improve the usability and reusability of management literature. Management models are important generalisations of business situations when applied in context and are powerful tools for solving business issues. http://www.provenmodels.com/ This is a website on which one can access numerous models as well as global comments on the models and principles. This could also serve as a place for you to voice your ideas and get feedback from all over the world. http://www.12manage.com/ The Alliance for Non-profit Management's general introduction to strategic planning is built around 15 questions that cover just about all aspects in brief (click on Strategic Planning.) http://www.allianceonline.org/faqs.html The Free Management Library can be used to improve your organisation, and for your own personal, professional and organisational development. This is by far the most comprehensive overview of all aspects of strategic planning covering all stages of the process. http://www.managementhelp.org/np_progs/sp_mod/str_plan.htm A series of 12 very short articles by Ron Robinson, an independent Canadian consultant, appeared on Charity Village between November 2001 and October 2002. These articles are refreshing in that they do not advocate a one best way for all types of nonprofit organisations. They discuss various ways of approaching the strategic planning process. https://charityvillage.com/topics/management/planning/strategic-planning.aspx?page1424=2 The TEDx programme (Technology, Entertainment and Design) was created to help communities, organisations and individuals to spark conversation and connection through local TED-like experiences. It includes topics from science to business to global issues in more than 100 languages their mission is to spread ideas ("to make great ideas accessible and spark conversation"). https://www.ted.com/about/our-organization There are many more sites and articles available that can help you to successfully complete this module. You are encouraged to post the website addresses or URLs of any additional interesting sites that you come across on the Regenesys Learning Platform. In this way, you can assist other students to access the same wonderful information that you have discovered. Regenesys Business School 7

A word of caution not all information available on the Internet is necessarily of a high academic standard. It is therefore recommended that you always compare information that you obtain with that contained in accredited sources such as articles that were published in accredited journals. 6. LEARNING OUTCOMES Upon completing this course, participants should be able to: Explore the human resource planning cycle; Identify and understand the elements of the cycle; Prepare a succession plan; Understand career planning; Understand job responsibilities and job descriptions; Understand the processes of performance measurement, performance evaluation and the supportive systems; Understand the use of performance appraisal in performance improvement; Understand the differences between reward and remuneration; Explore the non-financial rewards that can be used to motivate staff; and Explain the importance and approaches to developing workplace relationships. 7. CONTENT SCOPE AND LEARNING GUIDANCE A number of topics will be covered to assist you in successfully achieving the learning outcomes of this module. It is important to study each of these sections to ensure that you expand your knowledge in the subject and are able to complete the required assessments. The sections that will be dealt with include: Section 1 Section 2 Section 3 Section 4 Section 5 Human Resource Management in Context Human Resource Planning Strategies Performance Management Compensation Management Effective Workplace Relationships A more detailed framework of what is required for each of these topics follows under each section heading. A number of questions to probe discussion and guide you towards comprehension and insight are also provided. Regenesys Business School 8

The timetable under each section heading provides guidance on the time to be spent to study each section. It is recommended that you follow the given timetable to ensure that you spend the appropriate amount of time on each section. Following the timetable will ensure that you have covered the required sections relevant to each assignment and have appropriate time to prepare for the examination. 7.1 HUMAN RESOURCE MANAGEMENT IN CONTEXT Timeframe: Learning outcomes: Recommended reading: Section overview: 4 hours Explore the human resource planning cycle Identify and understand the elements of the cycle Foot, M. and Hook, C. 2011, Introducing Human Resource Management, 5 th edition, Cape Town: Pearson Education, http://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/027374 0989.pdf (Accessed 24 December 2012). Human resource management (HRM) focuses on all aspects that relate to the management of work in organisations, as well as the people doing the work. The purpose of this chapter is to give you an idea of what HRM entails and the effect that it has on members of the organisation and all other stakeholders. You do not need to focus on the details of this chapter; as long as you are able to describe the broad essence and value of HRM. 7.1.1 Human Resource Management: An Overview First-Year Human Resource Management provided you with a background to the basic functions of a Human Resources Unit/ Department. You learnt that managing the human resources of an organisation involves much more than hiring and firing people. Human resource management involves developing a workforce for an organisation in such a way that you provide the organisation with a competitive advantage through their human capital. Human capital refers to an approach of management that reflects the value of employees. The capacities of employees are seen as assets that can be leveraged to the organisation s advantage. Investopedia (2013) defines human capital as follows: A measure of the economic value of an employee's skill set. This measure builds on the basic production input of labour measure where all labour is thought to be equal. The concept of human capital recognizes that not all labour is equal and that the quality of employees can be improved by investing in them. The education, experience and abilities of an employee have an economic value for employers and for the economy as a whole. Simply put, the human capital of an organisation is the skills of its employees. These skills can be improved on through training and development (investment), which will allow employees to become more capable of doing what they were appointed to do or to develop their potential to become more in the organisation. This process must be managed and the management of human capital is referred to as Human Capital Management. Regenesys Business School 9

Rouse (2012b) defines Human Capital Management as: An approach to employee staffing that perceives people as assets (human capital) whose current value can be measured and whose future value can be enhanced through investment. Clearly, the employees of an organisation are more than just people doing their jobs. Human Capital Management requires that the Human Resource Department be aware of each employee s activities throughout the Human Resource Management Cycle to allow him/ her to identify possible potential in employees to ensure organisational success. Let us have a look at the HRM cycle. It is represented in Figure 1. Figure 1: Human Resource Cycle HR planning (Iden'fy needs) Compensa2on management (Ensure each employee is compensated for his/ her effort) Recruitment and selec2on (Iden'fy the right people) Performance Appraisal (Evaluate whether each employee is capable of fulfilling his/ her role) Induc2on and orienta2on (introduce them to and include them in the team) Training and Development (Develop each employee to reach his/ her full poten'al) Job analysis (Clarify each role in the organisa'on) (Adapted from: Rouse, 2012a) Each element of the HRM cycle will be discussed separately. Regenesys Business School 10

Human Resource Planning Swanepoel, Erasmus and Schenk (2008: 242) explain that there are different models that can be used to plan the people factor in an organisation. Different models may work better for different types of organisations. The most important factor to remember, however, is that there should be a clear link between the organisation s strategic objectives, the formulated HRM strategies and structures and the human resource plan, as such. This model (Swanepoel, Erasmus and Schenk, 2008: 244) is schematically represented in Figure 2. Figure 2: Human Resource Planning Model Step 1: Gathering, analysing and forecas2ng workforce and supply and demand data Phase 1: Forecas'ng Phase 2: Analysing the organisa'on's workforce Phase 3: Workforce demand forecast Phase 4: Budget considera'on Phase 5: Workforce supply forecast Step 2: Establishing objec2ves and formula2ng ac2on plans Gain top- management approval Workforce objec'ves and ac'on plans Step 3: Implemen2ng and adap2ng the workforce plan Recruitment Training and development Produc'vity analysis New technology Promo'on (succession planning) Retrenchments Contract labour Organisa'onal development Step 4: Monitoring and evalua2ng workforce planning Possible criteria: Actual staffing levels; Established staffing requirements; Produc'vity levels; Established goals; Actual personnel flow rates; Desired rates; Programmes implemented; Ac'on plans; Programme results; Expected outcomes; Labour and programme costs; Budget; Ra'os of programme results; Programme costs. (Swanepoel, Erasmus and Schenk, 2008: 244) We will discuss this in more detail in the next section of this study guide. Regenesys Business School 11

Recruitment and Selection Within the framework of human capital management (HCM), recruitment and selection takes on a new meaning. Employees are recruited and selected; not only for their current capabilities but also for their future potential. To introduce recruitment and selection, let us have a look at the recruitment and selection cycle (Figure 3): Figure 3: Recruitment and Selection Cycle Hiring Planning Interviewing Sourcing Screening Pos2ng (Mayhew, 2013b) Recruitment and selection will be discussed in detail in Year Three of your studies. Induction and Orientation Once employees have been employed, employers should induct and orientate them. Induction is described as: [The] first step towards gaining an employee s commitment, it is aimed at introducing the job and organisation to the recruit and him or her to the organisation. It involves orientation and training of the employee in the organisational culture, and showing how he or she is interconnected to (and interdependent on) everyone else in the organisation. (businessdictionary.com, 2013a) Regenesys Business School 12

Businessdictionary.com (2013b) also defines orientation: An introductory stage in the process of new employee assimilation and a part of his or her continuous socialization process in an organization. Major objectives of orientation are to: 1. Gain employee commitment; 2. Reduce his or her anxiety; 3. Help him or her understand organization's expectations; and 4. Convey what he or she can expect from the job and the organisation. It is commonly followed by training tailored to specific job positions. The Induction and Orientation stage is a key element in the HRM cycle. Remember; the induction of an employee is only complete after the employee s first performance appraisal (which is usually three months after the employee s start date). In third-year HRM, we will be discussing induction and orientation in greater detail. Job Analysis A job analysis audit clarifies the strategic importance of each position in the organisation. A job analysis will typically be part of the recruitment and selection process as well (it will be part of the planning process) to assist in the appointment of the right employee. These are more focussed on individual job descriptions than the organisational workforce planning. A job analysis can be conducted before recruitment commences as well, which will assist HR managers to specify the position in detail. Training and Development Training and development initiations are essential for the development of each employee in the organisation. This is linked to the workforce planning of the organisation. Workplace training and development is planned and usually legislated. Organisations develop training and development plans linked to their strategy to ensure that the workforce fulfils the needs of the organisation. The training and development function in human resource management is usually specialised and requires HR employees to specialise in a specific field like Skills Development Facilitation, Training and Development, and so on. Performance Appraisal Performance appraisals are a function of HR Management, which evaluates whether employees can fulfil the requirements of their positions. The performance appraisal of employees includes the following benefits (Table 1): Regenesys Business School 13

Table 1: Benefit of Performance Appraisals Organisational benefit Managerial benefit Employee benefit Improves organisational performance Retains employees Creates employee loyalty Improves productivity Overcomes communication barriers Indicates clear accountabilities Cost advantages Reduces conflict Saves time Ensures efficiency Ensures consistent performance Clarifies expectations Clarifies job accountability Contributes to improved performance Identifies clear career paths Promotes job satisfaction We will discuss this later in the study guide. (Managementstudyguide.com, 2012a) Compensation Management Compensation management ensures that each employee is compensated for the effort s/ he puts into his/ her job. Compensation management involves the following activities: Conducting a position analysis; Developing job descriptions; Rating each position by conducting an internal audit; Comparing salaries to market offers; Analysing the organisation s budget for incentives; Evaluating the benefits offered to employees. (DBSquared, 2011) Read the article below. It provides an overview of Human Resource Management: Foot, M. and Hook, C. 2011, Introducing Human Resource Management, 5 th edition, Cape Town: Pearson Education, http://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/0273740989.p df (Accessed 24 December 2012). Regenesys Business School 14

Task Questions 1. Name all the steps in the human resource planning cycle and explain the nature of each step, as well as the phases involved in each step. 2. Explain Human Capital Management in your own words. 3. What impact does this function have on the individual? 4. What impact does this function have on the organisation? Regenesys Business School 15

7.2 HUMAN RESOURCE PLANNING STRATEGIES Timeframe: Learning outcomes: Recommended reading: Multimedia: Section overview: 14 hours Prepare a succession plan Understand career planning Understand job responsibilities and job descriptions Smith, D. 2010, 'Improving Succession Plans: Harnessing the Power of Learning and Development', E3lg.com, http://e3lg.com/assets/files/articles/improving%20succession%20plans.pdf (Accessed 26 December 2012). Busgurus.ca. n.d., 'Workforce Planning Model: Workforce Plan Template', Canada: Motor Carrier Passenger Council of Canada, http://www.busgurus.ca/media/pdf/workforceplanning-template-en.pdf (Accessed 26 December 2012). RCI Recruitment Solutions Inc. 2008, 8 Steps, Step 1 Workforce Planning, [Video clip] You Tube, http://www.youtube.com/watch?v=yeiufm-qp70 (Accessed 26 December 2012). Section 2 in this study guide discusses workforce planning. We will evaluate the four steps of workforce planning identified in Figure 2. Thereafter, we will discuss specific HR planning functions; succession and career planning. 7.2.1 Workforce Planning Different terms are used to refer to the process by which organisations plan to ensure that their human resources are applied in a way that best serves the organisation. It is most often referred to as human resource planning. Workforce planning (or human resource planning) can be defined as follows: A systematic, yet dynamic process of estimating the future demand for and supply of employees to execute the organisation s work in ways that will best support its strategic direction, and deciding how to align and match them. (Swanepoel, Erasmus and Schenk, 2008: 228) Figure 2 identified four steps in workforce planning: 1. Gathering, analysing and forecasting workforce and supply and demand data; 2. Establishing objective and formulating action plans; 3. Implementing and adapting the workforce plan; 4. Monitor and evaluate workforce planning. (Swanepoel, Erasmus and Schenk, 2008: 244) These steps will be discussed separately. Regenesys Business School 16

Step 1: Gather, Analyse and Forecast Workforce Supply and Demand Workforce planning always starts with an analysis of the current organisational strategic plan. HR managers need to analyse the strategic plan and evaluate what the organisation will need in terms of its human assets. The first phase of this step is to forecast the HR supply and analyse the HR demand of the organisation. 7.2.2 Forecasting HR Supply Analysing a demand in the business environment requires that an organisation conduct a gap analysis. The gap analysis process is illustrated in Figure 4. As Figure 4 shows, one needs to analyse current employees knowledge, skills, abilities and other characteristics. To do this, the HR Department will have to conduct a staff and competency assessment. The staff assessment needs to include staff demographics (employee numbers, age, educational level, wage and salary information, appointment status, retirement date, length of service, turnover, etc.). The staff demographics should be accessible to efficient HR departments. A competency assessment should include the value-based competency, leadership competency and functional competency of all employees. hese types of competencies are discussed in Table 2. Table 2: Types of Staff Competencies Value-based competency Leadership competency This type of competency reflects the type of people the organisation values. It reflects the behavioural aspects or characteristics that top management would like to see in their employees. This type of competency assesses the employee s abilities and skills to be a leader. These skills and abilities will also be determined by top management Functional competency The functional competency reflects a particular function of a specific job. competency is usually defined in the job description of the employee. This (Successfactors.com, 2012) Once these assessments have been conducted, the planner will have a clear indication of existing employees skills, knowledge, capabilities and characteristics. After the existing employees have been analysed, the future projections of existing employees must also be analysed. This includes identifying potential leaders, predicting which employees that will leave the organisation and analysing the potential capabilities of current employees. Identifying the potential leaders in an organisation is done through succession planning, which will be discussed separately, later on in this guide. Regenesys Business School 17

Figure 4: Workforce Gap Analysis Process Projected Workforce Gap Required Employees Projected Internal Supply Growth Workload Ratio Policy New Initiative Regulatory Change Other Trend Analysis Retirements Resignations Terminations Promotions Demotions Transfers Others Current Employee Level Current Vacancies Projected Workload Changes Current Employee Level Projected Attrition (CPS Human Resource Services, 2007) Projecting which employees will leave the organisation involves a greater analysis of the current employees. This involves the following projections: Identifying possible retirements; Analysing employee turnover percentage; Discussing anticipative terminations, demotions and promotions; and Anticipating transfers. We will be discussing calculating retirements and employee turnover. Regenesys Business School 18

Employee Retirements Identifying possible retirements in an organisation requires the HR planners to evaluate the current employee age demographic and adding the amount of years to the plan. Study the example below for clarity: The following five employees work for Happy Inc. Name Age Years Service Position Mr J. Benjamin 27 2 IT Specialist Ms L. Lee 43 15 HR Manager Ms W. Sexwale 35 7 IT Manager Mr A. Twane 61 3 Chief Executive Officer The workforce plan spans over five years. This means that the age of the employees needs five years must be added to the employees ages. In other words: Name Age Years Service Position Mr J. Benjamin 27 + 5 = 32 2 IT Specialist Ms L. Lee 43 + 5 = 48 15 HR Manager Ms W. Sexwale 35 + 5 = 40 7 IT Manager Mr A. Twane 61 + 5 = 66 3 Chief Executive Officer We can thus conclude, for example, that Mr A. Twane will be retired in five years and his position will become vacant. Employee Turnover Rate Employee turnover reflects: The proportion of employees who leave an organisation over a set period (often on a year-on-year basis), expressed as a percentage of total workforce numbers. (CIPD, 2012) Calculating the projected turnover assists the organisation to project the percentage of employees they will lose over the period of the workforce plan. Employee turnover rates can be calculated per month. calculation could be used (Gross, 2010): For this to be done, the following Monthly turnover rate =!"#$%&!"!"#$%$&'()!!"#$%&!"#!"#$%!"#$%&#!"#$%&!"!"#$%&!!'!"#!"#!"#!"#$% x 100 Regenesys Business School 19

Let us look at the example below: Happy Inc. has 400 employees working for them. In November 2012, two employees resigned their positions. Monthly turnover rate =!!"" x 100 = 0.005 x 100 = 0.5% Therefore, the monthly turnover rate of Happy Inc. is 0.5% per month. If the projected turnover rate is calculated per month, the average percentage needs to be multiplied by 12 in order to calculate the year s turnover. If we use the same example as before: Yearly turnover rate = 0.5% x 12 (months) = 6% This means that Happy Inc. can project 6% staff turnover per year. You can go further by calculating how much 6% of 400 employees is: Amount of employees = = 1.5.!!"" x 100. This means that Happy Inc. will lose 1.5 employees per year. Employees now need to identify possible employees who can fulfil leadership positions from within the organisation through succession planning. Regenesys Business School 20

7.2.3 Succession Planning Succession planning is described by Heathfield (2013b): A process whereby an organisation ensures that employees are recruited and developed to fill each key role within the company. Through your succession planning process, you recruit superior employees, develop their knowledge, skills, and abilities, and prepare them for advancement or promotion into ever more challenging roles. Succession planning is a process whereby an organisation ensures that employees are recruited and developed to fill each key role within the company. This is done by: Determining critical roles within the company; Identifying and assessing possible successors; and Providing them with the appropriate skills and experience for present and future opportunities. The purpose of succession planning is to recruit superior employees; develop their knowledge, skills and abilities; and prepare them for advancement or promotion into more challenging roles. Succession planning is also a way of retaining high-performing employees, because they appreciate the time, attention, and development that you are investing in them. To effectively do succession planning in your organisation, you need to identify the organisation s long-term goals. Rothwell (n.d.) suggests a 10-step plan to successful succession planning. These are illustrated in Figure 5. Regenesys Business School 21

Figure 5: Succession Planning Steps Step 1: Clarify CEO expecta2ons Step 10: Evaluate results Step 2: Establish competency models Step 9: Establish accountability Step 3: Conduct assessment Step 8: Establish talent inventory Step 4: Establish performance management system Step 7: Implement individual development plans Step 6: Establish individual development plans Step 5: Establish poten2al assessment (Rothwell, n.d.) Regenesys Business School 22

Rothwell (n.d.) explains the steps as follows: Step One: Step Two: Step Three: Step Four: Step Five: Step Six: Step Seven: A first step for any systematic succession effort is to clarify the senior leaders expectations and preferences for a succession program. After Sarbanes-Oxley, corporate Boards have become more active in succession planning. A fundamental mistake, and a formula for disaster, is to dump the responsibility for the succession effort on the Human Resources department. While the Human Resources function or other parts of the organization must participate, the leadership responsibility for succession planning rests with the CEO. If he or she does not favour systematic succession planning, it cannot be successful. A second step is to establish competency models by talent pool considering the positions that will be fed by that pool. A competency model is a narrative description of the knowledge, skills, attitudes, and other abilities that lead to exemplary performance. Competency models provide blueprints of the talent to build at present and in the future. In short, a competency model describes what should be for such hierarchical levels as executives, managers, supervisors, salespersons, technical professionals, or other groups. Alternatively, competency models may be created for specific departments. A recent innovation in some corporations has been to articulate the organization s ethics, values and code of conduct and then rate individuals against that as well as against competencies. Ethics, values and codes of conduct provide a basis by which to assess individuals against a dimension that goes beyond what it takes to get good results on the job. A third step is to conduct individualized multi-rater, full-circle assessment. The idea is to assess individuals against the competencies required for success in an organization. The results of a multirater, full-circle assessment usually indicates gaps between what competencies an individual currently possesses and what he or she should possess to be successful. A fourth step is to establish (or reengineer) an organizational performance management system. One fact of life is that individuals are seldom eligible for promotion, advancement, or other developmental opportunities if they are not performing successfully in their current jobs. Individuals must thus be measured, as objectively as possible, against the performance expectations for their current level of responsibility. A fifth step is to assess individual potential for success at higher levels of responsibility. Unlike past or present-oriented performance management, potential assessment focuses on the future. Some means must exist to examine the talent available for future possibilities--and advancement. Regular potential assessment provides the means to do just that. A sixth step is to establish a means of regular, on-going individual development planning. Once it is clear what present and future gaps exist for individuals as a result of performance assessment and potential assessment, some means should be established to help them prepare for the future by narrowing those gaps. To that end, individual workers and their immediate supervisors devise a plan to help individuals develop themselves and thereby prepare for possible future promotions. A seventh step is to implement individual development plans (IDPs). There are various ways by which to do that. One way is to establish in-house leadership and management development programs. A second way is to develop competency menus, in print or online, that provide specific developmental suggestions for individuals. Examples of developmental suggestions might include books to read, classroom courses to attend, online courses in which to participate, on-the-job assignments to seek out, and action learning projects that bring together groups of people to solve practical business problems while simultaneously permitting the means by which to build competence in new areas. Regenesys Business School 23

Step Eight: An eighth step is to establish a talent inventory. Increasingly, decision-makers must be able to find the organization s talent on short notice. To that end, they must have information about the pools of talent that the organization is developing and has readily on tap so that teams can be marshalled on short notice to fight fires, seize opportunities, outdraw competitors, and fill vacancies. As part of this step, it may also be useful to create depth and development charts to show how many people fall into different categories. Different HR strategies may be needed to manage individuals in different talent grids. Step Nine: A ninth step is to establish accountability for the systematic succession planning effort. Individuals and their bosses must be held accountable, for cultivating their talents over time and closing developmental gaps. Otherwise, individual development plans will not be realized. Often, financial incentives for talent development can help. For instance, individuals can be given bonuses if they achieve their developmental objectives, and supervisors can be given bonuses if their workers achieve their developmental objectives. Alternatively, periodic meetings may be held in which individuals must report on how well they are implementing their individual development plans, and senior executives may report to the CEO or the Board on how well their employees have been progressing toward realizing their individual development plans. Step Ten: A tenth and final step is to evaluate the results of the systematic succession planning effort. Often, the time-to-fill metric is a key measure of success. How long does it take to fill positions with qualified applicants? While not directly a financial measure, the time to fill does translate into financial terms. Productivity is lost, and so are opportunities, when vacancies exist in today s right sized corporate settings. Read more about succession planning in the article below: Smith, D. 2010, 'Improving Succession Plans: Harnessing the Power of Learning and Development', E3lg.com, http://e3lg.com/assets/files/articles/improving%20succession%20plans.pdf (Accessed 26 December 2012). Task Questions 1. What is succession planning and why is it important for an organisation? 2. Explain the process of preparing a succession plan. 3. Evaluate the link between succession planning and career planning. From here, the demand of the organisation needs to be analysed. Regenesys Business School 24

7.2.5 Analyse HR Demand The HR demand analysis of an organisation projects the future workforce needs of an organisation. This means that planners will need to analyse the organisation s strategic plan and identify possible future needs of the organisation. When analysing the HR demands of the organisation, the following needs to be calculated or evaluated (Table 3): Table 3: Analyse HR Demand Growth Workload Ratio Policy New Initiative Regulatory change HR planners need statistics of potential organisational growth to factor in the employees that might be needed to fill the demand of the organisational growth. Current employee productivity and performance should be analysed and then compared to possible future productivity needs. An environmental scan should be conducted to indicate the current economic, legislative and competitive pressures of the organisation. The future developments of the organisation (new products/ services) are to be analysed and the possible staff needed for the new developments should be identified. Regulatory change refers to the possible change that might be imposed by governmental legislation and fiscal policies. (Adapted from: CPS Human Resource Services, 2007) During this phase, all the data obtained from the different calculations must be analysed in order to inform the workforce implementation plan. Step 1: Establish Objectives and Formulate Plans With all the information gathered, the next step would be to develop the workforce plan. This requires an action plan for the implementation of the plan. The steps for developing an action plan are illustrated in Figure 6. Regenesys Business School 25

Figure 6: Developing an Action Plan Set objec2ves What do we want to achieve? What is our aim? Ensure objec2ves are S.M.A.R.T. Assess the objec2ves Are the objec2ves compa2ble with the strategic plan? Are there enough resources to reach the objec2ves? What problems might hinder the objec2ves from being successful? Iden2fy ac2on List the ac2ons needed to achieve the objec2ves. Establish an evalua2on technique Evalua2on techniques need to be measurable. You need to know when an ac2on will be successful. Set the 2meframe Set a 2me for the achievement of the ac2vity. Assess the ac2on plan Decide how you will know whether the tasks have been achieved. Set possibili2es for interrup2ons. (Adapted from: Sugars, 2010) Step 2: Implement Workforce Plan Once the workforce plan has been developed, it needs to be implemented. To implement a workforce plan, you need to: Make sure that the plan is supported by top management Ensure that the necessary resources are allocated for the successful implementation of the plan Ensure that the timelines have been set Establish the performance measures and milestones of the plan; and Develop a communication plan (Sullivan, 2011) The next step is to ensure that the plan is implemented according to the measures and timelines indicated. Regenesys Business School 26

Step 3: Monitor and Evaluate Workforce Plan Monitoring can be defined as follows: Monitoring can be defined as a continuing function that aims primarily to provide the management and main stakeholders of an on-going intervention with early indications of progress, or lack thereof, in the achievement of results. An on-going intervention might be a project, program or other kind of support to an outcome. Monitoring helps organizations track achievements by a regular collection of information to assist timely decision making, ensure accountability, and provide the basis for evaluation and learning. (Sera and Beaudry, 2007: 1) Evaluation can be defined as follows: Evaluation is the systematic and objective assessment of an on-going or completed project, program, or policy, and its design, implementation and results. The aim is to determine the relevance and fulfillment of objectives, development efficiency, effectiveness, impact, and sustainability. An evaluation should provide information that is credible and useful, enabling the incorporation of lessons learned into the decision making process of both recipients and donors. (Sera and Beaudry, 2007:1) When one is monitoring and evaluating a plan, the following questions should be considered (Table 4): Table 4: Monitor and evaluate a Workforce Plan Relevance Efficiency Effectiveness Impact Sustainability Has the plan reached the objectives and goals? Was the plan implemented according to the timeline and within budget? What are the possible barriers that the plan encountered and how were they overcome? What was the impact of the plan? Are there lasting benefits to the plan? (Adapted from: Sera and Beaudry, 2007:1) Sera and Beaudry (2007: 2) identify the following steps to plan for monitoring and evaluation (Figure 7): Regenesys Business School 27

Figure 7: Monitoring and Evaluation Steps Iden2fy key stakeholders involved in the plan Clarify the scope of the plan Develop objec2ves and goals Select indicators Provide feedback Interpret findings Analyse and synthesise informa2on Determine collec2on methods Make recommenda2ons Communicate findings (Sera and Beaudry, 2007: 2) Watch the clip below. It is an overview of workforce planning. RCI Recruitment Solutions Inc. 2008, 8 Steps, Step 1 Workforce Planning, [Video clip] You Tube, http://www.youtube.com/watch?v=yeiufm-qp70 (Accessed 26 December 2012). The text below will guide you through a workforce-planning template. It could be a useful guide to developing a workforce plan for an organisation. Busgurus.ca. n.d., 'Workforce Planning Model: Workforce Plan Template', Canada: Motor Carrier Passenger Council of Canada, http://www.busgurus.ca/media/pdf/workforce-planning-templateen.pdf (Accessed 26 December 2012). At this stage of the HRM cycle, you will understand the employment needs of the organisation and you understand the current knowledge, skills and capabilities of employees. Next, we will look at evaluating the performance capabilities of employees. Regenesys Business School 28

Task Questions 1. What is meant by the concept people/ planning? 2. Develop a template for a workforce plan. Regenesys Business School 29

7.3 PERFORMANCE MANAGEMENT Timeframe: Learning outcomes: Recommended reading: Section overview: 8 hours Understand the processes of performance measurement, performance evaluation and the supportive systems; Understand the use of performance appraisal in performance improvement. Balaban, N., Belic, K. and Gudelj, M. 2011, 'Business process performance management: theoretical and methodological approach and implementation', Management Information Systems, (6) 4, 3-9, http://www.ef.uns.ac.rs/mis/archive-pdf/2011%20- %20No4/MIS2011_4_1.pdf (Accessed 5 January 2013). An essential function of human resource management is to manage the performance evaluation system of employees in the organisation. In this section, we will discuss the essential elements of managing individual performance management. 7.3.1 Introduction In your first year, you studied performance appraisals: Their meaning, their importance, and how to manage problems with performance appraisal systems. We also discussed performance appraisal procedures and methods. In this study guide, we will discuss performance management systems and how to deal with performance review meetings. Singh (2012) defines the performance management system as follows: Performance management is the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities. Performance management is a whole work system that begins when a job is defined as needed. It ends when an employee leaves your organisation. As the definition suggests, performance managements starts when employment commences and ends when the employee leaves the organisation. 7.3.2 Performance Management Process Each organisation will develop the performance management process that most suits the industry it serves. The performance management process must be linked to the organisation s performance management policy. Becom and Insler (2011: 34) provide an example of an integrated performance management system (Figure 8). The performance management system must assist employees and managers alike to reach the strategic goals of the organisation. Regenesys Business School 30

Figure 8: Performance Management Process Strategic Planning and Financial Forecasting Operational Goals and Budgets HR Strategies and Workforce Planning Succession Planning and Recruiting Illustrative Performance Management Process Performance management process Employee completes self- assessment Supervisors submit performance evalua2on and ra2ng Calibrate ra2ngs and evaluate promo2on requests Preliminary individual goals and objec2ves set Employees' and supervisors' year- end performance conversa2on Individual goal and objec2ves documented (development plan) Calculate incen2ve pool based on company business unit and results Company approves pay ac2ons Managers communicate pay ac2ons, ra2ngs and promo2ons Mid- year review Compensation Planning and Administration Career Development and Training Business Results and Incentive Funding Buy-Build Planning (Becom and Insler, 2011: 34) Figure 8 illustrates the interrelationship between business planning, HR planning and a performance management process. The performance management process is an essential element in measuring strategic success (Chapman, 2013b). Makakane (2007) identifies the following benefits to linking the performance management process to the strategic plan of the organisation: Regenesys Business School 31

It phases the strategic plan into implementation; Through it, individual performance is aligned to the strategic plan; It provides a framework for performance planning, performance monitoring and review and performance appraisal; It is a means to share the vision between employees; It underlines a culture of transparency and participation; It enhances the leadership capabilities of managers as it encourages optimal motivational opportunities; and It provides a framework for compensation and reward system. Task Questions 1. Evaluate the performance management process implemented in your organisation or an organisation with which you are familiar. 2. How does this system link to the strategy of the organisation? 7.3.3 Performance Management Systems The elements of the performance management system are illustrated in Figure 9. Figure 9: Elements of a Performance Management System (Singh, 2012) Regenesys Business School 32

Each of these elements is discussed in the next section. 7.3.4 Performance Management System Elements Implementing a performance management system ensures that performance happens according to plan and not at random. The performance management system is a tool to implement the organisation s strategy by linking performance criteria of employees to strategic tasks of the organisation. Hence, the importance that performance management starts when the employee starts at the organisation. Pre-Employment Interview The interview of potential employees is usually based on the job description of the position. You will learn more about writing a job description in your third year. At this stage, therefore, you only need to understand the concept of a job description and how this links to the performance management system of an organisation. Heathfield (20113a) explains that a job description describes the following elements of the position: Duties and responsibilities; Contributions and outcomes needed from the position; and Required qualifications, skills and knowledge. It is critical that a job description is linked to the strategic objectives of the organisation. This will ensure that the position recruited for is relevant to the organisation. During the pre-employment interview, potential employees are measured against the criteria as described in the job description. Employee Induction Induction is the process of introducing new employees to the organisation and where entrants learn about the organisational culture, policies, procedures and specific particulars of their new position (Dictionary.reference.com, 2013). The individual orientation to the specific particulars of the new position links to the performance management system. The employee needs to understand his/ her outputs and how these will be measured. This is discussed during the induction phase of the performance management process. Objective Setting The objectives of the performance management system should focus on quality, cost reduction and customer service (Vitez, 2012). Regenesys Business School 33

Managementstudyguide.com (2012b) further examines the key concerns of a performance management system as follows: The output, outcomes and processes required to achieve the organisational results; Measuring the results and reviewing progress to achieve specific targets; Defining business plans to shape future success of the organisation; Striving to improve and develop the learning culture of the organisation; Establishing the culture and trust of employees through open communication; and Assisting in the process of decision making. Remember, when setting objectives, you need to implement the S.M.A.R.T principles. Documentation Preparation The documents used for the performance management system should be prepared and ready to use. It is also very important that the relevant managers and employees have access to the needed documents when they need them. As discussed before, this documentation lists the measurement criteria of the position linked to the job description, which is linked to the strategic plan. Feedback Feedback is essential for the successful implementation of a performance management system. There are two ways of giving feedback: Constructively or through praise and criticism. Constructive feedback is information-specific, issue-focused and behaviour-focussed (Brounstein, 2013). Constructive feedback can either be positive or negative. In contrast to this, praise and criticism is based on judgments. Constructive feedback is a four-step process. This is illustrated in Figure 10. Figure 10: Feedback Process Step 1: Content Step 2: Behaviour Describe the situa'on: be specific and Describe the provide feedback behaviour of the in a 'mely manner. employee and not the employee. Step 3: Impact Describe the result of the behaviour of the employee. Step 4: Next Steps How will behaviour need to change in the future? Explain the reasons for the change. (MIT Human Resources, 2003) Regenesys Business School 34

Appraisal Performance appraisals have been discussed in your first year. To review, performance appraisals assist managers to develop individuals, improve organisational performance and feed the business strategy (Chapman, 2012a). The performance appraisal system will dictate the frequency of the performance appraisal interview. This interview assists with the review of individuals progress as identified in the performance criteria of the position. The performance review meeting must be structured, as the outcomes of the meeting are important to both the employee and the organisation. A generic structure of a performance meeting is provided in Figure 11. Figure 11: Performance Review Meeting Prepare documents related to employee performance Review feedback from peers, customers and other managers Review job descrip2on Evaluate performance goals Write down possible ques2ons to ask for clarity Conduct mee2ng construc2vely Discuss the way forward Follow up on decisions made (Performance Management Toolkit, 2007: 1) Regenesys Business School 35

Development Plan Professional development plans are a result of the performance appraisal interview. During the performance appraisal interview, the individual s strengths and weaknesses are discussed. The strengths of the individual will be leveraged and weaknesses strengthened. To do this, the employee will need a professional development plan (PDP). The PDP is linked to the individual s career plan and the organisation s succession plan. We will study the specifics of the PDP in Year Three of your studies. Compensation and Promotion Decisions The performance management system should be linked to the compensation management system of the organisation. It should be used to make promotion and benefit decisions fairly and effectively; as these decisions will be based on the employee s performance outputs and attitude. We will discuss compensation management in the next section of this study guide. We will therefore focus on promotion decisions. People are promoted for different reasons: To give capable employees more responsibilities; To recognise talent; To reward an individual for their contribution; and To benefit the organisation. (Rajan, 2010) Promotions must be based on job criteria. Hanson (2008) posits that there are factors to consider before promoting employees: Identify the key positions and develop the competencies required for these positions; Identify the skills, abilities and knowledge required for the position; Identify the employees who will fit the position; Evaluate the Professional Development Plans of the individuals identified; Link PDPs of individual to the requirements of the position; Motivate employees to develop their skills, abilities and knowledge; Test and assess the employee to determine whether their profile links to the position; Match employees to the organisational leadership development programme; Coach potential employees leadership abilities; Track the progress of employees; and Link the compensation plan of the organisation with the promotion plan. Before an employee is promoted, it is important to review the relevant legislation guarding promotion activities in an organisation. Another promotional tool used by organisations is the succession plan. This has already been discussed in this study guide. Following the elements of the performance management system will ensure that employees performance is linked to their job descriptions, which should be linked to the organisation s strategic goals. Regenesys Business School 36

Read more about the influence of performance management in the article below. Balaban, N., Belic, K. and Gudelj, M. 2011, 'Business process performance management: theoretical and methodological approach and implementation', Management Information Systems, (6) 4, 3-9, http://www.ef.uns.ac.rs/mis/archive-pdf/2011%20-%20no4/mis2011_4_1.pdf (Accessed 5 January 2013). Recap Questions 1. What is the significance of a performance management system for an organisation? 2. Explain the difference between performance appraisal and performance management. 3. Name the basic steps in the development of a performance management system and explain how you would apply each step within your work context. 4. Explain which techniques would be the most appropriate in your work context and highlight the advantages and limitations of each. 5. What are the characteristics of an effective performance review interview? Regenesys Business School 37

7.4 COMPENSATION MANAGEMENT Timeframe: Learning outcomes: Recommended reading: Multimedia: Section overview: 8 hours Understand the differences between reward and remuneration; Explore the non-financial rewards that can be used to motivate staff. Monis, H. and Sreedhara, T.N. 2011, 'Employee perceptions of reward and recognition policy', A comparative study of Indian and foreign MNC BPO firms, JM International Journal of Management Research, (1) 2, 122-130. Excentive International 2011, 4: Employee Performance and Compensation Management (HR), [Video clip] YouTube. Viewed 26 December 2012, http://www.youtube.com/watch?v=jtclgglk4pk (Accessed 26 December 2012). Overstrand Municipality 2008, Rewards and Incentives Policy, [Document] Oerswtrand.gov.za, http://www.overstrand.gov.za/index2.php?option=com_docmanandtask=doc_viewandgid=446anditemid =159 (Accessed 5 January 2013). This section focuses on remuneration and rewards to compensate employees for their time, talent and effort spent on the job. Compensation is a very important and powerful tool for motivating employees to work towards achieving the strategic objectives of an organisation. It is also an important element of recruiting and retaining the right employees. 7.4.1 Introduction For the purposes of this module, we distinguish between two types of compensation, namely remuneration and rewards. When referring to remuneration, we are talking about what is commonly known as pay, which often includes benefits or indirect remuneration. We reserve the term rewards to refer to incentives that employees receive, over and above their fixed salaries, to compensate them for exceptional service. Just remember that, in this use of these terms, remuneration is linked to employment, whilst rewards are usually linked to performance. 7.4.2 Compensation Management For many companies, the compensation of employees is their largest expense (Bhaumik, 2010). Compensation management is defined as: Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness (CiteHR, 2010) Regenesys Business School 38

Swanepoel Erasmus and Schenk (2008: 476) distinguish between intrinsic and extrinsic compensation: They define extrinsic compensation as the returns an employee gets from sources other than the job itself. Intrinsic rewards, on the other hand, refer to compensation that is associated with the job itself, for example: to do meaningful work, to be able to express yourself in your work, to experience variety and to receive positive feedback or gratitude for what you have done. Think, for example, of the satisfaction a doctor feels when s/ he has cured a patient or that you feel when a client comes to thank you for good service. Financial compensations are always extrinsic rewards, while non-financial compensation can be intrinsic or extrinsic. Access the clip below to understand the link between performance management and compensation management. Excentive International 2011, 4: Employee Performance and Compensation Management (HR), [Video clip] YouTube. Viewed 26 December 2012, http://www.youtube.com/watch?v=jtclgglk4pk (Accessed 26 December 2012). A compensation package usually consists of three components: Regular fixed pay received as salary or wages; Pay incentives that are designed to reward employees for good performance; Benefits or indirect remuneration. A compensation package is illustrated in Figure 12. (Swanepoel, Erasmus and Schenk, 2008: 476) Regenesys Business School 39

Figure 12: Components of a Compensation Package Medical Aid Pension fund Base pay Incen'ves Total compensa'on Allowance Indirect compensa'on Direct Total compensa'on (Bhaumik, 2010) The objectives of compensation management have four broad categories: Equity, efficiency, macro-economic stability and optimum allocation of labour. These issues are discussed in Table 5. Table 5: Objectives of Compensation Management Equity Efficiency Acquire qualified personnel Retain current employees Reward desired behaviour Individual worth The equity objective of compensation management refers to equal pay for work of equal value. This means: two employees, who started working for the company at the same time and are doing the same job, are compensated in the same way. This objective strives to link wages to productivity or profit, individual performance acquisition and application of skills The compensation system can attract talented and qualified employees. If the compensation levels are low, employees will leave and the organisation may face a higher turnover rate. Benefits to total compensation could be given as a reward for specific behaviour identified as important to the organisation. Employees often link their value to the remuneration they receive. (Bhaumik, 2010) To implement the compensation management system, one needs to complete or analyse the organisation s pay/ salary structure. Regenesys Business School 40

Pay/ Salary Structure A pay/ salary structure sets different levels of pay for jobs and references these levels by: Relative internal value; External relativities (market rates); and Negotiated rates. Job structures indicate the rates of pay for different jobs. They also provide a pay progression and the pay ranges for job groups. Pay structures assist organisation in the following way: They determine levels of pay; They help monitor pay practice; and They provide a framework for equitable, fair and consistent reward structures. (Adapted from: Ojimba, n.d.) Compensation management describes the remuneration and rewards the organisation provides its employees. We will discuss remuneration and rewards separately in the next section. Task Questions Distinguish between the concepts remuneration (salary) and reward (incentive). 7.4.3 Remuneration Remuneration is defined as: Reward for employment in the form of pay, salary, or wage, including allowances, benefits (such as company car, medical plan, pension plan), bonuses, cash incentives, and monetary value of the noncash incentives. (Businessdictionary.com, 2013c) Regenesys Business School 41

As discussed in the previous section, remuneration comprises the total compensation package provided to employees. According to Lynch (2010), employers pay employees for: Time Productivity Quality of work Customer service Creativity and new ideas New skills development Vision Commitment Flexibility Ability to work as part of a team; and Ability to work on own account Employees performance should be managed according to the ability to partake in the activities listed above. This ensures a fair and efficient allocation of rewards and can establish the groundwork for salary increases. Allocation of remuneration to employees is prescribed in the organisation s remuneration and reward policy, which is written to comply with the legislation prescribing compensation. Ensure that you understand the legislation of your country linked to compensation management. Task Questions 1. Name and explain the objectives of remuneration systems. 2. Distinguish between intrinsic and extrinsic compensation. 3. Name and discuss the internal and external factors that influence the design of remuneration systems. 4. Name the elements that you would include in a job-based remuneration system in order to ensure that it is internally consistent and linked to the labour market. 5. Distinguish between quantitative and non-quantitative methods of job evaluation. 6. Explain how to design a basic pay structure. Regenesys Business School 42

7.4.4 Rewards Rewards are forms of compensation, over and above the employee s fixed salary, that are meant as additional reward for outstanding efforts that assist the organisation in achieving their organisational goals. Swanepoel, Erasmus and Schenk (2008) use the term incentive remuneration to refer to this type of compensation. Rewards are either tangible or intangible. Table 6 explains the difference. Table 6: Tangible or Intangible Rewards Tangible Intangible Bonuses Commissions Incentive payments Performance rewards Paid holidays Retirement schemes Medical insurance Promotions Training and development opportunities Specific allowances (car, travel, savings, and so on) There are three approaches to rewards: Job security Recognition Participation Pride in position Job enrichment Interpersonal and work group relationships Growth and skills abilities Leadership skills improvement Opportunities to use talents and make contributions (Rudman, n.d.) 1. Stick-and-carrot approach (provide performance and behaviour incentives and rewards); 2. Deferred gratification (promise of future rewards for current efforts); and 3. Prerogatives (rewards and increments paid to employees as a right). (Rudman, n.d.) Each organisation will have a rewards policy that describes the allocation of rewards to employees. An example of such a policy is provided below: Overstrand Municipality 2008, Rewards and Incentives Policy, [Document] Oerswtrand.gov.za, http://www.overstrand.gov.za/index2.php?option=com_docmanandtask=doc_viewandgid=446anditemid =159 (Accessed 5 January 2013). Regenesys Business School 43

7.4.5 Develop a Remuneration and Reward Plan In the previous sections, we discussed the importance of following policies when allocating remunerations and rewards. The policy provides HR managers with the guidelines to design a remuneration and reward plan. When settling out to develop a reward programme, consider the following: Link the rewards plan to specifically identified strategic goals; Identify the performance and behaviours you would like to reinforce by evaluating the organisational culture; Determine the measurements you could use to measure the performance and behaviours of individuals; Identify which rewards will be allocated; and Communicate the plan to employees and allow feedback. (Inc.com, 2011) Figure 13 illustrates generic steps to developing a remuneration and reward plan. Figure 13: Develop a Remuneration and Reward Plan Step 1: Define jobs and prepare job descrip'on Step 3: "Price" jobs according to established criteria (market rates, reten'on strategy) Step 5: Compile administra'on plan for implementa'on Step 2: Evaluate jobs and cluster similar jobs together Step 4: Calculate average rate for each job Step 6: Communicate plan to employees Step 7: Appraise employees under the plan (Adapted from: SaSnetwork, n.d.) Regenesys Business School 44

As indicated above, decision makers must decide which reward programme they will adopt. Different types of reward programmes are discussed in Table 7. Table 7: Reward Programmes Variable pay Bonuses Profit sharing Stock options Variable pay is also referred to as pay-for-performance. The prescript is that a portion of an employee s pay is considered at risk. It is tied to the performance of the organisation if the organisation turns a profit or the unit is performing well or the individual accomplishes something unique the individual s salary increases. Bonuses are rewarded according to the individual s accomplishments. Profit sharing refers to a strategy where employees share in a percentage of the profits of the company. This programme provides employees with the option to buy a specific number of the company s shares at a fixed price at a specific period of time. (Adapted from: Inc.com, 2011) Read more about the development of reward and remuneration policies in the article below: Monis, H. and Sreedhara, T.N. 2011, 'Employee perceptions of reward and recognition policy', A comparative study of Indian and foreign MNC BPO firms, JM International Journal of Management Research, (1) 2, 122-130. Recap Questions 1. Name and explain the objectives of reward/ incentive schemes. 2. Which design principles would you use to develop an effective reward system? 3. Differentiate between individual-based and team-based reward systems and give examples of each. 4. Critically argue relevance of the following statement: Company rewards systems are an appropriate way to motivate employees. Regenesys Business School 45

7.5 EFFECTIVE WORKPLACE RELATIONSHIPS Timeframe: 8 hours Learning outcome: Explain the importance and approaches to developing workplace relationships. Recommended reading: Section overview: Lengnick-Hall, M.L. and Lengnick-Hall, C.A. 2003, 'HR s role in building relationship networks', Academy of Management Executive, (17) 4, 53-63. Many people misunderstand the notion of workplace relationships as romantic relationships between people in an organisation. However, this session does not speak to that issue. Instead, the focus is on establishing professional relationships with internal and external stakeholders to attain an organisation s goals. When these workplace relationships are managed effectively, enormous benefits can be derived. This section examines the definition of workplace relationships, the benefits of establishing workplace relationships, and the different types of workplace relationships and how to establish them. The role of spirituality in developing workplace relationships is also explored. 7.5.1 Understanding Workplace Relationships Clydesdale (2009: 179) defines interpersonal relationship management as: The management of the interpersonal interactions that managers have on a daily basis, with people who impact on the achievement of goals. This definition of interpersonal relationship management is useful for explaining workplace relationships in the sense that it explains the relationship between a manager and others in achieving goals. However, this definition is slightly too narrow for defining workplace relationships because workplace relationships do not only involve the relationships between managers and others, but also involve the interrelationships between managers, employees, and external stakeholders (such as clients, suppliers, partner, competitors, and government). This is illustrated in Figure 14. Regenesys Business School 46

Figure 14: Interrelationships of Workplace Relationships External stakeholders Employee Manager Employer (Clydesdale, 2009: 179) You need to access the following article, which accompanies the rest of this section: HR s role in building relationship networks (Lengnick-Hall and Lengnick-Hall, 2003) 7.5.2 Importance of Workplace Relationships Lengnick-Hall and Lengnick-Hall (2003: 53) argue that relationships are essential to getting things done. They further posit that, in this knowledge economy, relationships and social capital are critical for organisations to achieve competitive advantage over others. Task Questions 1. Explain the importance of relationships in organisations. 2. Clarify how developing effective workplace relationships can contribute to developing social capital in an organisation. In your response, define social capital and explain its benefits. 7.5.3 Role of Human Resources in Developing Social Capital There is a distinction between technical human resource activities and strategic human resource activities. Human resources have to re-orientate their role from performing a previously technical role to create business-related capabilities by building and nurturing relationships. Human resources have to adopt a partnership perspective as opposed to a paternalistic perspective (Lengnick-Hall and Lengnick-Hall, 2003: 54). Regenesys Business School 47

Task Questions 1. Compare the roles of technical human resources with strategic human resources. 2. Explain the characteristics of the partnerships that should be established by human resources. 3. Do you think that it is only the role of human resources in establishing these workplace relationships in the organisation? If not, who else should be developing these relationships? How would their role differ to the human resource practitioner s role? Justify your response. 7.5.4 Characteristics and Types of Relationships There are five characteristics of relationships (Lengnick-Hall and Lengnick-Hall, 2003: 56). In addition to these characteristics, there are six different types of workplace relationships that human resources should manage (Lengnick-Hall and Lengnick-Hall, 2003: 56-62). These relationships are with internal and external stakeholders and are listed below: Individual to individual; Individual to group; Individual to organisation; Group to group; Group to organisation; and Organisation to organisation. Task Questions 1. Describe the characteristics of the six types of relationships in organisations. 2. Give examples to explain each type of workplace relationship. 3. Explain the role of human resources and managers in general (if relevant) in ensuring that each type of relationship is productive. 7.5.5 Developing Workplace Relationships through a Mentor Managers often find themselves in a position where they are required to develop members in their team or unit. The process of assisting others to develop their skills and competencies in a supportive manner is called mentorship. The manager becomes a mentor either in a formal or informal context. Regardless of the level of formality, mentors are required to be familiar with the phases of developing a mentorship relationship and the skills required of a mentor. Regenesys Business School 48

There are five phases that characterise a developmental relationship (Clutterbuck, 2005: 2): Phase 1: Rapport-building Phase 2: Direction-setting phase Phase 3: Progress-making Phase 4: Winding down Phase 5: Moving on/ professional friendship A critical aspect of these phases is that the mentor requires specific competencies in each phase. In order to establish a positive and developmental workplace relationship with a mentee, the mentor should acquire and exercise the required competencies. It is important to note that some competencies might have to be more emphasised than others, depending on the person with whom the mentor is working. The relationship between a mentor and mentee is dynamic and reciprocal. Mentees are also expected to develop competencies to ensure that maximum benefit is gained from the relationship. The role of the mentor is to not only be self-aware, but to create selfawareness in the mentee. The aim of self-awareness is to realise the necessity of being open to change and learning new skills and knowledge. The competencies required by a mentee are grouped into three clusters, where each category requires specific competencies. This is reflected in Table 8: Table 8: Framework of Mentee Competencies Mentee Competency Cluster Relationship initiation level Relationship management level Learning maturity/ disengagement levels Focus proactivity Respect self-respect Listening-articulating Learn teach Challenge be challenged Open questioning Prepare reflect Specific Mentee Competencies Acknowledge the debt pay it forward Process awareness process management Extrinsic and intrinsic feedback Independence interdependence (Clutterbuck, 2005: 3-4) Regenesys Business School 49

Task Questions 1. Create a table with three columns. The first column lists the five phases that characterise a developmental relationship between a mentor and mentee. The second column explains each phase. The third column lists the competencies required by a mentor. An example of the table is reflected below. Phases that characterises the mentor relationship Explanation of the phase Competencies of the mentor 2. Research the competencies required by a mentee. 7.5.6 Role of Spirituality in Workplace Relationships A critical aspect of workplace relationships is the impact of spirituality on these relationships. Spirituality should not be confused with religion. Spirituality refers to a universal view that is not connected to any religion that focuses on values, improving society and transcendence (Standifer, Evans and Dong, 2010: 135). Four common themes emerge from most definitions of spirituality (Law, 2008: 6): Holism (understanding that we are all interconnected to each other and the Universe); Principles and values (these principles and values are positive and virtuous by nature); Authenticity (where there is alignment between one s inner and outer experience); and Purpose (being directed by a higher purpose and meaning and having a desire to search for meaning in what we do). Religion, by contrast, focuses on beliefs and practises that are connected to a particular faith. Religion is based on an external belief system that focuses typically on traditions, organised doctrine, rituals, sets of customs, and specific expected behaviours that emphasise salvation (Law, 2008: 7). Workplace Spirituality Workplace spirituality refers to people wanting to feel connected to their inner core at work and be involved in work that creates meaning (Standifer, Evans and Dong, 2010: 135). Workplace spirituality therefore involves living authentically because one s inner values and principles are reflected in one s outward behaviour at work. People feel that they are achieving their purpose and meaning in the work that they do. Regenesys Business School 50

Spirituality and Workplace Relationships One of the characteristics of spirituality is interconnected with holism or understanding our interconnectedness with others. According to Standifer, Evans and Dong (2010: 137), spiritual people attempt to create workplace relationships that are meaningful, positive, long-lasting and beneficial communities. Spirituality can play an important role in establishing meaningful and impactful relationships within and between organisations by the following means: Creating trust: Trust is an essential component in developing relationships. Trust is generally created when someone s perceived motives and intentions reflect sincere attempts to promote mutual benefit. A person s behaviour in relation to honesty, integrity and reliability greatly influences the level of trust one places in someone. Spiritual people tend to develop trust in their relationships because they aspire to live their values in a way that benefits others around them. Creating commitment: Commitment is considered a foundational component of establishing successful relationships and critical to achieving positive outcomes for all stakeholders. Successful collaborative relationships depend on exhibiting mutual trust, commitment and openness by all parties. Long-term relationships characterised by commitment are more easily established by spiritual people because they are able to genuinely connect with others in the workplace when they find value and meaning in the work they perform. Promoting open communication: Another critical dimension of establishing strong trusting and committed workplace relationships is meaningful communication. Spiritual people are inclined to communicate in a way that is based on positive values such as love, respect and integrity that promote open and meaningful communication amongst people. Promoting shared values: Shared values are an important component to establish trusting and committed relationships. Although a spiritual person cannot ensure that all stakeholders share the same values, this person can promote shared values between individuals. This is created when people feel a sense of interconnected with others, which encourages reciprocity and openness to sharing another party s values. Decreasing opportunism: Opportunism has a negative impact on relationships in that is focuses on deceitful behaviour such as cheating, misrepresentation and manipulation. Research shows that a desire to establish long-term relationships premised on mutual gain and cooperation lead to less opportunistic behaviour. Spiritual people strive to live according to values that are in direct opposition to opportunistic behaviour, thereby establishing relationships that are long-term, meaningful, and founded on trust and commitment. (Standifer, Evans and Dong, 2010) Recap Questions Discuss how spirituality can influence the establishment of relationships in the workplace. In your response, explain workplace spirituality. Regenesys Business School 51

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