Chapter 13 Personal use only Role of Human Resource Management
ISBN 978-0-9775849-7-0 2012 Don Sykes & Kim Crawford - www.redpeg.com.au Strategic role of human resources Strategic management is all about moving a business from its current position in the market place to the vision of the sort of business its managers want it to be in, say, five years time. This is the role of the top management team. This team establishes strategic goals that might include things like improving market share from, say, 12% to 15% over the next five years. The human resource manager can have an important role in developing the strategic plan because businesses achieve their goals through the people they employ. Once the strategic goals have been determined, the next step is to identify the employee skills, attributes and behaviours that will be required to achieve the goals. For example, when retailers, such as Coles, decide on the strategic goal of improving market share, one of the main strategies to achieve that goal is high levels of customer service. The ability to deliver high levels of customer service is the employee skill required to achieve the goal. Role of Human Resource Management Strategic human resource management is concerned with developing management policies that will deliver the employee skills and behaviours required to achieve the goals. In our previous retail example one of the most obvious policies will be concerned with training employees to deliver high levels of customer service. You know, from your own experiences in retail shops, that some businesses do this a lot better than others. Those that do tend to have carefully developed management policies. 273 The strategic role of human resource management is to provide the business with the people who have the skills, attributes and behaviours the business will require if it is to achieve its strategic goals in a dynamic and often turbulent environment. Group Work Imagine you and the other people in your group have contributed $50 000 to start a coffee shop and Internet gaming lounge. Use the following questions to guide your discussion on the strategic role of human resource management. 1. What are our strategic goals? 2. What employee skills and behaviours will be required to achieve the goals? 3. What human resource management policies will produce the required skills and behaviours?
Role of Human Resource Management Aged care has been identified as an area with a shortage of skilled workers ISBN 978-0-9775849-7-0 2012 Don Sykes & Kim Crawford - www.redpeg.com.au THINK, INK, PAIR, SHARE Imagine you are the human resource manager in a business that provides fulltime aged care to people who are unable to look after themselves. Your current task is to employ someone to carry out the typical tasks such as serving meals, helping people to dress and administering medicines. Try to identify a skill, an attribute and a behaviour you would be looking for in a potential employee. Attribute means a quality, characteristic or feature some people have and others may not, behaviour is the way a person acts towards others and a skill is the ability to do something well (something the person has expertise in). Jot down your thoughts and discuss them with your learning partner. 274 Case Study Using an Australian business to illustrate the strategic role of human resources: Kmart When Guy Russo was appointed CEO of Kmart he knew exactly what he had to do. The core strategic goals were obvious: to improve market share, improve profit growth, maintain the focus on low prices and create a business culture where committed employees embrace change and focus on high levels of customer service. Social and environmental responsibility was also an important goal. This is what strategic management is about. It is concerned with imagining what the business will be in five years time and then developing the strategies to move the business from what it is now to realising the image. In order to achieve the strategic goals Russo needed a plan to build and strengthen the business s long-term competitive position in the marketplace - in other words to provide the reason for potential customers to shop at Kmart rather than Big W, Target, or Best and Less. The reason a customer chooses one business s products rather than another s is its competitive advantage. Russo decided Kmart s competitive advantage would be based on cost leadership and customer service. This decision was the basis of the strategic plan to achieve the goals he had set. However, it is a workforce that puts the plan into action, and if the plan is going to be successfully implemented that workforce will require certain employee skills, attributes and behaviours. The basic skills required to implement the strategic plan at Kmart included things like using the checkout registers efficiently, effectively engaging with customers, knowledge of stock and the benefits delivered by particular products and so on. Effective training programs can deliver the skills needed to do a job well. RedPeg Publishing HSC Business Studies
ISBN 978-0-9775849-7-0 2012 Don Sykes & Kim Crawford - www.redpeg.com.au It is important to remember that Big W is also effectively training employees. If the long-term competitive position of Kmart in the marketplace is to be strengthened, more than training is required. Abilities such as embracing change, effectively engaging with customers, problem-solving and innovation are often employee attributes. Employee attributes are those qualities that are inherent, or an essential part, of someone. It is the role of the human resource function in the business to get as many people as possible with the relevant attributes to apply for jobs in the business and then to select the best. Employee behaviours are very important in a business like Kmart, where employees are constantly engaged with customers. Employee behaviour is the way employees conduct themselves towards others. Kmart requires behaviours such as friendliness, helpfulness, product knowledge, cooperation, working in teams and vigilance. Role of Human Resource Management It is up to the human resource function to deliver employees with the required skills, attributes and behaviours that will achieve Kmart s future goals. The skills are not so important. Effective training programs can ensure employees have the necessary skills to do the job well. Selecting employees who will be able to deliver the strategic goals focuses on attributes and behaviours. Obviously the human resource function needs to select employees who can effectively work in teams, effectively relate to other people and embrace change. 275 Has it worked? Kmart has significantly improved its market share from 2009 to 2011. Profits grew strongly in the same period. The business made significant progress in implementing the cost leadership strategy that focuses on low prices. The business, for example, no longer sells licensed products and that has significantly reduced prices. There is now a better mix of products that yield higher profits. Employees are delivering high levels of customer service. Perhaps the most important reason for the turn-a-round at Kmart was the ability of the human resource function to align the skills, attributes and behaviours of employees with the strategic goals of the business. Written comprehension 1. Identify the key goals of Kmart (and, indeed, most large businesses). 2. The Kmart strategic plan was based on building and strengthening the business s long-term competitive position in the marketplace. What does this statement mean in plain English? 3. What is Kmart s competitive advantage? 4. How did Russo plan to achieve the competitive advantage? 5. What was the strategic role of the human resource function at Kmart in achieving the competitive advantage? 6. Why did the human resource function consider that employee attributes were more important than skills in achieving the strategic goals of the business? 7. Imagine you were selecting a candidate to be a Kmart store manager. List three things you could ask, or do, that would be likely to identify the attributes needed to ensure that manager s store grew its market share and profits. What do you think the three most important attributes for such a store manager would be? Getting Better Results
Role of Human Resource Management Market research What are our customers needs? ISBN 978-0-9775849-7-0 2012 Don Sykes & Kim Crawford - www.redpeg.com.au Interdependence with other key business functions It is worth, at this stage, revisiting a diagram we introduced in the marketing unit. Segmentation In What part of the market can we best meet the needs of customers? 276 Promotion price Position the business brand support positioning with brand Place Product Human resources * Recruitment * Training finance profitability management * Cost controls * Revenue Controls Operations * Operations processes * Operations Strategies Make the product better than our competitors RedPeg Publishing HSC Business Studies
ISBN 978-0-9775849-7-0 2012 Don Sykes & Kim Crawford - www.redpeg.com.au The heart of a business is the marketing function. This is the function of a business that has the responsibility for constantly researching the environment to find opportunities and identify threats in the constantly changing needs and tastes of customers. The purpose of the research is to ensure there is a good fit between the products the business offers its customers, the business s resources, and the business goals. When products have been developed or adapted to meet the needs and tastes of customers more effectively than competing products, it is the role of operations to manufacture the goods or deliver the services. The operations function has the role of manufacturing the good or delivering the service with a high level of consistency, efficiency and cost effectiveness. And, of course, none of this can be done without money. The finance function of a business has the role of ensuring the cash is available when it is needed. Role of Human Resource Management You will have noticed that so far we have referred to aspects of the business as the marketing function, the operations function or the finance function and we also used phrases such as the business s resources. It is important to remember that people do the marketing and operations and people are a key resource in every business. The people in a business are its human resources. It is the skills, attributes and behaviours of the people in a business who can give it its competitive advantage. It is people who conduct the market research and develop the product. It is people who manufacture the product and people who provide the customer service. If the skills, attributes and behaviours of the people in a business are stronger and better than the people in competing businesses, it is likely that the business will win the battle for customers. Of course, the opposite is also true. If competitors have people with stronger skills, attributes and behaviours, they will increase their market share at the expense of our business. 277 Every function of a business is important in the sense that they are interdependent. Each individual function contributes to the overall goals of the business. Outsourcing Outsourcing of the human resource functions was very popular during the 1980s and 1990s. Outsourcing means that many of the traditional human resource functions, such as recruiting, were provided by other specialist human resource businesses. At the time it was considered that this was not only cost-effective but also the best way to get the best talent. It was considered cost-effective because permanent specialist human resource employees would not be required and effective because people could be recruited from anywhere in the world. Human resource functions Before we consider the way human resource functions are outsourced, it might be helpful to recall, from the unit in the preliminary course, the nature of the human resource function. Typically, the human resource function starts with job analysis. Job analysis is concerned with working out what tasks need to be done if the business is to achieve its objectives and the skills needed to do those tasks. The next task is to recruit and select the people best able to do those tasks. Training and development are also important. There are also quite a few functions that are less obvious. These include establishing grievance Getting Better Results
Role of Human Resource Management ISBN 978-0-9775849-7-0 2012 Don Sykes & Kim Crawford - www.redpeg.com.au procedures, monitoring Occupational Health and Safety (OH&S) issues, Equal Employment Opportunity (EEO) issues and, most importantly, planning for the development of a business culture that embraces change. In some businesses, some of the traditional human resource functions have been passed over to the operations function. Many operations managers, for example, are responsible for things like recruitment, training and OH&S. In other instances some of the human resource functions have been outsourced. In the 2000s large businesses tended to change many of the traditional human resource functions. Recruiting was an area of major change. Recruiting is concerned with getting a number of qualified people to apply for a job so that the best applicant can be selected. Currently, many large businesses get outside employment agencies to conduct the recruiting for temporary staff and jobs that do not require costly training and can generally be performed with a lower level of skill. 278 However, larger Australian businesses tend to keep the recruiting of high-value employees in-house. This is because they want to build a long-term relationship with key employees and they want that relationship to develop from the time of recruitment. Another reason is that the nature of jobs is always changing and a great deal of money will be invested in training employees. It is important to keep those employees. Employee attributes are the single most important criteria when recruiting people for many types of jobs. Skills can be taught but it is very difficult to change attitudes. In-house recruitment is more likely to select employees with the attributes needed to achieve specific business goals than an external employment agency. The main focus of current human resource management is to outsource any function that improves efficiency and cuts costs. However, large businesses doing this sort of outsourcing are very careful to keep in-house any human resource activity that requires understanding the business and its customers, identifying future leaders and promoting change. THINK, INK, PAIR, SHARE Imagine you worked in the human resource department at Kmart. You need to recruit casual employees for duties such as filling shelves, cleaning shelves, cash register and so on. Jot down TWO attributes you think would enable a potential employee to contribute to the achievement of the high levels of customer service business goal. RedPeg Publishing HSC Business Studies
ISBN 978-0-9775849-7-0 2012 Don Sykes & Kim Crawford - www.redpeg.com.au Go to www.seek.com.au and reflect on the following: 1. What customer need does this business meet? Research activity 2. Click on Drake International in the Search by Recruiter profile. What customer need does Drake international meet? 3. Imagine your business needs ICT staff. Which employment agency would you outsource this task to? Jot down your responses and discuss them with your learning partner. Role of Human Resource Management Using contractors - domestic, global The use of contractors can give a business a great deal of flexibility. This is because there is no long-term commitment between a contractor and a business. The extent of the relationship with the contractor depends on the amount of work to be done. It can be adjusted simply. On the other hand, if the work were to be done within the business, people would need to be dismissed if less work was available. Imagine, for example, you are CEO of a business developing apartments in the inner city and you employ a contractor to do all the electrical work. You have great certainty. You know how much it will cost because you have a fixed-price contract. You have no commitments to employees between projects. It is a similar process where contractors are used specifically to provide traditional human resource functions such as training and recruitment. 279 It is not easy to explain the difference between an employee and a contractor because it is a legal concept. For this reason it is helpful to look at the Australian Tax Office s definition. An independent contractor is an entity (such as an individual, partnership, trust or company) that agrees to produce a designated result for an agreed price. In most cases an independent contractor: is paid for results achieved provides all or most of the necessary materials and equipment to complete the work is free to delegate work to other entities has freedom in the way the work is done provides services to the general public and other businesses is free to accept or refuse work, and is in a position to make a profit or loss. Increasingly, large businesses are using contractors in the global, as well as the domestic, environment. The main reason for this is that it is often very cost-effective. Within the domestic economy the use of contractors is cost-effective mainly because of the flexibility it gives to a business. In the recession associated with the global financial crisis, for example, builders and developers were able to reduce their costs because they had no continuing commitment to employees when there was no work. The fixed-price contracts associated with the use of Getting Better Results
Role of Human Resource Management 280 ISBN 978-0-9775849-7-0 2012 Don Sykes & Kim Crawford - www.redpeg.com.au contractors also provide greater certainty for planning. The business knows at the outset how much it will cost. Again, the same idea relates to human resource functions such as training. In the global environment the cost advantages of contractors are significant. This is because there is a greater pool of talent, labour law variations and wage rates. Levi, for example, can now produce its main product, jeans, more cheaply by using contractors in Vietnam than it could when it employed 60 000 people in US factories. Most importantly, Levi can adjust quantities to changes in demand more effectively than it could in its own factories. Apple Inc. is able to produce iphones, ipods and ipads more cheaply by using global contractors in a range of countries. Many large businesses now approach the human resource function by building a core of committed employees, called high-value employees, in a long-term relationship and an outer ring of employees in a more casual relationship. These relationships are mainly concerned with outsourcing. It is interesting to note, however, that although businesses such as Nike, Levi and Apple use outsourcing, and global contractors in particular, they are still concerned to build partnerships with these contractors to ensure they have control over quality and some aspects of the contractor s employment relationships. Research activity Go to www.levistrauss.com. Click on New terms of engagement. In this video Levi Strauss argue it is time to advance the standards for apparel workers around the world. Watch the video and jot down any aspect of the contractual relationship between Levi Strauss & Co and its global contractors that you think is interesting. Discuss these points with your learning partner. At the same time go to www.levistrauss.com/careers and explore the site. You should note the phrase we hire talented people all over the world and the people we hire are excited by the chance to be a catalyst for change, both inside and outside our company and we don t just put our values on a poster, we live them. Is there a potential job in this company for you? Processing the work for the unit on the Role of human resource management At the outset, focus on your HSC. Carefully review the unit of work. Practise potential multiple choice and short responses. Most importantly, learn from business. Adopt the basic principles the most successful businesses have adopted. RedPeg Publishing HSC Business Studies
ISBN 978-0-9775849-7-0 2012 Don Sykes & Kim Crawford - www.redpeg.com.au Russell and Taylor (2005) have set out the following principles for implementing a continuous improvement effort. 1 Create a mind-set for improvement. Do not accept that the present way of doing things is necessarily the best. 2 Try and try again. Don t seek immediate perfection but move to your goal by small improvements, checking for mistakes as you progress. 3 Think. Get to the real cause of the problem. Ask why - five times. 4 Work in Teams. Use the ideas from a number of people to brainstorm new ways. 5 Recognise that improvement knows no limits. Get in the habit of always looking for better ways of doing things. Role of Human Resource Management Memory Work Carefully review the work you have done in this section. 281 What is the strategic role of human resource management? The strategic role of human resource management is to provide the business with people who have the required skills, attributes and behaviours the business will need to achieve its strategic goals in a dynamic and often turbulent environment. How is human resource management interdependent with the other key functions? It is important to understand the central role of marketing in a business. This is the function responsible for finding the opportunities to develop products with a good fit between the needs of customers and the business s resources. However, the operations function has to consistently deliver a quality product, finance has to provide the money for product development, employee training and equipment. None of this happens without people with the skills, attributes and behaviours that the business requires. Discuss the outsourcing of human resource functions and the use of domestic or global contractors. Outsourcing is where human resource specialists outside the business perform some of the tasks, such as recruiting and training, that were traditionally done within a business. Outsourcing is attractive because it is cost-effective and provides a greater pool of talent. Now there is a trend towards two types of human resource outsourcing. Employment agencies are often used for low skill requirements but the recruitment of high value employees is kept within the business. However, there is tendency to use both domestic and global contractors for not just operations but also the delivery of traditional human resource functions such as recruitment and training. Getting Better Results