Downsizing to increase efficiency or international operations


Chapter 11

Whether the organisation is a profit oriented or a non profit oriented organisation, without effective human resource management the company growth will be restricted and performance will continue to suffer. Effective HRM has a positive impact on organizational performance including higher employee productivity and stronger financial performance. HRM helps organizations to find the right mix of people and skills they need to meet the organizational goals.

Explain the role of human resource management in organisational strategic planning

The term human resource management (HRM) refers to activities undertaken to attract an effective workforce, develop the workforce to its potential, and maintain the workforce over the long term. (draw the exhibit 11.1 - page 369)

I say what I think, what I think is how I feel, and how I feel is who I am.

These goals take place within the larger organisational environment including competitive strategy, federal legislation and societal trends.

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The organisation's competitive strategy may include mergers and acquisitions, downsizing to increase efficiency, international operations or the acquisition of automated production technology. These strategic decisions determine the demand for skills and employees. The human resource strategy, in turn, must include the correct employee makeup to implement the organisation's strategy. (Basically the human resource strategy should be in line with organizational strategy since companies need to have the correct combination of people.)

Describe legislation and societal trends that influence human resource management

Several federal laws have been passed to ensure equal employment opportunity (EEO). The point of the laws is to stop discriminatory practices that are unfair to specific groups and to define enforcement agencies for these laws. EEO legislation attempts to balance the pay given to men and women; provide employment opportunities without regard to race, religion, national origin and sex; ensure fair treatment for employees of all ages; and avoid discrimination against disabled individuals. The introduction of the new Work Choice legislation late in 2005 will have a major impact on HRM over coming years. Trends in society that raise new problems for staffing the firm include everything from court decisions that rule against companies that fire employees to dramatic changes in the makeup of the labour force. These trends include the following:

- Globalisation. As companies enter the global marketplace HRM must deal with such staffing concerns as whether or not to send expatriate managers or hire local managers for foreign operations.

- Workforce diversity. The people filling jobs in the year 2010 will have a different racial and gender makeup than current employees.

- Labour supply fluctuations. Changing demographics and economic conditions affect labour supply. The future labour supply may fluctuate further between shortage and oversupply as conditions change such as the beginning of baby-boomer retirement in the year 2000.

- Employee flexibility. One of the clearest trends is the increased effort to obtain quality employees and, at the same time, reduce excess employee costs so that firms can remain competitive in the global marketplace. Employers will be making greater use of part-time employees, work schedules that allow employees to work other than the traditional hours

during the day, employee leasing and temporary employees, contract employees, etc. The intent is to allow employers to get the workforce needed and avoid the provision of offices and benefits on a full-time basis.

- Unionisation. The general trend is away from unionisation. Currently, about a quarter of all workers are covered by collective bargaining agreements. In companies where unions represent workers, union officials research the needs of members, the elements of the pay package, and the employer's financial condition. When a contract expires, union officials

negotiate on behalf of the members of the bargaining unit for desired pay components and other issues relevant to workers.

What is a social contract? it is a psychological contract held between organisation and the employee. The employee could contribute ability, education, loyalty, and commitment and expect in return that the organisation would provide wages and benefits, promotions and training through out the employees work life. However with fast ever changing environment this contract has changed. This can be depicted as follows.

New contract

Old contract


Employability, personal responsibility

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Job security

Partner in business improvement

A cog in the machine




Continuous learning, lateral career movement, incentive compensation

Traditional compensation package

Creative development oppurtunities

Standard training programmes

Challenging assignments

Routine jobs

Information and resources

Limited information

Explain what the changing social contract between organisations and employees means for workers and human resource managers

Not since the advent of mass production and modern organisations has a redefinition of work and career been so profound. In the new social contract, each person must take care of herself/himself. Particularly in learning organisations, everyone is expected to be a self-motivated worker who has excellent interpersonal relationships and is continuously acquiring new skills. Employees take more responsibility and control in their jobs, becoming partners in business improvement rather than cogs in a machine. Organisations provide challenging

work assignments as well as information and resources to enable workers to continuously learn new skills. HRM departments can help organisations develop a mix of training, career development opportunities, compensation packages and rewards and incentives. They can provide career information and assessment, combined with career coaching to help employees determine new career directions.

New ways of working-

More organizations are turning to contract or part-time workers to save money and avoid lay offs in the future.

Telecommuting - using computers and telecommunication equipment to perform work from home or another remote location.

Formation of teams is another significant trend in careers

As organizations are becoming cost conscious they tend to outsource certain activities in the organisation.

Attracting an effective workforce

The first step in attracting an effective workforce involve HR planning, the second step is to use recruiting procedures to communicate with the potential applicants. Third step is to select the most suitable from the applicants finally to welcome the new employee. ( Draw exhibit 11.4 - page 377)

Explain how organisations determine their future staffing needs through human resource planning

Human resource planning is the forecasting of human resource needs and the projected matching of individuals with expected vacancies. Human resource planning begins with several questions:

- What new technologies are emerging, and how will these affect the work system?

- What is the volume of the business likely to be in the next five to ten years?

- What is the turnover rate, and how much, if any, is avoidable?

By anticipating future HRM needs, the organisation can prepare itself to meet competitive challenges more effectively than organisations that react to problems only as they arise.

Describe the tools managers use to recruit and select employees

Recruiting is defined as 'the activities or practices that define the characteristics of applicants to whom selection procedures are ultimately applied'.

Many organisations use internal recruiting, or 'promote-from-within', policies to fill their high-level positions. Internal recruiting has several advantages because it is less costly, generates higher employee commitment, development and satisfaction, and offers opportunities for career advancement to employees rather than outsiders.

External recruiting is recruiting newcomers from outside the organisation. A variety of outside sources provide applicants. These sources include newspaper advertising, state employment services, private employment agencies, job fairs and employee referrals (potential candidates are nominated by known people). Referrals are one of the cheapest and most reliable methods of external recruiting.

Realistic job preview - a recruiting approach that gives applicants all significant and realistic information (both positive and negative) about the job and the organisation. This method will reduce employee turnover as before they join the employees will have a better understanding about the situation.

Further it is important that the firms comply with the legal regulations in relation to recruitment such as equal employment act.

Selection - select the desired employees from the pool of recruited applicants. At this time the managers asses the applicant's characteristics in an attempt to determine the fit between the job and the applicants characteristics. A good starting point to start selection process is through developing a Job description - it is a listing of duties as well as desirable qualifications for a particular job.

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Selection devices - the frequently used once are as follows:

Application forms - collects information about the applicants previous educational, job experience and other background characteristics.

Interviews - It serves a two way communication channel that allows both the organisation and the applicant to collect information that would otherwise be difficult to obtain. Even though it is widely used, this system does not guarantee the person who faces the interview well, will also perform well.

Paper & Pencil Test - a written test designed to measure a particular attribute such as intelligence or aptitude tests.

Assessment Centre - present a series of managerial situations to groups of applicants and they are being observed by judges. This allows the companies to learn how each candidate will react at work despite what they say in the application.

Describe the way organisations develop an effective workforce through training and performance appraisal

Training and development represent a planned effort by an organisation to facilitate employees' learning of job-related behaviour.

Some authors use the term 'training' to refer to teaching lower-level or technical employees how to do their present jobs, while development refers to teaching managers the skills needed for both present and future jobs. For simplicity, we will refer to both as training. Organisations spent lot of money each year on training. Training might occur in a variety of forms, the most common methods are;

On the job training - a type of training in which an experienced employee adopts a new employee to teach him or her how to perform the job duties.

Orientation training - new comers are introduced to the organisations's structure, culture, standards and goals.

Class room training (off the job training) - including lectures, films, audio visuals techniques.

Programmed and computer assisted instruction - the employees get trained at his or her own pace to learn material from a text that includes exercises and quizzes to enhance learning.

Conference & Case discussion groups - participants analyses cases or discuss topics assisted by a training leader.

Performance appraisal is another technique for developing an effective workforce. Performance appraisal comprises the steps of observing and assessing employee performance, recording the assessment, and providing feedback to the employee on the areas they need to develop or praise up on the good work they have done. Managers use performance appraisal to describe and evaluate the employees' performance.

The idea is that performance appraisal should be ongoing, not some thing that is done once a year and need to keep clear records of it.

To obtain accurate performance rating, managers must acknowledge that jobs are multi dimensional, hence performance is also multidimensional. E.g For an example a TV announcer needs to have general Knowledge, Presentation Skills, dedication to work etc. So in such situation a supervisor who thinks the knowledge is the key to be a good performer would rate his performance as good even though his presentation skill are bad.

To avoid above situations, now the companies are using new approach called the 360-degree feedback. A process that uses multiple rates, including self rating as a way to increase awareness of strengths and weaknesses and guide employee development. Members of the appraisal group may include supervisors, co-workers, customers and the individual employee. This opens the opportunity to appraise with a variety of view points.

Part II

Recruitment and development of the work force is a very costly affair for companies, hence in order to receive the benefit of it the HR professionals should practice action that would keep the employees within the organisation for a long time. Maintenance of the current workforce involves compensation, wage and salary structure, benefits and occasional termination.

Explain how organisations maintain a workforce through the administration of wages and salaries, benefits and terminations

Compensation refers to all monetary payments and all goods or commodities used in lieu of money to reward employees. An organisation's compensation structure includes wages and/or salaries and benefits such as health insurance, paid leave for recreation or sickness, company maintained cars or employee fitness centres.

An organisation's compensation structure is designed to fit organisation strategy and to provide compensation equity. The wage and salary structure is important in maintaining a productive workforce to wards achieving organizational goals. E.g. if the company aims to achieve certain sales levels then the company can introduce a wage structure that determines the wage level based on performance rather than on seniority. Some of the common pay structures used are as follows;

Skilled based pay systems - Employees with higher skill levels receive higher pay than with lower skills.

Job based pay - the wage is in relation to specific tasks that an employee performs.

Incentive pay - E.g. Commission, attendance allowance, profit sharing etc. Any extra money that is paid beyond the basic salary is called an incentive. Incentives are used to encourage the workers efficiency.

What ever the pay structure the managers use it is important that it is fair to all the employees in the organisation.

Equally important are the benefits offered by the organisation. Benefits were once called 'fringe' benefits, but this term is no longer accurate because they are now a central part of the compensation package. Some benefits are required by law such as paid maternity leave etc. Further companies provide various benefits to the employees such as child care facility in the office, providing meals and recreation facilities in house, to encourage workers to work more effectively and efficiently. It also makes the employees loyal to the company and would stay with the company for long periods of time.

Terminations are also valuable in maintaining an effective workforce. Employees who are poor performers can be dismissed. Also, employers can conduct exit interviews with departing employees. This is an interview conducted with departing employees to determine the reason why they are leaving the organisation. The exit interview is an excellent and inexpensive tool for learning about pocket s of dissatisfaction within the organisation and, hence, reducing future turnover.