Business Essays - Human Resource Companies

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Human Resource Companies

Introduction

Rationale

Among the list of the Times 100 best companies to work for in the UK, NC is ranked second, but of even greater importance as to answering why Nicoll Curtin was chosen for this report is the fact that it operates within the recruitment sector.

Overview

The financial world has its booms and its busts, but the staff of Nicoll Curtin feel cushioned.

These recruitment consultants work in three separate companies, helping to find executives, financial staff and IT experts for investment banks. Jonathan Dodge, managing director of NC Financial one of the firms says he has seen three or four crashes as well as some ridiculous rises. It makes it exciting, he admits. The banking world goes up and down, and there is always something going on. Banks survive.

The 52 employees (half of whom joined the expanding company in the past year) agree the firm took top spot for job security with a positive score of 92%. Staff feel fully involved (91%) and that they can make a difference (90%) and contribute to the company's success (94%).

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Everyone has performance-related pay and about half the employees earn more than 35,000, with a good number taking home more than 55,000. Nicoll Curtin makes an effort to be fair. When a member of staff finds a candidate for a client managed by somebody else, they both share the commission.

There is also a scheme to prevent people returning from time off to a backlog of work, with everyone having a wing man (or woman) for when the main contact is not around.

NC firms have a policy of working smarter not longer and, sure enough, people aren't under too much pressure to concentrate (89%) or to perform well (88%). The firm's London base closes between Christmas and new year, so everyone has holiday then, plus managers can give extra days off or duvet days as an ad hoc reward.

Derek Johnson, chairman, is inspiring (93%), and on the website he says of the firm: I felt that rather than being just another body-shifter in this unregulated industry we would create a company of high ethical standards, one concerned with the development of the careers of candidates as well as our own consultants.

http://www.timesonline.co.uk/tol/life_and_style/career_and_jobs/best_100_companies/article3441147.ece

Research was done using independent, third party, and research based sources.

Nicoll Curtin Limited is a London based group now comprised of three separate independent companies each focussing on the recruitment of professionals for the Investment Banking & Securities market.

Formed in 1999, we have specialised since inception in the Operations and Information Technology sectors and now offer a service within Finance & Accountancy for both the Investment Banking and Securities market and increasingly Industry & Commerce.

Our Clients are the top-tier Investment Banks, Asset & Fund Managers, Global Custodians, Clearers and Energy & Commodities companies based both in London and overseas. We enjoy both strong and long standing relationships with these Clients.

We have a reputation for excellence and pride ourselves on this. Our recruiters are professional, discreet and highly experienced and work within an innovative and vibrant environment conducive to teamwork, communication and reward.

Offering a highly personalised and specialised service to both our Clients and our candidates, we work within a set standard of principles, adhering to a self imposed Code of Ethics at all times.

We pride ourselves in providing a 'centre of excellence' for all matters relating to the Operations, Finance & Accountancy and IT recruitment market. Through our dedication to our profession each separate business has become not only a specialised supplier but also a centralised information source for other related matters; each Company's aim is to be the firm of choice.

  • We have specialised since the beginning

  • We are centrally based within the City, and are close to the Docklands DLR link

  • We ensure that our divisions have the latest technology available

  • We have an extensive database comprising only candidates with specific, in-demand skill sets that were considered suitable for our Client-specific needs after an intensive interview process

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    We employ a staff of three Directors, five support staff and twenty five consultants, all with experience in the financial and recruitment sectors

  • We offer a highly personalised and specialised service to both our Clients and our candidates, working within a set standard of principles and adhering to a steadfast code of ethics.

Our Specialist Sectors

  • Asset Servicing - Corporate Actions, Dividends, Tax

  • Business Re-engineering - Project & Change Management, Business Analysis

  • Client Services

  • Compliance

  • Finance

  • Information Technology

  • Middle Office - Product Control, Desk Support

  • Operations Control - Reconciliations, MIS, KPI

  • Risk Management - Operations, Credit, Market

  • Settlements - Pre & Post, Clearance, Fails

  • Trade Support - Trade Capture, Exception management

  • Loans & Trade Finance

Gathering in force since the 1980s, a growing challenge has confronted this model. This is the model of human resource management (HRM) that, in many larger firms, has represented a sea-change in the perception and management of staff. Driven by accelerating automation and the advent of the knowledge economy, firms have realised that their critical assets are no longer real estate and machinery, but people to think and to share ideas. As a famous aphorism in the New York Times (1995) put it: 'Microsoft's only factory asset is the human imagination.'

In a real sense, HRM tacitly demands the graduation of employees from 'pairs of hands' and 'filling jobs' to becoming the thinking and flexible agents of an intelligent organisation. In this model, people management is no longer a 'soft service' but instead becomes a 'hard' strategic centrality.

HRM acknowledges that in most firms employees represent a high proportion of costs. More significantly, it recognises that an even higher and often growing percentage of added value is dependent on the staff. In this context, HRM places a firm's workforce at the heart of the business and its strategy.

It is clear that competitive advantage is becoming more and more dependent on the people in the organisation. Often the major - even the only - differentiating factor in a firm is the knowledge, relationships and culture among staff. Advantages based on installed plant, technical processes, scale economies and even location all tend to lack longevity.

No matter how substantial or advanced a firm's operational advantage, in the long term it is open to replication. But people-based advantages are extraordinarily complex. They can adapt, transmute, and reinvent themselves in response to threat or opportunity. Replication by competitors of human resource advantages is extremely difficult.

The concept of HRM has applications at every level in the organisation. As always in business, the goal is to add more value. Specifically, this means that a key aim is to improve the ratio of cost to added value. This can be achieved by increasing the quantity or value of output for a given labour input. Sometimes it may also be possible to reduce the cost of labour, although leeway here is limited by the market forces of demand and supply.

Making people more productive is along-standing management goal. In its simplest form, this means increasing the quantity or volume of output per time period. But more and more today the measurement of productive output has a second dimension. Productive effectiveness embraces the quality of output, which in turn drives market value and ultimate customer loyalty. As products become more complex jobs become more skilled ....(and Nicoll Curtin has seen the critical importance of this and has embarked on its current path to ...

Although the trend towards empowerment gives still more discretion. Meanwhile, many products contain an increasingly value-adding element of personal service. All of these factors highlight the importance of quality. And effectiveness has a broader meaning still. Teams are only valuable because they generate synergy.

The mechanical view of people as cogs in a machine requires little more than obedience and the proper application of skills learned for the job. Reconceive people as thoughtful agents of a shared purpose and the whole picture changes. If as McGregor (1960) suggests, people naturally seek responsibility, then they need less supervision and control more skills of leadership and task management...(similar to the ______ strategy that NC implemented). This implies a flatter less hierarchical structure with more delegation and trust and wider spans of control. It also suggest the need for vigorous bottom-up communications and a sense of purpose understood and shared by all.

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Assisted by information technology, brought the top and bottom of their organisational pyramids much closer together. Training and development have expanded and intensified, with growing opportunities for employees to negotiate their own training plans. Many different forms of employee participation have emerged, including quality circles and autonomous work groups. These structures vary widely between industries and firms, but all aim to capture workforce ideas, take a team approach to problem solving and spread best practice.

These are the elements of corporate strategy:

Rationale

Combined, these trends represent a new philosophy of work that supports continuous improvement - Kaizen - in each and every productive process. This highlights the growing need in HRM to develop an organisational culture that encourages curiosity, entrepreneurship, knowledge-sharing and teamwork.

This is only likely to occur with the real and active support of top management. Maintaining the alignment between the resulting organisational energy and strategic goals is a challenge: the potential cumulative gains are building blocks of competitive advantage.

Introduction

Legal & General Insurance, is a UK based company with subsidiaries in over six countries. However with the turn of the new millennium the company needed to make some radical changes.

This report looks at the changes, considers the link between reward management, strategy, HR strategy and the business strategy. It analyses the advantages the advantages and disadvantages of the new reward structure and schemes; and it evaluates the effect the new reward structure and schemes on employee motivation.

Terms of Reference and Objectives

This report has been put together using terms of reference such as; periodical articles e.g. magazines and with information sourced from different textbooks, class notes and websites.

The objectives of this report are clearly:

  1. To understand the link between reward management, strategy, HR strategy and the business strategy.

  2. To understand and analyse the advantages the advantages and disadvantages of the new reward structure and schemes.

  3. To understand and evaluate the effect the new reward structure and schemes on employee motivation

  4. And to offer relevant and realistic recommendations.

Findings

The link between reward management strategy, HR strategy and business strategy.

Business Strategy

Legal and General plc (L&GI) business strategy was simple i.e. ...to increase the competitiveness of its products by achieving lower unit administration costs, more effective sales distribution and maintaining and effective investment policy in a range of bonds, equities and property. (APU Case Study, 2003)

HR Strategy

According to M. Armstrong (2000, p.6), H.R.M can be defined as a strategic and coherent approach to the management of an organisation's most valued assets - the people working there who individually and collectively contribute to the achievement of its objectives

Therefore L&GI's human resource strategy was to modify the way people worked and the culture in which they worked by stressing the psychological contract with the company. i.e. 'what is expected of me and what can I expect in return'. Therefore the H.R. strategy was supported by building teams, and emphasising the business strategy, skills etc. According to Schuler (1989), this is the utilisation model of HRM - individuals are selected on the basis of their technical skills, the view of HRM is short term i.e. cost minimisation and little emphasis are put on training and development. See (Fig.1) over page

A model for the strategic review

Strategic Review

Culture Change

Organisational Development

Resourcing

Development

Reward

Communications

Reward Management Strategy

The reward strategy of L&GI was to relate pay to local not national market rates - and to be made up of competency-based pay in other words performance-related pay - supported by a broadbanded approach. Broadbanding is the compression of a hierarchy of pay grades or ranges into small number of wide bands, each of which spans the pay opportunities previously covered by several pay ranges. (B.R. Jewell, 2000, p.520)

It is flexible and comprises delayering. To motivate employees, bonuses and chance for promotion were integrated into the structure. Reward strategies are designed in accordance with the both the business and human resource strategies to achieve organisational objectives. Reward management is formulating the right mix of financial and non-financial rewards in order to support the business strategy.

Critical Analysis

Advantages and Disadvantages of the new Reward Structure

Broadbanding

Advantages

  • Promotes lateral (sideways) career development

  • Increased flexibility i.e. employees moving to areas that they are best in

  • Provides a flexible system of rewards for those whose role is widened or skills/knowledge is increased

  • Is consistent with the flatter organisational structure

  • Not constrained by narrow grades and the bureaucracy of traditional job evaluation

  • Pays employees based on contribution rather than their job title

Disadvantages

  • Promotion opportunities are restricted

  • De-moralisation of employees who are placed in the same band with employees who were once in a lower grade to them

  • It is difficult to ensure that there is equal pay for equal value work, especially since it is team based in L&GI's case

Performance-related Pay (PRP)

Advantages

  • Motivate employees

  • Increase commitment to organisational objectives

  • Develop a performance culture

  • Reward contributions made to organisational success

  • Recruit and retain high-quality employees

  • Deliver a message about performance

Disadvantages

  • Money is not the only motivator

  • PRP might encourage short-termism

  • Attention is focused on volume and speed not quality

  • Intrinsic interest in a task declines when someone is given only external reasons for doing it

  • It is costly to introduce

  • It can cause 'pay drift' (pay rising without a commensurate increase in performance)

  • It can be demotivating if people feel that they are unable to achieve the performance standard or that assessment/ appraisal is not objective and fair

Bonuses - motivation to perform. The disadvantage in this instance is the timing of the appraisals the method i.e. team based.

Advantages and Disadvantages of the new Reward Scheme

The method of appraisal in itself can lead to entire groups of people being isolated. The implementation process is slow and meticulous but it is a mostly smooth transition into the new structure. The transition plans to meet manpower requirements, recruitment, training and development - a day long workshop i.e. total of 24hrs, promotion and career plans, pay and productivity and transfer. Finally, the polycentric approach to staffing does alleviate 'cultural myopia' (Charles W.L. Hill, 2001) and is inexpensive to implement. However it limits career mobility and isolates headquarters from foreign subsidiaries.

All of these elements fall under soft HRM which is subjective and difficult to measure. Soft HRM looks mainly at how people are managed, it includes; developing an organisational culture which helps to achieve the company's objectives, motivating employees to work to their best ability and providing support and training, so as to develop the individual.

The objectives of the HRM functions are to develop and maintain a level of morale and human relationships which evoke willing and full co-operation of all persons in the organisation, in order to attain optimum operational performance.

The Manpower Planning (MPP)/ Human Resource Planning (HRP) are a comparison of the organisation's existing human resources against its forecast needs, with a statement of planned strategies to eliminate any discrepancy. It is a rational approach to the recruitment, retention, utilisation, improvement and disposal of an organisation's human resources and it just as concerned with quality as it is with quantity. It over bounds all the divisional and departmental boundaries of any organisation and it claims the attention of all managers.

Taking into account that the functions of HRM are:

  1. Organisation design and effectiveness

  2. Resources

  3. Performance management

  4. Reward Management

  5. Motivation

  6. Commitment

  7. Employee relations

  8. Flexibility

  9. Quality

  10. Culture Management

It is now possible to illustrate how the functions of HRM, HRP/HR Strategy/ Business Strategy and Reward Strategy combine to form a coherent whole. See Fig.2 below.

Guest Model of HRM 1997

HRM

Strategy

HRM

Practices

HRM

Outcomes

Behaviour

Outcomes

Performance

Outcomes

Financial

Outcomes

Differentiation

(motivation)

Selection, Training, Appraisal

Commitment

Effort/

Motivation

High:

Productivity

Quality

Innovation

Profits

Focus

(quality)

Rewards

Job Design Involvement

Quality

Cooperation

Involvement

Low:

Absence

Labour turnover

Conflict

Customer

complaints

Return on

Investment

Cost

(cost reduction)

Strategy Security

Flexibility

Organisation Citizenship

The effect of the new reward structure and schemes on employee motivation and recommendations

The new reward structure is closely derived from the Herzberg 2 factor theory - in which case there were motivation satisfaction factors such as;

  1. Achievement

  2. Recognition (by teams)

  3. Responsibility

  4. Promotion prospects

  5. and The nature of work itself.

The intended effect being improvements in;

  • Interpersonal skills
  • Communication skills
  • Customer relation skills
  • Self-motivation and cooperation
  • Technical skills
  • Effective communication
  • Accountability
  • Business ethics

However, L&GI should have considered Maslow's hierarchy of needs, since safety/ security needs i.e. job security, was almost totally ignored. Therefore many employees were laid off regardless of their years of service and would have felt unappreciated, overlooked or betrayed.

The result could have been disastrous with rifts between the union and the company if individuals should be erroneously laid off - fortunately the union was consulted and equitable voluntary separation was agreed upon where necessary. Unfortunately, other employees will feel insecure that they might lose their jobs next.

Conclusion

Overall the reward structure did satisfy the business strategy which was to cut administrative costs etc. The reward structure had many desirable elements such as promotion opportunities, a polycentric culture and bonuses etc. However based on the performance appraisal outcomes; promotional decision errors could be made also encouraging many grievances because of subjectivity and bias.

Therefore, perhaps individual assessment should have been implemented versus a team assessment. Finally, it was via the reward and HR strategy that L&G achieved its business strategy which is ideally developed first. The result was highly skilled staff, lower costs because pay was polycentric i.e. specific to local subsidiaries and improved profitability. The reward structures are like the beams supporting the business strategy - it is a correlated complement in HR strategy.

  • M. Armstrong - Performance Management: Key strategies and practical guidelines. 2nd Edition
  • Michael Barratt and Andy Mottershead - Business Studies
  • G.A.Cole - Management Theory and Practice
  • R.L. Heneman - Strategic Reward Management: design, implementation and evaluation
  • Charles W. L. Hill - Global Business. 2nd Edition
  • Bruce R. Jewel - An Integrated Approach to business studies 4th Edition
  • Linda Maund - An Introduction to Human Resource Management
  • Laurie J. Mullins - Management and Organisational Behaviour
  • Newsweek Magazines
  • Class lecture notes.
  • http://www.financialtimes.com
  • http://www.times.com
  • New York Times (1995)
  • McGregor (1960)
  • http://www.personality-project.org/perproj/readings-theory.html 20th April 2004
  • http://www.ship.edu/%7Ecgboeree/conclusions.html 20th April 2004
  • http://www.humanmetrics.com/cgi-win/JTypes2.asp 20th April 2004