Human Resource Managment In Ethiopia
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This dissertation attempts to assess how HRM is evolving and developing in private and public organizations in Ethiopia. The research is qualitative and makes use of the few quantitative researches previously conducted by other researchers. This paper will examine the extent, public and private organizations in Ethiopia practice western hrm and the problems associated with the implementation process. Private and public organizations should employ effective hrm practices for better organizational performance results. In addition, the government must put in place proper economic policies to aid the activities of the private or public organizations as it will indirectly affect the economic performance of the country. The main finding shows that the current decentralized power structure of Ethiopia has promoted regional investment which in turn has made an impact on hrd, but still cultural and social factors are slowing down the development process. It is difficult to clearly identify the challenges and prospects of hrm in Ethiopia due to lack of researches done on the field. The dissertation may provide an insight into hrm practices in Ethiopia and contribute to future researches studies.
CHAPTER 1 INTRODUCTION
BACKGROUND OF THE RESEARCH STUDY
The Global market competition has forced private and public organizations in Africa to make organizational adjustments that may well help them participate in the competition. Parallel to financial strength, organizations are forced to develop their human capital as it has become an important factor in increasing their economic performance. Hence, focal attention is awarded to human resource activities to this end.
In Ethiopia, the change of the political system in June 1990 has introduced a different market oriented free economic system. One of the major issues in this new economic policy is the privatization of government owned enterprises. This change process has brought with it the reduction of labour force, change in the employment contract and different work appraisal policies.
In privatization, hrm activities have an important place. When aiming to bring a new culture change, human resource managers need to act through recruitment and training of staff that suit the new culture while removing staffs that opposes the new culture. For this, better and consistent human resource programmes need to be in effect in order to attain the steadiness of the process (Parker, 1992).
There are only few Researches done that prove the effectiveness of western management practice in the developing world and almost none regarding hrm practices in Ethiopia. Thus the lack of information has created a gap in understanding how management is practiced in Ethiopia. This research paper would contribute to the existing literature in two major ways. First, the paper argues that as the present economy of Ethiopia is growing and with its reformed economic policy, researchers need to investigate the hrm practices in Ethiopia. Second, it is crucial to find out whether or not western hrm policies can be adopted in a developing country.
STATEMENT OF THE PROBLEM
Modern management practice has its roots in the western world. Western hrm is transferred to African countries to aid their industrial development. But a direct transfer without regard to the cultural and social setting of African countries has decreased the effectiveness of the western management practices (Alfred & Kabindra, 1990). This paper does not promote the direct transfer of western hrm to Africa nor does it claim the dominance of the western practice over African indeginous management system, such as UBUNTU- a local management system in South Africa- which is believed to have the potentiall to fill the gap in management. Rather this paper hints that some local cultural practices are conducive for the transfer of modern management practices and to this they are applied in some environments (Jackson, 2000, 2004). This paper follows this approach considering the adaptive nature of organizations due to cultural influences evident in some African organizations, as Kamoche (2002) stress that national and organizational cultures have an effect in the convergence and divergence of hrm practices.
In 1996 following the political transition from a unitary system to a federal system, the Ethiopian government introduced a new civil service programme. This programme was initiated by donor countries and mainly IMF and World Bank, and was aimed at improving the civil service operating system mainly in the hrm, ethics and service delivery areas. This programme has an influence from reforms practiced in New Zealand under their new public management programme (Peterson, 2001). Even though the programme had some implementation problems at the initial stage, later on it has proven to be successful mainly in the public service organizations. Despite strong cultural and social structure, this new trend had also made limited indirect effect on the managment of private service giving organizations as it has proven to have various advantages .
SIGNIFICANCE OF THE STUDY
Ethiopia has opened its door to foreign investors in line with its new market oriented economy policy. But the progress of the economy is still unsatisfactory as there is a limited development in the countries' human capital as well as management system. A better understanding on how human resource is managed in Ethiopia and looking at the cultural and social setting of the country can help as a framework for further research and development of hrm in Ethiopia. Over and above, adding up to the data available, this study shall also add up to the existing body of knowledge. It shall also broaden my understanding of research and be a partiall fulfilment of my Masters degree.
RESEARCH QUESTIONS AND OBJECTIVES
The paper would try to address the following questions;
1.How does hrm practice in Ethiopian organizations differ from the westerm hrm practice?
2. What are the factors that affect the transfer of western hrm to Ethiopia?
3.What practical measures has Ethiopia taken to improve its hrm practices in private and public organizations?
The research paper has the following specific objectives;
To assess the influential factors that affect the transfer of western hrm to Ethiopia
To analyse the interrelation between economic development and hrm practices in Ethiopian organizations
To suggest and recommend effective hrm practices in recruitment, performance appraisal, training and development and rewards and compensation of employees.
SCOPE OF THE STUDY
The study focuses on employee recruitment, performance appraisal, training and development and rewards and compensation in organizations in Ethiopia. These human resource activities have an important role compared to other hr activities. Hence, major focus is given to these selected management activities.
There are generally three types of research methodologies identified by Creswell (2003). These are highlighted below along with their advantages and disadvantages.
Quantitative data is about numbers in general terms. They are all such data that are usually quantified to help answer research questions and meet pre specified objectives (Lewis et al, 2007). These claim post positivism knowledge with experimental strategies of enquiry. Quantitative analysis uses methods such as, cost and effect thinking, Measurement and observation as well as test of theories. Proponents of this approach claim that it is a great example of deductive logic of natural science. This is because it allows for comparison which is done through objectively determined validity and reliability. However, since by this approach variables may only be measured by specific point in time, one may not achieve an in-depth analysis of for example psychological factors.
Qualitative data is about words so to speak in general terms. These include all non numerical data that are not quantified or quantifiable and can be a product of all research strategies. This type of analysis claims constructivism of set of knowledge and mainly uses ethnographic and narrative strategies of enquiry. Qualitative analysis uses methods including, field observation, open ended interview and theory deductions among others. The main advantage of such approaches is that there is a greater degree of wholeness and richness of data collected since it focuses on natural occurrences within natural settings. This makes it a powerful tool to study the process.
Mixed approach to a research incorporates elements of both quantitative and qualitative approaches. It claims the knowledge of pragmatic assumptions for its rigor and validity. In essence, it uses both qualitative and quantitative strategies and methods of enquiry. This approach draws advantages of the two approaches discussed above. It as well draws a complexity of disadvantage of these approaches. This makes mixed method of research more time consuming and thus inevitably inappropriate for a master's research given the limited time and resources.
From the above argument, this research paper shall lend itself to the quanlitative analysis and tools that go with it.
DATA SOURCE AND MANAGMENT
Secondary data shall be used for analysis. These shall be outsourced from the relevant sources pertinent to the issue. These include International management journals, online company performance reports, company Journal reports on management and financial performance of organizations and text books shall be used. The study shall observe all the stipulated data access and usage policies for each of these resources.
Ethical considerations are expected to arise in any kind of research study. This paper therefore takes into consideration of those ethical issues on formulating and clarification of the topic, design, access and use of data, analysis and report of the findings in a moral and responsible way. The following may arise;
To begin with the paper shall consider the prevailing code of ethics for researches that is in use worldwide. In case of permission required, this shall be sorted out with the help of the university department office. While sufficient efforts shall be made to seek authority from relevant participant of the study, information on all aspect of the study shall be availed.
The integrity of all stake holders to the study shall be upheld with the objective and other processes of the study made explicit. The data shall be kept for analysis within the stipulated acceptable time period. Ownership rights, Privacy and interest of the stakeholders shall be respected.
The study shall use ways and methods of analysis and report the same in the manner that shall not be embarrassing, stressful, discomforting, painful or harmful to the readers and the participants.
The study shall take proactive stance not to engage in fraudulent procedures that affect the study results neither shall it misuse the same. The researcher aims at maintaining responsible behaviour and objectivity as much as possible in conducting the study.
LIMITATION OF THE STUDY
HRM has many functions but due to time constraints this research paper is limited only to the main four activities namely employee recruitment, training and development, performance appraisal and reward and compensation. Hence, the paper may not give a complete full account of hrm practice in Ethiopia. In addition, the lack of ample reference data on the subject has limited the research investigation.
ORGANIZATION OF THE PAPER
The dissertation paper is divided into four chapters. Chapter one sets out the background of the research paper, statement of the problem, the significance of the study, research question and objectives, scope of the study, methodology, data resource management, ethical issues, limitation of the study and organization of the paper. In chapter two the literature review presents the key concepts of hrm and its four activities; employee recruitment, performance appraisal, training and development and rewards and compensation. In addition, New Public Managment theory and culture are discussed . In chapter three ethiopias' politics, economy and culture are discussed. This discussion helps as a framework to analyse hrm activities in Ethiopia. Lastly in chapter four the researcher makes conclusion and recommendation based on the given facts on how to improve hrm practice in Ethiopia.
The subject of Human resource management increased in leaps and bounds in the last decade, and many scholars have contributed their share of knowledge to the development of management practice across the world. Even though all scholars revolve a central issue of developing the human capital, they differ in their approach on how it is done.
Bratton and Gold (2003) put Human resource management as a strategic formula, combining human capital and company policies in order to achieve a competitive advantage.
Dowling and Welch (2004) in their book International human resource management, say that HRM is a combination of activities in an organization that includes human resource planning, staffing, performance management, training and development, compensation and benefits and industrial relations. Human resource professionals perform the above activities as they see fit in order to address the organization objective.
Torrington et al. (2005) define HRM using two approaches. One is the generic term used to define the main objectives of human resource activities, i.e. staffing, performance, change management, and administration objectives. These objectives will set the plan and rules on how an organization handles and exploits its human resource capital. The second approach describes HRM as a distinct approach to the management of people. This approach is an extension or developed form of personnel management. Personnel management demanded employee compliance, pluralist perspective, external control of staff and held short term perspective but HRM holds a long term and unitary perspective, commitment from staff and promote self control perspective.
As stated by the above mentioned authors, although in different ways, the authors share a common point that HRM is a process accomplished by an organization on managing its human resource to achieve its goal efficiently and effectively..
WESTERN HUMAN RESOURCE MANAGMENT
It was accepted that lack of capital is the only obstacle in the development of an organization. But now, an organizations inability to employs competent manpower and management system is taken as the real obstacle organization dread to face (Desler, 2003). An organizations' competitiveness lies on its human resource. In order to achieve a competitive advantage, an organization needs to motivate its employee. The management section responsible for employee development and compensation, play an important role with this regard. This assumption has grown to form a plan, Strategic human resource management. This strategic practice is the connecting line between the HRM and the strategic objectives of the organization for performance efficiency (Beardwell and Claydon, 2010). In the present high competitive time, organizations are forced to devise their strategic plan assisted by technology. One thing that has defined and changed management is technology. It has enabled managers to efficiently execute their duty and control their employee appraisal, benefits and training needs. But still technology could not cover the duty of the manager in the personal interaction with the employees.
According to Desler (2003), the key functions of HRM are recruitment, benefits and compensation, training and development, employee security and safety. Of the mentioned factors staff recruitment is the major one that management need to focus at is, getting the right people at the right time for the right place as it is an a fundamental issue to execute an organizations action plan correctly. A clear work description and detail assists the manager in charge to make correct staff recruitment, appraisal and timely evaluation. In order to do this task the manager first does the planning to identify the right number and the needed qualification for recruitment.
RECRUITMENT AND SELECTION
Acquiring the right person for the vacant position is an important factor in securing a competitive advantage. Recruitment is a programme where organizations ..." attract a high proportion of well qualified candidates who are interested in accepting a job offer. " (Fisher et al., 1999, pp 250)
The selection process is what comes next to the recruitment. It involves choosing the best candidate from the recruited group using different selection criterias. Organizations have different recruitment philosophies. Big companies like General Electric and Universal Postal Service emphasise on recruiting and promoting employees from within their organizations, on the other hand organizations may also choose to recruit on long and short term basis with their own recruitment procedures (Fisher et al., 1999). Thus organizations may choose to apply internal or external recruitment methods or both at the same time. Both methods have their own advantages and disadvantages. Internal recruitment have the advantage of giving employees motivation and also reduce socialization and training time. While its disadvantages are reducing diversity and it creates vacant positions as employees are upgraded to new posts. The external recruitment may hold advantage in bringing new ideas and new faces to the organization while its disadvantages are the risk of hiring the wrong person and also decreases work motivation of active employees as it bypass internal promotion. For the internal recruitment employee referral, internal advertisements on notice boards and higher up recommendations are used to draw in interested applicants but for external recruitment, advertising in different mass Medias and employment offices as well as associations are involved in the process (Torrington et al. 2005, pp 124-135).
PERFORMANCE MANAGMENT AND APPRAISAL
"Performance management is a systematic process for improving organizational performance by developing the performance of individuals and teams. It is a means of getting better results by understanding and managing performance within an agreed framework of planned goals, standards and competency requirements."(Armstrong, 2009, pp618)
There is no universal system to manage and control performance but according to Fisher et al. (1999, p497) there are four common parts found in most organizations' performance managment system. They are defining performance, empowering employees, measuring performance and feedback and coaching. Depending on their organizational culture, organizations would adopt specific performance management system as they see fit for their system. Organizations appraise their employees and use the feedback for developmental uses, administrative decisions, organizational objectives maintainance and documentation purposes. It would also help identify employees in need of training, transfer to new job assignments, promotions, layoffs, HR planning, evaluation of HR system and for other legal requirements (pp 498). In the UK a new performance management was introduced in 1997 which set out five dimensions to measure performance management in the public sector. The five objective are strategic objective of the service, cost and efficiency, service delivery outcomes, quality and fair access of the service (Bratton and Gold, 2003. Pp 263). This system has created an incentive to develop a performance measurement system whereby organizations would set and define departmental, managerial and employee performance targets which would then be measured against the set targets initially incorporated and outlined in the performance strategy plan (2003, pp263-264).
TRAINING AND DEVELOPMENT
Organizations improve their competitive advantage by improving employee performance through training programmes. For efficient performance employees need to learn what is expected of them from the organizations and know beforehand how they should perform their tasks (Torrington et al., 2005, pp 385).
The purposes of training are to acquaint new staff members to their new job assignment, to enhance employees performance to the standard and level of the organization, to acquaint employees with new technologies or change and to prepare them for higher job qualifications(Fisher et al, 1999, pp 397). Organizations need to timely asses their training needs in three areas; Organizational, Task and Individual analysis. The organizational analysis takes into consideration the organizations strategy, goals and culture together with the proposed training scheme to assess the computability of the training with the need and aim of the organization. Task analysis is analysing jobs and identifying the specific job requirements needed to perform the job well. Identifying the detailed procedures, knowledge and skills is important to this analysis. The individual analysis which is the final analysis is about the employee to be trained. Attention must be given on the required skills and knowledge needed to participate in the training. For better outcome employees with a background knowledge for the required training should be considered (Fisher et al., 1999, pp 397-398). The training and development would not be restricted to training courses and international assignments, temporary transfers within the company and job rotation also help employees to acquire additional knowledge and skills (Lucas et al., 2006, pp 156-7). Organizations with effective training and development programmes benefit through high performance, well informed and committed employees and also reduces future employment training costs (Armstrong, 2009, pp 684).
REWARDS AND COMPENSATION
The term reward according to Bratton and Gold (2003, pp278) is" refers to all the monetary, non-monetary and psychological payments that an organization provides for its employees in exchange for the work they perform. " Further on it is discussed that there is a reward system and pay system. The reward system is divided into intrinsic and extrinsic rewards. Intrinsic is the psychological satisfaction gained from performing the job and the extrinsic is the outer job satisfaction that gives security and satisfaction to the employee. The pay reward is dealing with the monetary and other non-financial gains provided by the employer. Focusing on the pay system, employees receive reward or compensation either in direct financial payments like salaries, commissions, wages and incentives or through non-finacial payments such as insurance coverage, paid out leaves/vacations, child support and so on (Dessler,2003, pp302-303). The main objective of reward or compensation lies on motivating employees for performing higher results and in doing so organizations may choose to devise their own reward system as they see fit with their strategic organization plans. To this, Vroom's expectancy theory, which links rewards and performance is widely used method. Organizations apply this theory as it increases employee motivation, save compensation cost and help clearly communicate the organizations objectives (Fisher et al., 1999, pp 606-612).
NEW PUBLIC MANAGMENT THEORY
The basic concept behind New Public management theory is the transfer and use of valuable and productive management values from the private sector to the public administration. The important activities in this transfer includes efficiency, best management performance, flexibility, and responsibility (Polidano, 1999, 5). Hence, in the process there would be a shift from public administration to public management. In this transition there are certain actions needed to be accomplished (Hood, 1991, p96). These activities include reduction of public sector expenses, application of private sector management model, use of result oriented management system, high degree of efficiency and accountability. The process of establishing New Management reform needs the full participation of the public sector. To this end, inviting the civil service society for taking part in the process is paramount to the success of the reform programme. The main mechanisms to carry out this transition are decentralization, privatization and contracting-out.
Decentralization is the transfer of authority or responsibility of management, resource distribution and planning from central government to local government , public authorities or private organizations (Rondineli and Cheema, 1983, Hope, 2002). Centralized government structure have been blamed for public administration failure, government office bureaucracies and inefficiency. Nations under central command government system has the tendency of lower responsiveness to local public service delivery requirements (Friedman, 1992).
The main gains from decentralization as applied under New Public Managment plan are enabling government administration to provide better service to the public, increase management freedom in the public offices', facilitate and enhance performance, encourage public participation and provision of good governance (Hope, 2002, Silverman, 1992). Hence, decentralization is important to the reform of the public sector. It also assists developing countries in the restructuring of their economies.
Privatization is the transfer of ownership of public assets from the state to the private sector (Hope, 2002). This process of transfer can be done through ,the creation of joint venture set up between the private and the public organization, partial or full auction sale of government services to the private sector and through the lease or rent of government assets or properties. Privatization help governments to reduce their expense from holding up unprofitable organizations and at the same time generate an income from the lease or sale of the entities.
Contracting out is acquiring of goods and services from outside instead of getting it from in-house (Walsh, 1995). Contracting out can be done between a private and public organizations. It is cost efficient and reduces government bureaucracies. The strict control on the government side benefits the public at large on getting better and efficient services or goods.
DECENTRALIZED MANAGMENT SYSTEM
Decentralized management is part of the new Public Management Theory which aims to reduce the bureaucracies in the public sector (Hood, 1991). The main goal is giving managers the liberty to administer their offices or organizations as they see fit and efficient. To empower managers the free reign of managing organization, organizations must undergo organizational restructuring, outline clear and open work responsibilities and set up transparent board of governance (Bangwa, 2000). To accomplish these steps, organizations would need to downsize and break up the old bureaucratic governance structure. This can be done by setting up control or limiting mechanism on the cost/expense and size of the public offices (Larbi, 1999).
CHAPTER TWO ETHIOPIA
In Ethiopia, based on the ruling party ideology the country's economic policy and strategies are shaped and implemented. The previous government of Ethiopia, which was in power from 1974-1991 followed a socialist ideology with centralized power structure (Paulos, 2001). When the new government took power in may 1991, it started with a socialist ideology but later on in 1995 formed the Federal Constitution which distributed administration power to regional government bodies. Hence, the civil service was revised and rewritten to increase regional human resource capacity and development (UN-HABITAT, 2002, p89). Following this, regional governing bodies took the power to execute their respective regional resource recruitment, training, promotion and other human resource activities. At this point the problem most regions encountered was the lack of trained manpower and the finance to recruit and train new employees (Paulos, 2007).
Together with the civil service reform agenda, the country had declared to use free market economy system which had liberalized and transferred most of public organizations to private ownership. This had initiated both foreign and local investors to devote their capital towards various investment programmes. But still the country lags behind economically due to various economical and sociall factors.
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